Case Number: KC051243    Hearing Date: July 25, 2014    Dept: J

Re: Carmen Salcido v. Sharma Developments, Inc. (KC051243)

MOTION FOR TURNOVER OF JUDGMENT DEBTOR SANJESH SHARMA’S INDIVIDUAL RETIREMENT ACCOUNTS

Moving Party: Plaintiff/Judgment Creditor Carmen Salcido

Respondent: Defendant/Judgment Debtor Sanjesh Sharma

POS: Moving OK; Opposing filed just 8 court days prior to the hearing and served by regular mail contrary to CCP §§ 1005(b) and (c); Reply served by regular mail contrary to CCP § 1005(c)

Plaintiff/Judgment Creditor obtained a Judgment against Sharma Developments, Inc. and Sanjesh Sharma for $240,000.00 pursuant to a stipulation. Judgment was entered on 12/29/08.

PERTINENT PROCEDURAL HISTORY:

On June 9, 2014, Plaintiff/Judgment Creditor Carmen Salcido’s (“Creditor”) Motion for Turnover of Debtor Sanjesh Sharma’s (“Debtor”) Individual Retirement Accounts was denied without prejudice on the following grounds:

1. The motion was untimely pursuant to CCP § 1005(b).
2. The motion was made pursuant to CCP § 699.040(a)(1), but failed to provide any authority to demonstrate that this section applies to intangible items such as an IRA. Further, the funds in the IRA are not in the possession of Debtor, but are being held by a third party.
3. The issues raised by the motion should have been brought before the court by a timely claim of exemption after the account(s) was levied upon, accompanied by the detailed financial statement required by CCP § 703.530, and a timely Notice of Opposition by the Creditor .

INSTANT MOTION:

The Plaintiff/Judgment Creditor moves again pursuant to CCP § 699.040(a)(1) for an order of turnover of Debtor Sanjesh Sharma’s (“Debtor”) individual retirement accounts (“IRA”) held at Oppenheimer Funds on the grounds that Oppenheimer requires a turnover order be issued prior to releasing the funds contained within Debtor’s individual retirement accounts. Creditor cites to Schwartzman v. Wilshinsky (1996) 50 Cal.App.4th 619, 626-627 (“Schwartzman”) and McMullen v. Haycok (2007) 147 Cal.App.4th 753, 755 (“McMullen”) in support of her motion.

In Schwartzman, a judgment creditor sought to execute on funds in debtor’s IRA and in a profit-sharing account established by debtor’s employer. The trial court ordered a partial turnover of funds, and the debtor appealed. The judgment was affirmed as to appellant’s IRA, but reversed as to the Sutro & Co. Profit–Sharing Retirement Plan, referred to in the account statement as “Sutro & Co Profit–Sharing 401K Plan.” The Court of Appeal held that: (1) the debtor failed to demonstrate that the IRA was necessary to provide for support of debtor or debtor’s dependents based solely upon size of $1.75 million judgment entered against debtor; (2) control exercised by judgment debtor over employer-established benefit plan was not such as to prevent plan from qualifying as exempt “private retirement plan”; and (3) funds in qualifying “private retirement plan” established by debtor’s employer were entirely exempt from claims of creditors, regardless of whether the funds were contributed by employer or by debtor-employee.

In McMullen, the judgment creditor sought to enforce a judgment by levying a writ of execution against judgment debtor’s accounts. The judgment debtor claimed a full exemption for assets that were rolled over from a fully exempt private retirement plan into an IRA. The trial court granted only a partial exemption of the funds. The judgment debtor appealed. The Court of Appeal reversed and the matter remanded with directions to enter a new order granting a full exemption under section 704.115, subdivision (d) to the assets held in judgment debtor’s rollover IRA account. The Court of Appeal held that under the tracing statute, full statutory exemption for funds held in private retirement accounts applied to assets that were rolled over into an IRA that would otherwise have provided for only a limited exemption.

IRA EXEMPTION:

Amounts held in “self-employed retirement plans” (IRAs and Keoghs), whether payable or already paid, are exempt to the extent those amounts do not exceed the maximum amounts exempt from federal income tax. However, the exemption is also limited to the amount “necessary” for the support of the judgment debtor, spouse and dependents when the judgment debtor retires. (CCP § 704.115(a)(3),(e),(f); In re Vigghiany (BC SD CA 1987) 74 BR 61, 62–63; In re Mooney (BC CD CA 2000) 248 BR 391, 396–403 — exemption limit applies to IRA rolled over from fully exempt ERISA-qualified retirement plan.)

A judge should construe the exemption statutes, so far as practicable, to the benefit of the judgment debtor. (Schwartzman v Wilshinsky, supra, 50 Cal.App.4th at 630.) The judge must accept the claimant’s factual assertions as true if the judgment creditor does not controvert them. (Id. at 628 n5)

The judgment creditor submits evidence that on or about January 22, 2014, she caused to be served a Notice of Levy on Farmers Financial Solutions, LLC, obligating Farmers to turnover Debtor’s “monies, stock share certificates, bonds…held at or controlled…” by Farmers. (Motion, Taylor Decl. ¶ 6, Exh. D.) This included Debtor’s individual retirement accounts held at Oppenheimer. (Ibid.) On or about March 31, 2014, Melissa Mazer, an employee of Oppenheimer, informed Creditor’s counsel that Oppenheimer would not provide the release of such funds without a court order. (Id. ¶ 7, Exh. E.)

The Judgment Creditor contends that a turnover order should be issued because the Debtor will be unable to demonstrate that the funds in the IRA are exempt since: (1) Debtor currently makes more than $200,000 a year; (2) Debtor maintains additional employer based retirement accounts through his current employer, Platinum Home Mortgage; (3) Creditor does not seek to levy Debtor’s employer based retirement accounts. She seeks only Debtor’s IRAs (non-employer based); (4) Debtor is also a young individual, meaning he will have the opportunity to work many more years to adequately save for his retirement; and (4) Debtor has exhibited bad faith by attempting to liquidate his IRAs before Creditor’s levy. Creditor submits copies of Debtor’s wage statements in support of the motion. (Motion, Taylor Decl. ¶¶ 8-9, Exhs. F-G.)

The Judgment Debtor, in opposition, contends that the subject IRA is exempt because it is necessary to provide for his support and the support of his dependents upon retirement. In his May 30, 2014 Declaration, Debtor represented that his wife and three minor children are his dependents. (Sharma Decl. ¶ 4.) He has also provided his Earnings Statements for 2014, showing gross pay totaling approximately $12,500.00 as of the middle of May 2014. (Ibid.) The Debtor also represented that he currently owes more on his house than its worth ($600,000 in debt on the property versus an appraised value between $450,000 and $555,000). (Id. ¶ 5.) The Debtor further represented that with exception of a 401K with Platinum that has a balance of less than $40,000, Debtor has no other appreciable assets.

However, in order to claim the subject IRA exempt under a statute exempting property to the extent necessary for the support of the debtor and his or her spouse and dependents, the claim of exemption must include a financial statement. (CCP §703.530(a).) The financial statement must contain all the information specified in CCP §703.530(b). It must be executed under oath by the debtor and by the debtor’s spouse (unless the spouses are living separate and apart). (CCP §703.530(c).) A judge properly denies a claim that is not supported by a financial statement. (See Schwartzman v Wilshinsky (1996) 50 Cal.App.4th 619, 627.)

Thus, the Judgment Debtor is ordered to submit a financial statement in compliance with CCP § 703.530(b) and the court will continue the hearing to consider the financial statement.