Filed 1/2/14 Sulphur Mountain Land & Livestock v. Redmond CA2/8 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION EIGHT

SULPHUR MOUNTAIN LAND & LIVESTOCK CO. LLC,
Plaintiff and Respondent,

v.
JOHN A. REDMOND et al.,
Defendants and Appellants. B238767
(Los Angeles County Super. Ct. No. BS134625)

APPEAL from an order of the Superior Court of Lo s Angeles County. Matthew St. George, Temporary Judge. (Cal. Const ., art. VI, § 21.) Re versed and remanded.

Law Offices of Raymond H. Aver a nd Raymond H. Aver for Defendants and Appellants.

Westlake Law Group and David Blake Chat field for Plaintiff and Respondent.

__________________2 Plaintiff Sulphur Mountain Land & Live stock Co. LLC sued defendants John and
Maureen Redmond in Ventura Co unty Superior Court, and ob tained a sizable judgment against them. When plainti ff attempted to enforce its judgment, defendants sought bankruptcy protection. During the bank ruptcy, defendants claimed the California homestead exemption to protect a portion of the equity in their Los Angeles home from the bankruptcy estate, and therefore, to ma ke fewer funds available to pay plaintiff’s judgment. Defendants’ debts were not di scharged by the bankruptcy court, and ultimately, plaintiff sought to execute its judgment on defendants’ home by filing this action for the sale of their home, contending defendants could not again avail themselves of the homestead exemption. The trial cour t agreed, finding “there is no homeowners exemption because it was used by the judgment debtor” in bankruptcy. The trial court also concluded that plaintiff’s lien attached in 2002, giving it priority over all but the mortgage lien. Defendants appeal the order approving the sale of their home, contending the sale order deprived them of their homestead exem ption. We agree, finding no merit to plaintiff’s contention that the homestead exem ption evaporates after it has been claimed in bankruptcy. Plaintiff’s novel theory th at the homestead exemption may be claimed only once has no support in the homestead la w. The California homestead exemption protects defendants’ equity up to the amount of the exemption even if the home is sold. The homestead exemption is not like a retail disc ount coupon that can on ly be used once. We also find that plaintiff’s lien was effectiv e as of October 2002. We reverse the sale order and remand the case for further procee dings consistent with this opinion.
BACKGROUND On October 4, 2002, plaintiff sued de fendants and their daughter in Ventura County Superior Court for breach of a comm ercial lease. The court issued a writ of attachment against defendants’ property on October 11, 2002, which was recorded against their Los Angeles Co unty home on October 15, 2 002. A notice of lien was
recorded with the California S ecretary of State on October 25, 2002. In 2003, defendants obtained an order quashing the writ of attach ment, but plaintiff posted an undertaking to3 keep the attachment in place pending appeal or entry of judgment. Plaintiff’s appeal of the attachment order was dismissed by this court in 2012 (case No. B168314). 1 Meanwhile, the Ventura action proceeded, and in June 2005, defendants accepted plaintiff’s Code of Civil Pro cedure section 998 offer to co mpromise. The parties settled and judgment was entered for $25,000, leaving open the issue of cost s and fees. Plaintiff then moved for recovery of attorney fees, and an amended judgment for $456,853.14 was entered in February 2006 (the Ventura ju dgment). In March 2006, the Ventura court issued an abstract of judgment and writ of attachment. Notice of the judgment lien was filed with the Secretary of State. Defenda nts appealed the Ventura judgment, but their appeal was dismissed in 2011 for failure to file an opening brief (case No. B189989). 2 In May 2006, plaintiff ex ecuted on defendants’ bank account. Defendants filed a bankruptcy petition later that month. In Ma rch 2008, on the bankruptcy trustee’s motion, the bankruptcy court ordered a sale of the bankruptcy estate’s interest in defendants’ home (the equity), excluding their clai med $150,000 homeowners exemption. Defendants obtained a loan from Lori Haynes to buy $210,600 of the equity in their home. The Haynes loan was secured by a deed of trust recorded on the property on August 6, 2008. The loan proceeds were used to pa y defendants’ creditors, including plaintiff. Plaintiff received $181,478.15 from the loan proceeds in October 2009. Plaintiff filed an adversary complaint objecting to defendants’ discharge in the bankruptcy proceeding, for failu re to comply with their discovery obligations during the bankruptcy. In April 2010, the bankruptcy court found th e Ventura judgment against

1 The dismissal is not part of the record on appeal. Neve rtheless, we take judicial notice, on our own motion, of the order of di smissal, and of the other appeals by these parties. (Evid. Code, §§ 452, subd. (d), 459.) The first appeal was filed on June 25, 2003, but was stayed by defend ants’ bankruptcy on Septembe r 15, 2003. The stay was lifted on August 24, 2012. On September 19, 2012, the appeal was dismissed as abandoned, having been mooted by entry of judgment.

2 That appeal was originally filed in Ma rch 2006, but was also stayed because of defendants’ bankruptcy. It was dismissed in April 2011, after the bankruptcy stay was lifted and defendants failed to file an opening brief.4 defendants was a secured debt and entere d judgment for plaintiff on the adversary complaint, denying discharg e of the judgment debt under Bankruptcy Code, title 11 United States Code sections 727(a)(2)(B ), 727(a)(3), and 727(a)(4)(A). Defendants appealed, but the judgment was affirmed by the district cour t and the Ninth Circuit Court of Appeals. In September 2011, the Ventura judgment was amended to $543,804.35, to add postjudgment costs and interest, and to acc ount for credits r eceived during the bankruptcy. A new abstract of judgmen t was recorded on Oc tober 3, 2011. Therefore, as of October 2011, there we re several liens on defendants’ home. These included Citi Mortgage ’s December 2001 purchase m oney first deed of trust, plaintiff’s judgment lien (perfected by abstra cts of judgment record ed in October 2002 and October 2011), Lori Haynes’ s August 2008 deed of trust, and a March 2010 deed of trust recorded by defendants’ a ttorney to secure payment of $ 50,000 in attorney fees. On October 31, 2011, plaintiff sought an order to sell defendants’ home under
Code of Civil Procedure sections 704. 750 and 704.760. Th e application and accompanying memorandum of points and auth orities posited that defendants used their homestead exemption in the bankruptcy proceeding, and “are not entitled to utilize the exemption twice.” Plaintiff also contende d its judgment lien was junior only to Citi Mortgage’s lien, and was senior to the remain ing liens on the property. Therefore, based on a recent appraisal, plaintiff estimated th ere was $397,735.93 in equity available to satisfy its Ventura judgment. Defendants opposed the application, contending plaintiff’s 2002 lien was extinguished by the bankruptcy court order th at the sale of equity from the bankruptcy
estate to defendants “shall be free and clear of any and all liens and other interests of [plaintiff], and such liens and in terests, if any, shall attach to the sale proceeds with the same validity and priority as they may ha ve had against the Property.” Defendants argued that plaintiff’s lien di d not attach until 2011, after th eir bankruptcy discharge was denied and a new abstract of judgment was re corded, and was therefore junior in priority to all other liens on the property. Defenda nts also contended th ey were entitled to a5 homestead exemption.
The trial court concluded that “there is no homeowners exemption because it was used by the judgment debtor and their deci sion was to use their homeowners exemption in the bankruptcy proceedings for the entire amount they were allowed at the time. So there is no exemption to be employed here.” The trial court also concluded that plaintiff’s lien was effective as of October 15, 2002, and accordingl y, was only junior to Citi Mortgage’s lien. On Januar y 18, 2012, the trial court issu ed an order for the sale of
defendants’ home. Defendants filed a timely notice of appeal.

DISCUSSION We find the bankruptcy proceedings di d not extinguish defendants’ homestead exemption nor eliminate plaintiff’s 2002 lien.
1. Homestead Exemption Resolution of this appeal turns on the interpretation of the homestead exemption statute, Code of Civil Procedure section 704. 710 et seq. Statutory interpretation is a question of law, subject to de novo review on appeal. ( People ex rel. Lockyer v.
Shamrock Foods Co. (2000) 24 Cal.4th 415, 432.) Si milarly, when the facts are not disputed, the effect or legal significance of those facts is a question of law. ( Ghirardo v.
Antonioli (1994) 8 Cal.4th 791, 799.) “Our fundamental task in construing a stat ute is to ascertain the intent of the
lawmakers so as to effectua te the purpose of the statut e. [Citation.] We begin by examining the statutory language, giving the words their usual and ordinary meaning. [Citation.] If there is no am biguity, then we presume the lawmakers meant what they said, and the plain meaning of the language governs.” ( Day v. City of Fontana (2001) 25 Cal.4th 268, 272.) We must construe the la nguage of a statute “ ‘in the context of the
statute as a whole and the over all statutory scheme, and we give “significance to every word, phrase, sentence, and part of an act in pursuance of the legislative purpose.” ’ [Citation.]” ( Smith v. Superior Court (2006) 39 Cal.4th 77, 83.)6 The homestead right is r ecognized by the California Constitution, which provides that “[t]he Legislature shall protect, by la w, from forced sale a certain portion of the homestead and other property of all heads of families.” (C al. Const., art. XX, § 1.5.) “The object of all homestead legislation is to provide a place for the family and its surviving members, wher e they may reside and enjoy the comforts of a home, freed from any anxiety that it may be take n from them against their will, either by reason of their own necessity or improvidence, or from th e importunity of their creditors.” ( In re Estate of Fath (1901) 132 Cal. 609, 6 13.) “[T]he homestead law is not designed to protect creditors, but protects the home against credit ors . . . thereby preser ving the home for the family.” ( Amin v. Khazindar (2003) 112 Cal.Ap p.4th 582, 588.) Because homestead statutes are remedial, they ar e “given a liberal construction in favor of the exemptions created.” ( Thorsby v. Babcock (1950) 36 Cal.2d 202, 204.) The limitations and requirements for the homestead exemption are set forth by statute. (Cal. Const., art. XX, § 1.5; see also Noble v. Hook (1864) 24 Cal. 638, 639- 640.) A homestead is “the pr incipal dwelling . . . in which the judgment debtor or the judgment debtor’s spouse resided on the date the judgment creditor’s lien attached to the dwelling, and . . . in which the judgment de btor or the judgment de btor’s spouse resided continuously thereafter until the date of the court determination that the dwelling is a homestead.” (Code Civ. Pr oc., § 704.710, subd. (c).) “A homestead exemption does not preclude sale of the home but entitles the homesteader to receive the value of the exemption if the property is sold to satisfy a judgment lien.” ( Wells Fargo Financial Leasing, Inc. v. D & M Cabinets (2009) 177 Cal.App.4th 59, 68; see also Code Civ. Proc., § 704.730.) A homeowner or spouse of an owner may declare and record a homestead exemption. (Code Civ. Proc., § 704.920 [“A dwe lling in which an owner or spouse of an owner resides may be selected as a declared homestead . . . by re cording a homestead
declaration in the office of the county recorder of the county wh ere the dwelling is
located. From and after the time of recordin g, the dwelling is a declared homestead for the purposes of this article.”].) California law also provides an automatic homestead7 exemption. The Legisl ature created an automatic homestead exemption to protect debtors
who do not file homestead decl arations. (§ 704.720.) The automatic exemption does not
have to be memorialized in a recorded declarati on. Rather, “[t]he automatic homestead exemption is available when a party has continuously reside d in a dwelling from the time
that a creditors’ lien attaches until a court’s determination in th e forced sale process that the exemption does not apply.” ( In re Mulch (Bankr. N.D.Cal. 1995) 182 B.R. 569, 572, citing Webb v. Trippet (1991) 235 Cal.App.3d 647, 651 ; see also § 704.720.) A declared homestead provides a debtor with greater pr otection than the automatic homestead exemption. For example, a declar ed homestead is protected from a voluntary sale, whereas the automatic ho mestead only entitle s the debtor to protection from a forced sale. (Code Civ. Proc., §§ 704.960 [“If a declared homestead is voluntarily sold, the proceeds of sale are exempt”]; 704.720; see al so Legis. Com. com., 17 West’s Ann. Code Civ. Proc. (2009 ed.) foll. § 704.720, p. 141 [“As under former law, proceeds of a voluntary sale of [an automatic] homestea d are not exempt under the proceeds exemption”].) The proceeds from a voluntary sale of a declared homestead may be reinvested within six months, thus allowing the debtor to invest in another residence, which
will also be afforded homestead protection to the same extent as the initial homestead. (§ 704.960.) The proceeds of a forced sale of an automatic homestead are afforded the same protection, and may be rei nvested in a new homestead. (§ 704.710, subd. (c).) A judgment lien does not attach to a decl ared homestead; rather, the lien only attaches to the equity in the property that exceed s the declared homest ead exemption and any preexisting liens on the pr operty. (Code Civ. Proc., § 704.950, subds. (a), (c); Smith v. James A. Merrill, Inc. (1998) 64 Cal.App.4th 94 , 99.) When no declar ation of homestead has been recorded, the lien attaches to the prop erty, irrespective of th e amount of equity in the home. However, the judgment creditor is re quired to obtain a court order for sale of the homestead under section 704.800, and the court must determin e the amount of the homestead exemption and the fair market value of the property . The homestead may not be sold unless
a bid is received that exceeds the amount of the homestead exemption plus “any additional amount necessary to satisfy all liens and encu mbrances on the prop erty.” (§ 704.800,8 subd. (a); see also Rourke v. Troy (1993) 17 Cal.App.4t h 880, 885-886 [all liens senior to the executing creditor’s lien, and the homestead exem ption, must be satisfied or the home may not be sold].) Here, the trial court concluded that defe ndants had no homestead exemption because
defendants had claimed the ho mestead exemption in their earlier bankruptcy proceeding. Nothing in the homestead law provides that th e exemption expires after it was once claimed in bankruptcy. Instead, the Legislature clearly intended the exemption to apply so long as a dwelling qualifies as a homestead. For example, as mentioned above, homestead protection generally survives the sale of a homestead. In both declared and automatic homesteads, the proceeds of the sale of the homestead are also exempt, in the am ount of the homestead exemption, and may be reinve sted within six mo nths in a new prop erty, which will be afforded homestead protect ion to the same extent as the orig inal property. (Code Civ. Proc., §§ 704.960, 704.710, subd. (c) [“Where exempt proceeds from the sale . . . of a homestead are used toward the acquisition of a dwelling . . . ‘homestead ’ also means the dwelling so acquired if it is the principal dwelling in which the judgment debtor . . . resided continuously from the date of acquisition until the date of the court determination that the dwelling is a homestead, whether or not an ab stract or certified copy of a judgment was recorded to create a judgment lien before the dwelling was acquired”]; see also SBAM Partners, LLC v. Wang (2008) 164 Cal.App.4th 903, 907-908.) It is undisputed that defe ndants have resided in their home si nce 1997, and that
defendants reco rded a homestead d eclaration in July 2003. Thus , before the trial court may order the sale of defendants’ homestead, the cour t must follow the dictat es of Code of Civil
Procedure sections 704. 780 and 704.800 and all other statutes which control the forced sale of a homestead. For example, th e court may not order a sale of the homestead if no bid is
received that exceeds the amoun t of the homestead exemption plus the amount required to satisfy all liens and encumbrances. There are lim itations on the court’s ab ility to order a sale
if no bid is recei ved that is 90 percent or mo re of the fair market valu e of the dwelling. Since the trial court did not protec t defendants’ homestead exemption and otherwise did not comply with the restrictions on the forced sale of a homestead, the order for sale is reversed.9 2. Priority of Plaintiff’s Lien
The trial court also de termined that plainti ff’s lien was effective as of October 2002, and that the lien was not eliminated by the bankruptcy court. Defendants contend the property was sold to them “free and clear” of plainti ff’s 2002 lien, and therefore, the 2002 lien was eliminated. (Defendant s do not deny that a lien was created after defendants were denied discharge in bankruptcy, when an amen ded abstract of judgme nt was recorded by plaintiff in October 2011.) The question of the effect of the ba nkruptcy court’s order, and the priority of plaintiff’s lien, is reviewed de novo. (See People ex rel. Lockyer v. R.J. Reynolds Tobacco Co. (2004) 116 Cal.Ap p.4th 1253, 1267; Bolton v. Terra Bella Irr.
Dist. (1930) 106 Cal.App. 313, 319.) The trustee’s “Motion to Sell Estate’s Equi ty Interest in Real Property” was made pursuant to title 11 Un ited States Code sect ion 363(b)(1) and Federal Rules of Bankruptcy Procedure, rule 6004. The bankruptcy order approving the sale recited that: “The Trustee
is authorized to sell the Estate’s interest in the Property to the Debtors for $210,600.00, cash; [¶] . . . [¶] . . . A lender is authorized to record a deed of trust against the Property for the purpose of securing a lo an to the Debtors for the Debt ors’ purchase of the Estate’s equity interest; and [¶] . . . The sale sha ll be free and clear of a ny and all liens and other interests of [plaintiff], and such liens and interests, if any, sha ll attach to the sale proceeds with the same validity and prio rity as they may have had against the Property, pending
further order of this Court.” We find the bankruptcy court ordered only a sale of equity in the dwelling, and the equity was sold free of liens and encumbranc es so that the entire amount generated from
the sale could be turned over to the tr ustee to distribute among the creditors. The bankruptcy court’s later judgment denying di scharge permitted plaintiff to continue to pursue defendants’ nonexempt assets in fu ll satisfaction of plaintiff’s judgment. Bankruptcy Code section 363(b)(1) allows a trustee, “after notice and a hearing, [to] sell . . . property of the estate.” ( Ibid .) Moreover, section 363(f) permits the estate’s property to be sold free and clear of any lie ns if one of five conditions is satisfied. ( C.H.E.G., Inc. v. Millennium Bank (2002) 99 Cal. App.4th 505, 511; see also § 363(f).)10 Property may be sold free and clear of an entity’s interests only if applicable nonbankruptcy law permits sale of the property free and clear of such interests; the entity consents; the property is to be sold for greate r than the aggregate va lue of all liens on the property; the interest is in bona fide dispute; or the entity could be compelled to accept a money satisfaction of such interest. (§ 363( f).) A trustee seeking to sell property free and clear of any liens under section 363 (f) must do so by noticed motion to the lienholder. (Fed. Rules Bankr.Proc., rules 6004, 9014 (11 U.S.C.).)
The trustee’s motion did not seek to sell the estate’s interest in the property “free and clear of any liens” under Bankr uptcy Code section 363 (f). B ecause section 363(f) and the bankruptcy rules re quire notice and an opportun ity to be heard on the issue of the elimination of any liens, and section 363(f) requires satisfac tion of a condition preced ent for the sale to be free and clear of liens (that one of the five conditions of s ection 363(f) is satisfied), plainly the sale order was never contemplated to e liminate plaintiff’s lien on the prop erty. The order for the sale to be “free and clear of any and all liens and other interests of [plaintiff]” was meant to effectuate the sale of equity in the prop erty, in other words, the value of the property in excess of all liens, encumbran ces and exemptions. As is evident from the trustee’s accounting, numer ous creditor’s claims were made in the bankruptcy, and these were to be paid, in order of priority, from the proceeds of the sale of the estate’s portion of the equity. The order of the bankruptcy court denyin g defendants discharge allowed plaintiff to pursue collection of its debt, because de nial of discharge preserves the debtor’s liability to creditors, and does not stop the administration of the case. (See 11 U.S.C. § 727.) Because defendants’ debts were not di scharged, and a judgment lien relates back to (and merges with) the filing of a writ of a ttachment, plaintiff’s lien became effective in October 2002, when its writ of attachment was recorded. (See Code Civ. Proc., § 697.020; Diamond Heights Village Assn., Inc. v. Financial Freedom Senior Funding Corp. (2011) 196 Cal.App.4th 290, 302-303; see also Brun v. Evans (1925) 197 Cal. 439, 442-443.)11 DISPOSITION
The order is reversed and the matter is remanded for further proceedings consistent with this opinion. Appellant s are to recover their costs on appeal.

GRIMES, J.

WE CONCUR:

BIGELOW, P. J.

RUBIN, J.