STAS Group v Fowler

Claim of Exemption

Calendar: 13    
Case No.: EC060548    
Hearing Date: July 26, 2019    
Action Filed: May 09, 2013    
Judgment: July 08, 2017    

MP: Assignee Fidelity Capital Holdings, Inc.
RP: Defendant Kymry Fowler

 

ALLEGATIONS:

The instant action arose out of the sale of a business, Tustin Speech Therapy (“Tustin”) a d/b/a of Defendant Post Speech Pathology, Inc. (“Post”), by Lorena Post (“Decedent”) in or around 2012.  Defendant Kymry Fowler (“Fowler”), and Plaintiff STAS Group, LLC, (“Plaintiff”) were involved in the transaction, which ultimately resulted in the instant litigation.

Plaintiff filed their initial Complaint on May 09, 2013, and a First Amended Compliant (“FAC”) on October 22, 2019, alleging causes of action sounding in (1) Breach of Contract, (2) Breach of the Covenant of Good Faith and Fair Dealing, (3) Breach of Fiduciary Duty, (4) Conversion, (5) Fraudulent Conveyance, (6) Specific Performance, (7) Accounting, and (8) Breach of Guaranty.  Post filed a Cross-Complaint on June 21, 2013, against Cross-Defendants STAS Group, LLC, Clinton J. Sallee, Ted Feldman, End Game Advisors, LLC, the Estate of Lorena Post, and Scott Post alleging causes of action sounding in (1) Fraud in the Inducement, (2) Declaratory Judgment, (3) Declaratory Relief, (4) False Promise, (5) Declaratory Relief, (6) Negligence, (7) Intentional Misrepresentation, (8) Negligent Misrepresentation, (9) Declaratory Relief, and (10) Intentional Interference with Prospective Economic Relations.

PRESENTATION:

A bench trial took place from December 12, 2016, to December 15, 2016, and the Court entered judgment in favor of Plaintiff STAS Group, LLC, granting Plaintiff’s election of remedies by ordering specific performance.  The Court transferred ownership of Post Speech Pathology, Inc. d/b/a Tustin Speech Therapy to Jennifer Yost.  Plaintiff was additionally awarded monetary damages against Defendant Kymry Fowler in the amount of $150,000.00 in punitive damages, $205,489.50 in attorney’s fees, and $12,280.15 in costs.  The monetary judgment was thereafter assigned to Fidelity Capital Holdings, Inc. (“Assignee”) on or about May 29, 2018.

The instant hearing for a Claim of Exemption was noticed by Assignee on July 03, 2019, requesting a hearing and opposing Fowler’s claim of exemption, which was filed with the Court on July 10, 2019.

RELIEF REQUESTED:

Assignee Fidelity Capital Holdings, Inc. opposes Fowler’s exemption of certain items claims exempt.

DISCUSSION:

Standard of Review – “Except as otherwise provided by statute, property that has been levied upon may be claimed to be exempt as provided in this article.”  Code of Civ. Proc. §703.510.  A claimant may make a claim of exemption by following the procedure in Code of Civ. Proc. §703.520.

Code of Civ. Proc. §703.580 provides:

  1. The claim of exemption and notice of opposition to the claim of exemption constitute the pleadings, subject to the power of the court to permit amendments in the interest of justice.
  2. At a hearing under this section, the exemption claimant has the burden of proof.
  3. The claim of exemption is deemed controverted by the notice of opposition to the claim of exemption and both shall be received in evidence. If no other evidence is offered, the court, if satisfied that sufficient facts are shown by the claim of exemption (including the financial statement if one is required) and the notice of opposition, may make its determination thereon. If not satisfied, the court shall order the hearing continued for the production of other evidence, oral or documentary.
  4. At the conclusion of the hearing, the court shall determine by order whether or not the property is exempt in whole or in part. Subject to Section 703.600, the order is determinative of the right of the judgment creditor to apply the property to the satisfaction of the judgment. No findings are required in a proceeding under this section.
  5. The court clerk shall promptly transmit a certified copy of the order to the levying officer. Subject to Section 703.610, the levying officer shall, in compliance with the order, release the property or apply the property to the satisfaction of the money judgment.
  6. Unless otherwise ordered by the court, if an exemption is not determined within the time provided by Section 703.570, the property claimed to be exempt shall be released.

In the claim, Fowler contends that the claim is made pursuant to a provision exempting property to the extent necessary for the support of the judgment debtor, and has attached the financial statement.  In the financial statement, Fowler represents that he makes approximately $5,500 per month in income ($3,750.00-$4,200.00 in wages and $1,750.00 in contribution for rent from roommates), and pays approximately $4,479 in rent, food, utilities, clothing, medical expenses, transportation, and entertainment, leaving her with approximately $1,000 in remaining income per month.  Fowler further represents that the income is tied up in payments to creditor in the form of $1,125 to Macy’s, $1,100 to Home Depot, $600 to Talbots, $1,100 to Visa, $1,100 to Master Card, $3,000 to Best Buy, and $3,700 to Nordstrom – the accounts of which are represented to be in default.  Fowler additionally provides an unsigned declaration attesting to his age of 62, the $80,000 he spent in his prior management of Tustin, a reduction in his retirement savings, and the removal of a source of income that the litigation and removal from Tustin have caused.

The relevant code to guide the Court’s analysis appears to be the automatic exception under Code of Civ. Proc. §706.050, which provides that the maximum allowable garnishment may not exceed 25% of the judgment debtor’s “disposable earnings” or 50% of the amount by which the individual’s disposable earnings for that week exceed 40 times the state minimum hourly wage in effect at the time the earnings are payable.  Disposable earnings are defined under Code of Civ. Proc. §706.011 to be the amount remaining after the deduction of any amounts required by law to be withheld, e.g., income tax and social security.  Thus, the amount garnished from Fowler’s wages cannot exceed:

  1. 25% of Fowler’s weekly wages; or
  2. 50% of the amount the weekly wages exceed $480 (40 times the state minimum wage of $12)As Fowler has represented that her wages fluctuate between $3750.00 and $4,200.00 per month (or between $865.38 and $969.23 per week).  Making the maximum withholding under the first prong fall in the range of $216.35 and $242.31 per week or $937.50 and $1,050.00 per month. And the maximum withholding under the second prong fall in the range of $192.69 and $244.62 per week or $834.99 and $1,060.00 per month.As Fowler represents that she is self-employed, and it is unclear whether the amount listed is pre-tax or post-tax, the amount of withholding permissible under Code of Civ. Proc. §706.050 may be reduced pursuant to the amounts of taxes that Fowler pays per year, as “disposable income” is defined as an after-tax amount.  Code of Civ. Proc. §706.011(a) (“the portion of an individual’s earnings that remains after deducting all amounts required to be withheld by law.”).—

RULING:

Receiver evidence about the amount Fowler pays in taxes, determine the average of how much Fowler makes on a monthly basis, and reduce the amount recoverable to the maximum allowed under Code of Civ. Proc. §706.050.