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Sourcecorp, Inc v. Steven Shill

June 6, 2012

SOURCECORP, INC., PLAINTIFF AND RESPONDENT,
v.
STEVEN SHILL, DEFENDANT AND APPELLANT.



Super. Ct. No. 04CS01307) APPEAL from a judgment of the Superior Court of Sacramento County, Kevin R. Culhane, Judge.

The opinion of the court was delivered by: Butz , Acting P. J.

CERTIFIED FOR PUBLICATION

Affirmed.

In September 2004, plaintiff Sourcecorp, Inc., registered an Arizona fraud judgment in the Sacramento County Superior Court that it had obtained against defendant Steven Shill earlier that month. The total judgment was in excess of $3 million. Pursuant to this registered judgment, Sourcecorp obtained a "turnover" order (Code Civ. Proc., § 699.040)*fn1 ex parte in September 2010, which directed Shill to transfer possession of $125,000 in cash to the El Dorado County Sheriff. Sourcecorp had learned in the course of deposing Shill in August 2010 that the latter was keeping this sum of money in a safe in his residence. By that time, the outstanding amount on the judgment (with interest) was more than $4 million despite a garnishment order in effect since June 2005.

Shill filed a motion to vacate the turnover order wherein he contended the cash represented the balance remaining of his earnings after garnishment, and therefore under section 704.070 it was exempt from levy. The trial court denied the motion. Shill filed a timely notice of appeal from the order. (§ 703.600; Kono v. Meeker (2011) 196 Cal.App.4th 81, 86, fn. 2 (Kono); 8 Witkin, Cal. Procedure (5th ed. 2008) Enforcement of Judgment, § 180, subd. (3), p. 217 (Witkin).)

On appeal Shill renews his argument that the cash is exempt from levy as a matter of state and federal law. He also contests the trial court's finding that he inadequately traced the source of the cash to his exempt earnings. As we find the former issue determinative, we do not need to reach the latter. We affirm the order denying Shill's motion to vacate.

FACTUAL AND PROCEDURAL BACKGROUND

Shill sold a company to Sourcecorp, continuing as president of the company. The Arizona judgment determined that Shill thereafter caused the company's earnings to be overstated in order to trigger additional compensation to him.

After filing the garnishment order in 2005, Sourcecorp was able to collect only a little more than $216,000 from the earnings of Shill in his present employment with Document Fulfillment Services (DFS), even though tax documents showed DFS had paid him over $1.5 million from 2005 to 2009. Shill was a former part owner of DFS, in which he sold his interest in 2005 to an associate he described as a "'pretty good friend'" for $37,500. Shill continued to serve as general manager of operations and sales. The company administering the DFS payroll took only Shill's actual total monthly salary into account for purposes of the garnishment order, and ignored any direct payments that DFS made for Shill's expenses, which included his monthly rent of $6,000 and credit card bills (one of which accrued over $180,000 in charges over a three-year period). In addition, Shill had eschewed keeping money in any type of bank account for the past five years (after Sourcecorp had executed on more than $100,000 he had in deposits), and transacted only in cash.

Sourcecorp set a judgment debtor examination for August 2010. In the course of the examination, Shill admitted that he presently had $125,000 in the safe in his home, which he had not revealed in his other discovery responses. He had kept amounts of cash as high as $300,000 in the safe to avoid its being attached in a bank account.

After obtaining the turnover order, Sourcecorp's agent made 22 unsuccessful attempts through mid-October 2010 to effect personal service at Shill's residence and place of business. At that point, Shill retained counsel.

DISCUSSION

As we recently have noted, generally all the property of a judgment debtor is subject to enforcement of the money judgment. (Kono, supra, 196 Cal.App.4th at p. 86.) Since the state Constitution requires the protection of a "certain portion" of a debtor's property from forced sale (Cal. Const., art. XX, § 1.5), the Legislature has enacted a comprehensive and precise statutory scheme for the enforcement of money judgments, including the specification in sections 704.010 to 704.210 of the kinds and degrees of property that are exempt from levy. (Kono, supra, at p. 86.) These exemptions are not subject to judicial enlargement, though we construe them in the favor of the debtor. (Ibid.) We review de novo the issues of the application of a statutory exemption to undisputed facts (id. at p. 87), and interpretation of the statutes (People v. Meyer (2010) 186 Cal.App.4th 1279, 1283 (Meyer)).

In the chapter devoted to wage garnishment, section 706.050 provides "the amount of earnings of a judgment debtor exempt from the levy of [a garnishment] shall be that amount that may not be withheld from the judgment debtor's earnings under federal law . . . ." The cross-referenced federal law limits a garnishment (as pertinent here) to 25 percent of the debtor's disposable earnings.*fn2 (15 U.S.C. ยง 1673(a).) Thus, under the terms of Code of ...


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