A recent case decided by the Michigan Court of Appeals addressed the issue of whether a “judgment lien survives and can be foreclosed on after the judgment debtor’s conveyance of the encumbered real property to a vendee who has record notice of the lien, but where no available closing proceeds are distributed to the judgment creditor in whole or partial satisfaction of the underlying judgment.” Thomas v. Dutkavich.
Laverne and Marilyn Dutkavich (the “Dutkaviches”) “obtained a judgment lien against Steve Pelletier (“Pelletier”) in the amount of $29,183” in 2004. In 2006, Pelletier purchased a condominium unit and recorded a warranty deed on January 24, 2007. In July 2007, the “Dutkaviches filed a notice of judgment lien with the register of deeds” on the condominium. In September 2007, Pelletier conveyed the property to Robert Thomas (“Thomas”). None of the proceeds from the sale were dispersed to the Dutkaviches, even though the judgment lien had been filed prior to closing. The Dutkaviches recorded a notice of levy on the property after the property had already been transferred to Thomas. In 2009, Thomas filed suit to quiet title to the property.
The Dutkaviches claimed that “payment in full is a prerequisite to discharging a judgment lien under the” Michigan Judgment Lien Act (“MJLA”). Because there was no payment here, the Dutkaviches claim that the judgment lien clouded the title, and that Thomas was not a bona fide purchaser for value because Thomas “failed to demand that the lien be discharged with the proceeds from the sale.”
“Thomas contends that MCL 600.2819 requires that the judgment debtor alone to pay the judgment creditors with proceeds from the sale.” Thomas argued that the purchaser of the property has no duty to satisfy the judgment, regardless of whether or not they had notice of the judgment lien.
The Court of Appeals held that the MJLA did not permit the foreclosure of the judgment lien. Further, the MJLA did not give Thomas any obligation to make payment to the Dutkaviches, as Pelletier, the judgment creditor was required to make that payment.
The Court of Appeals held that the MJLA did require that the judgment lien remain attached to the property. The Court reasoned that the Legislature had provided that a partial discharge of a lien would continue as an encumbrance on the property, then certainly a non-payment would continue to remain attached to the property. This may seem unfair to Thomas, but he proceeded with the closing without demanding that the judgment lien be extinguished.
The Court of Appeals also held that MCL 600.6018 may allow the Dutkaviches to claim a levy on the property and force the sale of the property. MCL 600.6018 provides a separate remedy from the MJLA, which allows the levying against land conveyed in fraud of creditors. The Court of Appeals remanded the case to the trial court to determine whether MCL 600.6018 would allow the Dutkaviches to make such a claim.
This article was written by Matt Ehrlich from Demorest Law Firm.
