Case Number: 19GDCP00159 Hearing Date: February 14, 2020 Dept: NCD

TENTATIVE RULING

Calendar: 19

Date: 2/14/20

Case No: 19 GDCP00159

Case Name: Lakeland West Capital VIII, LLC v. Lasky

MOTION FOR ASSIGNMENT ORDER

Moving Party: Plaintiff Lakeland West Capital VIII, LLC

Responding Party: Defendant William F. Lasky

RELIEF REQUESTED:

Assignment of Rights, Turnover Order and Order to Appear

SUMMARY OF FACTS:

This is a petition file opened on an Application for Entry of Judgment on Sister-State Judgment, with respect to a judgment entered in Milwaukee County, Wisconsin.

On April 17, 2019, the court entered a judgment in this matter based on sister-state judgment in the sum of $850,125.86. The Judgment was mailed by the clerk on April 26, 2019. On May 15, 2019, defendant Lasky was personally served with the Application and Judgment.

The matter was originally heard on December 6, 2019. No timely opposition had been filed, and the court published its tentative ruling to grant the motion for assignment of rights as to accounts receivables with respect to designated companies and limited to the amount of the outstanding judgment plus interest, to issue a turnover order, and to grant a restraining order restraining the judgment debtor from assigning or otherwise disposing of the right to payment. The tentative ruling was to deny the request for an order obligating periodic appearance by the judgment debtor, without prejudice to judgment creditor noticing such appearances according to statute.

At the hearing counsel for defendant Lasky appeared and made an oral motion for a continuance of the hearing to file an opposition. The request was granted.

Opposition papers and reply papers have been filed.

ANALYSIS:

Relief is sought under CCP section 708.510, which provides, in pertinent part:

“(a) Except as otherwise provided by law, upon application of the judgment creditor on noticed motion, the court may order the judgment debtor to assign to the judgment creditor or to a receiver appointed pursuant to Article 7(commencing with Section 708.610) all or part of a right to payment due or to become due, whether or not the right is conditioned on future developments, including but not limited to the following types of payments:

(1) Wages due from the federal government that are not subject to withholding under an earnings withholding order.

(2) Rents.

(3) Commissions.

(4) Royalties.

(5) Payments due from a patent or copyright.

(6) Insurance policy loan value.

(b) The notice of the motion shall be served on the judgment debtor. Service shall be made personally or by mail.

(c) Subject to subdivisions (d), (e), and (f), in determining whether to order an assignment or the amount of an assignment pursuant to subdivision (a), the court may take into consideration all relevant factors, including the following:

(1) The reasonable requirements of a judgment debtor who is a natural person and of persons supported in whole or in part by the judgment debtor.

(2) Payments the judgment debtor is required to make or that are deducted in satisfaction of other judgments and wage assignments, including earnings assignment orders for support.

(3) The amount remaining due on the money judgment.

(4) The amount being or to be received in satisfaction of the right to payment that may be assigned.

(d) A right to payment may be assigned pursuant to this article only to the extent necessary to satisfy the money judgment.”

The order sought here is in the nature of the collection of account receivables from companies to which the judgment debtor has provided services as an independent contractor. This type of assignment of accounts is not one of the types of “payment” enumerated in the statute, but the statute refers to the payments involved as “not limited to” those enumerated. The Official Comment make clear that receivables are recoverable, although not mentioned in the statute:

LEGISLATIVE COMMITTEE COMMENT:

“Section 708.510 provides a new procedure for reaching certain forms of property that cannot be reached by levy under a writ of execution, such as the nonexempt loan value of an unmatured life insurance, endowment, or annuity policy. See Sections 699.720(a)(6), 704.100. It also provides an optional procedure for reaching assignable forms of property that are subject to levy, such as accounts receivable, general intangibles, judgments, and instruments. This section does not make any property assignable that is not already assignable. This remedy may be used alone or in conjunction with other remedies provided in this title for reaching rights to payment, such as execution, orders in examination proceedings, creditors’ suits, and receivership. The use of this remedy is subject to limitations on the time for enforcement of judgments.”

The motion indicates that in judgment debtor examination proceedings in a District Court in Clark County Nevada, judgment debtor has appeared at judgment debtor examinations, and produced documents showing that he has present and future accounts receivables relating to consulting work defendant performs for companies in the healthcare industry. The motion argues that Lasky has worked for a conglomerate of 28 individual companies, all managed under the umbrella of “Madison Realty Company, LLC,” but that each of the companies is a separate entity.

The motion appears to seek an order for assignment of all accounts receivable, when the showing before the court only submits evidence showing that five companies are established as having past or future receivables with respect to an independent contractor relationship, Madison Realty Companies, LLC, GT Madison Realty, LLC, Madison Realty Equities, LLC, Riverside Center Commerce Park, II, and Grandtag Madison Realty, LLC. The court’s order will be limited to the receivables from those five companies.

The opposition does not argue that an assignment order is not properly sought or may not be ordered here but concedes that Lasky is employed as an “independent consultant in the healthcare industry,” that he has a regular monthly income of $20,000 from Madison Realty Company, LLC (“MRC”), and that he does not have a written employment agreement with MRC but expects the income to continue absent disruption of the relationship. [Lasky Decl. ¶¶ 3, 4].

Lasky argues that the court should delay in making any decision on the merits of the motion pending consideration of plaintiff’s settlement with defendant Lasky’s guarantor, Andrew Turner. Lasky argues that without information concerning the settlement, the court is unable to consider the factor under the statute of “(3) The amount remaining due on the money judgment.”

The reply submits the agreement, which is for Turner to make total payments of $275,000, with monthly payments to be made of at least $4,583.33 per month, for five years. [McKee Decl., Ex. 6]. The reply also indicates that any such payments, if and when they are made, will be credited against the entire judgment. This issue will be discussed at the hearing, as this creates a housekeeping issue with respect to the total sum up to which the accounts should be ordered assigned.

The opposition also argues that the requested relief should be denied because Lasky believes that if his income from MRC were to be attached or if MRC were to become involved in this or any other legal action, his sources of income could decrease or cease altogether. [Lasky Decl. ¶5]. While the reply argues that Lasky has provided no facts substantiating this belief, it would appear that given that Lasky is now participating in this matter through an attorney, the court could take an initial step of entering an assignment order, directed only at the judgment debtor, not any other parties, and if the judgment debtor violates that order, further turnover and restraining order type of relief can be sought. However, the court elects not to utilize this option at this time.

Lasky also argues that the court, in taking into account the statutory factors, should consider, “The reasonable requirements of a judgment debtor who is a natural person and of persons supported in whole or in part by the judgment debtor.” CCP § 708.510 (c)(1). Lasky submits his declaration stating that “I do not have any other regular source of income, other than MRC.” [Lasky Decl. ¶ 4]. Lasky then submits a monthly budget he prepared for the monthly expenses of himself and evidently his family, including three children in college, showing monthly expenses of $23,230, which he argues exceeds his $20,000 income. [Lasky Decl. ¶6, Ex. A]. The argument is also made that wage garnishment orders, which is essentially what this assignment order would be would not permit all wages to be garnished, but limited to a percentage.

Under CCP section 706.050:

“Except as otherwise provided in this chapter, the amount of earnings of a judgment debtor exempt from the levy of an earnings withholding order shall be that amount that may not be withheld from the judgment debtor’s earnings under federal law in Section 1673(a) of Title 15 of the United States Code.”

15 USC 1673 (a) provides:

“(a) Maximum allowable garnishment. Except as provided in subsection (b) and in section 305 [15 USCS § 1675], the maximum part of the aggregate disposable earnings of an individual for any workweek which is subject to garnishment may not exceed
(1) 25 per centum of his disposable earnings for that week, or
(2) the amount by which his disposable earnings for that week exceed thirty times the Federal minimum hourly wage prescribed by section 6(a)(1) of the Fair Labor Standards Act of 1938 [29 USCS § 206(a)(1)] in effect at the time the earnings are payable,
whichever is less. In the case of earnings for any pay period other than a week, the Secretary of Labor shall by regulation prescribe a multiple of the Federal minimum hourly wage equivalent in effect to that set forth in paragraph (2).”

(Emphasis added).

The reply argues that Lasky had previously prepared a budget during judgment debtor examination which was in the neighborhood of $14,000, and that plaintiff would be satisfied to have assigned only 25% of the monthly income, or $5,000. [See Weis Decl. ¶ 3, Ex. 1]. This appears a reasonable compromise given that Lasky has paid nothing on the substantial judgment, and the budget presented now by Lasky does not appear to set forth reasonable requirements for a judgment debtor to avoid payment of a final judgment debt. This issue will be discussed at the hearing. The court could issue an assignment order in the sum of $5,000 per month, but the court elects not to do so at this time.

However, the showing made with respect to Lasky’s reasonable requirements is somewhat incomplete. The declaration indicates Lasky does not have any other “regular” sources of income, which appears evasive, and there is nothing indicating that his spouse, or his college student children, are not generating income. There is also no listing of assets which might be used toward paying this debt. The court will require defendant to submit to the court a verified financial statement, on the form used to make a claim of exemption in a wage garnishment matter, which would include all sources of income, assets, and provide more information concerning the ages of the children and their circumstances. See CCP § 703.530 (a) and (b).

As set forth above, the statute permits the assignment of a right to payment “only to the extent necessary to satisfy the money judgment.” CCP section 708.510(d). Any order must reflect that payments are to be assigned only to this extent. The court file shows that the judgment was for $850,125.86, entered on April 17, 2019, and the moving papers indicate that no sums have been paid on that judgment. Under CCP section 685.010(a), a money judgment remaining unsatisfied accrues interest on the principal amount at the rate of 10 percent per annum. The court’s ultimate order will indicate that the total sum must also be adjusted by expected periodic credits as the guarantor Turner makes his payments in satisfaction of the judgment. The court must likely would make the notional assumption that the judgment would be reduced by the guarantor amount of $275,000.00.

The motion also seeks a turnover order pursuant to CCP § 699.040 and a restraining order pursuant to CCP § 708.520. As to the turnover order, under CCP § 699.040:

“(a) If a writ of execution is issued, the judgment creditor may apply to the court ex parte, or on noticed motion if the court so directs or a court rule so requires, for an order directing the judgment debtor to transfer to the levying officer either or both of the following:

(1) Possession of the property sought to be levied upon if the property is sought to be levied upon by taking it into custody.

(2) Possession of documentary evidence of title to property of or a debt owed to the judgment debtor that is sought to be levied upon. An order pursuant to this paragraph may be served when the property or debt is levied upon or thereafter.

(b) The court may issue an order pursuant to this section upon a showing of need for the order.

(c) The order shall be personally served on the judgment debtor and shall contain a notice to the judgment debtor that failure to comply with the order may subject the judgment debtor to arrest and punishment for contempt of court.”

As to the restraining order, an order is sought preventing defendant from engaging in any act which would interfere with the assignment order. Relief is sought under CCP section 708.520, which provides:

“(a) When an application is made pursuant to Section 708.510 or thereafter, the judgment creditor may apply to the court for an order restraining the judgment debtor from assigning or otherwise disposing of the right to payment that is sought to be assigned. The application shall be made on noticed motion if the court so directs or a court rule so requires. Otherwise, it may be made ex parte.

(b) The court may issue an order pursuant to this section upon a showing of need for the order. The court, in its discretion, may require the judgment creditor to provide an undertaking.

(c) The court may modify or vacate the order at any time with or without a hearing on such terms as are just.

(d) The order shall be personally served upon the judgment debtor and shall contain a notice to the judgment debtor that failure to comply with the order may subject the judgment debtor to being held in contempt of court.”

Here, a noticed motion has been made, and the court had previously noted that both such orders require a “showing of need for the order.” Plaintiff relies on a declaration of counsel stating that the judgment debtor in an initial examination stated he was paid $5,000 a month for consulting, but later documentation and testimony showed he was paid $5,000 a week. [Blakely Decl. ¶¶ 12b, 15h]. Plaintiff argues that this willingness to lie and be evasive about what he is owed and paid, combined with the failure of judgment debtor to pay any of the judgment, suggests Lasky is likely to secrete or manipulate funds to further avoid payment.

Lasky in opposition argues that there was some confusion in his judgment debtor examination with respect to his income from a senior care development project being only $5,000 a month, and that he has cooperated with Nevada counsel in producing check stubs showing his $5,000 per week payment from MRC, as well as bank account statements, so he is not hiding his financial condition. [Lasky Decl. ¶ 11]. However, this explanation suggests there may be other sources of income which are not taken into account in the purported budget. Lasky’s argument would be stronger if he had in fact made some offer to begin making payment on this debt, or in fact started to do so. The reply refers to copies of the transcripts of two judgment debtor examinations in the Nevada case, which were submitted with the moving papers. [Blakely Decl., Exs. 1, 2]. No courtesy copy of these voluminous papers has been submitted to the court despite two requests from court staff for such copies. While Lasky does not appear to be as forthcoming as would be preferred at his examinations, it appears that some documentation has been provided, and that plaintiff is able to obtain information about those documents.

As discussed above, particularly given the fear that the income from MRC could evaporate if MRC is to become involved in this matter, the court does not issue an assignment order at this time, without prejudice to plaintiff seeking further orders if Lasky does not comply with this court’s ultimate order regarding a payment plan. In the alternative, the court reserves the option, if the court is persuaded by the transcripts and at a further hearing regarding Lasky’s financial condition, that Lasky and his counsel are not to be trusted, such that plaintiff has demonstrated that a need has been shown for these orders so that the court may issue such orders. No undertaking would be required, as none is requested.

The motion also seeks an order that defendant be obligated to periodically appear, on a quarterly basis, to testify as to the current and new accounts receivables, and other matters. This relief appears premature, and judgment creditor instead is required to formally notice such appearances pursuant to statute.

RULING:

Matter is CONTINUED to March 27, 2020. The court is inclined to grant an assignment order in the sum of $5,000 a month, as proposed in the reply. The court finds the showing made with respect to the reasonable requirements of the judgment debtor and of persons supported in whole or in part by the judgment debtor is incomplete. The judgment debtor is ordered to submit to the court a financial statement, including a calculation of net worth, both verified under penalty of perjury, on the form approved for use in wage garnishment claims of exemption, or which complies with CCP § 703.530, and which includes, at a minimum, all sources of income, from the debtor, his spouse and the persons he supports, all assets and their value, supporting documentation, as well as a clear explanation of debtor’s relationship with the persons he claims are supported in whole or in part by the judgment debtor, whether they are supported in whole or in part, and in what part, their ages, and if and what income they earn.

Such a verified financial statement must state all assets, investments, stock portfolios, sources of income for plaintiff’s spouse with the defendant having such financial information available at the hearing. The defendant should bring his tax returns for the last three years in the event it becomes appropriate for the court and/or the parties to inspect such tax returns in camera so the court can accurately assess defendant’s income and for the court to determine the accurate sum for 25% of defendant’s wages because plaintiff’s Motion for Attachment in this case is the functional equivalent of a wage garnishment order. Defendant’s financial statement and net worth statement is due March 11, 2020 and may be filed conditionally under seal, with any response by plaintiff due March 18, 2020, which response must be filed conditionally under seal with defendant filing concurrently a motion to seal set for hearing on March 27, 2020 at 9:00 a.m. so the court can enter a sealing order at that hearing, if necessary. The parties must provide courtesy copies to chambers on the day of filing of all pleadings the parties file.

Please note that any confidential financial materials filed under seal conditionally are to be filed with the court in a sealed envelope and are not to be e-filed.

Motion to Continue is taken off calendar, as previously resolved by the continuance of the hearing on the motion for assignment order to this date.