How Do You Collect Your Multi-Million Dollar Judgment After The Debtor Dies?
By: Julia M. Wei, Esq.
Don’t Wait Nine Months After Judgment to Start Collecting.
Recently, the California Court of Appeals issued an opinion finding that even though the judgment creditor had used the wrong judicial process, his execution of the $2M judgment against the deceased’s estate would stand.
John C. Torjesen obtained a $2 million judgment against defendants
Harry Mansdorf, and his trust on January 31, 2012. Nine months later, on September 17, 2012, judgment creditor obtained a writ of execution and on October 11, 2012, the Ventura County Sheriff‟s Department, at the direction of Torjesen, levied on property (the Malibu property) owned by Mansdorf. One problem for creditor – the debtor had died a few weeks earlier on August 27, 2012.
So what happened here? Judgment creditor starts a sheriff’s sale on the judgment, but the debtor died before the creditor started the judgment levy. Under California law, judgments creditors are bound by the statutes found in the California Enforcement of Judgments law (“EJL”). The EJL sets forth the rules on judgment levies, sheriff sales, wage garnishments, debtor examinations and other post-judgment mechanics for judge creditors to follow.
What that means is that when Torjesen commenced a sheriff’s sale, he was using the EJL statutes. However, because the judgment debtor was deceased and under California law, the EJL no long applies to the judgment debtor’s estate. Instead, the Court explained:
“The statutory scheme could not be more clear: following the death of a judgment debtor, a judgment cannot be enforced against the judgment debtor‟s property, or property in his trust, by levying on that property under a writ of execution, and the judgment creditor must instead proceed under the Probate Code. (Code Civ. Proc., § 686.020; Prob. Code, §§ 9300, 19300.)”
Creditors have a separate process that they must observe under the Probate Code during the claim period. Torjesen obviously did not follow those rules and the consequence might have been moot but for the fact that a competing creditor came out of the woodwork. Shortly after the notice of levy, Jaime DeJesus Gonzalez filed a third party claim to the Malibu house that about to be levied upon. Gonzalez had a deed that purported to transfer title from Mansorf to Mansorf and Gonzalez as joint tenants. Since Mansor had died, theoretically, Gonzalez became the sole owner of the Malibu property before Torjesen’s levy and thus deprived the judgment creditor of reaching any equity in the Malibu house.
For a variety of legal missteps, Gonzalez apparently failed to complete his third party battle and Torjesen prevailed by default. However, two years later, Gonzalez showed up with new counsel and filed a motion to vacate the trial court’s order that vacated his third party claim. The trial court denied it and this appellate opinion followed. The Torjesen opinion addressed the lower court’s fundamental jurisdiction and noted that although Torjesen improperly used the EJL to enforce his judgment, the superior court had jurisdiction to evaluate the claim. However, since Gonzalez, having waited two years, was untimely in challenging that Order. The only way Gonzalez’s argument would have merit is if the court had no jurisdiction and thus the order it issued was void ab initio.
Conclusion: The takeaway is that both parties probably waited too long to move on their respective claims. Understandably, the judgment creditor may have not have been thinking about the debtor’s lifespan and since a judgment is enforceable for up to 10 years, his timeframe was not particularly long to wait 9 months. However, as to Gonzalez, his facts did not favor his case either. For his allegation that his arrangement with the debtor occurred in 2008 it seemed dubious why he would wait until after Mansorf’s death four years later to record the deed. Secret deeds (or "wild deeds") are problematic as they circumvent the state's recording process. Later, his abandoning the claim only to try after two years was certainly untimely. Lesson learned: don’t sit on your claims.
[Torjesen vs. Mansdorf (July 5, 2016) Second Appellate District]