Fin. Holding Co. v. Am. Inst. of Certified Tax Coaches, Inc.

• Decision Date: 29 November 2018
• Docket Number: D072910
• Citation: 29 Cal.App.5th 663,240 Cal.Rptr.3d 604
• Court: California Court of Appeals Court of Appeals
• Parties: FINANCE HOLDING COMPANY, LLC, Respondent, v. The AMERICAN INSTITUTE OF CERTIFIED TAX COACHES, INC., Appellant.

29 Cal.App.5th 663

240 Cal.Rptr.3d 604

FINANCE HOLDING COMPANY, LLC, Respondent,

v.The AMERICAN INSTITUTE OF CERTIFIED TAX COACHES, INC., Appellant.

D072910

Court of Appeal, Fourth District, Division 1, California.

Filed November 29, 2018

Dental & Medical Counsel and Mukesh Advani, San Ramon, for Appellant.

Law Office of David Sean Dufek and David Sean Dufek, San Diego, for Respondent.

HALLER, Acting P. J.Finance Holding Company, LLC (Finance) obtained a judgment against Dominque Molina for about $50,000 plus interest and attorney fees. In judgment enforcement proceedings, Finance sought documents from Molina's employer, The American Institute of Certified Tax Coaches, Inc. (Institute). Finance requested numerous categories of business, tax, and bank records, without limiting the request to information relevant to Molina. The court overruled the Institute's objections and ordered the Institute "to produce for inspection and copying all the demanded documents."

On appeal, the Institute contends the document production order is overbroad under the statute governing third party discovery in judgment enforcement proceedings.

( Code Civ. Proc., § 708.120.)¹ Finance responds that the order is not an appealable final order, and therefore we should dismiss the appeal. On the merits, Finance contends the document production order was proper under related statutes and/or the court's equitable authority in judgment collection proceedings.

We conclude the order is appealable. We also determine the order is statutorily overbroad, and the court did not have the authority to order the expansive document production that went far beyond the statutory guidelines. We remand for the court to narrow the order to require production only of those documents pertaining to Molina's compensation, property, or services, and/or the Institute's debts owed to Molina.

FACTUAL AND PROCEDURAL BACKGROUND

Accountonit, LLP entered into a contract with a bank for a $50,000 credit line, and Molina signed a personal guaranty to repay borrowed sums. In January 2014, Finance, as the bank's assignee, sued Molina alleging the borrowed funds had not been repaid. After a trial, the court entered judgment in Finance's favor for $49,958.74 plus prejudgment interest and attorney fees. Molina appealed, and this court affirmed the judgment in May 2016. (Finance Holding Co., LLC v. Molina (May 19, 2016, D067952) [nonpub. opn.].)

While the appeal was pending, Finance sought to enforce the judgment and engaged in "substantial collection related activity." In November 2015, Finance's counsel conducted Molina's judgment debtor examination, during which Molina stated she worked for the Institute as an instructor, and her compensation consisted solely of medical insurance benefits and $4,500 in monthly rental payments for her residence. She denied an ownership interest in the Institute, that she was an officer of the Institute, or that the Institute owed her any money. Molina said she was separated from her husband, and had no assets other than a vehicle.

About 16 months later, Finance moved for a judgment debtor examination of the Institute and the court signed an order scheduling the examination. The order attached a document titled "DOCUMENTS AND THINGS TO BE PRODUCED," listing 15 categories of requested documents, including (for the past five years) all of the Institute's bank records, federal and state tax returns, deposit accounts, business books and records, financial statements, documents from the California Employment Commission, sales tax documents, retirement plan information, and credit card statements.

This document request read in full:

"All discoverable documents in your possession, custody, or control relating or relevant to any assets in which [Molina] may hold, including but not limited to any interest in [the Institute], and which might be used to satisfy the Judgment entered in this cause, including but not limited to the originals or true and correct copies of the following items:

"1. Any and all checkbooks, cancelled checks, account statements, deposit slips or trust vouchers for any and all bank accounts, wherever situated, existing for the benefit of or in the name of [the Institute] individually, jointly, beneficially or in trust with any other individuals or entities for the past five (5) years.

"2. Any and all income tax returns, gift tax returns, estate tax returns, partnership information returns, or other tax returns, whether state or federal, filed by or signed in any capacity by [the Institute], individually or jointly with any other individuals or entities, whether such returns be individual or as a corporation, for the past five (5) years, including any estimates of income tax and any and all records of taxable income from any of these individuals or entities during the current tax year and any other years for which such returns have not yet been filed.

"3. Any and all contracts, partnership agreements, limited partnership agreements, or any other agreements, of whatever kind or character, entered into by [the Institute]—Individually or jointly with [Molina], for the performance of services or other acts for which is in any way possible that [Molina] will or may receive any compensation or any other thing of value for such services for the past five (5) years.

"4. Any and all check books, cancelled checks, account statements, deposit slips, pass books trust vouchers, and all other written documentation of the existence of any and all bank accounts, savings accounts, trust folios, credit union deposits, certificates of deposit, or safety deposit boxes in which funds or real or personal property or any other assets, of whatever kind or character, in any way relating to the business operations or personal finances of [the Institute] have been deposited, kept, or maintained, withdrawn or otherwise recorded in any manner at anytime during the past five (5) years.

"5. Any and all books or records, of whatever kind or character, maintained by [the Institute's] agents, attorneys, business manager, accountants or other representatives, in any way reflecting the financial condition of [Molina] or any entity in which [Molina] has ever participated as an officer, director, owner, or member, including, but not limited to notes payable, notes receivable, accounts receivable, accounts payable, financial statements, periodic and annual income statements, balance sheets, cash receipts and disbursement journals, profit and loss Statements, general ledgers, statements of changes in financial position, statements of changes in shareholders' equity, and any and all other financial information in any way relating to any of [Molina's] individual or personal finances during the past five (5) years.

"6. Any statement of the financial condition of [the Institute] furnished or exhibited to any person, institute or business organization during the past two (2) years.

"7. All franchise tax returns, filed in the name of [the Institute].

"8. All documents filed with the Internal Revenue Service, including, but not limited to, IRS Form 941, pertaining to quarterly earnings, tax withholdings, FICA withheld, and the portion of FICA withheld on behalf of [the Institute].

"9. All documents filed with the California Employment Commission filed by [The Institute] on behalf of [Molina] for Unemployment Tax paid to the State of California.

"10. All documents filed with the Internal Revenue Service by [the Institute] on behalf of [Molina], including, but not limited to, IRS Form 941, pertaining to Federal Unemployment Tax.

"11. All documents filed with the State of California by [the Institute] on behalf of Defendant pertaining to Sales Tax collected.

"12. All documents by [the Institute] relating to the current status of Defendant including, but not limited to, open bank accounts, deeds, accounts receivable, accounts payable, and rental of office space and equipment.

"13. The documents evidencing all IRA, SEPP, Keogh, 401K, 403B, Roth, or other retirement plans held by or for benefit of Defendant, including but not limited to all statements pertaining to any such accounts for the past four (4) years.

"14. The documents evidencing Defendant's contributions to any IRS 529b plans during the preceding five (5) years.

"15. With regard to every credit card and bank card owned or controlled by [the Institute] that Defendant has used during the preceding five (5) years, the monthly billing statements for each such card pertaining to that time period."

On May 10, 2017, the Institute's counsel notified Finance it would not provide "information about the Institute's finances outside of that which directly relates to Ms. Molina's compensation." The Institute's counsel attached a letter from the Institute's accounting manager addressed to Molina, stating Molina was "not permitted to disseminate any information not directly related to your compensation without Board approval."

Two days later, Molina appeared at a debtor examination on behalf of the Institute, and said that after her November 2015 examination, her job title changed and she was now the Institute's chief executive officer (CEO). She said she had retained her instructor duties, and her current compensation consisted solely of $4,900 rental payments to her landlord (a slight increase from the former monthly payments). She said the Institute also reimburses her for business travel (which involves primarily teaching classes in various locations). She denied any ownership interest in the Institute, and said the Institute no longer pays for her insurance or any other benefits. She identified the location of the Institute's bank accounts; testified that the Institute was governed by an independent board of directors; and said she did not have the authority to write checks or use the Institute's credit card.

The Institute produced only two documents responsive to Finance's document request: (1) an unsigned two-page agreement ("Work Agreement") dated March...