Wednesday, October 26, 2016
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C.A. Rejects Creditor’s Bid to Seize Campaign Funds
By KENNETH OFGANG, Staff Writer
A statute allowing a judgment creditor to obtain a restraining order to prevent a transfer of property to the debtor does not apply to transfers to the debtor’s spouse, even if the transferred money or goods would constitute community property, the Fourth District Court of Appeal has ruled.
Div. Three Monday affirmed an order by Orange Superior Court Judge Geoffrey T. Glass, allowing the campaign of state Board of Equalization Member Dianne Harkey to transfer $100,000 to Harkey to repay a loan.
Harkey, a former mayor of Dana Point and six-year member of the state Assembly, was elected to the BOE in 2014. As one of two Republicans on the five-member board, she became one of the highest-ranking GOP state officials, as Democrats swept all of the statewide offices at the time of her election.
The BOE member and her husband, Don Harkey, were defendants in a multimillion dollar lawsuit charging that Don Harkey’s firm, Point Central Financial, misled investors. Don Harkey and the firm were found liable, but Dianne Harkey was not.
Creditor’s Suit
Following entry of judgment, one of the plaintiffs, Don Mealing, brought a creditor’s suit against the Harkeys in an attempt to collect part of the $1.6 million he was awarded. He sought relief under Code of Civil Procedure §708.240(a), which allows the judgment creditor to apply for an order restraining the third person from making any transfer or payment “to the judgment debtor.”
The application for an order under this subdivision may be made ex parte unless the trial court or a court rule requires a noticed motion. In granting such an order, the judge may require the judgment creditor to post an undertaking.
Mealing argued that the campaign’s indebtedness to Diane Harkey was a community asset and thus subject to creditors’ claims, and applied ex parte for a restraining order. Glass denied the application.
The judgment creditor argued on appeal that the judge was required to grant the requested relief because he had an unpaid judgment against Don Harkey, and the loan by Diane Harkey to her campaign was a marital asset and thus subject to his claim.
No Dismissal
The parties stipulated to dismissal of the appeal the day before oral argument was scheduled. The Court of Appeal declined to accept the stipulation, but allowed the parties to waive oral argument.
Mealing’s contention fails, Justice Richard Aronson wrote for the court, because “Diane is not a judgment debtor, which is statutorily defined as the person against whom a judgment was rendered.”
He elaborated:
“Judgment in the earlier action was rendered against Dan, not against Diane. Even assuming the loan Diane made to the Campaign is a community property asset that may be used to satisfy the judgment, Diane is not a judgment debtor and section 708.240, subdivision (a), therefore does not apply.”
The justice noted that another part of the statute, §708.240(b), authorizes a judgment creditor to obtain a temporary restraining order and preliminary injunction preventing a third party who is indebted to a judgment debtor from making a payment or transfer to any person, not just the judgment debtor, but that Mealing abandoned his request for an order under that provision after it was denied by the trial judge, and offered no showing on appeal of entitlement to such an order.
The case is Mealing v. Diane Harkey for Board of Equalization 2014, 16 S.O.S. 5253.
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