Peck v. Hagen

• Decision Date: 18 October 1989
• Docket Number: No. B037113,B037113
• Citation: 214 Cal.App.3d 1242,263 Cal.Rptr. 198
• Court: California Court of Appeals Court of Appeals
• Parties: , 215 Cal.App.3d 602 Robert M. PECK, as Trustee of the Robert M. Peck, M.D., Inc., Defined Benefit Pension Trust, and Ruth R. Peck, Plaintiffs and Appellants, v. Earle H. HAGEN, assignee for the benefit of creditors of Stephen H. Henry, Respondent.

Page 198

263 Cal.Rptr. 198

214 Cal.App.3d 1242, 215 Cal.App.3d 602

Robert M. PECK, as Trustee of the Robert M. Peck, M.D., Inc., Defined Benefit Pension Trust, and Ruth R. Peck, Plaintiffs and Appellants, v. Earle H. HAGEN, assignee for the benefit of creditors of Stephen H. Henry, Respondent.

No. B037113.

Court of Appeal, Second District, Division 7, California.

Oct. 18, 1989.

As Modified on Denial of Rehearing Nov. 13, 1989.

Review Denied Jan. 17, 1990.

Herbert Murez, Los Angeles, for plaintiffs and appellants

Kroll & Tract and John D. Monte, Los Angeles, for respondent.

JOHNSON, Associate Justice.

Appellants Robert M. Peck, as trustee of the Robert M. Peck, M.D., Inc. Defined Benefit Pension Trust, and Ruth R. Peck (collectively referred to as Peck) appeal from an order quashing their levies of execution. We conclude the trial court erroneously quashed the levies of execution rather than resolving any issues of priority through the appropriate statutory scheme. The judgment is reversed.

STATEMENT OF FACTS AND PROCEEDINGS BELOW

On October 1, 1986, Peck commenced an action against Stephen Henry (Henry) and various defendants for breach of contract and money had and received. Peck filed writs of attachment against real property held by Henry (the property) on January 6, 1987. On October 31, 1986, the writs of attachment, along with notices of attachment and the right to attach orders, were recorded in Los Angeles County.

The property was encumbered by various liens in addition to Peck's writs of attachment. Great Western Bank held a first trust deed and Wilshire Bank held a second trust deed on the property. A third lien was held by Henry's wife. Pursuant to a marital settlement agreement between Henry and his wife, Susie, dated December 27, 1981, Henry received title to the property. In exchange, Susie received, inter alia, a promissory note in the amount of $305,000 secured by various trust deeds, including one on the property. The trust deed was recorded on July 6, 1982.

On November 18, 1986, Henry executed a document entitled "General Assignment" whereby he assigned assets to Earle Hagen for the benefit of Henry's creditors. This assignment included the property.

To avoid foreclosure on the property by Great Western Bank, the senior lienholder, Hagen and the various lienholders, including Peck, agreed to permit Hagen to sell the property free of encumbrances and pay the amounts owing to Great Western Bank and Wilshire Bank. The remaining proceeds from the sale were then to be deposited in bank accounts with the lienholders maintaining their identical lien positions against these proceeds.

In accordance with this agreement, in August 1987, the property was sold, the banks repaid, and the remaining proceeds deposited into various bank accounts. Peck's attachments were then transferred to the bank accounts.

On April 10, 1987, Hagen moved to dissolve Peck's attachments on the property arguing the attachments were terminated pursuant to Code of Civil Procedure section 493.030, subdivision (a) by the assignment of Henry's assets to Hagen. Peck opposed the motion arguing the assignment was not a general assignment within the meaning of Code of Civil Procedure section 493.010. ¹ On February 2, 1988, the trial court denied Hagen's motion. Hagen did not appeal from this order.

On April 20, 1988, Peck obtained judgments against Stephen Henry totalling $195,904.11. Peck then obtained writs of execution to levy on the accounts containing the property's sale proceeds.

The marshal then levied on the bank accounts. However, the levies apparently exceeded the amount of the judgments and Peck's attorney instructed the marshall to release any levy in which Peck did not have an interest and any funds over the amounts necessary to satisfy the writs of execution.

On June 27, 1988, Hagen moved ex parte to quash Peck's levies. Susie Henry joined

                in the motion to quash. 2  The trial court granted the motion, concluding the levies were improper since the priority of competing claims to the proceeds had yet to be resolved.  Peck timely appealed
                

DISCUSSION

I. THE TRIAL COURT ERRONEOUSLY QUASHED THE LEVIES OF EXECUTION.

There is no dispute Peck complied with the statutory requirements necessary to levy on the bank accounts. Rather the questions raised both below and on appeal involve whether (1) the levies were improper because of unresolved questions involving competing liens against the accounts, and (2) Henry's assignment to Hagen operates to bar Peck from levying on the bank accounts. As we discuss below, the answer to both of these questions is "no" and, thus, the order quashing the levies must be reversed.

A. A Party May Levy on Personal Property Although the Priority of Various Lienholders Has Not Been Resolved.

Hagen argued, and the trial court agreed, the bank accounts could not be levied upon until the priority of liens against the funds was resolved. This is incorrect.

Both Hagen and the trial court correctly identified a potential problem with permitting Peck to obtain possession of the levied money without resolving the priority of the various liens against Henry. However, as Peck properly notes, quashing the levies is not the proper mechanism for resolving the priority issue.

A party may levy on property even where there are competing liens and the priority of these liens has yet to be resolved. Under such circumstances, the Legislature has provided two statutory methods for resolving the priority issue. First, where there is a sale or collection by a levying officer, an interested party asserting a claim to the property may notify the levying officer of the competing claim pursuant to section 701.830. The levying officer will then deposit the levied funds with the trial court. (Code Civ.Proc., § 701.830, subd. (a).) Following a noticed motion, the trial court will determine the priority of the claims and order the proper distribution of the proceeds. (Code Civ.Proc., § 701.830, subd. (b); see 8 Witkin, Cal. Procedure (3d ed. 1985), Enforcement of Judgment, § 153, p. 144.)

Alternatively, under section 720.210, et seq., a third-party claimant such as Susie Henry, the alleged senior lienholder, may file a claim with the levying officer setting forth her security interest in the property. The third-party claimant may then petition for a hearing to determine the validity of the third-party claim and the correct disposition of the property. (Code Civ.Proc., § 720.210, subd. (a); 720.220; 720.230; 720.310; see 8 Witkin, Cal. Procedure, supra, Enforcement of Judgment, § 364 et seq.)

In either instance, the levy is not quashed as a condition to resolving the priorities. (See Code Civ.Proc., § 701.830, subd. (a) ["If there are conflicting claims to all or a portion of the proceeds of sale or collection known to the levying officer before the proceeds are distributed, the levying officer may deposit with the court the proceeds ..."]; 720.210, subd. (a) ["Where personal property has been levied upon under a writ of attachment, a writ of execution, ..."].) Thus, the trial court erred in quashing the levies on this basis.

B. Henry's Assignment to Hagen Does Not Bar Peck From Levying on the Bank Accounts.

Hagen also argues the trial court's order was proper because the assignment by Henry to Hagen was an assignment for the benefit of creditors within the statutory definition of section 493.010 which foreclosed Peck's ability to execute against the bank accounts. This is incorrect. As Peck notes, the trial court's previous order denying Hagen's motion to terminate the attachments is res judicata on whether there was a general assignment for the benefit of creditors.

A final judgment or order has the effect of res judicata, even if it is incorrect, if the merits of the claim are tried and determined or might have been urged, but were not, by one of the parties. (Hight v. Hight (1977) 67 Cal.App.3d 498, 502-503, 136 Cal.Rptr. 685; see Signal Oil etc. Co. v. Ashland Oil etc. Co. (1958) 49 Cal.2d 764, 777, 322 P.2d 1; In re Marriage of Anderson (1981) 125 Cal.App.3d 553, 560 -561, 178 Cal.Rptr. 117.) The doctrine is applied to a particular case when all of the following conditions are met: (1) The issue in the prior adjudication is identical to the one in the present action; (2) there was a final judgment or order on the merits; (3) the party against whom the doctrine is applied is the same party or in privity with the party to the prior adjudication. (See County of Los Angeles v. Superior Court (1985) 169 Cal.App.3d 1095, 1100-1101, 215 Cal.Rptr. 699.)

There is no dispute the first and third conditions are met here. The sole basis for Hagen moving to dissolve the attachments was that a general assignment for the benefit of creditors within the statutory definition had occurred. Peck's opposition disputed such an assignment had been made. Thus, the issue was squarely presented and ultimately resolved by the trial court in Peck's favor.

"Hagen initially argued, without any supporting authority, the order denying his motion to quash the attachments was an interim, rather than final order and, therefore, there can be no res judicata effect. In his petition for rehearing, Hagen argues for the first time the order was an interim order because it was not an order refusing to discharge an attachment. We disagree.

"An order is deemed final if it is directly appealable. (Rebco Development, Inc. v. Superior Court (1977) 67 Cal.App.3d 13, 16, 136 Cal.Rptr. 351; accord Blue Mountain Development Co. v. Carville (1982) 132 Cal.App.3d 1005, 1013, 183 Cal.Rptr. 594; compare Harth v. Ten Eyck (1941) 16 Cal.2d 829, 832, 108 P.2d 675 [final order not res judicata if trial court empowered to reconsider order within statutory period].) Code of Civil Procedure section 904.1, subdivision (e) provides an order "discharging or refusing to discharge an attachment ..." is appealable.

"Hagen contends an order discharging or...