Bank Collects With Deficiency Judgment in California

Deficiency Judgment in California

KINSMITH FINANCIAL CORPORATION, Plaintiff and Respondent, v. J. ROBERT GILROY, Defendant and Appellant.
No. A098147.
COURT OF APPEAL OF CALIFORNIA, FIRST APPELLATE DISTRICT, DIVISION ONE

105 Cal. App. 4th 447; 129 Cal. Rptr. 2d 478; 2003 Cal. App. LEXIS 64; 2003 Cal. Daily Op. Service 543; 2003 Daily Journal DAR 659
January 16, 2003

Facts: On July 6, 1989, A filed a complaint for judicial foreclosure to collect defaulted obligation. On July 5, 1991, the court entered a foreclosure decree, entitled Judgment of Foreclosure and Order of Sale. On March 25, 1992, Kinsmith filed a timely motion for a deficiency judgment. The deficiency judgment was entered on May 7, 1992.

Time passed. The debt remained. A filed an abstract of the May 7 deficiency judgment and an application for an order of examination of the debtor. On January 23, 2001, the Orange County court filed an order for delivery of property, ordering debtor to turn over $ 7,000 in cash, 1,400 shares of the stock of V Corporation valued at $ 4,000, approximately $ 4,000 in a bank account and a wine collection consisting of 500 to 600 bottles valued at $ 20,000, all to be applied towards the Lake County debt.

On February 15, 2001, the parties stipulated to extend the time for compliance to May 15 and modify the order by adding a country club membership, an antique wall clock, an antique armoire, an antique china cabinet and a Lexus automobile. Between May 9 and August 30, 2001, the parties agreed to four more extensions of time while settlement negotiations continued. One extension was due to debtor’s threatened bankruptcy in the absence of an extension and another was to allow debtor’s new counsel to review the history of the negotiations.

On September 27, 2001, A renewed its May 7, 1992 deficiency judgment in Lake County.

On December 5, 2001, debtor’s new counsel moved for an order staying enforcement of the turnover order and moved to quash the turnover order and the 1992 deficiency judgment based on the argument that the only final judgment in the matter was the original 1991 foreclosure decree, which was over 10 years old and had not been renewed.

Issue: Whether the 1992 deficiency judgment is now barred from being enforced?

Ruling: No. Said deficiency judgment is not barred from execution notwithstanding that Code Civ. Proc., § 663.010 et seq., which requires renewal of a money judgment or judgment for possession or sale of property within 10 years of the judgment. The court held that neither the one action rule of Code Civ. Proc., § 726, nor the statutory renewal procedure dictated that the 10-year period run from the time of the foreclosure decree. The one action rule is meant to protect debtors from multiple collection actions, not to bar entry of more than one final determination in a foreclosure action. Whether we view the foreclosure process as two actions or a two-part procedure with two final determinations, we see no support for the argument that the earlier foreclosure judgment must be renewed in order to enforce the subsequent money judgment on the deficiency. Furthermore, the renewal statute requires a party renewing a judgment for the possession or sale of property to "describe the performance remaining due." (§ 683.150, subd. (e).) No performance remained due under the foreclosure decree in this case. The only unsatisfied judgment here, and the only one that creditor sought to enforce, was the money judgment for the deficiency. No purpose is served by also requiring renewal of the already satisfied foreclosure decree.

Lesson Learned: Debtor should not be complacent in thinking that a deficiency judgment secured more than 10 years ago can no longer be enforced. The one action rule is meant to protect debtors from multiple collection actions, not to bar entry of more than one final determination in a foreclosure action. Given the lapse of time to consummate full satisfaction of the obligation, debtor should have negotiated with creditor in an amicable manner the satisfaction of whatever remaining obligation.

Written by Kevin Levonas and Giselle G.