One of the difficulties of commercial collection in California is the basic premise that by the time a debt holder has reached the point of being able to collect on the debt, most debtors don't voluntarily pay the judgment. This means that you must employ a variety of strategies to force the debtor to pay on the judgment, including the turnover order.
The turnover order basically orders the turn over of the judgment debtor's interest in the property in the possession or under the control of the judgment debtor or the third person, or a debt owed by the third person to the judgment debtor to be applied toward the satisfaction of the money judgment provided the property is not exempt from enforcement of a money judgment. A turnover order can be obtained under two methods: 1) on motion/ ex parte application pursuant to CCP Section 699.040, or 2) at the conclusion of either a debtor examination or a third party examination pursuant to CCP Section 708.025.
An experienced collection attorney should always carry a blank turnover order with to every debtor exam or third party exam. With the exception of cash, most property that can be turned over must be turned over to the Sheriff in the county where the exam takes place. It is important to ask for a ruling on the turnover at the conclusion of the exam because many of the more mobile and liquid types of assets; such as cash, jewelry, and cars can mysteriously disappear if they are not immediately required to be surrendered.
Advantages of a turnover order
The advantage to a turnover order issued under CCP Section 708.025 at the conclusion of an exam is two-fold:
1. if the judgment debtor (or third person) is personally served with a copy of the order and fails to comply, they can be held in contempt of Court for violating an order of the Court.
2. and this is also an important benefit not found when obtaining a turnover order by motion, the turnover order creates a lien on the property or debt that is the subject of the turnover order.
Keep in mind that the property that can be turned over is tangible personal property only. Thus for example, a domain name is intangible personal property that cannot be turned over under this procedure.
The second way to obtain a turnover order is by motion or ex parte application pursuant to CCP Section 699.040. This section provides an aid to execution and levy. It directs the transfer of possession of property upon a showing that: (a) a writ of execution is issued and (b) upon a showing of need for the order. Although a contempt order may also be obtained under this statutory section, the main difference in the two methods is that a turnover order served under this section does not create any lien rights in the identified property. While a lien is generally preferable especially if a bankruptcy is looming on the horizon, sometimes the threat of the contempt order can be more powerful than the actual turning over of the property.
Depending on the type of personal property you are seeking to collect, if you believe that the property may be difficult for the sheriff to obtain at the residence, one other benefit obtaining a turnover by motion or application, is to bring a concurrent motion under CCP Section 699.030 for an order directing the levying offer to seize the property in a private place. That way if the property is not voluntarily delivered to the levying officer upon request, the levying officer may cause the building or enclosure where the property is believed to be located to be broken open. This process is particularly beneficial for property like vehicles that are in a closed garage.
For more information on turnover orders, contact knowledgable Los Angeles commercial collections attorney Ronald P. Slates.