Thursday, June 9, 2016

Tax Return Privilege Overriden to Prevent Fraud

Li. v. Yan, No. A144994 (D1d2 May 2, 2016)

This is a collections case. Like most collections cases that progress to an appeal, the facts are convoluted and difficult to follow. But the court’s rulings aren’t. First, when the debtor is subject to a judgment debtor exam, the creditor doesn’t need to personally serve a subpoena demanding that he bring docs to the exam. Service in the same manner as applies to pre-judgment party discovery (e.g., mail service to counsel) will suffice.

Second, although California recognizes a privilege against the discovery of tax returns, it can be overridden in difficult collection cases by a “public policy greater than that of the confidentiality of tax returns.” To wit, the “policy is to prevent fraud against creditors. And against lenders. And perhaps against the court.” The record here showed that debtor had engaged in a bunch of pretty egregious conduct designed to frustrate the collections process. Under the circumstances, the court finds the privilege overridden.

1 comment:

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