BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 2317|
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THIRD READING
Bill No: AB 2317
Author: Maienschein (R)
Amended: As introduced
Vote: 21
SENATE JUDICIARY COMMITTEE : 6-0, 6/17/14
AYES: Jackson, Corbett, Lara, Leno, Monning, Vidak
NO VOTE RECORDED: Anderson
ASSEMBLY FLOOR : 78-0, 5/15/14 (Consent) - See last page for
vote
SUBJECT : Execution: sale of property
SOURCE : The Insolvency Law Committee of the Business Law
Section,
State Bar of California
DIGEST : This bill codifies in Californias Enforcement of
Judgments Law a judgment debtors equitable right of redemption.
ANALYSIS : Existing law, the California Constitution, provides
that a person may not be deprived of life, liberty, or property
without due process of law.
Existing law provides, in relevant part, that after entry of a
money judgment, and upon application of the judgment creditor, a
writ of execution shall be issued by the clerk of the court and
shall be directed to the levying officer in the county where the
levy is to be made and to any registered process server. Writs
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may be issued successively until the money judgment is
satisfied, except as specified.
Existing law states that, except as otherwise provided, a sale
of property pursuant to the Enforcement of Judgments Law is
absolute and may not be set aside for any reason.
Existing law provides that if a judgment is reversed, vacated,
or otherwise set aside, the judgment debtor may recover from the
judgment creditor the proceeds of a sale pursuant to the
judgment with interest at the rate on money judgments to the
extent the proceeds were applied to the satisfaction of the
judgment.
Existing law provides, as specified, that if a sale was improper
because of irregularities in the proceedings, because the
property sold was not subject to execution, or for any other
reason:
1. The judgment debtor, or the judgment debtor's successor in
interest, may commence an action within 90 days after the
date of sale to set aside the sale if the purchaser at the
sale is the judgment creditor; and
2. The judgment debtor, or the judgment debtor's successor in
interest, may recover damages caused by the impropriety.
This bill provides that the above provisions do not affect,
limit, or eliminate a judgment debtor's equitable right of
redemption.
Background
Under existing law, when a court awards a money judgment against
a certain party (a "judgment debtor"), the opposing party who
secured the judgment (a "judgment creditor") is entitled to
collect his/her judgment through a process called execution.
Upon issuance of a writ of execution from a court, a levying
officer (such as a sheriff) is directed to enforce the judgment
by levying on the property, i.e., by seizing the property under
the writ. Seized property can then be sold at a judicially
ordered sale (an "execution sale") to satisfy the money
judgment.
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From at least the 1860s up until 1982, California law protected
real property owners who lost property at an execution sale
under certain circumstances by granting a statutory right to
redeem property from the sale, most prominently when the
purchaser of seized property was the judgment creditor of a
judgment later invalidated by a court. (Reynolds v. Harris
(Cal. 1860) 14 Cal. 667 [where the plaintiff in an action
purchases the defendant's property under a sale ordered by a
judgment, the former owner, after reversal on appeal, may have
the sale set aside and be restored to possession].) In 1982,
the California Law Revision Commission (Commission) recommended
eliminating California's statutory right of redemption as part
of broader reforms to the Enforcement of Judgments Law. The
Commission, through its examination of the issue, determined
that "[t]he very existence of the right of redemption operates
as the greatest impediment to the achievement of the primary
purpose of obtaining a fair bid at a sale of real property
because the purchaser can only obtain title that is defeasible
for another year or, in certain cases, three months," and that
the statutory right to redeem in "exceptional cases does not
justify the detrimental effect in the vast majority of cases
[caused by] the right to redeem." (Commission, 1982 Creditors'
Remedies Legislation, Sept. 1982). The Legislature responded to
the Commission's recommendations by enacting AB 707 (McAlister,
Chapter 1364, Statutes of 1982), which codified the current
Enforcement of Judgments Law and eliminated the prior statutory
right to redeem. Under the new statutory scheme, except in
limited circumstances, an execution sale "is absolute and may
not be set aside for any reason."
Importantly, in its recommendation on reforming the Enforcement
of Judgments Law, the Commission noted that elimination of the
statutory right to redeem "would not affect the equitable right
of a judgment debtor to redeem from a sale at a grossly
inadequate price where the purchaser is guilty of unfairness or
has taken undue advantage." (1982 Creditors' Remedies
Legislation) The Senate Judiciary Committee's analysis of AB
707 noted the Commission's report, stating that "[t]he Law
Revision Commission has prepared a report which it wishes the
Committee to adopt as the Committee's comments." (Senate
Judiciary Committee, analysis of AB 707 (1981-1982 Regular
Session.) California Appellate Courts have concluded that "the
Legislature adopted the [Enforcement of Judgments Law] based on
the recommendations of the Commission," and consult its
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recommendations in interpreting that statute. (Lang v. Roché
(Cal.App.2d Dist. 2011) 201 Cal.App.4th 254, 263.)
Consequently, at least one court has held that despite repealing
the statutory right to redeem property sold at a judicially
ordered sale, Californians enjoy an equitable right to
redemption under certain circumstances.
This bill codifies that the Enforcement of Judgments Law does
not affect, limit, or eliminate a judgment debtor's equitable
right of redemption.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local:
No
SUPPORT : (Verified 6/19/14)
The Insolvency Law Committee of the Business Law Section,
State Bar of California (source)
ARGUMENTS IN SUPPORT : The author writes:
The lack of clarity regarding the equitable right of
redemption [in the Enforcement of Judgments Law] presented
itself in Lang v. Roche (2011) 201 Cal.App.4th 254, and
almost caused plaintiff Lang to unfairly lose his property.
In a long-running dispute, one neighbor ("Roche")
deliberately misspelled the other neighbor's name ("Lang")
on a defamation lawsuit, falsely claimed to the trial court
that Lang could not be found, and obtained a default
judgment after serving Lang by publication under the
misspelled name. Eight years later, Roche obtained a writ
of execution on Lang's property.
Lang discovered the default judgment as Roche prepared to
execute on it, and filed a lawsuit against Roche seeking to
void the judgment and enjoin the sheriff's sale. Lang
failed to obtain the injunction and Roche bought Lang's
property for $100 at the sheriff's sale. The default
judgment was ultimately vacated and the lawsuit dismissed.
Thereafter, Lang filed a lawsuit against Roche seeking to
quiet title to the property that Roche obtained at the
sheriff's sale. Since Lang's lawsuit to get back the
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property was filed six years after the execution sale, the
trial court dismissed the case on the basis that Lang
missed the statutory 90 day deadline.
On appeal, the court looked at the history of the
[Enforcement of Judgments Law (EJL)] and set aside the
sale, holding that the intent of the legislature as
evidenced by the [California Law Revision Commission's]
recommendation evidenced that the legislative intent when
enacting the EJL was not to abrogate a property owner's
equitable right of redemption. Had the court not looked
beyond the plain language of the statute, Lang's property
would have been lost for good. This bill would codify the
original intent of the EJL by making explicit that property
owners retain their equitable right of redemption after a
[s]heriff's sale.
ASSEMBLY FLOOR : 78-0, 5/15/14
AYES: Achadjian, Alejo, Allen, Ammiano, Bigelow, Bloom,
Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian
Calderon, Campos, Chau, Chávez, Chesbro, Conway, Cooley,
Dababneh, Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox,
Frazier, Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon,
Gorell, Gray, Grove, Hagman, Hall, Harkey, Roger Hernández,
Holden, Jones, Jones-Sawyer, Levine, Linder, Logue, Lowenthal,
Maienschein, Medina, Melendez, Mullin, Muratsuchi, Nazarian,
Nestande, Olsen, Pan, Patterson, Perea, John A. Pérez, V.
Manuel Pérez, Quirk, Quirk-Silva, Rendon, Ridley-Thomas,
Rodriguez, Salas, Skinner, Stone, Ting, Wagner, Waldron,
Weber, Wieckowski, Wilk, Williams, Yamada, Atkins
NO VOTE RECORDED: Mansoor, Vacancy
JA:d 6/19/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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