Vacating or preserving stale judgments bearing inherent defects: setting aside the final judgment

September 16, 2011

By David J. Cook

The Free Press – Volume 10, Summer 2011

Published by the Commercial Law League of America

The crucible of every judgment is enforcement, compelling the judgment debtor to involuntarily compensate the plaintiff. Absent insurance or a solvent defendant, judgments do not reach a flash point until the debtor sells valuable property encumbered by a judgment lien, or confronted by aggressive and successful campaign of civil enforcement.

View the complete article here…

Post judgment subpoena power: Creditors need not fly blind into the quagmire of enforcement.

September 12, 2011

This ruling demonstrates that a judgment creditor is generally entitled to use the power of a subpoena to marshal financial records at a debtors exam. This is important in enabling the judgment creditor to meaningfully examine the judgment debtor with bank statements, and financial statements at hand.

Read the full opinion here.

Arbitration: An iron clad, albeit not infallible form of dispute resolution.

September 12, 2011

Arbitration benefits litigants by offering finality. As the California Court of Appeal held in Sappal v. Business Investment Management,  absent the most extreme ruling, an arbitrators decision is not subject to judicial review.

Why is this important? Winners like arbitration as they offer finality, assuming they got what they wanted. Losers abhor arbitration, as they offer finality, assuming that they are disappointed with the result.

Read the full opinion here.


Fraudulent Conduct and Jurisdiction

August 29, 2011

In Kraus-Anderson Capital v. Alamo Medical Supply & Equipment, Inc. the California Court of Appeal (2nd Dist.) upheld a trial court’s finding that the Minnesota Courts had the jurisdiction to enforce a promisory note executed in California.

The facts here are typical of many finance transactions. An out of state financier lends money to a customer of expensive, specialized equipment. The customer executes a promisory note and security agreement. The vendor executes a remarketing agrement obligating the vendor to recover the collateral and provide for remarketing, a common mechanism facilitating the sale of specialized equipment.

The customer in this case defaulted, and the financier sought to recover its collateral and call upon the vendor to re-market the equipment. The financier then discovered that the equipment was misrepresented and that the vendor defaulted on the remarketing agreement. The financier obtained a judgment in its home state (Minn.) against the vendor for the fraudulent equipment and the breach of the remarketing agreement. The financier then sought to domesticate the sister-state judgment in California, prompting the vendor to challenge the judgment on jurisdictional grounds. The California trial court denied the motion and the Court of Appeal affirmed.

In a scholarly analysis the appellate court found that the sister-state court properly had jurisdiction over the vendor.

The message from this case is that a financier is entitled to seek relief in its home court given a breach of a remarketing agreement by an out of state vendor.

Read the full opinion here.

The Discretionary Stay Against Enforcement of a Judgment

June 24, 2011

Los Angeles Lawyer – April 2011

By David J. Cook

THE RACE TO ENFORCEMENT begins as soon as a judgment creditor wins a lawsuit. While typically the plaintiff, a judgment creditor can also be the defendant in an anti-SLAPP suit. In either situation, the judgment creditor can begin enforcement procedures immediately upon entry of judgment and can go so far as to direct the sheriff to appear at the defendant’s front door, break it down, and seize the contents from ?oor to ceiling, including the family dog. Only settlement, posting of an expensive appeal bond, or entry of a discretionary stay of enforcement by the trial court can prevent enforcement…

Continue reading the full article here.

Bankruptcy as an Impregnable Shield to Enforcement? Not So Fast.

June 10, 2011




A quick hypothetical: A debtor isn’t paying. You’ve unleashed your full arsenal of enforcement allowed under the law, bank levies,  a motion for the appointment of a receiver, motion for sale of a dwelling house, etc. The whole gamut.

Everything is going along well enough, until your fax machine coughs out a friendly notice from your local bankruptcy court that your debtor filed Chapter 13.

That’s funny, you were sure that your debtor had deep pockets. Bankruptcy? This debtor could write you a check tomorrow if he weren’t still bitter that you had the sheriff sell his Lamborghini. No, this time it’s personal. Your debtor just doesn’t want to pay.

Your debtor then sets forth a plan which purports to pay his creditors (You) 100 cents on the dollar, but in monthly payments spread out over 5 years and with no interest.  This doesn’t sound appealing at all.

The court in the case of  In re Steven Allan Korn (CAEB, Case No: 11-91339) rejected precisely such a plan, finding that when bankruptcy is filed for the sole purpose of frustrating the enforcement attempts of a single creditor the filing was in bad faith.

Read the full opinion here.

Checks and Wire Transfers to Counsel are not Privileged: Discovery Reveals Clients’ Accounts.

May 31, 2011
In the case of Garza v. ACL the judgment creditors sought to obtain a corporate debtor's financial records through a subpoena targeted at the debtor's attorneys.  In answering the question of  "Are canceled checks  protected by attorney client privilege?" the court, Hon. John K. Stewart, Judge Presiding, answered with a resounding No.

“THE COURT: I think the difference is that a check or a money transfer, these have lives of their own. They are not communications. They are instruments of commerce. They are negotiable instruments. A letter accompanying a check would be a communication, but a check is really a communication to a bank. It’s telling the bank to pay a certain amount of money on behalf of a client. So I think the Harris analysis, to me, is the most appropriate and on point. And that’s the Ninth Circuit Court of California — Ninth Circuit Court in California. It’s 413 F.2d 316. But they say, and they are quoting another case, but they say “The canceled checks and bank statements are not within the attorney-client privilege. These items were negotiable instruments in commerce and were never confidential from the time of their creation.Their transfer from the client to the attorney did not constitute a confidential communication.”In those cases, they were trying to subpoena those records from a bank.And again, if those documents ultimately end up in a bank, and they do, when the check comes into your firm, you endorse it, and it goes back to the bank. The original sometimes is referred to the person who signed the check. Now, for example, my own bank account, I get little microfiche reprints and the originals are either in my bank or else they are kept on microfiche somewhere. But they are ultimately in the bank.”

(See attached transcript, Pg. 13)

Read the full transcript here.