Federal Deposit Insurance Corporation v. Hyun et al, No. 5:2012cv04749 - Document 52 (N.D. Cal. 2016)
Court Description: ORDER GRANTING IN PART AND DENYING IN PART 45 MOTION FOR ASSIGNMENT AND RESTRAINING JUDGMENT DEBTOR. Signed by Judge Beth Labson Freeman on 12/13/2016. (blflc4S, COURT STAFF) (Filed on 12/13/2016) Modified on 12/13/2016 (sp, COURT STAFF).
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Federal Deposit Insurance Corporation v. Hyun et al Doc. 52 1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 SAN JOSE DIVISION 7 8 9 FEDERAL DEPOSIT INSUANCE CORPORATION, IN ITS CAPACITY AS RECEIVER FOR INNOVATIVE BANK, et al. Plaintiffs, 10 v. United States District Court Northern District of California 11 12 13 DAVID HYUN M.D., and CARDIOGRAFIX, INC. Case No. 5:12-CV-04749 ORDER GRANTING IN PART AND DENYING IN PART MOTION FOR ASSIGNMENT AND RESTRAINING JUDGMENT DEBTOR [Re: ECF 45] Defendants. 14 15 On October 7, 2016, Plaintiff and Judgment Creditor Federal Deposit Insurance 16 Corporation (“FDIC”) filed a motion for Judgment Debtor David Hyun and Cardiographix, Inc. 17 (collectively, “Hyun”) to assign “to the extent necessary to satisfy the judgment in full,” “interest 18 in all fees for service payments, percent discounts from charges and per diem on daily rates, and 19 case rates” earned as an independent contractor, in any funds due and owing to Hyun, and in all 20 rights to payment. Mot. 1-2, ECF 45. FDIC also moved for an order restraining Hyun from 21 encumbering, assigning, hypothecating, disposing, or spending all fees from service payments, 22 percent discounts from charges and per diem or daily rates and case rates earned as an independent 23 contractor, and any funds due and owing Hyun, and all rights to payment. Id. at 2. 24 For the reasons set forth below, the Court GRANTS IN PART and DENIES IN PART 25 FDIC’s motion for assignment order and for restraining order against Hyun. 26 27 I. BACKGROUND In 2013, the Court granted summary judgment and entered judgment against Hyun for 28 Dockets.Justia.com 1 defaulting on a loan pursuant to a promissory note to Innovative Bank. ECF 22. The Court issued 2 orders awarding damages, costs of suit, and attorneys’ fees to FDIC, as receiver for Innovative 3 Bank. Id.; ECF 36. On February 10, 2016, through a series of assignments, CadleRock III, LLC 4 (“Assignee of Record”) became the assignee of record for both the judgment and the attorneys’ 5 fees award. ECF 37-40. After judgment was entered, FDIC conducted an asset search in an effort to satisfy this 6 7 judgment without success. Memorandum in support of Mot. (“Mem.”) 5, ECF 45. Through its 8 search, however, FDIC became aware that Hyun “possesses a right to payments due or will 9 become due, including all fees for service payments, percent discounts from charges and per diem or daily rates and case rates fees from Aetna, Inc., Blue Shield, of California, Cigna Corporate 11 United States District Court Northern District of California 10 Headquarters, and United Health Care for services rendered as an independent contractor.” Id. 12 With late fees, interests, unpaid principal, and legal fees, the balance owed to date is 13 $1,010,561.18. Mot., Isler Decl. ¶ 4, ECF 45-3. FDIC then moved this court for an assignment 14 order for 25% of the aforementioned payments and an order restraining Hyun. Proposed Order, 15 ECF 45-3; Reply 2, ECF 50. 16 17 II. LEGAL STANDARD Pursuant to Federal Rule of Civil Procedure 69, a federal court may enforce a money 18 judgment in accordance “with the procedure of the state where the court is located, but a federal 19 statute governs to the extent it applies.” Fed. R. Civ. P. 69(a)(1). Under California law, where a 20 judgment creditor can identify a person or entity obligated to make payment to the judgment 21 debtor, and where the right to payment is assignable, the right to payment may be assigned from 22 the third party obligor to the judgment creditor. Cal. Civ. Proc. Code § 708.510(a). 23 24 25 26 27 28 In determining whether to order an assignment or the amount of an assignment, the court may take into consideration all relevant factors, including the following: (1) The reasonable requirements of a judgment debtor who is a natural person and of persons supported in whole or in part by the judgment debtor. (2) Payments the judgment debtor is required to make or that are deducted in satisfaction of other judgments and wage assignments, including earnings assignment orders for support. (3) The amount remaining due on the money judgment. 2 (4) The amount being or to be received in satisfaction of the right to payment that may be assigned. 1 2 Cal. Civ. Proc. Code § 708.510(c). 3 Notwithstanding, “[w]here a specific amount of the payment or payments to be assigned is 4 exempt by another statutory provision, the amount of the payment or payments to be assigned 5 pursuant to subdivision (a) shall not exceed the amount by which the payment or payments exceed 6 the exempt amount.” Cal. Civ. Proc. Code § 708.510(f). 7 III. DISCUSSION 8 FDIC argues that an order for assignment is necessary for it to reach forms of property that 9 cannot be reached by levy under a writ of execution, such as accounts receivables. Mem. 3 (citing Cal. Civ. Proc. Code § 708.510). FDIC further contends that Hyun could easily evade judgment 11 United States District Court Northern District of California 10 without an order restraining him from encumbering, assigning, or spending payments for his work 12 as an independent contractor. Id. at 5-6. According to FDIC, payments to Hyun as an 13 independent contractor lack documentation and may not be reported. Id.; Isler Decl. ¶ 10. FDIC 14 requests this Court to assign it rights to 25% of all the aforementioned payments to Hyun. Reply 15 2; Proposed Order. 16 In opposition, Hyun argues that no assignment should be ordered because all his income is 17 necessary for him and his household. Specifically, Hyun claims that the 25% requested by FDIC 18 is inappropriate given that he is left with only $2,411 per month after business and household 19 expenses. Opp. 4. Hyun further argues that his business and bank accounts have already been 20 levied, that he has already made a substantial payment, and he has attempted to negotiate a 21 settlement to no avail. Id. at 5, 8. In support of these arguments, Hyun urges this Court to 22 consider “[t]he reasonable requirements of a judgment debtor who is a natural person and of 23 persons supported in whole or in part by the judgment debtor.” Id. at 4 (citing Cal. Civ. Proc. 24 Code § 708.510(c)(1)). In addition, Hyun contends that statutes pertaining to wage garnishment 25 should also apply here despite the fact that the motion is for an assignment order. California 26 statutes governing assignment similarly provide an exemption at least for “[p]roperty which is 27 necessary for the support of a defendant who is a natural person or the family of such defendant 28 supported in whole or in part by the defendant.” Id. at 3-4 (citing Cal. Civ. Proc. Code § 487.020). 3 1 Lastly, Hyun attacks the requested assignment as overly broad and lacking particularity as to 2 whether the “judgment debtor actually possesses assignable property.” Id. at 6-7 (citing Icho v. 3 PacketSwitch.com, Inc., No. 1-20858-LHK-PSG, 2012 WL 4343834, at *1 (N.D. Cal. Sept. 21, 4 2012)). 5 6 A. The Reasonable Requirements of a Judgment Debtor and Payments that Are Required to be Made The Court first analyzes whether Hyun is entitled to claim an exemption for all of the 7 payments to him based on Hyun’s “reasonable requirements” and the payments that Hyun is 8 required to make. The Court will also consider statutes and case law relating to wage garnishment 9 here, as the payments to Hyun as an independent contractor could be analogized to “earnings,” as 10 defined in wage garnishment law. Cal. Civ. Proc. Code § 706.011 (defining “earnings” to mean 11 United States District Court Northern District of California “compensation payable by an employer to an employee for personal services performed by such 12 employee, whether denominated as wages, salary, commission, bonus, or otherwise”). 13 The amount of a debtor’s earnings that a creditor may garnish is generally limited to 25% 14 of the debtor’s disposable earnings. Id. § 706.050(a)(1). What counts as “necessary for support” 15 of a judgment debtor’s family is ill-defined. Choice Hotels Int’l, Inc. v. Penta Denver, LLC, No. 16 13-80249-WHA-JSC, 2015 WL 3830691, at *3 (N.D. Cal. June 19, 2015). In making a 17 determination, courts should consider all income available to the judgment debtor and his family, 18 including the separate earnings of the spouse. Cal. Civ. Proc. Code § 703.115 (“[T]he court shall 19 take into account all property of the judgment debtor and, to the extent the judgment debtor has a 20 spouse and dependents or family, all property of such spouse and dependents or family, including 21 community property and separate property of the spouse, whether or not such property is subject 22 to enforcement of the money judgment.”). However, courts should ensure that the judgment 23 debtor “retain[s] enough money to maintain a basic standard of living, so that the debtor may have 24 a fair chance to remain a productive member of the community.” Barnhill v. Robert Saunders & 25 Co., 125 Cal. App. 3d 1, 6 (Ct. App. 1981). Lastly, as to the “reasonable requirements” for 26 supporting Hyun and his family, it is Hyun’s burden to show any limitations on his ability to 27 satisfy a money judgment. Cal. Civ. Proc. Code § 703.850(b). 28 4 1 Here, Hyun has submitted a declaration and his 2014 joint tax return in support of his 2 opposition. Ex. C to Hyun Decl., ECF 48-1. Given FDIC’s lack of objection, the Court will 3 assume that the numbers on this tax return reflect his current financial situation. Ex. B to Hyun 4 Decl. However, Hyun’s declaration and submitted exhibits fail to make clear many issues 5 important for the Court’s determination. First, Hyun fails to explain why additional income is not 6 taken into account. For example, line 31 of Schedule C shows that the net profit from the business 7 is $408,672 but the total business income reflected on line 12 of the 1040 tax return is $477,097. 8 Exs. B, C to Hyun Decl. Line 7 of the tax return also shows that there are wages and salaries from 9 Hyun, his spouse, or some other sources. Exs. B and C to Hyun Decl. However, neither the opposition nor the declaration explains the sources of these wages and salaries and the additional 11 United States District Court Northern District of California 10 business profit. The statute requires the Court to consider all property of the debtor, including that 12 of a spouse even if such property may not be subject to judgment. Cal. Code Civ. Proc. § 703.115. 13 Second, Hyun conclusorily states he is responsible for half of the expenses of his household, and 14 half of the tax liability without explanation. Ex. C to Hyun Decl. ¶ 16. Third, the Court finds no 15 support anywhere in the declaration or the exhibits why an additional amount of $21,800 of taxes 16 should be added to Hyun’s monthly household expenses at line 15 of “Current Expenses.” Ex. D 17 to Hyun Decl. Finally, Hyun also fails to explain why he further deducts $4,000 as rent for his 18 business Cardiographix, Inc., when this deduction is a business expense that has already been 19 taken into account to calculate the net profit from his business. Ex. B to Hyun Decl. 20 Because the information provided is inadequate for the Court to consider all of Hyun’s 21 property and to follow the calculations set forth in Hyun’s declaration, Hyun fails to satisfy his 22 burden to show any limitations on his ability to satisfy a money judgment and his argument 23 against any assignment is without merit. 24 In light of the information submitted to the Court, the Court makes the following findings 25 with respect to Hyun’s “reasonable requirements” and the payments that Hyun is required to 26 make. First, the Court does not reduce Hyun’s monthly household expenses, except to disallow an 27 additional amount of $21,800 in taxes. Although FDIC argues that Hyun’s monthly household 28 expenses are extravagant, it fails to identify any itemized amount that should be reduced. Reply 25 1 3. For a family of five living in the San Francisco Bay Area, the Court finds that the expenses 2 listed are reasonable. Ex. D to Hyun Decl. For example, expenses such as a monthly rent of 3 $7,400, food cost of $1,500, and educational expenses of $6,000 for three children, are comparable 4 to what an average family living in this area might spend. Id. 5 Second, the Court notes that Hyun’s total income is $481,052, shown at line 37 of Hyun’s 1040 tax return as adjusted gross income. Ex. C to Hyun Decl. Line 63 of the tax return also 7 shows taxes paid in the amount of $141,573. Id. Hyun’s household should then have about 8 $339,478 in net income after taxes, averaging to $28,289.83 per month. Hyun’s monthly 9 household expenses are about $21,692, after disallowing the $21,800 in taxes. Ex. D to Hyun 10 Decl. Subtracting the monthly expenses from the monthly income leaves about $6,597.83 of 11 United States District Court Northern District of California 6 disposable income per month. Accordingly, the Court finds that Hyun has about $6,597.83 of 12 disposable income per month. 13 B. 14 Turning to the remaining factors the Court may consider under section 708.510(c), the Amount Remaining Due and Amount to be Received 15 “amount remaining due on the money judgment,” and the “amount to be received,” the Court finds 16 that the current judgment amount of $1,010,561.18 remains substantial. Cal. Civ. Proc. Code § 17 708.510. If substantial payments are not continuously made, the accruing interest on the amount 18 would only make the judgment more difficult to satisfy. Hyun argues that he had already paid a 19 substantial portion and attempted to further negotiate to settle this debt, so these factors should 20 weigh against assignment. Opp. 4-5. Although Hyun’s past payments and the effort to reach a 21 settlement with the debtor are commendable, these reasons alone do not absolve Hyun of his 22 obligation to satisfy the judgment. 23 After considering all the factors, the Court finds that all of Hyun’s monthly disposable 24 income of $6,597.83 should be assigned to satisfy the judgment. The Court recognizes that his 25 household expenses are reasonable except for the amount of additional taxes. Barnhill, 125 Cal. 26 App. at 6 (holding that some money should be retained for “the debtor may have a fair chance to 27 remain a productive member of the community”). In light of the available information submitted 28 to the Court, the Court finds that $6,597.83 per month (or approximately $79,173.96 per year) out 6 1 of his gross payment of fees requested by FDIC here is reasonable and should be assigned to 2 satisfy the judgment. See Ex. B to Hyun Decl. An amount of $79,173.96 per year is about 9% out 3 of $884,314, the gross payment of fees shown at line 1 of Schedule C. Ex. B to Hyun Decl. 4 C. 5 Lastly, Hyun’s argument that the assignment request lacks particularity is without merit. 6 In Icho, the plaintiff sought assignment without listing any person or entities as the source of the 7 right to payment. 2012 WL 4343834, at *1. Instead, the plaintiff merely requested assignment of 8 proceeds “arising out of [debtor’s] activities as an entertainer, television and theatrical performer, 9 singer, songwriter, dancer, promoter, producer, consultant, inventor, investor, lecturer, speaker, Particularity of FDIC’s motion for assignment publicist, and entrepreneur, or the like.” Id. The court there denied the motion for an assignment 11 United States District Court Northern District of California 10 order because no sources had been identified as the source of the right to payment. Id. at 2. The 12 court additionally noted that that Section 708.510 does not require “detailed evidentiary support 13 for the request,” as long as the creditor describes “the sources of the right to payment with 14 sufficient detail so that [debtor] can file a claim of exemption or other opposition.” Id. at 2. 15 Here, FDIC has adequately listed Aetna, Inc., Blue Shield, of California, Cigna Corporate 16 Headquarters, and United Health Care as the sources of the rights to payment. This list and other 17 information in its motion were sufficiently particular for Hyun to file a claim of exemption and an 18 opposition. Other cases cited by Hyun are similarly distinguishable and do not compel a different 19 conclusion. E.g., Garden City Boxing Club, Inc. v. Briano, No. 06-1270, 2007 WL 4463264, at *1 20 (E.D. Cal. Dec. 17, 2007) (finding that a general assignment of all possible funds failed to identify 21 any specific source of money to be assigned). Accordingly, FDIC’s motion for an assignment 22 does not lack particularity. 23 IV. ORDER 24 Hyun, the judgment debtor has not met his burden of showing that the entire amount of his 25 right to payment is necessary to support his family. Accordingly, the Court DENIES the judgment 26 debtor’s claim of exemption of all of his rights to payment for necessary support. The Court then 27 GRANTS IN PART FDIC’s motion for assignment, in which all rights to 9% of all fees, 28 commission, and other payments owed to David Hyun and/or Cardiografix, Inc. from Aetna, Inc., 7 1 Blue Shield, of California, Cigna Corporate Headquarters, and United Health Care are 2 ASSIGNED to the Assignee of Record, CadleRock III, LLC, until such time as the judgment 3 herein and the associated attorneys’ fee award are fully satisfied or this order is amended. 4 The Court further ORDERS Aetna, Inc., Blue Shield, of California, Cigna Corporate 5 Headquarters, and United Health Care to pay 9% of all fees for service payments, percent 6 discounts from charges and per diem or daily rates and case rates owed to David Hyun and/or 7 Cardiograpfix, Inc. to the Assignee of Record, CadleRock III, LLC, to be applied to the judgment 8 and the associated attorneys’ fee award until both are fully satisfied or this order is amended. 9 10 United States District Court Northern District of California 11 The Court also ORDERS that David Hyun and Cardiografix, Inc. shall not assign or otherwise dispose of the right to payment assigned to Assignee of Record. IT IS SO ORDERED. 12 13 14 15 Dated: December 13, 2016 ______________________________________ BETH LABSON FREEMAN United States District Judge 16 17 18 19 20 21 22 23 24 25 26 27 28 8
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