Family Law Attorney's Real Property Lien -California

[sassy]

My husband and I filed a Chapt. 7 in Dec. and it was discharged in March 2005. My husband went thru a long protracted property settlement from a divorce which ended in 2004 (actually divorced in 1998). In 2003, his ex-spouse gave her attorney what is called a "Family Law Attorney's Real Property Lien" on the real property where we live. This is allowed under California Family Code. The property was in both of their names at that time even though we live on the property. The lien is $30,000, which is what the court said her interest in the property was at the time of the settlement in 2004. We had no record of the lien being recorded and were told by our County there no liens. We included the debt to her attorney in our bankruptcy and thought we were okay. Now we find out he recorded the lien prior to our bankruptcy. The county filed it wrong in their records so they couldn't find it. Is this a judical or statutory lien? Can we file to have it avoided as it impairs our exemption (we have a disability exemption)? All he filed with the County Recorder was a copy of the declaration the ex signed granting him the lien and a cover sheet stating "Abstract of Judgment". He didn't attach a copy of the Final Judgment because there wasn't one at the time and he hasn't filed it since it was issued. There is nothing to actually establish how much the lien is except her declaration claiming she owed her attorney $50,000 at the time she signed the declaration, which the lien can't be for since her interest was determined to be only $30,000. The lien states it is limited to whatever the court determined her interest in the property to be. We aren't sure the filing is even valid without the actual Final Judgment but we aren't sure. We were able to find a case In re Stoneking which applied to a judicial lien for attorney fees where the bankruptcy court said the lien didn't attach to the spouse's new interest in the property because the attorney didn't record the lien once the property was deeded to the spouse after the divorce settlement. It is very similar to our situation but the case doesn't say if it was this type of lien and we don't know if this is a judical lien and can't seem to find out. If this is a judical lien, it would seem to be avoidable. I can't find much about this subject on the internet and I know it is related specifically to California law but we would like any info available regarding this type of lien and if we should try to have it avoided. The attorney is threating to file a Writ of Execution to foreclose unless we pay and we would like to finish with this and move on. We don't want to spend more money filing to avoid the lien if we don't stand a chance. Would really appreciate any info provided as we are frustrated trying to figure this out. Thank you!

[HHM]

You might as well hire your own attorney, spend $5,000 to save $30,000.

I am not sure what advice anyone can offer here, if you want to challenge the lien, you have to file a Motion in the Bankruptcy Case.

Who now owns the house that was part of the divorce?

Alot will depend on how California Attorney's Lien law works. Generally, the "agreement" is what "attaches" the property. Having the judge sign off fixes the amount and "perfects" the lien, and recording is what puts other people on notice. However, when it comes to real estate, generally all aspects of the lien process need to be perfect.

[sassy]

The property is now in my husband and my name. It was transferred to my husband by Quit Claim Deed signed by the court after the property settlement when his ex didn't sign it in the time allowed by the court. He then put it in both our names. Does anyone know how to define a lien as being either statutory or judicial? As I understand it, statutory liens are not avoidable. Is that correct?

The right to give the lien to the attorney is granted in Calif. statutes but it is conditional on the court finding as part of a judgment that she had an interest in the property.

What really seems wrong is that if she hadn't given the lien to her attorney, the equalization payment of $30,000 due to her for the property (which she gave to her attorney so she is no longer entitled to it) would have been discharged in the bankruptcy. She actually owes my husband more money from the divorce than he owed her, even if he had owed her the $30,000 payment for the property and the court made it clear there was no support award in the settlement. So, we would be free of this if she hadn't given the lien. She was ordered to pay $20,000 of my husband's attorney fees and hasn't paid plus she has a $71,000 (includes interest) debt to my husband for "misappropriation" of money he inherited with a "violation of her fiduciary duty" for taking the funds. As we understand it, she can't even file bankruptcy to get rid of that obligation. Plus she lives in Texas now and they have pretty strong exemptions so it is hard to collect money from someone in Texas. We'll never see the money and basically no way to collect it but by this round about way, she is making us pay $30,000 of her attorney fees. Seems wrong to us.

As to perfecting a lien, do you think the attorney made a mistake by not filing to attach the Final Judgment to the lien? Honestly, all he filed with the County was a declaration signed by her (with no notary) giving him the lien for $50,000 with a sentence at the end stating the lien was limited to a determination by the court of the amount of her interest in the property. He added a cover sheet titled "Abstract of Judgment" and filed it. He never added the Final Judgment so it seems like it wouldn't be perfected without the Final Judgment that determines the amount of the lien. Any title company doing a search would believe the lien is $50,000.

We appreciate the help and information. Thank you.

[HHM]

As to perfecting a lien, do you think the attorney made a mistake by not filing to attach the Final Judgment to the lien?

Actually, I think that is probably the weakest of the issues you have identified (this is an issue of CA law, not bankruptcy law, also, an attorney's lien is not a judgment, so there is no Final judgment to be recorded). Generally, Attorney's Liens are statutory liens. You probably have stronger arguments in other areas, i.e. the lien only attached to the ex-spouses portion of the community interest in the house, once the house was refinanced and the ex-spouses community interest was paid, I don't see that the attorney could still have a valid lien.

A motion to Avoid lien would be the wrong avenue to challenge this lien as generally, you are admitting the lien is valid. You may have to file for a Motion to Lift the Automatic Stay in your Bankruptcy so you can file a Complaint in California State Court to have the lien declared void/invalid.

However, these are all technical issues of california law, so you should seek the advice of a CA lawyer. Also, are you represented by an attorney in your Bankruptcy?

[sassy]

Thank you so much for responding and providing information so quickly. Could you explain what kind of motion we would file in State Court to have the lien declared invalid? Our bankruptcy has been discharged (March 05) so is there still an automatic stay in place?

Would we need a real estate attorney to declare the lien invalid?

We have a bankruptcy attorney but we are frustrated about not being able to get a response from him. He says he is researching and will call back and doesn't. Last week he told me the attorney was just preserving her (the ex) interest in the property) but I think he got issues confused and he was short on time/distracted so we couldn't talk. Yesterday he said he would call back today and he seemed apologetic about the call last week. When we do talk to him, we want to ask intelligent questions since it takes a month to get a chance to talk to him about this. This seems to be beyond his experience. Can we change attorney's to handle this if it turns out to be a bankruptcy issue and we need a motion to avoid? It is really frustrating to have an attorney and not be able to get answers.

Thank you.

[sassy]

Sorry, wanted to add that the property is paid for so there was no refinancing. The court signed a Quit Claim Deed putting it into my husband's name only because the Judge ordered the ex to sign one within 10 days and she did not. That transferred the property from joint ownership to my husband as his separate property. Does this make a difference if as to your statement that the lien only attached to ex-spouses community interest in the property? Thank you.

[HHM]

I am really not in a positions to give you specifics aobut HOW to go about doing it, but yes, an real estate attorney would be a good starting point. Also, sorry, I missed the fact that you were already discharged, so ignore what I said about the automatic stay, there is no automatic stay in place.

In CA state court, you would probably file something called a "Complaint for Declaratory Judgment" or "Complaint to Clarify Title" or whatever CA calls it. Basically, you would be asking the court to interpret and make a declaration regarding the validity or invalidty of the lien.

Again, I don't see how this attorney has a valid lien on the property, attorney's lien can only run to the property of their client (unless there is an order by the court ordering one party to pay the other parties attorney's fees). But again, it will really depend on the the Decree of Divorce, how property was distributed, etc.

[sassy]

Again, thank you so much. There is no order that my husband pay any of her attorney fees. The court said my husband got the property as his separate property with an equalization payment of $30,000 due her (again, this was not due her because she had signed her interest in the property over to her attorney in the lien). If not for that lien, we could have included this equalization in our bankruptcy (she is a creditor) and been on our way to a life without all this stuff.

I know bankruptcy is supposed to a fresh start and I've read where the court tries to apply that concept to the bankruptcy laws when issues arise. By giving her attorney a lien on the property, it interfers with our fresh start (and exemption) by not allowing us to discharge a debt to her that would have been dischargeable but now might not be because a real property lien exists as a result of her assigning her debt to the property. She essentially converted a dischargeable debt into something that might not be. Is that wrong thinking on my part?
I know it sounds complicated but you've helped give us some direction.
Thank you