Coastline JX Holdings LLC v. Bennett

• Decision Date: 07 July 2022
• Docket Number: G059552
• Citation: 80 Cal.App.5th 985,296 Cal.Rptr.3d 437
• Parties: COASTLINE JX HOLDINGS LLC, Cross-complainant and Appellant, v. Stephen H. BENNETT, Cross-defendant and Appellant.
• Court: California Court of Appeals Court of Appeals

80 Cal.App.5th 985

296 Cal.Rptr.3d 437

COASTLINE JX HOLDINGS LLC, Cross-complainant and Appellant,

v.Stephen H. BENNETT, Cross-defendant and Appellant.

G059552

Court of Appeal, Fourth District, Division 3, California.

Filed July 7, 2022

Frandzel Robins Bloom & Csato, Hal D. Goldflam, Los Angeles; Greines, Martin, Stein & Richland, Cynthia E. Tobisman and Alana Rotter, Los Angeles, for Cross-complainant and Appellant.

Miller Shah and Ronald S. Kravitz, San Francisco, for Cross-defendant and Appellant.

OPINION

MARKS, J.^*

INTRODUCTION

In December 2019, Coastline JX Holdings LLC (Coastline), assignee of a judgment creditor's interest in a money judgment entered against Stephen H. Bennett, served on Seamount Financial Group, Inc. (Seamount) a notice of levy on Bennett's assets in an individual retirement account and a profit-sharing plan. After the trial court ordered Seamount to liquidate Bennett's interest in both assets and turn them over to the levying officer to be delivered to Coastline, Bennett filed a motion for reconsideration of the trial court's order, under Code of Civil Procedure section 1008.¹ In his motion, Bennett first argued to the trial court that the profit-sharing plan was protected from levy because it qualified as a plan under the Employee Retirement Income Security Act of 1974 (ERISA; 29 U.S.C. § 1001 et seq. ). He also filed a motion to tax costs.

The trial court denied Bennett's motion, but informed the parties that, under its inherent authority, it would reconsider its prior order regarding the distribution of the profit-sharing plan only (not the individual retirement account) because the court previously had not considered the implications of it being an ERISA-compliant plan. After ordering supplemental briefing and setting a hearing on the court's own motion, the court reversed its prior decision and concluded the profit-sharing plan was exempt from levy due to preemption by ERISA. The court ordered Coastline to reimburse the profit-sharing plan any funds it had received under the court's prior order. The trial court also denied Bennett's motion to tax costs and the request for attorney fees that was included in his supplemental briefing.

Coastline and Bennett each appealed. We affirm the trial court's order and reject each of the parties' arguments on appeal.

As to Coastline's appeal, we hold the trial court timely exercised its inherent authority to reconsider its order regarding the profit-sharing plan. We further hold, as a matter of first impression, that the profit-sharing plan here was automatically exempt from levy under both ERISA and California law because (1) it is an ERISA-compliant pension plan which is not assignable as a matter of federal law ( 29 U.S.C. § 1056(d)(1) ); and (2) under California's Enforcement of Judgments Law (§ 680.010 et seq.), property that is not assignable is not subject to California's enforcement of judgment procedures and is thus automatically exempt from levy. (See §§ 695.030, 704.210.) There is no conflict, therefore, between ERISA and California law here. Accordingly, ERISA preemption, upon which the trial court based its ruling, is not at issue. The trial court had authority, in reversing its prior order, to direct Coastline to return to the plan the funds that had been ordered delivered to it in contravention of federal and state law.

In his appeal, Bennett argues the trial court abused its discretion by denying his request for attorney fees. Bennett was not entitled to such an award for several reasons, not the least of which is that the trial court denied his motion for reconsideration. The trial court's reasons for denying the motion to tax costs were supported by the record and its ruling did not otherwise constitute an abuse of discretion. Bennett forfeited his argument challenging the court's ruling as to the individual retirement account because he did not file a timely notice of appeal from the court's prior ruling ordering its liquidation.

FACTS AND PROCEDURAL HISTORY

I. COASTLINE SERVED THE NOTICE OF LEVY ON SEAMOUNT

In June 2016, an amended judgment was entered in favor of CU Bancorp and against, inter alia, Bennett in the amount of $398,351.52.² After succeeding CU Bancorp following a merger, PacWest Bancorp assigned all of its rights, title, and interest in the amended judgment to Coastline, which had replaced PacWest Bancorp/CU Bancorp as judgment creditor in the amended judgment.

As of September 2019, a total of $619,583.61 remained unpaid and owed to Coastline on the amended judgment. At Bennett's debtor examination in November 2019, Bennett confirmed he had an interest in an individual retirement account and in a profit-sharing plan. He stated the individual retirement account was held "under the name of Pershing, but the investment advisor is Seamount Financial" and the profit-sharing plan was held by Seamount. Bennett failed to produce documents regarding these assets in response to Coastline's subpoena.

In December 2019, Coastline served a "Notice of Levy under Writ of Execution, a Memorandum of Garnishee and a Writ of Execution" (the notice of levy) on Seamount to levy all property in which Bennett had an interest, including any simplified employee pension individual retirement accounts or profit-sharing accounts. The total amount of the levy at that time was $619,635.61.

After being served with the notice of levy, Seamount identified an individual retirement account in Bennett's name (IRA); Seamount's broker-dealer, H. Beck, Inc., placed a hold on the IRA, which at the time had a total value of $100,717.69. Seamount also discovered Bennett had an interest in an employer sponsored profit-sharing plan which was offered in connection with Bennett's accounting business and was titled "Letwak & Bennett, An Accountancy Corporation Profit-sharing Plan" (PSP). Seamount did not have information regarding the number or identities of the PSP's participants, or the amount of Bennett's interest in the PSP.³

Later that month, at the continued judgment debtor's examination, Bennett produced some documents that were responsive to Coastline's subpoenas and confirmed he had an interest in the IRA and the PSP.

II. SEAMOUNT QUESTIONED THE EXTENT OF BENNETT'S INTEREST IN THE PSP AND WHETHER THE IRA AND THE PSP MIGHT BE EXEMPT FROM LEVY

In January 2020, Seamount confirmed to Coastline's counsel that it had received the notice of levy and had frozen the assets of the IRA, but did not have any information regarding Bennett's interest in the PSP. Seamount also informed Coastline's counsel that Bennett had claimed to have not received the notice of levy, asserted that the IRA and the PSP were exempt from levy, and provided Seamount with a copy of a nonalienation of benefits clause from the PSP's plan documents.

Coastline provided Seamount with a copy of the proof of service on Bennett of the notice of levy and advised Seamount that whether the assets might be exempt was an issue for the court to decide and that Seamount had a duty to turn over the funds in the IRA to the levying officer. After that conversation, H. Beck effected "manual restrictions on" the PSP pending resolution of Seamount's questions about whether to release funds from it.

On January 15, 2020, Coastline's counsel received a claim of exemption form in which Bennett asserted the IRA and the PSP were exempt from levy under sections 703.080 and 704.115. On January 21, 2020, however, the Orange County Sheriff's Department (OCSD) returned Bennett's claim of exemption paperwork, unprocessed, explaining: "According to the process server's proof of service, you were notified by mail on 12/16/2019. The deadline to file a claim of exemption on this levy was 5:00 [p.m.] on 12/31/2019."

The following day, Coastline sent Seamount a letter demanding that Seamount cause the IRA and a portion of the PSP, in an amount sufficient to satisfy the total amount specified in the notice of levy, to be liquidated and all proceeds delivered to the levying officer. Coastline's counsel enclosed a copy of the letter from the OCSD rejecting Bennett's claim of exemption as untimely.

Bennett later advised Seamount that he owned approximately $70,000 of the PSP's total value and four other individuals owned the remainder of the PSP's assets. Bennett provided no documentation to support the assertions he made to Seamount.

III. SEAMOUNT SOUGHT LEAVE TO INTERVENE IN THE ACTION; THE TRIAL COURT DENIED SEAMOUNT LEAVE TO INTERVENE AND ORDERED SEAMOUNT TO LIQUIDATE THE IRA AND BENNETT'S INTEREST IN THE PSP FOR LEVY

On January 24, 2020, Seamount gave notice of its ex parte application for leave to file a motion to intervene in the underlying court action for the purpose of obtaining a court order on the proper disposition of the disputed assets. In response, Coastline stated it opposed Seamount's request to the extent it sought interpleader of the IRA but did not oppose Seamount's request to interplead the PSP. Bennett advised Seamount he did not oppose intervention but opposed interpleading.

Bennett did not appear at the February 4, 2020 hearing on Seamount's ex parte application. At that hearing, the court deemed the ex parte application a motion, and set the motion for hearing on March 12, 2020. Bennett was served via overnight mail on the motion to intervene set for March 12, 2020. The court ordered the IRA to remain frozen pending further ruling of the court. That same day, three of the PSP's other participants filed third party claims.

Bennett informed Coastline's counsel that he would attend the hearing but he did not appear at the March 12, 2020 hearing.

Following the hearing, the trial court denied Seamount's motion to intervene and issued an order (the March 2020 Order) stating in relevant part:

"1. IT IS HEREBY ORDERED that Seamount's Motion to Intervene is DENIED.

"2. IT IS FURTHER ORDERED, with respect to the Notice of Levy upon the interests of Judgment Debtor Stephen H. Bennett (‘Bennett’) in the Simplified Employee...