BILL ANALYSIS �
SENATE JUDICIARY COMMITTEE
Senator Hannah-Beth Jackson, Chair
2013-2014 Regular Session
AB 2317 (Maienschein)
As Introduced
Hearing Date: June 17, 2014
Fiscal: No
Urgency: No
TH
SUBJECT
Execution: Sale of Property
DESCRIPTION
This bill would codify in California's Enforcement of Judgments
Law 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 or 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. (8 Witkin Cal. Proc. Enf. Judg. Sec. 99.) Seized
property can then be sold at a judicially ordered sale (an
"execution sale") to satisfy the money judgment.
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. (See e.g. 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 recommended eliminating
(more)
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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." (California Law Revision Commission, 1982
Creditors' Remedies Legislation (Sept. 1982), pgs. 1118-1119.)
The Legislature responded to the Commission's recommendations by
enacting AB 707 (McAlister, Ch. 1364, Stats. 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." (Code Civ.
Proc. Sec. 701.680(a).)
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, pgs. 1119-1120.) This 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." (Sen.
Judiciary Com., analysis of AB 707 (1981-1982 Reg. Session),
Aug. 2, 1982, p. 22.) California Appellate Courts have
concluded that "the Legislature adopted the [Enforcement of
Judgments Law] based on the recommendations of the CLR
Commission," and consult its recommendations in interpreting
that statute. (Lang v. Roch� (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.
(See Id.)
This bill would codify that the Enforcement of Judgments Law
does not affect, limit, or eliminate a judgment debtor's
equitable right of redemption.
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CHANGES TO EXISTING LAW
Existing law , the California Constitution, provides that a
person may not be deprived of life, liberty, or property without
due process of law. (Cal. Const. art I, Sec. 7.)
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
may be issued successively until the money judgment is
satisfied, except as specified. (Code Civ. Proc. Sec.
699.510(a).)
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. (Code Civ.
Proc. Sec. 699.510(a).)
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. (Code Civ. Proc. Sec. 699.510(b).)
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:
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
the judgment debtor, or the judgment debtor's successor in
interest, may recover damages caused by the impropriety.
(Code Civ. Proc. Sec. 699.510(c).)
This bill would provide that the above provisions do not affect,
limit, or eliminate a judgment debtor's equitable right of
redemption.
COMMENT
1. Stated need for the bill
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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 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.
2. Due Process
Both the federal and California Constitutions guarantee that an
individual's "life, liberty, or property" shall not be deprived
without due process of law. Construing the federal due process
clause, the U.S. Supreme Court has held that "[u]ndoubtedly
where life and liberty are involved, due process requires that
there be a regular course of judicial proceedings, which imply
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that the party to be affected shall have notice and an
opportunity to be heard; so, also, where title or possession of
property is involved." (Hagar v. Reclamation Dist. No. 108
(1884), 4 S. Ct. 663, 667.) As the author's description of Lang
v. Roche above indicates, individuals who deliberately
perpetrate fraud upon a court and deceptively enlist the court's
power to issue writs of execution to seize the property of
others denies a judgment debtor the benefit of "a regular course
of judicial proceedings."
Moreover, our own Supreme Court has held, in the context of an
execution sale, that when a "purchaser has, in the language of
the [U.S.] [S]upreme [C]ourt, been guilty of any unfairness or
has taken any undue advantage, resulting in such gross
inadequacy and consequent injury to the owner of the property,
he will be deemed guilty of fraud warranting the interposition
of a court of equity in favor of the owner who is himself
without fault." (Odell v. Cox (1907), 151 Cal. 70, 75 [internal
quotation marks omitted].) When such a miscarriage of justice
occurs, "[o]nly the return of the innocent individual's property
satisfies the constitutional guarantee that no state may deprive
any person of life, liberty, or property, without due process of
law." (Lang v. Roch�, 201 Cal.App.4th at 265.) "[I]t would,"
in the words of our Supreme Court, "be a reproach to a court of
equity, if it could not lay hold of such a transaction as this
is shown to be, and set aside a sale of property acquired under
the forms of law and in defiance of natural rights." (Odell v.
Cox, 151 Cal. at 77.)
This bill ensures that courts are explicitly able to exercise
their equitable powers to allow those unfairly dispossessed of
property through an execution sale to redeem their property.
Staff notes that because such miscarriages of justice are
extremely rare, codifying this equitable remedy will not act as
an impediment to obtaining fair bids at execution sales, and
will therefore not undercut the policy rationale for striking
the pre-1982 statutory right of redemption from the Enforcement
of Judgments Law.
Support : None Known
Opposition : None Known
HISTORY
Source : Business Law Section, State Bar of California
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Related Pending Legislation : None Known
Prior Legislation :
AB 707 (McAlister, Ch. 1364, Stats. 1982) See Background.
SB 137 (Ducheny, Ch. 452, Stats. 2005) created a right of
redemption for property sold following a nonjudicial foreclosure
by a homeowners association for nonpayment of assessments.
Prior Vote :
Assembly Floor (Ayes 78, Noes 0)
Assembly Committee on Judiciary (Ayes 10, Noes 0)
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