When Serving by Mail, Use a Stamp!

Dalessandro v. Mitchell, No. B293472, D2d8 (Jan. 3, 2020)

This is a discovery dispute in a judgment collections case. The underlying dispute isn’t super clear, but it appears that Creditor engaged in some sketchy stuff in judgment debtor discovery. Stuff like filing a phony proof of service and a false declaration in support of a motion to compel. Creditor’s counsel got sanctioned, for about $3,500.

There’s a question of appealability under the long-standing Fox Johns / Macaluso split regarding when post-judgment discovery orders are appealable under Code of Civil Procedure § 904.1. The Court of Appeal takes the Fox Johns side of the ledger and finds the order isn’t appealable, but takes the case as a writ anyway.

On the merits, the Court finds that debtor was never properly served with the discovery at issue. Among other things, there’s no evidence that the purportedly mailed discovery had a stamp on it. Since you can’t properly compel responses to improperly served document demands, the court was authorized to issue a sanction under Code of Civil Procedure § 2031.300(c). The fact that the court didn’t make an express finding of a lack of substantial justification did not render the sanction flawed. Instead, the statute requires the court to find substantial justification if it does not issue the sanction. In the absence of such a finding, the statute makes the sanction mandatory—“the court shall impose a monetary sanction . . . .”

Affirmed.

The Fox Johns-Macaluso Paradox, Resolved(?)

Yolanda’s, Inc. v. Kahl Goveia Commercial Real Estate, No. B271408 (D2d6 May 3, 2017)

Former Tenant is trying to collect on a $2 million judgment against a Former Landlord. Landlord entities claim insolvency. But Landlord had created a new entity and transferred all of the judgment-debtor entities’ assets and several of their employees to it. Which smacks of fraudulent transfer.

When Tenant took a PMQ debtor exam over the Landlord entities, the witness identified assets that had been transferred to related parties, but refused to testify about his knowledge of the current location of those assets, claiming it was beyond the scope of the exam. The trial court granted a motion to compel, which the debtor now tries to appeal.

There’s an issue, however, about whether the order is even appealable. As I noted back in 2013, there’s a split of authority on this issue between two opinions of the same court decided within six days of one another. One case—Macaluso v. Superior Court, 219 Cal. App. 4th 1042 (2013)—says that an order related to a judgment debtor exam is, literally, an order after final judgment, which is immediately appealable under Code of Civil Procedure § 904.1(a)(2). The other—Fox Johns Lazar Pekin & Wexler, APC v. Superior Court, 219 Cal. App. 4th 1210 (2013)—says that it isn’t, reasoning that a discovery order isn’t final enough. Without much analysis, the court here agrees with the Fox Johns approach, reasoning that treating every judgment debtor discovery order as appealable “will invite unnecessary delay and facilitate the concealment of assets.” So the court exercises its discretion to treat the appeal as a writ.

On the merits, the court finds the discovery to be permissible. Code of Civil Procedure § 708.120 permits discovery of third parties who have an interest in the debtors property or a debt to the judgment debtor that exceeds $250. Landlord here argues that limits discovery. But that ignores § 708.130(a), which permits judgment debtor discovery to an extent that a witness could be called at trial in an action to enforce the debt. That’s a pretty broad reach. And beyond that, the trial court’s power is backstopped by § 187, which gives the court the authority to enter orders necessary to carry out its jurisdiction, unless the order would be precluded by some statute. Given the policy favoring the enforcement of judgments, to the extent § 708.130 wasn’t enough, § 187 could fill the gap.

Affirmed.