Federal Intermediate Credit Bank of Spokane v. O/S Sablefish
| Decision Date | 15 July 1988 |
| Docket Number | No. 54386-1,No. 625927,625927,54386-1 |
| Citation | 758 P.2d 494,111 Wn.2d 219 |
| Court | Washington Supreme Court |
| Parties | . O/S SABLEFISH, Official, her engines, machines, and appurtenances, etc.; Derry E. and Cynthea C. Gislason; James A. and Lynda L. Campbell; Rudolph K. and Rosemary Johanson; Virgil L. and E. Luana Gordon; Roger K. Bassett, Jr., and "Jane Doe" Bassett; and their respective marital communities, d/b/a Sablefish, a partnership, Judgment Debtors, v. Christopher MARTIN and Gregory S. MacLachlan, Intervenors. Supreme Court of Washington, En Banc |
Witherspoon, Kelley, Davenport & Toole, P.S. by Kristine A. Chrey, Spokane, for intervenors.
The legal questions in this case certified to us by the United States District Court are whether a judgment creditor may enforce a judgment under Washington's general judgment lien statutes (RCW 4.56.190-.200) against real property purchased without actual notice of the judgment and, if so, whether any of the property purchased is exempt from execution under Washington's homestead statutes.
A chronology of the critical dates and facts is helpful to an understanding of the issues certified.
On February 10, 1987, the Federal Intermediate Credit Bank of Spokane, judgment creditor herein, presented a praecipe for writ of execution to the United States District Court, Western District of Washington, for issuance against certain real property located in King County (the Property). Named as judgment debtor was Rosemary Johanson.
The supporting affidavit stated that on July 2, 1984, Puget Sound Production Credit Association (PSPCA) obtained a judgment in the amount of $1,308,889.09, plus interest, against the judgment debtor, and that PSPCA assigned the judgment to the judgment creditor on July 1, 1985.
The affidavit added that a judgment lien attached to the Property on July 2, 1984, when the judgment was entered. The judgment debtor sold the Property to Christopher Martin and Gregory S. MacLachlan (purchasers) on April 1, 1985 subject to the lien. The judgment debtor never occupied the Property as her homestead.
On February 13, 1987, the United States District Court Clerk issued a writ of execution on the Property. On February 19, 1987, the United States Marshall issued notice that sale of the Property would occur on April 10, 1987. On February 25, 1987, the marshall levied execution on the Property and posted Notice of Sale.
On March 5, 1987, the purchasers filed a motion to intervene, quash writ of execution and levy on real property and enjoin sale of real property. Purchaser Martin stated that he and Gregory MacLachlan purchased the Property from the judgment debtor on April 1, 1985 for a purchase price of $53,000 and that he has occupied the house solely as his dwelling and that the dwelling is his homestead. The purchaser also declared that he had no knowledge, nor did he have any reason to know about, any judgment or claim against the judgment debtor which might affect the Property, as it was his understanding that the Property was owned by her free and clear at the time of sale. Further, the purchaser declared that he had never heard of the judgment creditor or PSPCA, and that his title insurance company did not advise him of any liens against the house prior to the April 1, 1985 purchase. The judgment was listed in the district court's Party Index and its judgment book before the April 1, 1985 purchase date. The judgment debtor recorded the judgment in the King County Auditor's Office on November 20, 1985.
On March 27, 1987, after hearing oral argument, the United States District Court entered an order permitting the purchasers to intervene in this action, and also quashing the writ of execution and levy on real property and enjoining the sale of the real property.
On May 26, 1987, the purchasers asked the district court to quash the purported judgment lien and quiet title to their real property. This motion superseded their March 5th motion. Alternatively, they moved for certification to the State of Washington Supreme Court. On September 10, 1987, the United States District Court entered an order granting the purchasers' motion for certification and staying their motion to quash and quiet title. The district court determined that unresolved questions of state law exist, the answers to which are necessary for the court to rule on the purchasers' motion to quash the judgment lien and quiet title. The court entered a statement of questions for local law certified for answer pursuant to RCW ch. 2.60.
These questions are as follows.
ISSUE ONE. Can a judgment creditor enforce a judgment lien commenced pursuant to RCW 4.56.190-.200 against real property purchased from the judgment debtor by a purchaser for value without actual notice of the judgment, when the judgment was not recorded with the county auditor at the time of sale?
ISSUE TWO. If the answer to Issue One is affirmative, then is the subsequent purchaser's homestead under RCW 6.12.090 (now codified as RCW 6.13.070) exempt from execution except as provided by statute (RCW 6.12.100; now codified as RCW 6.13.080)?
ISSUE ONE.
CONCLUSION. A judgment lien on real estate is created by RCW 4.56.200 and when entered by a federal district court, commences upon real property in the county where the judgment is entered from the date of entry. Such entry serves as constructive notice to purchasers that a judgment lien has attached to a judgment debtor's property. While a judgment may also be separately filed for record in the county auditor's office, such recording is not necessary for the lien to be effective against purchasers of the property to which a lien has attached.
Federal law provides that state laws governing the creation and existence of liens shall apply to a lien entered by a federal district court in such state. 1 In Washington, a judgment lien arises automatically upon entry of judgment as to all real estate of the judgment debtor located in the county of the federal district court or of the state superior court in which the judgment is rendered. 2 Judgments rendered by a federal district or superior court in any other county become liens when a certified abstract of the judgment is filed with the county clerk of the county where the debtor's real estate is located. 3 Since the judgment in this case was entered in the county where the judgment debtor's property is located, it became a lien on that property on the day it was entered. 4
The purchasers argue that while such a judgment lien is effective upon entry between a judgment creditor and debtor, the judgment must also be recorded in the county auditor's office to be effective against subsequent purchasers of a judgment debtor's property. It is interesting to note that Washington statutory law once supported this argument by requiring a judgment to be recorded in the county auditor's office before it could take effect as a lien upon a judgment debtor's property. 5 That requirement was expressly repealed, however, in 1893. 6 The amended statutes provided that judgments would become liens either on the date of entry or by filing a transcript of the judgment with the county clerk. 7 All references to the auditor's office in the earlier statutes were eliminated.
It is of interest to further observe that the Legislature considered reinserting that early recording requirement into the judgment lien statutes during the recently concluded 1988 legislative session. Senate Bill 5450 introduced at that session would have amended RCW 4.56.200 to require money judgments upon a debtor's real estate to be recorded before a lien would commence. This bill, however, did not become law.
The general judgment lien statutes, RCW 4.56.190-.200, thus retain the characteristics and consequences set forth in 1893 as described by this court in the early case of Young v. Davis, 50 Wash. 504, 506, 97 P. 506 (1908):
Since the act of March 3, 1893 (Laws 1893, p. 65), a judgment of the superior court has been a lien upon the real property of the judgment debtor in the county where the judgment is rendered from the date of its entry, and this being so, it is of course constructive notice to anyone purchasing such real property. It must follow, also, that since the judgment itself is constructive notice, all of the subsequent proceedings had thereunder are, likewise, constructive notice to subsequent purchasers of real property affected by such proceedings.
(Italics ours.) Since the Legislature has not seen fit to reinstate the 1881 recording requirement, the observations of Young are as valid and subsisting today as they were when Young was decided in 1908. A money judgment entered by a federal district court becomes a lien on property in the county where the judgment is rendered from the date of entry, and from that date serves as constructive notice to purchasers that a judgment debtor's property is encumbered accordingly. 8
Since the judgment lien statutes contain no separate recording requirement, we will not read one into them. 9 The Legislature has inserted recording requirements into other areas of the law; e.g., a judgment against the owner of a homestead becomes a lien on the value of the homestead property in excess of the homestead exemption from the time the judgment is recorded (RCW 6.13.090); notices of federal liens must be recorded (RCW 60.68; Laws of 1988, ch. 73, § 2); final judgments or decrees partitioning or affecting title or possession of real property must be recorded (RCW 65.04.070). Moreover, the Recording Act states that while a conveyance of real property is effective between the immediate parties without being recorded, it must be recorded to be...
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