What if your judgment debtor is or has a business? It is important to perform post judgment investigations, to uncover the existence of any business that your judgment debtor owns or is involved with. Ideally, you also did this before you sued them. My articles are my opinions, and not legal advice. I am a judgment broker, and am not a lawyer. If you ever need any legal advice or a strategy to use, please contact a lawyer.
Is your judgment debtor’s business a DBA (Doing Business As), or is their business a corporate entity? A corporate entity is treated as an entirely separate and individual entity in the eyes of the law. Legally speaking, a corporate entity has many of the same rights that an individual person has.
A DBA (sometimes called a Fictitious Business Name) business is not legally separate from the person or persons that own it. With a DBA business, a money judgment against the owner is essentially also a judgment against their DBA business, even if the original cause of action for the judgment has nothing to do with their DBA business.
With a DBA business, a judgment creditor is free to hire a Sheriff to attempt to freeze, seize, levy, or garnish (and then sell); non-exempt assets belonging to the business owner, (whether the assets or the debtor) appear to be a part of their business or not. The possible assets that might be levied include real estate, some business equipment, furniture, accounts receivable, some inventory, bank accounts, some vehicles, or perhaps any other asset which the debtor owns.
Before you have any debtor’s equipment, vehicles, tools, computers, etc., levied; make sure you know your Sheriff’s policy and the cost of doing this. Most assets do not sell for much at a Sheriff auction, and you must pay for storage, the levy, and transportation. Some Sheriff’s will not levy computers, but some will levy all but the hard drive, because they do not want data levied. Sometimes it is not worth it to attempt a levy.
When a judgment debtor has a DBA business, it may increase the range of possibilities available to attempt to recover a judgment. The additional choices can make judgment enforcement easier, especially when their DBA business is profitable or has available assets.
When your judgment debtor is a business entity, for example a LLC or a corporation, you cannot have the Sheriff levy anyone’s assets, unless they are specifically listed as judgment debtors, in the body of the judgment, no matter what kind of company-related shenanigans they might be practicing now or in the past. Unless a court order specifies otherwise, when your judgment debtor is a corporation or LLC, only that entity’s assets may be used to help satisfy your judgment.
In the second edition of Judge Browns judgment book, it mentions U.S. vs Miller (1976) 425 US 435, which was a 4th amendment search and seizure case. An accused bootlegger moved to suppress bank records produced pursuant to a subpoena for which he had not received any notice. The USSC ruled that there was no illegal search and seizure or violation of the Bank Secrecy Act. The court found there was no reasonable expectation of privacy in checks, etc. because those are negotiable instruments and not secret by nature.
In response to US vs Miller Congress passed the Right to Financial Privacy Act which prohibits release of financial information to any government authority without compliance with the act which includes notice to the customer.
Also, Judge Brown’s book is not specific to California. In California the state constitution spells out a right of privacy. California Bank records are clearly covered under as personal records under CCP 1985.3 and a consumer notice is required. The purpose of the consumer notice is to let the consumer know you are seeking their records so that they may make a motion to quash or limit your subpoena, this seems unnecessary to me. And, in that context, you can litigate the issue of whether or not they have a privacy right, etc. In the context of judgment enforcement you should win the privacy right issue. Rutter Civil’s Procedure Before Trial; has a very good discussion of privacy in the context of pre-trial discovery.
A corporation is treated as an entirely separate and individual entity in the eyes of the law, with many of the same rights as an individual person. The more public, profitable, and established a business is, the easier it is to recover a judgment against them. In some cases, a profitable business pays off judgments when they are brought to their attention. Usually, one must find, and have the Sheriff levy the judgment debtor entity’s assets or income streams. This requires discovery, to find out who is paying your judgment debtor, or what assets they own.
When your judgment debtor owns shares in a corporate entity, or has partial ownership of one, levying those kinds of assets to help satisfy your judgment is usually complex, and is mostly beyond the scope of this article. In some cases the best chance is to appoint a receiver and get a turnover order, this is costly, and you should consult with a lawyer.