Once a judgment creditor sniffs out that its debtor has filed a lawsuit, it’s not too difficult for the creditor to obtain a lien on the debtor’s cause of action and on any judgment the debtor may get. This complication goes beyond the obvious financial implications — if such a lien is granted, the judgment debtor loses some control over its own case.
A lien in a pending action or proceeding is available whenever the judgment debtor has filed a complaint or cross-complaint seeking affirmative relief against another party. Any judgment creditor who’s got a money judgment against a judgment debtor who is a party to a pending action may obtain a lien to satisfy its money judgment. CCP §708.410(a).
Getting the lien isn’t too difficult; the judgment creditor just has to file in the pending action a notice of lien and an abstract or a certified copy of the money judgment. CCP §708.410(b).
A lien in a pending action has an obvious effect on the judgment debtor’s potential recovery, attaching to both the judgment debtor’s causes of action for money or property that are the subject of the action and the judgment debtor’s rights to money or property under any judgment obtained later in the action. CCP §708.410(a).
But it also affects the judgment debtor’s ability to control its own case. Once the judgment creditor gets a lien in a pending action or proceeding, the judgment debtor’s autonomy is majorly curbed, i.e.,:
- it can’t enforce, by writ or otherwise, any recovery unless the judgment creditor’s money judgment is first satisfied or the judgment creditor’s lien is released (CCP §708.440(a)), and
- it can’t enter into any compromise, dismissal, settlement, or satisfaction of the pending action or special proceeding or the judgment obtained without the judgment creditor’s written consent. CCP §708.440(b).
There are a couple of ways around the judgment creditor’s grip. The judgment debtor can file a noticed motion in the court where the action is pending or in which the judgment is entered to authorize a compromise, dismissal, settlement, or satisfaction on such terms and conditions as the court deems necessary (despite the judgment creditor’s opposition). CCP §708.440(b); see Comment to CCP §708.440.
The judgment debtor can also claim that all or part of the money or property that the judgment debtor may recover is exempt from enforcement of a money judgment. CCP §708.450(a). This exemption claim must be made to the court in which the action or special proceeding is pending by application on noticed motion. CCP §708.450(a).
Instead of looking for ways to release the judgment debtor’s grip on the lawsuit, the judgment debtor’s best bet is to avoid the lien altogether by resolving the underlying judgment before filing another suit.
CEB has you covered with everything you need to know about dealing with judgment creditor liens in its Debt Collection Practice in California, chap 11.
CEB also has a great new program on liens in injury cases, Lien and Mean: Effectively Dealing with Liens During Litigation and at Trial. This program will be live in SF on March 2, 2012, and thereafter available On Demand.
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