Renewal Lien Does Not Have Retroactive Effect

Under CPLR 211(b), a money judgment remains effective for 20 years. Under CPLR 5203(a), a lien on real property arising from that money judgment remains effective for only ten years. If the judgment creditor brings an action to extend that lien before the expiration of the ten-year period, and ultimately prevails, is the judgment creditor protected against a mortgagee or transferee who acquired an interest in the real property after expiration of the ten-year period but before the judgment creditor obtained a judgment extending the judgment lien? That question reached the Court of Appeals in Gletzer v. Harris (NYLJ 5/13/09, p. 36., col. 1), and the court held that the mortgagee prevails over the judgment creditor. How, then, can the judgment creditor protect himself?

The Statutory Scheme

CPLR 211(b) provides that an action on a money judgment must be brought within 20 years from the time when the party recovering the judgment was first entitled to enforce it. After that time, the judgment is presumed to have been paid.

CPLR 5203(a) provides that, subject to statutory exceptions, no transfer of an interest in real property is effective against a judgment creditor “from the time of the docketing of the judgment with the clerk of the county in which the property is located until ten years after the filing of the judgment-roll.” That is, once the judgment creditor dockets the judgment, the judgment creates a lien against real property within the county, and the lien lasts for ten years.

Taken together, these two statutes create a problem for judgment creditors: The lien on real property disappears after ten years, even though the judgment remains valid and enforceable. Of course, if the judgment creditor has managed to execute against the real property successfully within ten years after docketing of the judgment, the problem disappears. If not, however, CPLR 5014 permits the judgment creditor to bring a new action to enforce the judgment. As originally enacted, the statute did not permit the judgment creditor to bring the action until ten years had elapsed since the first docketing of the judgment. That requirement created an inevitable problem from the judgment creditor: there would necessarily be a gap between expiration of the original judgment lien and commencement of a new action on the judgment. Thus, in Brookhaven Memorial Hospital v. Hoppe, 65 Misc.2d 1000, the court dismissed an action by a judgment creditor on the ground that the action had been brought before expiration of the ten-year period. To remedy that problem, the legislature, in 1986, amended the statute to permit an action to be brought “during the year prior to the expiration of ten years since the first docketing of the judgment.”

The Gletzer Case

It is against that statutory background that the Gletzer case arose. In 1991, Gletzer obtained a default judgment against Harris, and docketed the judgment in New York County, where Harris owned a condominium. For reasons not specified in the Court of Appeals opinion, Gletzer had been unable to foreclose on the condominium, and had been unsuccessful in collecting the $470,000 judgment. A day before the ten-year lien expired, Gletzer brought an action, pursuant to CPLR 5014, to extend the lien. Four years later, in 2005, the Supreme Court granted Gletzer's summary judgment motion, and granted him a lien, nunc pro tunc, dating back to the date on which the initial judgment lien expired. Meanwhile, however, two mortgage comnpanies lent money to Harris on the security of the condominium, recording both mortgages before the Supreme Court awarded Gletzer summary judgment in 2005.

In a separate action, the mortgagees sought a determination that their liens were superior to Gletzer's lien. The Supreme Court dismissed their action, noting that Gletzer had timely commenced his renewal action, and holding that the duration of the subsequent litigation should not be held against him. In consolidated appeals from the two related actions, the Appellate Division reversed, holding that Gletzer's renewal lien became effective on the date it was granted by the Supreme Court, not the date when the original lien expired. As a result, the mortgagees enjoyed priority over Gletzer. Gletzer appealed.

In an opinion by Judge Carmen Ciparick, the Court of Appeals affirmed. The court rejected Gletzer's argument that the 1986 amendment to CPLR 5014 was designed to give retroactive effect to a renewal judgment. Gletzer had relied on the last sentence of section 5014(3), which provides that the “lien of the renewal judgment shall take effect upon the expiration of ten years from the first docketing of the original judgment,” to argue that the judgment takes effect upon expiration even if the judgment is rendered long after expiration of the ten-year period. The Court of Appeals, by contrast, read that sentence to apply when the renewal judgment is rendered before expiration of the ten-year period, to ensure that the renewal judgment extends the lien by a full ten years. In reaching that conclusion, the court noted that “nunc pro tunc” treatment is generally reserved for correction of clerical errors and other irregularities in the entry of judicial mandates. The court indicated that nunc pro tunc treatment “may not be wielded when third parties have substantive rights in play that may be altered” by treating a fact as having occurred by a particular date when it did not happen by that date.

The court's discussion of legislative intent, however, is not terribly persuasive. The court noted that a statute should be construed in light of the problem to be cured, and further notes that the amendment was designed to remedy the Brookhaven problem. But Gletzer's problem in this case was precisely the same problem that had arisen in Brookhaven: The holder of a judgment lien wanted to ensure continuity of the judgment lien after expiration of the ten-year period. In Brookhaven, the court held that the prior statute did not permit the judgment creditor to bring an action to renew the lien until after expiration of the original period ' ensuring a break in continuity. The legislature responded by authorizing a judgment creditor to bring an action before the expiration of the ten-year period to enable the judgment creditor to ensure continuity. Gletzer brought just such an action. The problem is that the legislature did not consider how long it might take to resolve an action for a renewal judgment, and did not specify what would happen if the rights of third parties intervened ' the very situation that arose in Gletzer.

Conclusion

Perhaps the most persuasive element of the court's opinion is buried in a footnote where the court noted that Gletzer had other means available to protect himself against the interests of third parties ' in particular, filing a notice of levy pursuant to CPLR 5235, which would have “provided notice to the world of his interest in the property.” The intervening mortgagees, by contrast, could not have protected themselves unless they searched for judgment liens more than ten years old ' an obligation inconsistent with CPLR 5203(a), which limits the duration of judgment liens to ten years. Perhaps the court's opinion can best be read as recognizing that as between Gletzer and the mortgagees, Gletzer was in the best position to protect his own interests, and, in the light of statutory ambiguity, his failure to do so should deny him protection against the “innocent” mortgagees. Nevertheless, the lesson of Gletzer is clear: The holder of a judgment lien must take steps to put the world ' and particularly bona fide purchasers and mortgagees ' on notice of the judgment creditor's interest. Simply filing an action under CPLR 5014[3] is not sufficient for that purpose.

Stewart E. Sterk is Editor-in-Chief of this newsletter.

Under CPLR 211(b), a money judgment remains effective for 20 years. Under CPLR 5203(a), a lien on real property arising from that money judgment remains effective for only ten years. If the judgment creditor brings an action to extend that lien before the expiration of the ten-year period, and ultimately prevails, is the judgment creditor protected against a mortgagee or transferee who acquired an interest in the real property after expiration of the ten-year period but before the judgment creditor obtained a judgment extending the judgment lien? That question reached the Court of Appeals in Gletzer v. Harris (NYLJ 5/13/09, p. 36., col. 1), and the court held that the mortgagee prevails over the judgment creditor. How, then, can the judgment creditor protect himself?

The Statutory Scheme

CPLR 211(b) provides that an action on a money judgment must be brought within 20 years from the time when the party recovering the judgment was first entitled to enforce it. After that time, the judgment is presumed to have been paid.

CPLR 5203(a) provides that, subject to statutory exceptions, no transfer of an interest in real property is effective against a judgment creditor “from the time of the docketing of the judgment with the clerk of the county in which the property is located until ten years after the filing of the judgment-roll.” That is, once the judgment creditor dockets the judgment, the judgment creates a lien against real property within the county, and the lien lasts for ten years.

Taken together, these two statutes create a problem for judgment creditors: The lien on real property disappears after ten years, even though the judgment remains valid and enforceable. Of course, if the judgment creditor has managed to execute against the real property successfully within ten years after docketing of the judgment, the problem disappears. If not, however, CPLR 5014 permits the judgment creditor to bring a new action to enforce the judgment. As originally enacted, the statute did not permit the judgment creditor to bring the action until ten years had elapsed since the first docketing of the judgment. That requirement created an inevitable problem from the judgment creditor: there would necessarily be a gap between expiration of the original judgment lien and commencement of a new action on the judgment. Thus, in Brookhaven Memorial Hospital v. Hoppe , 65 Misc.2d 1000, the court dismissed an action by a judgment creditor on the ground that the action had been brought before expiration of the ten-year period. To remedy that problem, the legislature, in 1986, amended the statute to permit an action to be brought “during the year prior to the expiration of ten years since the first docketing of the judgment.”

The Gletzer Case

It is against that statutory background that the Gletzer case arose. In 1991, Gletzer obtained a default judgment against Harris, and docketed the judgment in New York County, where Harris owned a condominium. For reasons not specified in the Court of Appeals opinion, Gletzer had been unable to foreclose on the condominium, and had been unsuccessful in collecting the $470,000 judgment. A day before the ten-year lien expired, Gletzer brought an action, pursuant to CPLR 5014, to extend the lien. Four years later, in 2005, the Supreme Court granted Gletzer's summary judgment motion, and granted him a lien, nunc pro tunc, dating back to the date on which the initial judgment lien expired. Meanwhile, however, two mortgage comnpanies lent money to Harris on the security of the condominium, recording both mortgages before the Supreme Court awarded Gletzer summary judgment in 2005.

In a separate action, the mortgagees sought a determination that their liens were superior to Gletzer's lien. The Supreme Court dismissed their action, noting that Gletzer had timely commenced his renewal action, and holding that the duration of the subsequent litigation should not be held against him. In consolidated appeals from the two related actions, the Appellate Division reversed, holding that Gletzer's renewal lien became effective on the date it was granted by the Supreme Court, not the date when the original lien expired. As a result, the mortgagees enjoyed priority over Gletzer. Gletzer appealed.

In an opinion by Judge Carmen Ciparick, the Court of Appeals affirmed. The court rejected Gletzer's argument that the 1986 amendment to CPLR 5014 was designed to give retroactive effect to a renewal judgment. Gletzer had relied on the last sentence of section 5014(3), which provides that the “lien of the renewal judgment shall take effect upon the expiration of ten years from the first docketing of the original judgment,” to argue that the judgment takes effect upon expiration even if the judgment is rendered long after expiration of the ten-year period. The Court of Appeals, by contrast, read that sentence to apply when the renewal judgment is rendered before expiration of the ten-year period, to ensure that the renewal judgment extends the lien by a full ten years. In reaching that conclusion, the court noted that “nunc pro tunc” treatment is generally reserved for correction of clerical errors and other irregularities in the entry of judicial mandates. The court indicated that nunc pro tunc treatment “may not be wielded when third parties have substantive rights in play that may be altered” by treating a fact as having occurred by a particular date when it did not happen by that date.

The court's discussion of legislative intent, however, is not terribly persuasive. The court noted that a statute should be construed in light of the problem to be cured, and further notes that the amendment was designed to remedy the Brookhaven problem. But Gletzer's problem in this case was precisely the same problem that had arisen in Brookhaven: The holder of a judgment lien wanted to ensure continuity of the judgment lien after expiration of the ten-year period. In Brookhaven, the court held that the prior statute did not permit the judgment creditor to bring an action to renew the lien until after expiration of the original period ' ensuring a break in continuity. The legislature responded by authorizing a judgment creditor to bring an action before the expiration of the ten-year period to enable the judgment creditor to ensure continuity. Gletzer brought just such an action. The problem is that the legislature did not consider how long it might take to resolve an action for a renewal judgment, and did not specify what would happen if the rights of third parties intervened ' the very situation that arose in Gletzer.

Conclusion

Perhaps the most persuasive element of the court's opinion is buried in a footnote where the court noted that Gletzer had other means available to protect himself against the interests of third parties ' in particular, filing a notice of levy pursuant to CPLR 5235, which would have “provided notice to the world of his interest in the property.” The intervening mortgagees, by contrast, could not have protected themselves unless they searched for judgment liens more than ten years old ' an obligation inconsistent with CPLR 5203(a), which limits the duration of judgment liens to ten years. Perhaps the court's opinion can best be read as recognizing that as between Gletzer and the mortgagees, Gletzer was in the best position to protect his own interests, and, in the light of statutory ambiguity, his failure to do so should deny him protection against the “innocent” mortgagees. Nevertheless, the lesson of Gletzer is clear: The holder of a judgment lien must take steps to put the world ' and particularly bona fide purchasers and mortgagees ' on notice of the judgment creditor's interest. Simply filing an action under CPLR 5014[3] is not sufficient for that purpose.

Stewart E. Sterk is Editor-in-Chief of this newsletter.