Judicial Lien Imposition Found to be the Equivalent of an Improper Deficiency Judgment.
Borrower/former owner of San Diego property damaged by 2007 wildfires was nonjudicially foreclosed out of the property by a junior lienholder, which held the property for a couple of years before losing it to a foreclosing senior lienholder. Former owner then sued San Diego Gas & Electric and other third party tortfeasors for various claims relating to the wildfires, with the junior lienholder suing owner back to impose a judicial lien on any future recoveries from the third party tortfeasors or for equitable conversion recovery.
The lower court did impose a judicial lien in the amount of $837,385, plus interest, attorney’s fees and costs.
The appellate court, in Thoryk v. San Diego Gas & Elec. Co., Case No. D062680 (4th Dist., Div. 1 Apr. 9, 2014) (published), reversed, examining the trust deed language and determining the judicial lien imposition was the equivalent of an impermissible deficiency judgment. That meant the fee/costs awards went POOF! The decision is interesting reading for real estate practitioners and title companies to show how trust deed language needs to be made specific to include these types of recoveries as personal property subject to more lender-friendly mixed collateral rules.