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Bankruptcy Stay Does Not Prevent Creditors from Renewing Judgments, Published CA Court Holds

Tim Kowal     June 8, 2021

So you have a judgment that is about to expire, but the judgment-debtor has filed for bankruptcy. Can you renew the judgment? Or does the bankruptcy stay apply until the stay expires?

Yes, says the recent published opinion in Rubin v. Ross (D4d2 Jun. 4, 2021) no. E074210. Yes to both.

Justice Menetrez concurs, asking: both? That doesn't exactly make sense, now, does it?

In Rubin, the creditors got a judgment in 2007. The debtor filed for bankruptcy in 2009, which was still going on in 2019 when the creditors filed their renewal. The debtor challenged the renewal and, when unsuccessful, appealed.

The automatic bankruptcy stay under 11 US.C § 362 does not preclude renewal of judgments:

As an issue of first impression in California courts, the Fourth District Court of Appeal declined to follow the only federal court on the question whether the bankruptcy stay affected a creditor's right to invoke the judgment renewal procedures under Code of Civil Procedure sections 683.120 and 683.130. In In re Lobherr (Bankr. C.D.Cal. 2002) 282 B.R. 912, the bankruptcy court concluded that section 362 preempts California law concerning renewal, and that 11 U.S.C. § 108(c) extends the time to seek a renewal.

Rubin disagreed with Lobherr that renewal is preempted, reasoning that, contrary to Lobherr, renewal is an ex parte procedure that does not require service of the application for renewal, and thus is purely a ministerial act that does not interfere in any way with the bankruptcy estate. (Justice Menetrez points out that this is not quite true, because the application for renewal triggers a procedure by which the debtor may assert any claims or defenses to the judgment, akin to a motion to vacate. This process certainly would be stayed under section 362.)

A judgment creditor enjoys an extension of time under 11 U.S.C. § 108(c) to renew a judgment pending debtor's bankruptcy: 

In addition to having the right to renew a judgment pending bankruptcy, the Rubin court also held that creditors enjoy an extension of time to renew following expiration of the bankruptcy stay pursuant to 11 U.S.C § 108(c). While Ninth Circuit precedent has held this, Rubin now furnishes a binding California Court of Appeal authority on the point. (Justice Menetrez agrees with this holding.)

Concurring, Justice Menetrez notes an incongruity between the Rubin majority's two holdings:

But as Justice Menetrez's concurring opinion suggests, there is some incongruity between the Rubin majority's two holdings. If the stay does not prevent the creditor from seeking renewal, then how does the stay extend the creditor's time to seek renewal? Section 108(c) provides that the period to commence or continue a civil action "does not expire until ... 30 days after notice of the termination or expiration of the stay ... with respect to such claim." The Rubin majority says nothing in section 362 "conditions its grant of an extension" on an "actual[] prohibit[ion] from acting." But in this commentator's view, the language "30 days after ... expiration of the stay" sets up the stay as the triggering event for the extension: no stay, no extension.

Bankruptcy does not "toll" the time to renew the judgment:

In a footnote, the majority offers this important distinction: "Toll" means to suspend or stop the statutory period, and the tolled period is added to the end of the allowed period to take the action in question – here, to renew the judgment. But a bankruptcy does not "toll" the statutory period. Instead, section 108(c) has been interpreted to provide a 30-day “grace period” or “extension” for a judgment creditor to perform any act necessary to commence or continue a claim following the expiration of a bankruptcy stay. (Rogers v. Corrosion Prods. (5th Cir. 1995) 42 F.3d 292, 297; see In re Spirtos (9th Cir. 2000) 221 F.3d 1079, 1080-1081 (Spirtos).) Meaning: You get the 30-day extension period only. Otherwise, the 10-year period to renew the judgment never stops running.

The Upshot: If you have a judgment, do not be deterred by debtor's bankruptcy from timely renewing that judgment. But even if you are deterred, you still get a 30-day extension of time after the bankruptcy concludes.

Tim Kowal helps trial attorneys and clients win their cases and avoid error on appeal. He co-hosts the Cal. Appellate Law Podcast at www.CALPodcast.com, and publishes a newsletter of appellate tips for trial attorneys at www.tvalaw.com/articles. His appellate practice covers all of California's appellate districts and throughout the Ninth Circuit, with appellate attorneys in offices in Orange County and Monterey County. Contact Tim at [email protected] or (714) 641-1232.

Tim Kowal is an appellate specialist certified by the California State Bar Board of Legal Specialization. Tim helps trial attorneys and clients win their cases and avoid error on appeal. He co-hosts the Cal. Appellate Law Podcast at CALpodcast.com, and publishes summaries of cases and appellate tips for trial attorneys. Contact Tim at [email protected] or (949) 676-9989.
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