Pursuit of Third Parties to enforce the judgment against debtor/imposing liability on third parties

One of the most underrated and fun tools in judgment enforcement is imposing liability on, and enforcing against, third parties who are in some way involved in helping or allowing the debtor to hide assets or avoid debts. There are many examples of this, but here are a few:

Example 1: (From Actual Case): Debtor is a pastor, gets fully and 100% supported by his church (which he controls), but himself has no money. At his examination, it is revealed his employment contract with his church calls for the Church to pay him $125k/year. But where is the money? Turns out, Church hasn’t paid him in 4 years “because of hard times” of course. So does creditor retreat back to its bedroom without supper?

ANSWER: No.  Creditors Suit (C.C.P. 708.210) – If a 3rd party owes a Debtor money, the Creditor can sue that 3rd party to recover the debtors money — and apply it to Creditors Judgment. (In the above case, the Church ended up paying the Debtors debt because of this)

Example 2: (From Actual Case): Eerily similar case where Debtor is a Pastor, and uses church to support himself, with nothing in his name. Creditor served intangible levy on Church for any monies owed to Debtor. Church disclosed it owes Debtor $250k in book royalties, but hasn’t paid, because its unable to, because COVID.  Debtor has not enforced this debt. Does creditor go back home crying to mommy?

ANSWER: No. Creditor can file Motion for Judgment against Church for failure to pay on levy (C.C.P. 701.020). The law appears to simply allow the creditor to take a judgment by motion against a third party who hasn’t paid on a levy- no new lawsuit required!**

Example 3: Creditor serves levy on bank, banks agent misfiles the papers and the levy does not get processed. Over a week later, creditor discovers this, and brings it to the banks attention. Bank processes the levy 1 week late, but unfortunately, by the time bank got around to correctly processing the levy, the Debtor drained all the money (Approx. $118,000.00) and Creditor ended up with $83.00. Does creditor curse his luck and wait till next time?

SOLUTION: No. Creditor files Motion for judgment against the bank. In the published case of Bergstrom v Zions Bankcorp, the Court ruled that Zions Bank was on the hook for the entire amount of the money in the bank account which it failed to turn over to creditor, which debtor then withdrew, causing creditor to never get it. Bank failed to process levy, Creditor was damaged, bank at fault. Bank owes the money to Creditor.

Example 4: (Actual case): Creditor serves levy on bank, gets nothing. Bank subpoena reveals that less than a week before the levy, Debtor wired $250,000.00 to his mother, draining the account to avoid the Creditor. Give up?

SOLUTION: Not even close.  Creditor served Mom with notice of a fraudulent transfer action (C.C. 3439 et seq) and Creditors Suit (C.C.P. 708.210). Debtor paid the judgment within days. (Also see Litigating Fraudulent Transfers)

There are multiple other methods of involving third parties in judgment collections, and putting third parties who are in some way complicit with debtor, on the hook for the judgment, or at least a part of the judgment. Oftentimes, third party liability makes the difference between collecting on the judgment, or never getting a dime.

Collection Attorneys  in Los Angeles since 2011, The Evanns Collection Law Firm has been enforcing judgments for years, and knows the ins and outs of these and other remedies.  Phone calls are always free and no obligation. Call now at 213-292-6888.

**: There are legal questions of whether this would work or a creditors suit would be necessary, but the case settled, so we may never know the exact answer- till next time, anyway.