## Facts

- Property owners recorded declarations of homestead on Santa Clara County real property.
- The owners had a senior first deed of trust (Bohnett) recorded in 1965.
- After the homesteads were recorded, Parish recorded an abstract of judgment against the owners.
- The owners later executed and recorded a deed of trust securing a promissory note in favor of Cali.
- Parish partially released its judgment lien to allow a partial sale, and in exchange received a later-recorded deed of trust on the retained portion, securing the same judgment debt.
- Parish foreclosed under its deed of trust and purchased at that sale, but the senior lienholder later conducted a trustee’s sale under the first deed of trust.
- The senior trustee’s sale produced surplus proceeds after payment of the senior debt; Valley Title, as stakeholder, filed interpleader to determine whether Parish or Cali was entitled to the surplus.

## Issues

1. Whether homestead declarations recorded before a judgment abstract limit the judgment creditor’s priority claim to surplus proceeds from a later trustee’s sale under a senior deed of trust.
2. Whether a judgment creditor can improve its priority against homesteaded property by taking a later deed of trust securing the preexisting judgment debt.
3. How surplus proceeds from a foreclosure under a senior deed of trust are distributed among competing junior claimants when homestead protections affect lien enforceability and priority.

## Decision

- The Court of Appeal affirmed the judgment awarding the surplus proceeds to Cali.
- The homestead declarations restricted Parish’s ability, as a judgment creditor, to claim priority based on its abstract of judgment.
- Parish’s later deed of trust, taken as security for the judgment debt, did not redate or elevate Parish’s position to defeat the homestead-based priority scheme applicable to competing interests.
- Cali’s deed of trust, as a consensual lien, had superior entitlement to the surplus over Parish’s judgment-based claim in light of the homestead protections.
- Surplus proceeds from the senior trustee’s sale stood in place of the property and were distributable to junior interests according to their lawful priority as affected by homestead law.

## Legal Principles

- A recorded homestead can limit the effect and enforceability of subsequently recorded judgment liens against the homesteaded property, subject to statutory rules.
- Surplus proceeds from a trustee’s sale under a senior deed of trust are treated as a substitute for the property and are distributed to junior claimants in order of priority.
- Consensual liens (such as deeds of trust) on homesteaded property may be treated differently from judgment liens for purposes of enforceability and priority.
- A creditor’s later acceptance of a deed of trust securing a preexisting judgment debt does not permit the creditor to bypass homestead-based limitations or alter priorities to the detriment of other creditors under the statutory scheme.

## Conclusion

The court upheld distribution of surplus proceeds from a senior trustee’s sale to a junior deed-of-trust holder where homestead declarations limited a judgment creditor’s priority, and it rejected the judgment creditor’s attempt to improve its position by taking a later deed of trust securing the same judgment debt.


Valley Title Co. v. Parish Egg Basket, Inc., 31 Cal. App. 3d 776 (Cal. Ct. App. 1973)