468 B.R. 396
Bankr. S.D. Cal.2012Background
- Collect filed motion to vacate turnover order II regarding funds seized by sheriff but not yet turned over.
- Debtor Hernandez filed Chapter 7; sheriff held funds in Wells Fargo account at time petition filed.
- Turnover Orders I and II directed turnover of funds to Debtor; funds were transferred to Zee Law Group before service of Turnover II.
- Collect argued no rights in funds after levy and failed to comply with turnover; Debtor seeks damages for stay violations.
- Court analyzed under 11 U.S.C. §542 and Whiting Pools; California law treated levy as a lien, not ownership, but Debtor retained exempt rights that supported turnover.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Turnover Order II was proper given the debtor’s rights in the funds | Hernandez argues Collect held no right post-levy; funds should be turnover | Collect argues funds became its property after levy | Turnover Order II proper; funds subject to turnover due to debtor’s exempt rights |
| Whether the debtor retained rights to exempt funds on petition date | Debtor retained exemption rights (e.g., social security exemption) | Collect contends exemption rights expired or were not applicable | Debtor retained exempt rights as of petition date, supporting turnover |
| Whether Collect violated the automatic stay by releasing funds to itself | Debtor seeks damages for stay violation; Collect should have ceased garnishment | Collect may have argued it acted within rights | Collect violated the automatic stay; potential damages to be determined under §362(k) |
| Whether Collect’s Rule 9023 reconsideration arguments were timely and proper | Debtor; reconsideration timely under 9023 | Collect’s grounds were untimely or improper | Motion analyzed under Bankruptcy Rule 9023; arguments deemed untimely substantively flawed |
Key Cases Cited
- Whiting Pools, Inc. v. United States, 462 U.S. 198 (1983) (turnover of levied funds when debtor has rights in property)
- Del Mission Ltd. v. Taxel, 98 F.3d 1147 (9th Cir. 1996) (automatic stay and turnover duties during bankruptcy)
- Churchill Nut Co., 251 B.R. 143 (Bankr. N.D. Cal. 2000) (examination of exemption timing and turnover)
- California Commerce Bank v. Superior Court, 8 Cal. App. 4th 582 (Cal. App. 4th Dist. 1992) (levy creates a lien, not ownership, under CA law)
- Del Riccio v. Superior Court of Los Angeles County, 115 Cal.App.2d 29 (Cal. App. 1952) (discussed but held inapplicable to modern levy/ownership)