Judge: Nathan Vu, Case: 2018-00972820, Date: 2022-09-26 Tentative Ruling

Application for Order for Sale of Dwelling

Plaintiff Stephanie Grace’s Application for Order for Sale of Dwelling is DENIED without prejudice.

Plaintiff Stephanie Grace applies for an order for the sale of Defendant Mathew Nugent’s right, title, and interest in the real property commonly known as 2943 Sequoia Avenue, Fullerton, CA 92835-2040, APN No. 284-422-09 (Property).

The Enforcement of Judgments Law, Civil Procedure Code sections 680.010–724.260, is “a comprehensive scheme governing the enforcement of civil judgments in California.” (California Coastal Comm’n v. Allen (2008) 167 Cal.App.4th 322, 326.) Specifically, Civil Procedure Code section 704.740 permits the sale of a dwelling or “homestead” to satisfy a money judgment in appropriate circumstances.

If the dwelling is owned by a judgment debtor as a joint tenant or tenant in common, “the interest of the judgment debtor in the dwelling and not the dwelling shall be sold.” (Civil Proc. Code, § 704.820.) However, a sale shall not be ordered if the court determines that “the sale of the dwelling would not be likely to produce a bid sufficient to satisfy any part of the amount due on the judgment.” (Civil Proc. Code, § 704.780.)

Defendant is a judgment debtor pursuant to the Enforcement of Judgments Law, but claims that he is not the owner of the Property. However, the Property was placed in a revocable living trust of which Defendant is a settlor. Such assets are considered the property of the settlor (i.e., the Defendant in this case). (See Zanelli v. McGrath (2008) 166 Cal.App.4th 615, 633 [“Property transferred to, or held in, a revocable inter vivos trust is nonetheless deemed the property of the settlor . . . .”]; Arluk Medical Center Industrial Group, Inc. v. Dobler (2004) 116 Cal.App.4th 1324, 1331–1332 [“[A] settlor with the power to revoke a living trust effectively retains full ownership and control over any property transferred to that trust.”]; see also Probate Code, § 18200 [property in revocable trust subject to claims of settlor's creditors “to the extent of the power of revocation during the lifetime of the settlor”]; Revenue & Tax. Code, § 62, subd. (d) [transfer by settlor to revocable trust is not a change in ownership].)

Defendant’s other arguments are not supported by the law and the court overrules Defendant’s objections.

The Enforcement of Judgments Law also requires the creditor to apply for a court order specifically authorizing the sheriff or other levying officer to sell the dwelling. (Civil Proc. Code, §§ 704.750, subd. (a), & 704.760; Amin v. Khazindar (2003) 112 Cal.App.4th 582, 589.)

The application must be “made under oath,” and in addition to “describ[ing] the dwelling,” must specify: (1) “whether or not the records of the county tax assessor indicate that there is a current homeowner’s exemption or disabled veteran’s exemption for the dwelling,” (2) “whether the dwelling is a homestead and the amount of the homestead exemption [which reserves a statutorily specified amount of equity in a dwelling to the debtor],” (3) “the amount of any liens or encumbrances on the dwelling, the name of each person having a lien or encumbrance on the dwelling, and the address of such person used by the county recorder for the return of the instrument creating such person’s lien or encumbrance after recording,” and (4) whether the judgment “is based on a consumer debt.” (Civil Proc. Code, § 704.760, subds. (a), (b), (c) & (d).)

Plaintiff has submitted an application under oath that describes the Property and contains statements in compliance the first 3 requirements above. (See Plaintiff’s Application ¶¶ 5-6, 9, & 11-12, & Exh. 5.) Plaintiff’s application, however, does not contain a statement specifying whether “the judgment is based on a consumer debt, as defined in subdivision (a) of Section 699.730, or that the judgment is not based on a consumer debt, and if the judgment is based on a consumer debt, whether the judgment is based on a consumer debt that was secured by the debtor’s principal place of residence at the time it was incurred or a statement indicating which of the exemptions listed in subdivision (b) of Section 699.730 are applicable.”

Further, the trial court reviewing the application must determine whether the fair market value of the judgment debtor’s interest in the dwelling is “likely to produce a bid [at the sale] sufficient to satisfy” (1) the amount of the homestead exemption and (2) the amount of “all liens and encumbrances” “senior to the [judgment] lien being executed.” (Civil Proc. Code, §§ 704.730, subd. (a), & 704.780, subd. (b); Rourke v. Troy (1993) 17 Cal.App.4th 880, 883-884; Amin v. Khazindar, supra, 112 Cal.App.4th at p. 589.)

If the proposed sale is unlikely to yield a bid high enough to cover the homestead exemption plus any preexisting liens and encumbrances, leaving no money left over for paying off even a portion of the judgment creditor’s lien, the application should be denied. (Kahn v. Berman (1988) 198 Cal.App.3d 1499,1508.) But if the court determines that a bid for the judgment debtor’s interest will likely exceed the homestead exemption plus all pre-existing liens and encumbrances, such that there is some amount available to satisfy even a “part” of the judgment creditor’s lien, then the court must grant the application for sale. (Civil Proc. Code, § 740.780, subd. (b); Rourke v. Troy, supra, 17 Cal.App.4th at pp. 884-885.)

Plaintiff’s application states: “The estimated fair market value of the property is $1,243,600. Accordingly, upon the Dwelling’s sale by the Sheriff, there will be an estimated $1,243,600 in equity available to satisfy the Judgment before deduction of the homestead exemption.” (Plaintiff’s Application, ¶ 13.) However, Plaintiff did not submit evidence to support this conclusory statement. The court is thus not able to make the determination required by Section 740.780(b), Rourke v. Troy, and Amin v. Kazindar.

Plaintiff shall give notice of this ruling.