Daily Development for Friday, October 8, 1999

By: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
randolphp@umkc.edu

HOMESTEAD; PRIORITY; JUDGMENT LIENS: A judgment lien cannot attach to homestead property and does not reattach when the property ceases to be a homestead due to foreclosure of the property by a junior mortgagee.

NationsBank Mortgage Corporation v. Security Bank & Trust, No. C3 00555 (Minn. App. 10/5/99)

Creditor obtained and filed a judgment lien against judgment debtor. The judgment lien could not attach to debtor's homestead. Two months after the filing of the judgment lien, the debtor gave a mortgage to lender. A year later, debtor defaulted on the mortgage, and lender foreclosed, purchasing at the foreclosure sale. Minnesota has a six month statutory redemption period, but debtor did not redeem during that period.

Judgment creditor claimed that its lien attached to the property with its original docketed priority as of the moment that the debtor failed to redeem, thereby relinquishing any claim of homesteadin the property. Consequently, judgment creditor claimed a line against the property in the hands of the foreclosure sale purchaser.

The judgment creditor cited authority to the effect that the judgment lien is merely barred from seizure and sale, and argued that it really should be viewed as perfected against the property, and therefore attached as against a nonhomestead owner. It also pointed to cases involving the situation where a judgment debtor had lost homestead status but still owned the land. In that situation, a prior docketed judgment had been held to attach to the property with the priority of its original docketing.

The court found that the judgment lien was ineffective against the foreclosure purchaser. It took the view that there was never a moment in time when the property was "owned" by the mortgagor but not subject to homestead. Consequently, there was never a time for the judgment to attach. Consequently, the judgment did not attach when the property passed to the foreclosure sale purchaser. .

Comment: This is another of those "law is plumbing" decisions that deals with the question as a mechanical one, rather than an analysis of policy. This approach has some validity, granted, in priority disputes, since the real effort ought to be to have a clear, predictable rule. Sitll, there does seem to be a policy issue at stake here. Should a mortgagee, whose portgage attaches pursuant to a waiver of homestead, be permitted to assert foreclosure title free and clear of prior judgment liens who are barred by the homestead?

If the mortgagee were not able to transfer clean foreclosure title, then the homesteader would be denied the ability to mortgage the homestead property where there was a threatening judgment lien. If it is the policy of the state to permit the right to mortgage as part of the homestead right, then the judgment lien should not have any claim against the foreclosure title, and the case is right. But shouldn't the focus of the court be on whether that, indeed, is the policy of the state?

Also see: Baratta v. Polk County Health Serv., Inc., 588 N.W.2d 107 (Iowa 1999). Second wife's homestead interest in property prevents exwife's subsequently registered judgment lien for unpaid child support from attaching to property sold by husband and second wife to a third party purchaser. (This case was the DD for 9/20/99)

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