Case Name: Hoge, Fenton, Jones & Appel, Inc. v. Alex Banuelos

Case No.: 111CV196291

Plaintiff Hoge, Fenton, Jones & Appel, Inc. moves for an order compelling the sale of property located at 471 S. White Road, San Jose, CA. Defendant Alex Banuelos and his former wife, Gloria Acosta, own the property. Plaintiff filed the motion to enforce a judgment lien entered August 11, 2011. Defendant has filed an opposition, claiming that service was improper, claiming a homestead exemption, and moving for sanctions to be levied against Plaintiff for violation of CCP § 1008.

I. Service of Process

California Code of Civil Procedure § 704.770(b) requires service of process on the judgment debtor either by mail or in person and on an occupant of the property in person or attached to the property if there is no occupant when a judgment creditor files an application to order a property sold. Defendant argues that an occupant was not served nor were papers attached to the dwelling. However, the record shows that on May 1, 2014, Michael Dube served Defendant by posting a copy of the order to show cause, a copy of the application by the judgment creditor, and a copy of the notice for the hearing set for June 12, 2014. Therefore, the court finds that service of process has been met, and that § 704.770(b)(2) has been satisfied.

II. Family Division Order

Plaintiff claims that Defendant should sell the property pursuant to a Family Division Order that demanded the property be sold in 2008. However, the Order provided by the Plaintiff does not mention the 471 S. White Road property as those properties that ought to be sold. The Order mentions other properties, but unless one of the names of those properties meant to be the subject property, the Order does not explicitly state 471 S. White Road, and therefore the Order cannot be used as a means to compel the sale of the property.

III. Co-ownership in Property

There is a question as to what type of co-ownership exists in the property because Defendant and his former wife were married at the time the property was purchased. If the property is community property, then Plaintiff can force the sale of the entire dwelling to satisfy its judgment lien. Lezine v. Security Pacific Fin. Services, Inc., (1996) 14 Cal.4th 56, 64. If the property is a joint tenancy, then only the Defendant’s interest in the property can be sold. Cal.Code.Civ.Proc. § 704.820(a). California allows husbands and wives to hold property as joint tenants, tenants in common, or as community property. Fam.Code, § 750. However, California presumes that jointly held property is community property unless there is a clear statement in the deed that the property has been acquired as separate property or there is proof of a written agreement that the property is held as separate property. Fam.Code, § 2581. In Abbett Electric Corp. v. Storek, a married couple was going through a divorce and there was an issue as to whether property that the couple owned was held as community property or as joint tenancy. (1994) 22 Cal.App.4th 1460, 1463-65. The court held that because the instrument by which the couple purchased the property showed that the title was in joint tenancy, “a different intent is expressed and the community property presumption does not apply.” Id. at 1466 (quoting Kane v. Huntley Financial (1983) 146 Cal.App.3d 1092, 1097, fn. 2). In this case, the deed states that the Defendant and his former wife held the property as joint tenants. Such evidence shows the intent of Defendant and his former wife to own the property as separate property and thus rebuts the presumption of community property. See Abbett, 22 Cal.App.4th at 1466. Therefore, the Defendant has a 50% interest in the property.

IV. 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. Cal.Code.Civ.Proc. § 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.Code.Civ.Proc. § 704.710(c). Defendant has lived at the subject property since July 1, 2011 and has not moved out. The judgment lien was entered on August 11, 2011. Therefore, Defendant is entitled to a homestead exemption. See id.

V. 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.Code.Civ.Proc. § 704.780(b). Rourke v. Troy, (1993) 17 Cal.App.4th 880, 886. Because the property is held in joint tenancy, only Defendant’s half interest in the property is subject to the forced sale. Cal.Code.Civ.Proc. § 704.820(a).

Defendant has a $100,000 exemption because Defendant lives with a minor child of 26 months and with his son who has attained the age of majority but is unable to take care of himself because he has been unable to find employment. Cal.Code.Civ.Proc. § 704.710(b)(2)(A), (b)(2)(D), § 704.730(a)(2). The property is subject to two liens that both parties agree exist: $40,943.39 in real estate taxes and $56,098.39 to the Franchise Tax Board. However, there is a dispute as to whether a debt of $686,674.93 created by a line of credit has priority over the judgment lien. Defendants contend that it does. Plaintiff contends that it does not because there was no recorded document securing an interest in the property. An unrecorded mortgage is valid against those who made the agreement and those with notice. Cal.Civ.Code § 1217. Bank of Ukiah v. Petaluma Sav. Bank, (1893) 100 Cal. 590, 590-91. Also, an unrecorded mortgage is only declared void as to subsequent purchasers or mortgagees for value and in good faith, but not to judgment creditors. Bank of Ukiah, 100 Cal. at 591. See also Cal.Civ.Code. § 1214 (“Every conveyance of real property [. . .] is void as against any subsequent purchasers or mortgagee of the same property”). “An attaching creditor takes only whatever interest the debtor has.” Id. at 591. Therefore, even though the line of credit may not have been recorded, it is still valid and has greater priority over a judgment obtained after the mortgage was executed as long as the mortgage is secured. See id. at 591. The agreement between WaMu Mortgage Plus(TM) and Defendant and his former wife states that the line of credit is “secured by the property [471 S White RD San Jose, CA 95127-3234].” Ex. A of Decl. of Alex Banuelos in Response. In addition, in the Standard Terms and Conditions Section, the contract states “to secure the performance of your obligations under this Agreement, one or more of you is giving us a deed of trust, deed to secure debt, mortgage, or other security agreement, on the real property located at [471 S White RD San Jose, CA 95127-3234].” Ex. A of Decl. of Alex Banuelos in Response. Therefore, the subject property is secured by the mortgage, and because the mortgage agreement was signed in 2007, it has a greater priority than the judgment lien. See Cal.Civ.Code. § 2897. See also Bank of Ukiah, 100 Cal. at 591.

The property has a fair market value of $435,000 as of June 2, 2013. Therefore, if the property were sold at fair market value, then Defendant’s half interest would be $217,500. The minimum bid needed to satisfy the threshold requirement under § 704.780(b) is $883,716.71. Because Defendant’s fair market value is below the minimum bid, the court finds that it is unlikely that there will be a bid that satisfies the requirements under § 704.780(b).

VI. Refiling Motion

A party who originally made an application that was denied in whole or in part may make a subsequent application for the same order by presenting new evidence, circumstances, or law. Cal.Code.Civ.Proc. § 1008(b). Plaintiff filed a motion to compel a sale of the subject property in August, 2013, and the motion was dismissed without prejudice. The transcript of the hearing shows that the motion was dismissed for failure to serve Defendant’s former wife regarding the sale of the property. The court also said that the party can re-notice the motion. The phrase “without prejudice” invites the moving party to renew the motion later as long as the moving party introduces new evidence in order to correct the deficiency that led to the denial. Farber v. Bay View Terrace Homeowners Ass’n, (2006) 141 Cal.App.4th 1007, 1015. In this instance, Plaintiff has served Defendant’s former wife. Therefore, the court finds that refilling the motion does not violate CCP § 1008(b).

Therefore, Plaintiff’s motion to order the sale of property is DENIED.