County Lines Holdings, LLC v. McClanahan

Filed 5/2/18
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SIX
COUNTY LINE HOLDINGS, 2d Civil No. B278790
LLC, (Super. Ct. No. 56-2013-
00444799-CU-OR-VTA)
Plaintiff and Respondent, (Ventura County)
v.
JANICE M. McCLANAHAN,
Defendant and Appellant.
A cause of action survives one year after the death of a
debtor. But not a judgment lien. Judgment liens have longevity.
A judgment debtor dies. A contest over the priority of two
judgment liens ensues. Both liens were established prior to the
judgment debtor’s death. After the judgment debtor died,
plaintiff purchased one judgment lien at the execution sale of the
junior lien. Plaintiff then brought this action to quiet title
against defendant’s senior lien. The trial court gave judgment to
plaintiff. The court concluded that enforcement of defendant’s
senior lien was barred by Code of Civil Procedure section 366.2
for failure to enforce the lien within one year of the judgment
debtor’s death. 1
We reverse. Section 366.2 limits the time to bring a cause
of action, not the time to enforce a judgment.
FACTS
Harold Mansdorf, as trustee for the Mansdorf Family Trust
(hereafter “Mansdorf”), owned a parcel of property in Ventura
County near the Pacific Coast Highway. The parties refer to the
parcel as the “Malibu Property.”
In January 2008, Janice M. McClanahan obtained a $12
million judgment against Mansdorf. McClanahan recorded an
abstract of judgment in May 2008.
In January 2012, John Torjisen obtained a $2 million
judgment against Mansdorf. Torjisen recorded an abstract of
judgment in April 2012.
The recordation of an abstract of judgment places a
judgment lien against all real property of the judgment debtor.
(§ 697.310.)
Mansdorf died in August 2012. The trustee of his trust did
not initiate the Probate Code claims procedure. (Prob. Code,
§ 19000 et seq.)
In April 2013, Torjisen enforced his judgment lien on the
Malibu Properly by sheriff’s sale. County Line Holdings, LLC
(County Line) submitted the winning bid of $500,000 and
received the sheriff’s deed.
In November 2013, County Line brought the instant action
to quiet title to the Malibu Property free and clear of any lien or
claim by a number of named defendants, including McClanahan.
1All statutory references are to the Code of Civil Procedure
unless otherwise stated.
2
The trial court rendered judgment in favor of County Line. The
court found that McClanahan’s judgment lien was extinguished
by Mansdorf’s death and could only have been revived by filing a
claim against Mansdorf’s trust. The court concluded that because
McClanahan had not filed such a claim within one year,
enforcement of her judgment lien is barred under section 366.2.
DISCUSSION
I
McClanahan argues section 366.2 does not apply to the
enforcement of her judgment lien.
Section 366.2, subdivision (a) provides: “If a person against
whom an action may be brought on a liability of the person,
whether arising in contract, tort, or otherwise, and whether
accrued or not accrued, dies before the expiration of the
applicable limitations period, and the cause of action survives, an
action may be commenced within one year after the date of death,
and the limitations period that would have been applicable does
not apply.”
Section 366.2, subdivision (a), by its terms, limits the time
for bringing a “cause of action.” Execution on a judgment lien is
not a cause of action. (Bay Cities Paving & Grading, Inc. v.
Lawyers’ Mutual Ins. Co. (1993) 5 Cal.4th 854, 860 [cause of
action arises from breach of a “primary right” and is
distinguished from “remedy” or “relief”].) Issues relating to a
primary right had long passed away, allowing for the birth of a
judgment lien with a long life. Section 366.2 does not apply.
(Estate of Bennett (2008) 163 Cal.App.4th 1303, 1310 [“The claim
against decedent had been reduced to a judgment before he died,
thereby rendering the statute of limitations on a ‘cause of action’
where the ‘person against whom [the] action may be brought . . .
dies’ (Code Civ. Proc. § 366.2, subd. (a)) inapplicable”].)
3
County Line’s argument that section 366.2 applies to
execution on a judgment lien leads to an absurd result. A
plaintiff who had not brought an action prior to a defendant’s
death would have one year to both file an action and execute on
the ensuing judgment lien, an impossibility in most cases.
Nor is County Line assisted by section 686.020, which
states: “After the death of the judgment debtor, enforcement of a
judgment against property in the judgment debtor’s estate is
governed by the Probate Code, and not by this title.” “[T]his title”
refers to the Enforcement of Judgments Law (EJL). (§ 680.010 et
seq.)
Section 686.020 refers to enforcement of a judgment
against “property in the judgment debtor’s estate.” Here the
Malibu Property was subject to Mansdorf’s living trust and thus
was not in the judgment debtor’s estate.
McClanahan points out that to construe section 686.020 as
applying to trusts we must add language to the statute.
Ordinarily we are loathe to construe a statute by adding
language. (General Development Co., L.P. v. City of Santa Maria
(2012) 202 Cal.App.4th 1391, 1395.) The problem here, however,
is that the Probate Code contains a creditor claims procedure for
trusts similar to that applicable to estates. (See Prob. Code,
§ 19000 et seq.) If section 686.020 does not include trusts,
McClanahan suggests no circumstances in which the probate
procedure for creditor claims against living trusts would apply.
There is no problem here. The Malibu Property is
currently held in neither an estate nor a trust. Instead, County
Line has title. The purpose of the Probate Code creditor claims
procedure is to promote the expeditious administration of estates
and trusts and to provide security of title for distributees. (See
Embree v. Embree (2004) 125 Cal.App.4th 487, 495.) That policy
4
applies where the contest is between a creditor and an estate or a
trust beneficiary. The policy does not apply where, as here, the
contest is between two judgment lien claimants.
In any event, even if the Probate Code applies, County Line
would not be helped. Although the Probate Code’s creditor claims
procedure for trusts differs somewhat from that for estates, our
Supreme Court’s discussion of judgment liens in Corporation of
America v. Marks (1937) 10 Cal.2d 218 is instructive. Judgment
liens survive.
In Corporation of America v. Marks, supra, 10 Cal.2d 218,
creditor obtained judgment liens against debtor’s property while
debtor was alive. When debtor died, creditor failed to file a claim
in debtor’s estate because it did not know that debtor had died.
After the period for filing a claim in debtor’s estate had passed,
creditor filed an action to foreclose the judgment liens. The trial
court sustained the debtor’s demurrer on the ground that creditor
failed to file a timely claim in the debtor’s estate. Our Supreme
Court reversed the resulting judgment.
Our Supreme Court stated that, while the debtor is still
alive, the usual and ordinary method of enforcement of a
judgment lien is by execution sale. (Corporation of America v.
Marks, supra, 10 Cal.2d at p. 220.) On death of the debtor,
however, former Probate Code section 732, now section 9300,
terminates the right of the creditor to enforce the judgment lien
by execution and sale. (Corporation of America, at p. 220.) “But
the death of the debtor does not terminate the judgment lien.”
(Ibid.) The lien continues for its statutory duration 2 unless
2 Section 697.310, subdivision (b) provides: “Unless the
money judgment is satisfied or the judgment lien is released,
subject to Section 683.180 (renewal of judgment), a judgment lien
5
sooner terminated by satisfaction or discharge. (Ibid.) “The
judgment lien creditor . . . may file a claim, and in such event the
priority of his lien will be protected in the administration
proceeding . . . and he will have a claim for any deficiency against
the general estate of the decedent.” (Ibid.)
Our Supreme Court expressly rejected the debtor’s
contention that enforcement of the judgment lien in the course of
estate administration is the exclusive remedy of the judgment
lien creditor on the death of the debtor prior to levy of execution.
(Corporation of America v. Marks, supra, 10 Cal.2d at p. 221.)
The court stated heirs and distributees take subject to the lien.
(Ibid.) “‘A judgment lien has always been regarded as the highest
form of security.’” (Ibid.) A judgment lien creditor may, without
filing a claim in probate, bring an equitable action to foreclose the
judgment lien, but he has no right to a deficiency. (Ibid.) The
creditor may bring the action at any time during the statutory
duration of the judgment lien. (Id. at p. 220.) 3
created under this section continues until 10 years from the date
of entry of the judgment.”
3 Probate Code section 9391 now expressly authorizes a
judgment lien creditor to bring a separate action to foreclose a
judgment lien during the lien’s statutory life without filing a
claim. The statute provides in part: “[T]he holder of a mortgage
or other lien on property in the decedent’s estate, including, but
not limited to, a judgment lien, may commence an action to
enforce the lien against the property that is subject to the lien,
without first filing a claim as provided in this part, if in the
complaint the holder of the lien expressly waives all recourse
against other property in the estate. Section 366.2 of the Code of
Civil Procedure does not apply to an action under this section.”
6
Thus, under Corporation of America, the judgment creditor
has an option: file a timely claim in the estate probate
proceeding and seek a deficiency; or, without filing a claim, bring
an action to foreclose the lien during its statutory duration,
waiving any right to a deficiency. In neither case does the lien
lose its priority.
Although the Probate Code provides for a creditor claims
procedure for trusts, the trustee is not required to use it.
(Wagner v. Wagner (2008) 162 Cal.App.4th 249, 255.) Where the
trustee elects to use the claims procedure, the rights of judgment
lien creditors should be no different than those set forth in
Corporation of America.
Where, as here, the trustee elects not to use the creditor
claims procedure, the trustee has waived the protection of the
claims statutes. (See Ross & Cohen, Cal. Practice Guide:
Probate (2017 Rutter Group) § 2:117.2a, p. 2-95.) Thus, the
rights of the creditors are unaffected and the judgment lien
creditor may proceed by execution and sale. In any event, the
lien does not lose its priority.
County Line’s and the trial court’s reliance on Embree v.
Embree, supra, 125 Cal.App.4th 487 is misplaced. In Embree,
plaintiff, decedent’s former wife, brought an action to enforce an
alleged promise that decedent would create an annuity for her.
Plaintiff filed the action more than one year after the decedent’s
death. The court concluded plaintiff’s action was barred by
section 366.3, requiring an action to enforce a promise by
decedent to make a distribution from an estate or trust to be
brought within one year of the decedent’s death.
Thus, in Embree, plaintiff’s action was barred for failure to
file the action within the applicable limitations period. The
holding in Embree does not concern the enforcement of a
7
judgment lien or, for that matter, any enforcement of a judgment.
It appears Embree’s dicta led the trial court astray.
Embree’s dicta discuss what would happen if plaintiff were
trying to enforce an existing spousal support judgment. The
court noted that the trustee did not initiate the Probate Code
claims procedure. Under the circumstances, Probate Code
section 19400 4 permits an unsecured creditor to proceed against
property distributed to the beneficiaries of the judgment debtor’s
revocable living trust, subject to the one-year limitations period
of section 366.2. The court stated: “The property distributed to
the beneficiaries of [decedent’s] revocable trust is not available to
satisfy her support judgment because she failed to file her claim
within one year of [decedent’s] death.” (Embree v. Embree, supra,
125 Cal.App.4th at p. 493.) The court then stated in a footnote:
“To the extent [plaintiff’s] argument is predicated on the
existence under the EJL of a ‘judgment lien’ against [decedent’s]
real property created during his lifetime as a result of the
recording of the abstract of judgment for spousal support payable
in installments (§ 697.320, subd. (a)(1)), any such lien was
effectively extinguished once [decedent] died. (See Prob. Code,
§ 9300 [‘Except [with respect to execution liens existing at the
4 Probate Code section 19400 provides: “Subject to Section
366.2 of the Code of Civil Procedure, if there is no proceeding to
administer the probate estate of the deceased settlor, and if the
trustee does not file a proposed notice to creditors pursuant to
Section 19003 and does not publish notice to creditors pursuant
to Chapter 3 (commencing with Section 19040), then a
beneficiary of the trust to whom payment, delivery, or transfer of
the deceased settlor’s property is made pursuant to the terms of
the trust is personally liable, to the extent provided in Section
19402, for the unsecured claims of the creditors of the deceased
settlor’s probate estate.”
8
time of the decedent’s death] all money judgments against the
decedent . . . are payable in the course of administration’ and are
not enforceable under the EJL].)” (Id. at p. 495, fn. 10.)
First, Embree appears to conclude, without discussion or
analysis, that section 366.2 applies to the enforcement of existing
judgments, a proposition we reject. Moreover, given that the
trustee in Embree did not initiate the claims procedure, it is not
clear what the court meant when it said plaintiff could not
enforce her support judgment because she failed to file her
“claim” within one year.
Second, Probate Code section 19400, stating that creditors
are subject to section 366.2, applies by its terms to “unsecured
claims,” not judgment liens.
Finally, Embree’s discussion of judgment liens is not only
dicta, it is the lowest form of dicta: footnote dicta. The court’s
statement that any judgment lien is effectively extinguished once
the judgment debtor died is directly contradicted by our Supreme
Court in Corporation of America v. Marks, supra, 10 Cal.2d at
page 221. (See also Prob. Code, § 9391.)
The judgment is reversed. Costs are awarded to appellant.
CERTIFIED FOR PUBLICATION.
GILBERT, P. J.
We concur:
YEGAN, J.
PERREN, J.
9
Henry J. Walsh, Judge
Superior Court County of Ventura
______________________________
Law Offices of Thomas P. Cacciatore, Thomas P.
Cacciatore; Benedon & Serlin, LLP, Douglas G. Benedon, Gerald
M. Serlin; Sottile Baltaxe, Timothy B. Sottile for Defendant and
Appellant.
Antoni Albus, LLP, John Antoni, Kevin Tredway for
Plaintiff and Respondent.
10