by Julia M. Wei, Esq.
As judgment creditors know, it is one thing to obtain a judgment, but the hard work begins to collect and enforce on that judgment after. In California, one of the more challenging methods of collection allowed by the California Code of Civil Procedure “Enforcement of Judgment Law” (affectionately referred to as the “EJL”) is the levy of personal property.
In the recent case of Kono v. Meeker, judgment creditor tried to levy against the Meekers, who owned an antiques business. As part of Kono’s collection efforts, she OEX’ed (debtor’s examination) them, and obtained a turnover order after examination which required the Meekers to turn over 11 pieces to be sold in satisfaction of Kono’s judgment.
The Meekers filed a claim of exemption pursuant to California Code Section 704.060, which states:
(a) Tools, implements, instruments, materials, uniforms,
furnishings, books, equipment, one commercial motor vehicle, one
vessel, and other personal property are exempt to the extent that the
aggregate equity therein does not exceed:
(1) Six thousand seventy-five dollars $6,075), if reasonably
necessary to and actually used by the judgment debtor in the exercise
of the trade, business, or profession by which the judgment debtor
earns a livelihood.
(2) Six thousand seventy-five dollars ($6,075), if reasonably
necessary to and actually used by the spouse of the judgment debtor
in the exercise of the trade, business, or profession by which the
spouse earns a livelihood.
(3) Twice the amount of the exemption provided in paragraph (1),
if reasonably necessary to and actually used by the judgment debtor
and by the spouse of the judgment debtor in the exercise of the same
trade, business, or profession by which both earn a livelihood. In
the case covered by this paragraph, the exemptions provided in
paragraphs (1) and (2) are not available.
And claimed that three of the antiques were exempt as “tools” and reasonably necessary to their business. The “tools” were an antique sewing machine, surveying unit and fluting iron—none of which were actually used in the business, but were more akin to inventory as the trial court concluded.
The trial court, going on to use its “common sense” application of the code section, gave the analogy of a store—where the computer, cash register, racks were actually used by the business would be exempt as tools of the trade even though those items were not actually for sale by the business.
The Meekers appealed and the California Third Appellate District concurred, finding that prior case law had exempted a car for a Realtor, a truck for a repairman, a locksafe for a jeweler, all of which were 1) actually used by the business and 2) reasonably necessary. The appellate court further concluded that even if the Meekers could show that the antiques were “actually used” by the business (they had argued the pieces were for advertising), that would fail the second prong of Section 704.060(a)(3), that the three antiques were actually necessary for the business.
COMMENT: The facts of this case seemed pretty obvious, making it seem an unlikely case for publication, however there is very little case law or legislative history on what “tools” or “materials” were actually exempt. However, both the lower court and the appellate court actually applied the “plain meaning” doctrine and common sense to arrive at the correct result. The public policy implications are clear – the law has already shifted the burden of collection onto the judgment creditor to have the creditor bear the cost and effort of collection to avoid society from having the burden of too many bankrupts or debtors. However, once collection efforts are undertaken, the exemptions allowed to a business must be reasonable, and not an abuse of the EJL.
(Kono v. Meeker, California Third Appellate District, June 3, 2011)