Friday, December 20, 2013

Too Late to the Collections Party to Strike the Judge

National Financial Lending, LLC v. Superior Court, No. D064226 (D4d1 as modified, Dec. 18, 2013)

Q: Can a third-party debtor from whom a judgment creditor tries to collect during post-judgment collections proceedings strike the judge under Code of Civil Procedure § 170.6. 

A: No.

On this writ, plaintiff and real-party-in-interest Brewer and related entities obtained a $2.8 million trial verdict against defendant PCF. Brewer tried in vain to collect on its judgment using various post-judgment collections procedures. Petitioner NFL, a third party under common ownership with PCF owed PCF substantial amounts in management fees. Brewer served NFL with a notice of levy on that money, but NFL nonetheless paid over $2 million to PCF.

Brewer managed to get the court to appoint a receiver, but PCF was uncooperative. Before the receivership bore fruit, PCF went bankrupt. Brewer then moved under Code of Civil Procedure § 701.020 to hold NFL liable for the money it transferred to PCF after the levy was noticed. NFL responded by filing a motion to quash the notice of levy. At the same time, NFL filed a peremptory strike under Code of Civil Procedure § 170.6. The trial court denied the
§ 170.6 challenge as untimely and NFL sought writ relief.

Under § 170.6(a)(2), no party to a proceeding can strike the judge after trial has commenced or the judge has resolved a disputed fact issue on the merits. This rule applies even to third parties who are added after one of those things has happened. So the question is, is a post-judgment motion under § 701.020 a new “special proceeding” or is it just a continuation of the underlying case?

Looking to case law applying the definitions in §§ 21 through 23 of the Code of Civil Procedure, the court notes that a special proceeding must generally be commenced separately and independently from an underlying civil action.  Procedures that are simply ancillary to an ongoing civil or criminal case are not "special proceedings" as the term is used in § 170.6.  Generally, unless a separate collections case is filed, post-judgment debt collection procedures are considered a continuation of the underlying action in which liability was established. If that's the case, NFL's post-trial strike was too late. 

And even if post-judgment collection proceedings are separate “special proceedings,” Berger had already successfully moved to put PCF into receivership and sought relief under § 701.020 before NFL filed its peremptory strike. Because the trial court was required to make factual findings in ordering the receivership, any challenge after that point would still be untimely under § 170.6(a)(2), even if brought by a new party that had not previously appeared in the case.

Writ denied.

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