Legal Standard

“Section 704.740 says ‘a dwelling may not be sold to enforce a money judgment ‘except pursuant to a court order for sale obtained under this article ....’ (Sec. 704.740(a).) The ‘article’ referred to is article 4, “Homestead Exemption,” sections 704.710 through 704.850.” (Wells Fargo Financial Leasing, Inc. v. D & M Cabinets (2009) 177 Cal.App.4th 59, 67.)

“Section 704.740 is part of the homestead laws. ‘Homestead laws are designed to protect the sanctity of the family home against a loss caused by a forced sale by creditors.... The homestead exemption ensures that insolvent debtors and their families are not rendered homeless by virtue of an involuntary sale of the residential property they occupy. Thus, the homestead law is not designed to protect creditors .... This strong public policy requires courts to adopt a liberal construction of the law and facts to promote the beneficial purposes of the homestead legislation to benefit the debtor [and his family].’” (Id. at 67–68.)

Court Order for Sale

A Court Order for sale obtained under Civ. Code Sec. 704.710 et seq. is required before the interest of a natural person in a dwelling may be sold to enforce a money judgment.

The creditor's application for an order for sale must be made under oath and must describe the dwelling. (Civ. Code Sec. 704.760.) Further, the application must include all the following:

1. A statement whether or not the records of the county tax assessor indicate a current homeowner's exemption or disabled veteran's exemption for the dwelling and the person or persons claiming the exemption. (Civ. Code Sec. 704.760(a).)
2. A statement, which may be based on information and belief, whether the dwelling is the homestead and the amount of any homestead exemption, and a statement whether or not the records of the county recorder indicate that the judgment debtor or the debtor's spouse has recorded a homestead declaration under Civ. Code '704.910 et seq. (Civ. Code Sec. 704.760(b).)
3. A statement of the amount of any liens or encumbrances on the dwelling and the names and addresses of persons holding those liens or encumbrances. (Civ. Code Sec. 704.760(c).)

(See Little v. Community Bank (1991) 234 C.A.3d 355, 359).

Time and Notice of Hearing

After a Judgment Creditor files an application for an order for sale of a dwelling, the Court must set a time and place for hearing and order the Judgment Debtor to show cause why an order for sale should not be made. The hearing must be scheduled no later than 45 days after the application is filed, unless the time is extended for good cause. (Civ. Code Sec. 704.770(a); see also In re Marriage of Schenck (1991) 228 C.A.3d 1474, 1481.) Not later than 30 days before the hearing date, the Creditor must serve the Debtor, personally OR by mail, with a copy of the show cause order, a copy of the application, and a copy of the notice of hearing in the form prescribed by the Judicial Council, and must personally serve an occupant of the dwelling with a copy of each of those documents. If there is no occupant present at the time service is attempted, the Creditor must post a copy of each of the documents in a conspicuous place at the dwelling. (Civ. Code Sec. 704.770(b).)

Determination and Order

If the county tax assessor's records indicate the existence of a current homeowner's exemption or disabled veteran's exemption on the dwelling claimed by the Judgment Debtor or the Debtor's spouse, the Judgment Creditor has the burden of proof that the dwelling is not a homestead. If the records indicate that there is not a current homeowner's exemption or a disabled veteran's exemption, the burden of proof that the dwelling is a homestead is on the person claiming a homestead. Where the application states the amount of the homestead exemption, the person claiming the exemption has the burden of proving that the amount of the exemption is other than the amount stated in the application. (Civ. Code Sec. 704.780(a).)

The Court must determine if the dwelling is exempt and, if so, it must determine the amount of the exemption and the fair market value of the dwelling. (Civ. Code Sec. 704.780(b).) To assist in determining the fair market value of the dwelling, the court may appoint a qualified appraiser and determine reasonable compensation for the appraisal. (Civ. Code Sec. 704.780(d).) As originally enacted, Civ. Code Sec. 704.780(b) simply provided that the court must make an order for sale of the dwelling. In Abbett Elec. Corp. v. Storek (1994) 22 C.A.4th 1460, 1470, the Court held that this provision imposed a mandatory duty on the trial court to issue an order for sale on the determination that a dwelling is exempt, regardless of the Court's determination of the dwelling's value. In response to Abbett, the statute was amended to provide that an order for sale must be made unless the court determines that the sale would not be likely to produce a bid sufficient to satisfy any part of the amount due on the judgment under the minimum bid requirements of Civ. Code Sec. 704.800. (Id. citing Civ. Code Sec. 704.780(b).)

The order must specify the amount of the proceeds of the sale to be distributed to each person having a lien or encumbrance on the dwelling, and the names and addresses of those persons. Except as otherwise provided by Civ. Code Sec. 704.710 et seq., the Sale is governed by the general procedure governing execution sales (Civ. Code Sec. 701.510 et seq.). If the Court determines that the dwelling is not exempt, it must order a Sale in the manner provided by Civ. Code Sec. 701.510 et seq. (Civ. Code Sec. 704.780(b).) However, despite this mandatory language, the Court may refuse to issue an order of Sale for a nonexempt dwelling if to do so will interfere with the family law department's continuing jurisdiction over division of community property interests in the dwelling. (In re Marriage of Schenck (1991) 228 C.A.3d 1474, 1482.) The Court Clerk must transmit a certified copy of the order to the levying officer and, if the Court making the order is not the Court in which the judgment was entered, to the clerk of the Court in which the judgment was entered. (Civ. Code Sec. 704.780(c).)

Amount of Homestead Exemption

The exemption amount in effect at the time a judgment creditor obtains a lien shall apply to enforcement of that lien, notwithstanding later amendments to the exemption amounts set forth in Civ. Code Sec. 704.730. Civ. Code Sec. 704.965. (Berhanu v. Metzger, 12 Cal.App.4th 445, 448 (1992) “[A] judgment lien on real property is created... by recording an abstract of a money judgment with the county recorder.”; see also Civ. Code Sec. 697.310.)