- Judgments
- Liens
- Deeds
- Receivables
- Defaults
Judgments
Once a money judgment is rendered and signed, the winning party (now the judgment creditor) is entitled to initiate procedures to enforce it. The types of enforcement mechanisms that are available depends on a number of factors, including the amount of time that has elapsed since rendition, and whether the judgment debtor has suspended enforcement of the judgment pending appeal, among others. In some cases, the defendant, now a judgment debtor, or the liability insurance carrier will arrange to pay the judgment. In other situations, the recalcitrant judgment debtor owns no nonexempt assets, or the existence and location of the judgment debtor's nonexempt property is not readily ascertainable. In these situations, the judgment creditor should take the following actions in order to preserve the judgment creditor's rights and in an effort to obtain satisfaction of the judgment:
1. Record an abstract of judgment in the judgment records of every county where the judgment debtor may own an interest in real property, currently or in the future, to perfect a lien on that interest.
2. Have a writ of execution issued and delivered to a sheriff or constable to levy on and sell some nonexempt property belonging to the judgment debtor and apply the proceeds of the sale to payment of the judgment.
If the judgment is not satisfied by these efforts, the judgment creditor has other tools to aid collection, including:
Discovery in aid of execution. If the judgment debtor's financial affairs and holdings are unknown or unclear to the creditor, as long as the enforcement of the judgment has not been suspended by supersedeas or court order, the creditor may serve the judgment debtor with postjudgment interrogatories, depose the judgment debtor, or use any other discovery device available to litigants under the Texas Rules of Civil Procedure, in an effort to find nonexempt assets owned or controlled by the debtor.
Turnover statute. If the creditor knows or learns through discovery that the debtor possesses or controls nonexempt property, but that property cannot be readily attached or levied on by ordinary legal process, the creditor can ask a court to assist by ordering the judgment debtor to ``turn over'' specific property to a sheriff, constable, or receiver to be sold or otherwise applied to satisfy the judgment.
Garnishment. If a third party is in possession of the judgment debtor's personal property or is indebted to the judgment debtor and the property or indebtedness is not exempt from legal process, the judgment creditor may ``garnish'' the property or funds in the hands of the third party Regardless of the collection method, the target is always some asset belonging to the judgment debtor that is not exempt from the judgment creditor's claim. The exemption provisions are numerous and complex, providing many exceptions and restrictions.
Lien on Real Property
Usually, when payment of a judgment is not forthcoming, the judgment creditor's first step is to prepare and record an abstract of the judgment, commonly called an ``AJ''. Proper filing of an AJ perfects a lien on the real property then owned or thereafter acquired by the judgment debtor. A district or county court clerk may prepare and issue an AJ for judgments rendered in district and county level courts for a small fee, on the request of the judgment creditor or the creditor's agent, attorney, or assignee. While some courts provide their own printed abstract forms, an abstract prepared and verified by the creditor or its attorney is the preferred practice. An abstract of judgment in a small claims or justice court, however, may be prepared only by an attorney, not by the judgment creditor. A judgment creditor proceeding without counsel in a small claims or justice court must apply to that court for an abstract of judgment to be prepared by the justice of the peace or judge who rendered the judgment.
An abstract of judgment is recorded in the judgment records as kept by each county clerk in Texas. Typically, the judgment creditor will present an AJ to the county clerk of the county where the judgment debtor has a principal residence and to the clerks of any other county where the judgment debtor may then own or in the future acquire an interest in real property. On payment of the appropriate fee, the county clerk will record the AJ in the judgment records, note the day and hour of the filing, and enter in the alphabetical index to the judgment records the name of each plaintiff and defendant in the judgment and the location (by volume and page numbers) in the records where the abstract is recorded. With some exceptions, once an abstract of judgment is duly recorded and indexed in a county, a judgment lien attaches to the judgment debtor's real property in that county.
Properly indexing a recorded abstract of judgment is of the utmost importance to the creation of the judgment lien. The normal presumption that a public official properly performed his or her duties does not apply to the creation of a judgment lien. Additionally, recording and indexing an abstract of judgment will not perfect or create a lien on the debtor's real property in the following situations:
1. When the judgment has become dormant. Recording an abstract of a judgment that has become dormant is ineffective to establish a judgment lien. A judgment becomes dormant unless enforcement by levy of execution is attempted at least once in the first 10 years after its rendition. After that, the judgment will become dormant unless a second writ of execution is issued before the lapse of 10 years after issuance of the first writ. However, a dormant judgment can be revived by an action for debt brought not later than the second anniversary of the date that the judgment became dormant.
2. When the court finds the lien offers no substantial increase in the security for payment. Even though a judgment debtor has posted security, or is excused by law from posting security, to supersede enforcement of a judgment pending appeal the judgment creditor nevertheless may record an abstract of judgment. But the judgment debtor, having superseded the judgment, may apply for a finding by the appellate court that the creation of the lien would not substantially increase the degree to which the judgment creditor's recovery would be secured when balanced against the costs to the judgment debtor after the exhaustion of all appellate remedies. If successful in obtaining such a finding, the debtor may file a certified copy of the finding in the real property records of each county where the abstract has been filed and, thus, nullify its effect and prevent perfection of a judgment lien
In connection with the exception based on court's findings, it should be noted that the judgment creditor may present evidence to the court to convince it to withdraw the finding. By filing a certified copy of the withdrawal order in the real property records, the judgment lien attempted by the recorded abstract comes into being as a perfected lien.
The perfection of a judgment lien puts the judgment creditor ahead of any subsequent claimant of an interest in or right to property of the debtor. Because the lien's recordation and indexing puts any party dealing with property owned or to be owned by the judgment debtor on notice of the judgment creditor's interest, potential purchasers and mortgagees usually will insist that the judgment creditor's claim be extinguished or otherwise released or subordinated before consummating any transaction involving the property. Thus, the debtor, at some point in time, may be compelled to obtain a release of lien in order to buy, sell, or mortgage a property. Furthermore, the filing of an abstract may cast a cloud on the title of the debtor's homestead and this situation may be continued by the judgment creditor's periodic attempts to levy a writ of execution, impairing the debtor's ability to sell or encumber the property until a release of lien is obtained.
The usual principle of ``first in time'' to record determines the priority of judgment liens on the judgment debtor's real property. However, with respect to real property acquired after several abstracts have been recorded and indexed, the judgment liens attach simultaneously and, thus, share the proceeds prorata.
A perfected judgment lien has priority over any previous but unrecorded conveyance, mortgage, or deed of trust, absent actual notice to the judgment creditor. This formulation of the judgment lien's priority status calls attention to the following situations in which the lien is not superior and, thus, cannot defeat another party's claim to the property:
1. Possession and control of the property by a person other than the judgment debtor may be so openly and unequivocally at odds with unfettered ownership by the judgment debtor as to impute notice to the creditor of some outstanding interest or equitable claim.
2. Another party may have equitable title or an equitable right to title under an unrecorded contract for a deed. The statute that addresses the effect of unrecorded instruments applies only to conveyances, mortgages, and deeds of trust; it does not say that an unrecorded executory contract is void against creditors without notice. There is no requirement that an executory contract for a deed must be recorded. And, in the usual situation when the judgment debtor has sold property under a contract for a deed, the purchaser is in possession of the property and that possession should be deemed notice to the judgment creditor of the equitable rights of the purchaser.