[WSBAPT] Enforceability of Judgment Lien Related to Closingof Sale of Real Property by Estate

Mon Jul 17 11:51:56 PDT 2017

That is interesting hypothetical in extending the effect of a district court judgment.  It seems to me no matter what happens the client won’t see much money.  Isn’t it as simple as telling DSHS about the new info and the additional prior judgment lien (prior to their lien) and they will take 80% of the new amount left over after judgments are paid in full?  Somehow it seems more satisfactory to pay off court judgments than DSHS liens.

From: Douglas Bratt 
Sent: Saturday, July 15, 2017 5:48 PM
To: tjw at w3net.net ; WSBA Probate & Trust Listserv 
Subject: Re: [WSBAPT] Enforceability of Judgment Lien Related to Closingof Sale of Real Property by Estate

Correct, Tom.  I was sent the Preliminary Title Report to be able to prepare the Personal Representative’s Deed just recently, and I was quite surprised to see mention of this judgment.  There was absolutely no evidence of this problem in the Decedent’s personal files and records.  

The costs of sale, the amounts owed on the first mortgage, renovation costs by a contractor who did his work under an agreement to be paid out of escrow, plus what I am guessing could be the maximum amount of the judgment in question, plus interest, is still less than the sales price, with money also there to cover costs of administration of the probate.

The house is the only significant asset belonging to the Estate.

The complication is that DSHS Office of Financial Recovery has filed a very large Creditor’s Claim in the probate for Medicaid extended to the Decedent, and we had reached an agreement with DSHS for them to accept 80% of the remaining net proceeds from the sale (or at least what we had estimated would be the remaining net proceeds, not taking into account the judgment about which we had no knowledge), in exchange for a Satisfaction of Creditor’s Claim, with the remaining 20% of the net sale proceeds to go to the family of the Decedent.  (I understand that this is an arrangement to which DSHS often agrees in these sort of cases and I have done this a number of times.)  We had been working under the assumption that only the first mortgage would have to be cleared, so our estimate of net proceeds was significantly greater than it would be if the full judgment, plus full interest, is going to have to go to the Judgment Creditor.

I think your interpleader idea is a good one under the circumstances, because there is a bit of a push for closing, because the lender documents have finally been delivered to the LPO.  Because previous negotiations with DSHS involved different assumptions, the task is to get them to go along with the lesser amount to go to DSHS, given the introduction of this judgment lien that the PR had no knowledge was even in existence, much less the extent of the possible claim for interest because almost ten years has gone by since the transcript of the original District Court Judgment was filed with the Superior Court Clerk. 

However, I am not sure if the Title Company will go along with an interpleader, since the statute seems to make clear that the judgment is still less than ten years old since the cited statute tells us to go back to the filing date in Superior Court of the transcript of the District Court judgment.  We are in an interesting time-line.  The District Court judgment is now more than ten years old.  However, given the filing of the transcript with the Superior Court about a year after the original District Court judgment, we are within the ten year period during which the judgment creditor could renew the judgment if he/she petitions to do so within 90 days of October 20, 2017.  I don’t think that putting the judgment creditor to the test of whether or not he/she petitions to renew the judgment for ten years within 90 days of October 20, 2017, will fly, because as of the date of the proposed closing of the sale transaction, isn’t the Judgment lien still attached to the real property involved.  I can’t see the title company not wanting to gain clearance of this judgment lien prior to issuing its title policy by the direct payoff of the judgment lien as it exists today. Besides that, the LPO was working on contacting the attorney for the Judgment Creditor to get a payoff figure.  (One doubts that the attorney will even remember all that went on in a case that took place in 2006/2007, but of such surprises, windfalls might well result.) 

Dealing with DSHS to clear its Creditor’s Claim in this fashion has been something that has worked quite well in the past, but this experience has led me to believe that we should not even open up discussions with DSHS prior to getting a Preliminary Title Report to discover evidence of any unknown liens and encumbrances, that will affect the bottom line of net sale proceeds. Now, I have to go back to DSHS and reveal that the expected net proceeds are significantly less than we had first discussed.  It would have been easier to have announced that the probable net proceeds was a figure that took into account that previously unknown judgment lien.  

Thanks for your input, Tom.

Regards,

Doug Bratt

P.S.  The other interesting facet of this case is that my study of the statute leads me to believe that the following would be possible in situations in which the transcript of a District Court Judgment is filed with the Superior Court.  Subsection 7 of RCW 6.17.020 says very clearly that the no judgment is enforceable beyond twenty years from the date of entry in the “originating court.”  However, subsection 7 carves out an exception (citing subsection 3 of RCW 6.17.020) in cases where the transcript of the District Court Judgment is filed with the Superior Court, essentially saying that if a person obtained a District Court Judgment in Year 1 and filed a Transcript of that Judgment in Superior Court in Year 9, the person could apply for a ten year extension anytime within 90 days of the ten year period after the date of filing of the transcript of judgment in Superior Court, which, in the cited example, would make the judgment enforceable till year 29.  Admittedly, that would be an extreme set of facts, but it is possible when the transcript of the District Court judgment is filed with the Superior Court many years after the rendering of the judgment in the originating court.  Here, it was only a year later, but nothing would prevent it from being filed in Superior Court in year 9 or even year 9 plus 364 days.  

From: wsbapt-bounces at lists.wsbarppt.com [mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Tom Westbrook
Sent: Saturday, July 15, 2017 4:31 PM
To: 'WSBA Probate & Trust Listserv'
Subject: Re: [WSBAPT] Enforceability of Judgment Lien Related to Closing of Sale of Real Property by Estate

Doug, 

Not sure what is meant by suddenly, but I assume you mean upon receiving a copy of the preliminary title report. 

Assuming, without knowing, the judgment is less than the sale price, why not ask your title company (escrow) to hold back the amount of funds from the judgment out of closing and hold onto it until October 20th (or whatever date) and if the judgment isn’t renewed by then they can pay it out to the estate. Or they can interplead it into the Court registry and let you fight over it later. 

Sincerely,

Tom

Thomas J. Westbrook

Attorney at Law

Rodgers, Kee & Card

324 West Bay Drive NW, Suite 201

Olympia, Washington  98502

Phone: 360-352-8311

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Email: tjw at buddbaylaw.com

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From: wsbapt-bounces at lists.wsbarppt.com [mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Douglas Bratt
Sent: Saturday, July 15, 2017 3:45 PM
To: wsbapt at lists.wsbarppt.com
Subject: [WSBAPT] Enforceability of Judgment Lien Related to Closing of Sale of Real Property by Estate

Hello Listmates:

We are close to closing a sale of a residence by an Estate.  

Suddenly, I find out about an old judgment.

The judgment, for just under $20K, was entered in District Court in the county in which the Estate-owned real estate is located on September 25, 2006.  A Transcript of the District Court Judgment was then filed in the Superior Court in the same county on October 19, 2007.  The judgment was subsequently recorded on October 22, 2007, with the Auditor of the same county.  It is showing up as an exception on a Title Policy Commitment, and the escrow closer is in the midst of making inquiry about a payoff figure for the judgment from the Judgment Creditor’s Attorney.

As I understand the law related to judgments, the judgment is enforceable for ten years after entry, but that period can be extended an additional ten years by petitioning the court that entered the judgment within 90 days of the expiration of the original ten years.  

However, sadly, I find that under RCW 6.17.020(3), if a District Court judgment has been transcribed to the Superior Court, the petition is not to be filed in District Court, and thus be tied to the ten year anniversary of the entry of the District Court Judgment. Rather, the Petition to extend is to be filed in the Superior Court and the Petition must be filed within 90 days of the expiration of the ten year period after the date the transcript of judgment was filed in the Superior Court, not the District Court.  So, even though relating back to the original date of the District Court judgment would have been supremely helpful, the statute means that the Judgment Creditor would have until October 19, 2017, to file the Petition to extend the judgment.     

The Decedent died on September 3, 2017. The first date of publication of the Notice to Creditors took place on October 7, 2016.  Thus, the four-month period for Creditor’s Claims expired on February 7, 2017.  The Judgment Creditor did not file a Creditor’s Claim. In addition, the PR found no evidence of the judgment when making the PR’s reasonable search to ascertain the identity of Creditors to determine which creditors, if any, were to get actual notice.  However, I am not thinking that of the Judgment Creditor to file a Creditor’s Claim in the probate will defeat the lien of judgment on the real estate owned by the Decedent.   

My initial conclusion is that we are SOL on trying to escape liability on the judgment, due to the fact that the lien of judgment attaches to the real estate of the judgment debtor, and it does not appear that the judgment debtor’s death nor any defenses under the Creditor’s Claim statute will help us in escaping the effect of the judgment, with the real estate closing becoming the means of collection for the Judgment Creditor. 

Any contrary thoughts about the possibility of escaping liability on this judgment?

Thank you for your collective knowledge.

Regards,

Doug Bratt

Douglas J. Bratt

Lawyer

Office: (360) 213-2040 

Fax: (360) 213-2030

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