Judgment

Key Takeaways

• A judgment is a court's final decision in a lawsuit, fixing the rights and obligations of the parties, including any money one party must pay another.
• A money judgment becomes an involuntary general lien that reaches the debtor's non-exempt real estate, including real estate the debtor acquires later.
• In Washington a judgment is a lien on the debtor's real estate for a period not to exceed ten years from the day the judgment was entered, and the period can be extended (RCW 4.56.190 and RCW 6.17.020).
• In Washington the lien reaches real estate in another county only from the time a duly certified abstract of the judgment is filed with that county's clerk (RCW 4.56.200).

What It Means

A judgment is the decision a court enters at the end of a lawsuit. It resolves the controversy and states the rights and obligations of the parties, including any money one party must pay the other. The money judgment is the kind that shows up in real estate, because once it is entered and docketed it becomes a claim against the losing party's property.

What makes a money judgment matter at a closing is that it creates a Judgment Lien, and a judgment lien is a General Lien. A specific lien attaches to one identified property, the way a deed of trust or a property tax lien does. A general lien reaches all of the debtor's non-exempt real property in the county where it is docketed, including property the debtor buys later. That is why a seller with an old unpaid judgment cannot deliver clear title until the judgment is satisfied or released, and why a title search runs the names of the sellers and not just the address. Escrow usually finds the judgment in the title commitment and pays it out of the seller's proceeds at closing.

How It Works in Washington

In Washington the rules are statutory and precise. RCW 4.56.190 provides that the real estate of a judgment debtor, and such as the judgment debtor may acquire, not exempt by law, is held and bound to satisfy the judgment, and that the lien runs for a period of not to exceed ten years from the day on which such judgment was entered unless it is extended under RCW 6.17.020(3). Under RCW 6.17.020 the judgment holder may issue execution or garnishment at any time within ten years of entry, and may apply within ninety days before that period expires for an additional ten years.

When the lien starts, and where, comes from RCW 4.56.200. For a superior court judgment, the lien on real estate in the county where the judgment was entered commences from the time the county clerk files it on the execution docket. Real estate in a different county is reached only from the time of the filing of a duly certified abstract of such judgment with the county clerk of the county in which the real estate of the judgment debtor to be affected is situated, which is the job an Abstract Of Judgment does. Homestead property gets separate treatment. RCW 6.13.090 provides that a judgment against the owner of a homestead becomes a lien on the value of the homestead property in excess of the Homestead Exemption, and only from the time the judgment creditor records the judgment with the recording officer of the county where the property is located.

Example

Ray is selling a house in Pierce County for $525,000. The preliminary title report turns up a $28,400 money judgment entered against him in King County Superior Court four years ago in a contract dispute, and a duly certified abstract of that judgment filed with the Pierce County clerk two years ago. Because the abstract was filed there, the judgment is a lien on the Pierce County house even though the case was tried in King County.

Ray's first position deed of trust payoff is $310,000. At closing escrow pays the deed of trust, then the judgment, then the balance to Ray: $525,000 minus $310,000 minus $28,400 leaves $186,600 before commission, excise tax, and the rest of the closing costs. The buyer's title insurance will not issue with the judgment outstanding, so the payoff is not optional. Ray asks whether he can simply wait the judgment out. He cannot count on it. The lien runs ten years from entry, so six years remain, and the creditor can apply for another ten.

Common Mistakes and Exam Traps

• A judgment is the court's decision. A judgment lien is what that decision does to the debtor's real property once it is docketed or recorded. Exam questions swap the two.
• A judgment lien is a general, involuntary lien. A mortgage or deed of trust is a specific, voluntary lien. Both encumber real property, but only one was agreed to by the owner.
• A lis pendens is notice that a lawsuit affecting title is pending, filed before there is any decision. A judgment comes at the end of the case. Answering lis pendens for a completed money award is a common miss.
• In Washington a judgment is not automatically statewide. It reaches real estate outside the county of entry only after a duly certified abstract is filed with that county's clerk (RCW 4.56.200).