United States District Court, N.D. California
ROY T. CAVELLINI, et al., Plaintiffs,
v.
MICHAEL F. HARRIS, et al., Defendants.
ORDER DENYING DEBTOR'S CLAIM OF EXEMPTION Re:
Dkt., 383
KANDIS
A. WESTMORE JUDGE
On
November 10, 2015, the Court granted Plaintiffs' motion
for an assignment order against Judgment Debtor Michael F.
Harris to the extent that distributions made to Michael F.
Harris from the Rita Harris Trust, the Gilbert Harris Bypass
Trust and/or the Michael Harris Discretionary Trust are
subject to assignment. (Dkt. No. 382.) The Court gave Debtor
leave to file a claim of exemption under California Code of
Civil Procedure § 708.550, and required Debtor to file a
properly noticed motion for a claim of exemption within 14
days.
On
November 23, 2015, Debtor filed a claim of exemption. On June
16, 2016, the Court held a hearing, and, for the reasons set
forth below, DENIES Debtor's claim of exemption.
I.
BACKGROUND
In
1998, the district court granted summary judgment against
Michael Harris for self-dealing, prohibited transactions and
breaches of fiduciary duty under ERISA involving the Harris
Realty Pension Plan in 1998, and awarded damages in an amount
of over $1, 000, 000 (including attorneys' fees and
costs), later renewed in 2008 for a total amount of
approximately 1.6 million dollars. (Dkt. No. 255). The Ninth
Circuit affirmed the judgment. Cavellini v. Harris,
188 F.3d 512 (9th Cir. 1999).
In
parallel criminal proceedings, Michael Harris was convicted
of theft, false statements and mail fraud involving the same
Pension Plan transactions, which was affirmed on appeal.
United States v. Harris, 185 F.3d 999, 1003 (9th
Cir. 1999). As part of that criminal case, Michael Harris was
ordered to make restitution in the amount of $646, 000.00.
Sentencing Hearing Minutes, United States v. Harris,
Case No. 3:95-CR-00227-TEH (N.D. Cal. June 9, 1997), ECF No.
127.
On
October 2, 2014, Plaintiffs filed the motion for assignment
order. (Dkt. No. 350.) On October 30, 2014, the district
court issued an abstract of judgment in this civil matter in
the amount of $1, 685, 470.54. (Dkt. No. 356.) On April 16,
2015, Defendant filed a notice of death of trustor Rita E.
Harris. (Dkt. No. 367.) After additional supplemental
briefing, the Court held a hearing on August 6, 2015. On
November 20, 2015, the Court granted in part Plaintiffs'
motion, finding that distributions from the Trusts were
subject to assignment to satisfy the judgment. (Dkt. No.
382.) The Court, however, granted Debtor leave to file a
claim of exemption, "which includes a financial
affidavit that complies with California Code of Civil
Procedure § 703.520." Id. at 10. Debtor
was advised that the "[f]ailure to make a timely claim
of exemption constitutes a waiver of the exemption, and all
distributions to Debtor from the Trusts will be assigned to
Plaintiffs. Id.
On
November 23, 2015, Debtor filed a claim of exemption.
(Def.'s Mot., Dkt. No. 383.) On November 30, 2015,
Plaintiffs filed an opposition. (Pls.' Opp'n, Dkt.
No. 384.)
On June
16, 2016, the Court held a hearing on the claim of exemption,
and granted leave to the Debtor to file a supplemental letter
to clarify the statutory basis for his claim of exemption. On
June 21, 2016, Debtor filed the supplemental letter.
(Def.'s Suppl. Letter, Dkt. No. 389.) On June 27, 2016,
Plaintiffs filed a response. (Pls.' Suppl. Letter, Dkt.
No. 390.)
II.
LEGAL STANDARD
When a
judgment creditor files a motion for an assignment order, a
judgment debtor who wishes to claim that all or a portion of
the right to payment is exempt from enforcement of a money
judgment, must file the exemption claim by noticed motion
along with an affidavit and a copy of his financial statement
with the levying officer. Cal. Civ. Proc. Code §§
703.520, 708.550(a). Generally, the claim must be served on
the judgment creditor no less than three days before the
hearing date. Cal. Civ. Proc. Code § 708.550(b). The
court decides whether to grant the claim of exemption based
on the declaration of the parties and any evidence presented
at the hearing. Kono v. Meeker, 196 Cal.App.4th 81,
86 (2011); Kilker v. Stillman, 233 Cal.App.4th 320,
330 (2015); Cal. Code Civ. Pro. § 708.550(c). The debtor
claiming an exemption bears the burden of proving that an
exemption applies. Cal. Civ. Proc. Code § 703.580(b).
III.
DISCUSSION
A.
Whether the financial statement was executed under
oath
The
November 10, 2015 order explicitly required Debtor to
"file a properly noticed motion for claim of exemption
within 14 days of this order, which includes a financial
affidavit that complies with California Code of Civil
Procedure § 703.520." (Dkt. No. 382 at 10.) Debtor
was advised that the failure to make a timely claim would
constitute a waiver, "and ...