Case Name: Valli Construction, Inc. v. Amazing Controls, Inc., Et Al

Case No.: 1-10-CV182485

Plaintiff Valli Construction, Inc. moves for an order compelling a sale of Defendant Dhiraj Marya’s property located at 334 Santana Row, Unit 346 in San Jose. The motion was filed April 29, 2014, to enforce a judgment lien which Plaintiff attached to the property on March 28, 2014. Defendant filed an opposition, claiming a homestead exemption and that the house should not be sold pursuant to California Code of Civil Procedure Section 704.780(b).

I. Homestead Exemption

When a judgment creditor files a motion to order a sale of property attached with a judgment lien, an automatic homestead exemption may apply. California Code of Civil Procedure Section 704.710. Because there is no record that the dwelling in question is a homestead, Defendant can get the exemption if he proves that he has lived there continuously since the filing of the judgment lien to when the court determines the property is a homestead. Cal.Civ.Proc.Code § 704.710(c). The court will look at two factors to determine whether or not the owner has lived at the property continuously: (1) the owner has physically occupied the dwelling, and (2) the owner intends to live there. Ellsworth v. Marshall (1961) 196 Cal.App.2d 471, 474. In re Burton involves a condominium owner who left his furniture and other belongings at the property and used the property as his mailing address while the owner was away for “out-of-town” employment. 167 B.R. 923, 926 (1994). The court held that even though the owner was not physically present, the owner had the intent necessary to satisfy the requirement for a homestead exemption. Id.

In this case, Defendant had his personal effects and household furnishings at the condominium and used the condominium as his mailing address from March 28, 2014 to the present. In addition, Defendant has lived at the property for the past three years. There is sufficient evidence to show that Defendant continuously lived in the property from March 28, 2014 to the present. See id. Therefore, the homestead exemption applies in this case.

II. Motion to Sell the Property

If the homestead exemption applies to the property, the court can order the property sold if the court determines that the property is likely to receive a bid above the homestead exemption amount plus all liens and encumbrances on the property senior to the judgment lien. Cal.Civ.Proc.Code § 704.780(b). Rourke v. Troy (1993) 17 Cal.App.4th 880, 886. Because the condominium is held in joint tenancy, only Defendant’s interest of the property, and not the entire property, would be subject to the forced sale. Cal.Civ.Proc.Code § 704.820.

Defendant has a homestead exemption of $75,000. Cal.Civ.Proc.Code § 704.730(a)(1). The property is encumbered by a deed of trust in favor of Wells Fargo Bank with a balance of $632,566.94, and the deed of trust is in both the Defendant’s and the Defendant’s mother’s name. The entire amount of the mortgage is added to total encumbrance calculation. Schoenfeld v. Norberg (1970) 11 Cal.App.3d 755, 766. In addition, Defendant’s mother claims an equitable lien against the property in the amount of $88,367.61 on the grounds that she paid Defendant’s portion of the mortgage, his portion of homeowner association fees, and his portion of insurance on the condominium for the past three years to protect her interest in the property.

An interest holder of a property subject to a lien has a right to reclaim that interest after the claim is due and thereby becomes subrogated to all of the benefits of the lien against other owners, unless the interest holder was bound to make that redemption on behalf of the owners. Cal.Civ.Code § 2903. In a mortgage context, a cotenant may pay off a portion of the loan that the other cotenant is required to pay and thereby become entitled to an equitable claim for that portion of the loan. Snider v. Basinger (1976) 61 Cal.App.3d 819, 823. That equitable claim assumes the same priority as the lien that was paid off because an equitable lien by subrogation has the same rights as a written assignment of that encumbrance. Id. at 825. Because Defendant’s mother was not bound to make the payment on behalf of Defendant, and because Defendant’s mother’s payments were on claims that arose before the judgment lien, Defendant’s mother is entitled to subrogation of $88,367.61. Cal.Civ.Code § 2903. Therefore, the minimum bid required to surpass all liens senior to the judgment lien is $795,934.55. Cal.Civ.Code.Proc § 704.780(b).

The property at issue has been appraised at $1,150,000 as of May 16, 2014. Because Defendant owns half of the interest in the property, his proceeds, if his interest were sold at market value, would equal $575,000. That is $220,934.55 below the minimum bid required for an order to sell the property. As such, the court finds it unlikely that a bid for Defendant’s half of the interest in the property would satisfy all encumbrances and liens on the property prior to satisfying any part of the judgment lien. Cal.Civ.Proc.Code § 704.780(b).

Therefore, Plaintiff’s motion to sell the property is DENIED.