Appellate Court Rules for Bad Guy!
In December 2016, Division 1 of the Court of Appeal for the Fourth Appellate District wiped out a $ 5,070 sanction imposed against an attorney (William K. Brewer) for instructing his client not to answer certain questions at a debtor examination. The decision (Smith Bros. Constr. v. T.S. Stone and Tile., Inc., No. D069212) was unpublished, but deserves a review and some comments.
The underlying facts are uncomplicated. A judgment was entered against a company (“T.S. Stone and Tile, Inc.”). The company did not satisfy the judgment and purportedly went out of business. The judgment creditor, Smith Brothers Construction, noticed a judgment debtor examination of Stone’s president, Anthony (“Tony”) Sciarrino.
A judgment debtor exam is similar to the standard (oral) deposition in a civil case in that it allows a judgment creditor to question a witness (usually the judgment debtor) in real-time, under oath. The scope of permissible questioning is broad. While examinees generally retain the evidentiary privileges that would be asserted at trial (CCP § 708.130(a)), judgment creditors are given “the widest scope of inquiry concerning the property and business affairs of the debtor.” See Jogani v. Jogani, 141 Cal. App. 4th 158, 172 (2006). There is no reason the rule that applies in deposition practice would not also apply in debtor examinations: It is almost always improper to instruct a witness not to answer a deposition question unless the question seeks privileged information. See Stewart v. Colonial Western Agency, Inc., 87 Cal. App. 4th 1006, 1015-15 (2001) (even if the question seeks irrelevant information it should be answered and there should be no objection); accord Fed. R. Civ. P. 30(c)(2).
During the examination Sciarrino was asked if he had formed a new company that replicated the business of the judgment debtor and operated from the location formerly used by the judgment debtor. One can guess where the question was going. California courts have amended judgments to add successor entities created in an attempt to defraud judgment creditors. See, e.g., McClellan v. Northridge Park Townhome Owners Ass’n, Inc., 89 Cal. App. 4th 747, 753 (2001). At a minimum the question sought testimony that would be directly admissible on a motion to amend the judgment to make the new company a co-debtor on the judgment with T.S. Stone and Tile, Inc.
Sciarinno’s attorney responded by instructing Sciarrino not to answer the questions. Nothing in the appellate decision suggests there was any legitimate basis for the instruction. The conduct was simply unprofessional.
The opinion indicates the judgment creditor subsequently brought a written motion to compel answers to the questions and for sanctions. You can bet the judge in the trial court was livid. Attorney Brewer had improperly disrupted an examination and prevented the examiner from obtaining information to which the examiner was entitled. The judge awarded $ 5,070 in sanctions against Brewer under Section 2023.030 of the Code of Civil Procedure. Brewer appealed.
In a pithy, unpublished disposition filed December 9, 2016, the Court of Appeal reversed the sanction on grounds Section 2023.030 does not apply to judgment debtor examinations and therefore could not be used as a basis for imposing sanctions. It declined to decide whether Code of Civil Procedure Section 708.170 would authorize sanctions, but noted that section does not authorize sanctions against a judgment debtor’s attorney. See Eby v. Chaskin, 47 Cal. App. 4th 1045, 1049 (1996).
The decision is not wrong. That does not mean it is good. A bad guy won and the Court did not even take the opportunity to condemn Attorney Brewer’s conduct. Maybe the Court was miffed that the judgment creditor did not bring the motion under valid authority. At the very least, however, it could have called out the attorney by noting this sort of conduct can imperil the ability of a client to obtain a discharge in bankruptcy. See In re Marcus-Rehtmeyer, 784 F.3d 430, 442 (7th Cir. 2015) (withholding information required by law to be made known in state law examination proceedings during year before filing for bankruptcy constituted “concealment” warranting denial of discharge under 11 U.S.C. § 727(a)(2)).
While Brewer’s conduct cannot be excused, the situation might have been avoided. It is doubtful a judgment debtor examination was needed to obtain answers to the questions at issue. If one insists on standing on one’s rights, however, it would have been preferable to avoid the written motion proceedings and simply obtain an immediate order that the witness answer the questions. After all, debtor exams (unlike civil depositions) are usually conducted at the courthouse under the auspices of a judge or referee to facilitate such orders.
Finally, even in a pre-trial deposition witnesses and opposing counsel will attempt to disrupt questioning they perceive to be particularly damning. Attorneys should anticipate even greater problems with judgment debtors. A common counter-measure is to disassociate related questions so the opponents do not see the connections until it is too late. Here, for example, the witness might have been asked the name and address of his present employer among the “harmless” background questions typically asked at the beginning of an examination. After examining the witness on other subjects, the witness could have been asked about the type of work he was doing in the new company. There is no jury in a debtor exam and no need to score points with dramatic ‘Perry Mason” moments.
Copyright (c) 2017, Charles Q. Jakob. All Rights Reserved.