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Walsworth Obtains Appellate Victory for Distributor in Los Angeles

Attorney: John A. Kaniewski, Lawrence E. Duffy, Lisa M. Rice | Published 5.7.19

Walsworth partners, John Kaniewski, Lisa Rice, and Lawrence Duffy have obtained a reversal of a judgment entered against a product distributor (“distributor”), after being brought in to appeal the judgment.

The judgment creditor (“creditor”) obtained a money judgment against a foreign manufacturer (“debtor”). Creditor then attempted to enforce the judgment by serving a writ of execution and notice of levy on distributor, one of debtor’s distributors. Creditor sought to attach any amounts due and payable from distributor to debtor. Several months after distributor declared it held no property or obligations in favor of the debtor, the creditor moved under Code of Civil Procedure section 701.020.1 to impose liability upon distributor for failing to comply with the levy. The trial court granted the creditor’s motion and ordered distributor to pay $78,161.14. However, the Court of Appeal reversed the decision.

The Los Angeles Court of Appeal observed that liability under section 701.020 is limited to property belonging to the debtor, or amounts due and payable to the debtor, that a third person refuses to deliver to the levying officer. Here, there was no evidence that distributor retained the debtor’s property or was obligated to make payments to the debtor at the time it was served with the levy. And even though distributor placed three purchase orders with the debtor after it was served with the levy, distributor prepaid for those goods. Accordingly, since distributor was not required to deliver property or make payments for outstanding obligations to the levying officer, the Court of Appeal held distributor could not be held liable to creditor under section 701.020.