Tuesday, October 30, 2012
Page 15
THE LEGAL COMMUNITY
Playing Cards
More Ways to Collect
By DAVID J. COOK
(The author is the senior attorney for Cook Collection Attorneys PLC and publisher of CollectionLawReporter .com)
Fifth in a Series
Assignment Orders
California law permits a Judge to assign to a judgment creditor the receivables due the judgment debtor in a wholesale fashion. This is called an assignment order. For example, all insurance monies due a dentist, now owed and owed in the future, could be assigned to the judgment creditor. All monies owed to an auto body shop could be assigned to a plaintiff who has obtained a discrimination judgment against the auto body shop. Unlike a garnishment which requires service through the Sheriff, at the expense of $35 per levy, plus about $100 for the private process server, the judgment creditor can serve the assignment order through the mail upon as many obligors as can be developed. For example, if the judgment creditor is owed money by a dentist or doctor, the judgment creditor can serve an assignment order upon nearly every insurance company, amounting to 1,000. Cost: $40.00 to file the motion.
The value of an assignment order is the ability to reach a large number of obligors, at a low expense, and do so repetitively. The fact that the motion is even filed might be enough to compel the judgment debtor to pay or settle.
Are you dealt the dentist and doctor cards? Dentists are poor business people and stumble over their commercial debts. While a good dentist might turn your teeth into a work of art, rivaling the statue of DAVID, paying bills on time is like pulling teeth. The dentists bill insurance companies all whom have a national wide presence. Serving the assignment order on insurance companies is like herding cattle: you are driving the accounts receivable away from the debtor to the plaintiff as assignee. Get a long, little doggie is our motto. Winning hand here? Well yes, but this takes a number of hands, and a lot of money, to get it right.
Keepers and Seizure of Personal Property
If the judgment debtor is running a retail or wholesale place of business, commercial enterprise, restaurant, bar, tavern, insurance agency, law office, medical office, accounting office, or any business open to the public, a judgment creditor can have the Sheriff enter the premises and seize the contents, including the cash-on-hand. The Sheriff can open the mail, seize checks, and deposit them in the Sheriff’s trust account. With a sufficient cash deposit, the Sheriff can seize the personal property on the premises and liquidate it. That is very expensive.
A Sheriff’s keeper can run for a minimum of $225 for an 8-hour keeper, or multiples thereof. Sometimes a Sheriff’s keeper can run 48-hours and require a deposit in the $1,350 range or more.
Before seizing the personal property, the judgment creditor should run a UCC to make sure that they are not seizing fully-collateralized personal property which would be valueless. Moreover, the secured creditor might file a third party claim which would defeat the levy. Given correct instructions and proper deposit, the Sheriff will seize personal property, such as cars, rolling stock, equipment, furnishings, and other valuables.
Notwithstanding the expense of this procedure and its riskiness, keepers are very successful in getting the debtor’s attention, either by way of the immediate payment of the judgment or a payment program. The downside of a keeper is precisely the expense and risk that the debtor will be driven into bankruptcy.
This round has many jokers. Engaged to collect $2,000 owed by a moose lodge, we sent in the sheriff to grab the money from the till. The sheriff came back empty handed because the club lacked a bill as the lodge used a chit system and billed the customers at the end of the month. Fold on that round. Taking another round we send in the sheriff with the instructions to seize the personal property. Half opened bottles of liquor? Cheap wine? Warm beer? Dirty glasses? No, none of this stuff. We instructed the sheriff to bring a ladder, lay the ladder against the wall, ascend the ladder and take the moose head. That did the trick. You can’t run a moose club without the moose head. The dealer paid on that round.
Miscellaneous Remedies
The judgment creditor can reach the interest of the debtor in an LLC or partnership through a charging order. The judgment creditor can reach the interest of the debtor in a lawsuit by filing a notice of lien. The judgment creditor can proceed against the debtor’s interest in a franchise, probate estate, or other assets. The judgment creditor can move for the appointment of a receiver for a patent, trade mark, copyright or trade dress, and even against a domain name. In the digital age, domain names have significant value and might serve as an asset, which if sold, could compensate the creditor. Absent certain limitations that deal with residential sales, in nearly most cases, the judgment creditor can “bid in” part of the judgment and acquire that asset at the Receiver or Sheriff’ sale.
The judgment creditor can proceed against the judgment debtor’s community property, such as a spouse’s wages, under the right facts.
Dealt the hand that compels you to collect rent? Commercial rent claims are tough. The person not paying rent is the person headed to bankruptcy court. The debtor can scrape by not paying nearly every other expense, except rent. Why would anyone take a rent judgment to collect? Bad round of cards. Except when the judgment debtor is a contestant on the Next Iron Chef America. You read that right. Elizabeth Falkner. The case dropped into our lap while she was mid cycle and beating out the better chefs. My wife and I were cheering her on. Go, Elizabeth, Go. Well, she lost to Gregory Zakarian. She shut down her two San Francisco restaurants, and her only know asset was the cookbook featuring baking and pastry concoctions. What was the next round? A receivership motion for the cook book, and copyright and recipes. The judge granted the order, and we made a deal. Adverse counsel told me that part payment of fees was that Ms. Falkner was giving baking lesson to his daughter. This round was a royal flush.
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