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] Consequently, the homestead exemption does not prevent a mortgage lien from being perfected.

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, the court concluded that because the homestead exemption applied to the property, the judgment lien did not attach to the property before the mortgage was recorded.[7] Because the mortgage was perfected when it was recorded, the mortgage had priority over the unattached and unperfected judgment lien.[8]

[1] Minn. Stat. § 548.09, subdiv. 1; Nationsbanc Mtg. Corp. v. Security Bank and Trust, 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 (Minn. Ct. App. 2008) (citing 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 (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 advances secured by mortgage 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 real estate mortgage perfects lien against property of bankruptcy estate).