Neil Acquisition, L.L.C. v. Wingrod Inv. Corp., No. 86634

• Court: Supreme Court of Oklahoma
• Writing for the Court: OPALA; WILSON; SUMMERS
• Citation: 932 P.2d 1100,1996 OK 125
• Decision Date: 19 November 1996
• Docket Number: No. 86634
• Parties: NEIL ACQUISITION, L.L.C., an Oklahoma limited liability company, Appellant, v. WINGROD INVESTMENT CORPORATION, a Delaware corporation, Appellee.

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932 P.2d 1100 1996 OK 125 NEIL ACQUISITION, L.L.C., an Oklahoma limited liability
company, Appellant,
v.
WINGROD INVESTMENT CORPORATION, a Delaware corporation, Appellee. No. 86634. Supreme Court of Oklahoma. Nov. 19, 1996.
Rehearing Denied Feb. 3, 1997.

Kurt M. Rupert, Melanie J. Jester, Hartzog Conger & Cason, Oklahoma City, for appellant.

James D. Tack, Jr., Robertson & Williams, Oklahoma City, for appellee.

OPALA, Justice.

The issues we are asked to decide today are simply put by these two questions: 1) May a trial judge, by nunc pro tunc correction of an earlier unrecorded deficiency adjudication (that was misfiled in the court clerk's office), reorder judgment lien priorities? and 2) Does a recorded foreclosure decree establish lien priority for a later acquired but unrecorded deficiency judgment? Our answer to both questions is in the negative.

The parties in this case are two companies with competing judgment lien claims sought to be impressed against the same real property. By summary judgment the trial court ruled Wingrod Investment Corporation [Wingrod] held the superior lien because its foreclosure decree was recorded in the county clerk's office before the foreclosure decree secured by Neil Acquisition, L.L.C. [Neil]. The appellate court affirmed. Both courts appear to have overlooked that Wingrod failed to record its post-sale deficiency order, while Neil's like adjudication was placed of record. Neil's contention is that Wingrod's priority status was lost by its failure to perfect a judgment lien for the adjudged deficiency. We agree and direct that, on remand, judgment be entered in a manner consistent with today's pronouncement.

I THE ANATOMY OF LITIGATION

The FDIC secured in 1989 several foreclosure decrees upon real property owned by C.A. Henderson. Two cases here in contention proceeded to sale. Deficiency determinations followed in each of them for the unsatisfied amount of the adjudicated indebtedness. By assignment, the parties in this suit succeeded to the deficiency interests of the FDIC.

The probative material in the record establishes that the Wingrod deficiency order, though pronounced December 7, 1989, initially was not filed in the court case nor shown upon its appearance docket. Through a "scrivener's error" the case number next to

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the caption shown on the order identified the wrong case. The misnumbered order was then filed in a case in which Neil was the foreclosing litigant. A nunc pro tunc memorial, issued on July 20, 1994, corrected the number for the Wingrod deficiency, expunged the document from the other (wrong) case file, and ordered the court clerk to enter Wingrod's deficiency adjudication in the correctly numbered case "as if it had originally been entered on December 7, 1989," the date the deficiency was initially pronounced. Neither Wingrod nor its predecessor in interest ever recorded the misfiled deficiency document in the office of the county clerk.

The Neil company's predecessor recorded the December 15, 1989 deficiency order in the office of the county clerk no less than twice --first on January 10, 1990, and then again on January 17, 1990. Both companies caused writs of general execution to issue. Neil brought this suit to establish its judgment lien priority over the competing interest claimed by Wingrod. After initial summary judgment for Neil, the cause came to be reconsidered, and summary judgment then went to Wingrod. The Court of Appeals affirmed the trial court's decision. Certiorari was granted on Neil's petition. Because the trial court's disposition was effected by summary judgment, the issues on review are before us for a de novo examination. ¹

II

A DEFICIENCY ADJUDICATION MUST BE RECORDED IN THE OFFICE OF

THE COUNTY CLERK IN ORDER TO ESTABLISH THE

JUDGMENT CREDITOR'S LIEN PRIORITY

To be considered a lien on real property, a judgment must be filed of record in the office of the county clerk. ² The Court of Appeals rested its holding on Wingrod's act of recording its foreclosure decree before Neil's like decree was placed of record. In this it erred. The dispositive issue here does not deal with the priority of recorded foreclosure decrees, but with the priority of recorded deficiency orders. Neil recorded its deficiency while Wingrod did not. Neil's judgment lien is hence superior to that of Wingrod. Qui prior est tempore potior est jure. ³

A foreclosure decree authorizes merely the sale of the specific land that is mortgaged. It does not represent a recovery of money and hence will not support a general execution. ⁴ It is the postjudgment deficiency adjudication which determines the amount of deficiency and then allows a general execution to issue against the property owned by the debtor other than that which has been foreclosed. ⁵

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Not until there is a judicial determination of a deficiency ⁶ can a general execution issue. To keep the deficiency alive, execution upon the deficiency must be issued within five years. ⁷ The deficiency instrument must be recorded if it is to be established as a judgment lien against the real property of the debtor.

The statutory scheme prevents the automatic entry of deficiency. That adjudication, which cannot be effected in advance of sale and does not deal with issues on the merits, ⁸ is part of postjudgment process. ⁹ A deficiency order does not legally transform itself into a lien until its sine qua non prerequisites have been met by: 1) a timely filing of a motion for deficiency judgment ( within 90 days of the sale); ¹⁰ 2) the court's ascertainment that a deficiency exists in the 12 O.S.1990 § 686 sense; ¹¹ and 3) the order

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(memorial) is entered and recorded. If the deficiency's entry were automatic--in the sense that it could be effected ex lege and without judicial intervention--there would no doubt be merit to the argument that the lien of a post-foreclosure monetary deficiency recovery should be allowed to attach at the time the foreclosure decree is recorded (after its entry upon the court clerk's record). At common law, the deficiency was automatic and called for no judicial intervention. ¹² Since § 686 mandates a hearing and a determination of deficiency in accordance with the statutory formula, it cannot be said that a foreclosure decree alone, once recorded, may serve to establish the priority of a § 706 lien whose underlying amount of obligation is not yet in legal existence. III

NEIL'S KNOWLEDGE OF WINGROD'S UNRECORDED DEFICIENCY ORDER

DOES NOT ADVANCE WINGROD'S PRIORITY STATUS

Wingrod's argument that its priority should be advanced because Neil knew or should have known of Wingrod's deficiency order (since the instrument adjudicating its amount was erroneously filed in the Neil case) is without merit. An unrecorded deficiency ascertainment did not place Wingrod in the protected class of a judgment lienholder. ¹³ Because Wingrod's unrecorded deficiency never acquired the attribute of a lien, Neil's priority cannot be subordinated by mere knowledge of Wingrod's unrecorded deficiency order. Courts are powerless to advance an unperfected judgment lien to a higher priority than that held by a perfected judgment lien. Such action would impermissibly disturb the law's regime that is made dependent on the order of time a judgment is recorded rather than on the lienor's notice of outstanding encumbrances.

IV

AN ORDER NUNC PRO TUNC CANNOT OPERATE RETROSPECTIVELY TO

PERFECT A JUDGMENT LIEN OR TO AFFECT A JUDGMENT

LIEN'S PRIORITY

Neil's argument that Wingrod's foreclosure decree became dormant because over five years had elapsed before execution was issued confuses the lien priority issue with dormancy statutes. ¹⁴ We reject the notion

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that by a nunc pro tunc device the court can reorder lien priorities that are statutorily based on time...