Do Judgment Liens Take Priority Over Later-Recorded Mortgages?

Does a Judgment Lien Against a Homestead Exempt Property Take Priority Over a Later-Recorded Mortgage?

A judgment becomes a lien against the judgment debtor’s real property at the time of docketing.[1] The fact that a judgment becomes a lien when docketed, however, does not mean it has priority over a later-recorded mortgage. The basic rule of lien priority law states that “in disputes between creditors concerning a lien on the debtor’s property, the first creditor to perfect the lien shall prevail.”[2]

A judgment lien is not perfected until it attaches.[3] Further, a judgment lien does not attach to exempt property.[4] The homestead exemption, on the other hand, does not extend to any lawfully obtained mortgage on the homestead.[5]

In NationsBanc Mortgage Corp. v. Sec. Bank & Trust Co., 600 N.W.2d 481 (Minn. Ct. App. 1999), the Minnesota Court of Appeals addressed a priority dispute that involved a judgment lien and a later-recorded mortgage on homestead property. The judgment lien was based on a judgment that had been docketed two months before the homestead was mortgaged.[6] Although the judgment was docketed before the mortgage was recorded, it was undisputed that the judgment lien never attached to the homestead.[7] Because the mortgage was perfected when it was recorded, before any judgment lien could attach, the court held that the mortgage had priority over the unattached and unperfected judgment lien.[8]

[1] Minn. Stat. § 548.09, subdiv. 1; NationsBanc Mortgage Corp. v. Sec. Bank & Trust Co., 600 N.W.2d 481 (Minn. Ct. App. 1999).

[2] Oldewurtel v. Redding, 421 N.W.2d 722, 726 (Minn. 1988).

[3] Deutsche Bank Nat’l Trust Co. v. Petersen, 748 N.W.2d 306, 312 (Minn. Ct. App. 2008) (quoting NationsBanc Mortgage Corp. v. Sec. Bank & Trust, 600 N.W.2d 481, 483 (Minn. Ct. App. 1999), review denied (Minn. Dec. 14, 1999)).

[4] See, e.g., Eustice v. Jewison, 413 N.W.2d 114, 120 (Minn. 1987) (holding that a judgment could attach only to the judgment debtor’s non-exempt property); Oxborough v. St. Martin, 170 N.W. 707, 708 (Minn. 1919) (holding that a judgment lien does not attach to homestead property until and unless the property ceases to be a homestead).

[5] Minn. Stat. § 510.05.

[6] Nationsbanc, 600 N.W.2d at 483.

[7] Id.

[8] Id.; see also Landers-Morrison-Christenson Co. v. Ambassador Holding Co., 214 N.W. 503, 505 (1927) (stating that future advances secured by a mortgage, at least where made pursuant to an obligation to make them, have priority over mechanics’ liens that attached after the mortgage was recorded but before the advances were made); Landmark v. Schaefbauer, 41 B.R. 766, 770 (Bankr. D. Minn. 1984) (determining that recording a real estate mortgage perfects the lien against property of the bankruptcy estate).