22 Cal. App. 5th 867
Cal. Ct. App. 5th2018Background
- ACRC purchased property (959 N. Vista St.) in 2000 and granted a deed of trust to the City; Tesfai (ACRC exec) later convicted of fraud and ordered to pay $341,404 restitution to Los Angeles County.
- Prosecutors filed a Penal Code § 186.11 petition in 2007, recorded a lis pendens, and obtained temporary restraining order/preliminary injunction to freeze assets (including the Vista property) pending criminal proceedings.
- Tesfai pled guilty to several counts in 2011 and was ordered to pay restitution in 2012, but there is no record she admitted (or a trier of fact found) the § 186.11 white‑collar enhancement, and the criminal court never ordered the Vista property levied or sold to satisfy restitution.
- In 2014, after the criminal proceedings concluded, trusts (Barrington 2005 and Vista 2014) obtained interests in the property (grant deed and junior deeds of trust).
- The City foreclosed its 2000 deed of trust in 2014; sale produced a $273,157.09 surplus, deposited with the court. County claimed the surplus under the earlier lis pendens/TRO as restitution; the trusts claimed the surplus as junior lienholders.
- The trial court awarded the surplus to the trusts, finding the § 186.11 freeze/seize procedures were not completed (no enhancement finding, no levy), so County had no proprietary interest; this appeal followed.
Issues
| Issue | County's Argument | Trusts' Argument | Held |
|---|---|---|---|
| Whether the County obtained an enforceable interest in the Vista property via the § 186.11 lis pendens/TRO prior to the trusts’ interests | The lis pendens and TRO froze/seized the property for restitution, giving County priority dating to the lis pendens | The lis pendens/TRO only froze the property; no levy or § 186.11 finding occurred, so trusts’ later-recorded interests control | Held for the trusts: freeze alone did not create a property interest; no levy or § 186.11 finding occurred, so County had no superior interest |
| Whether a lis pendens alone converts to a lien or transfers title to secure restitution | Lis pendens provided notice and should relate back to secure County’s restitution claim | Lis pendens only gives constructive notice of litigation and does not itself create a lien or transfer title without the statutory levy/entry of an order | Held for the trusts: lis pendens only gives notice; absent levy or court order under § 186.11, it did not secure County’s restitution against the property |
| Whether the TRO/preliminary injunction (issued in 2007) continued to bind title or prevent transfers in 2014 | TRO deprived transferees of superior rights because it predated trusts’ interests | TRO merely restrained transfers by defendants; it did not by itself grant County a proprietary right or substitute for the § 186.11 levy/ordering of sale | Held for the trusts: TRO did not create a property interest in favor of County; it restrained transfer but did not substitute for a § 186.11 levy |
| Whether County’s failure to record a money‑judgment lien altered priority | County contends freeze-related documents sufficed; recording unnecessary where property was seized | Trusts emphasize County never recorded judgment lien and never sought civil enforcement against the property | Held for the trusts: County never recorded a judgment lien and never levied property; thus no enforceable lien existed against the surplus |
Key Cases Cited
- People v. Green, 125 Cal.App.4th 360 (2004) (describing Penal Code § 186.11 "Freeze and Seize" procedure)
- Slintak v. Buckeye Retirement Co., LLC, Ltd., 139 Cal.App.4th 575 (2006) (lis pendens provides constructive notice and binds subsequent purchasers to later judgment)
- Deutsche Bank Nat. Tr. Co. v. McGurk, 206 Cal.App.4th 201 (2012) (purchasers after a lis pendens take subject to the pending action and any judgment)
- People v. Pollard, 90 Cal.App.4th 483 (2001) (where defendant admitted § 186.11 enhancement and court ordered sale under that statute, subsequent conveyance was defeated)