Superior Court of California 

County of Los Angeles – West District  

Beverly Hills Courthouse / Department 205 

MOVING PARTY: Defendant Lucreta Kathryn Morris Taylor  

RESPONDING PARTY: Plaintiff Hozelito Duric 

BACKGROUND 

This action arises from a motorcycle accident.  Plaintiff Hozelito Duric was on his motorcycle when he was hit by Defendant Lucreta Kathryn Morris Taylor.  After a trial, a jury returned a verdict unanimously finding that Defendant was negligent, that her negligence was a substantial factor in causing Plaintiff’s damages, and that Plaintiff was not negligent.  (8/19/2022 Minute Order.)  The jury awarded $1,437,000 in total damages.  (8/19/2022 Minute Order.)   

This hearing is on Defendant’s claims of exemption of an IRA account held at Malaga Bank and a checking account at Wells Fargo Bank the latter of which Defendant contends contains social security benefits.  Plaintiff opposes the claims of exemption, arguing as to the Malaga account that the amounts are not necessary to provide support for Defendant, and as to the Wells Fargo account, that the account contains amounts not tied to Defendant’s social security benefits.   

LEGAL STANDARD 

As a general rule, all property of the judgment debtor is subject to enforcement of a money judgment. (Code Civ. Proc. § 695.010, subd. (a).) The California Constitution, however, requires the Legislature to protect from forced sale a certain portion of the homestead and other property of all heads of families. (Cal. Const., art. XX, § 1.5.)   

The immunity of certain property from enforcement of a money judgment is based on the theory that some types of property should not be taken to satisfy a judgment.  The kinds and degrees of property exempt from levy are described in sections 704.010 through 704.210.  The exemptions available to a judgment debtor are for the personal benefit of the judgment debtor.  These exemptions relate to property that might ordinarily be subject to enforcement of a money judgment by execution or otherwise, but the debtor is allowed to retain all or part of this property for the protection of the debtor and the debtor’s family.  The exemptions are wholly statutory and cannot be enlarged by the courts.  (Ford Motor Credit Co. vs. Waters (2008), 166 Cal.App.4th Supp. 1, 8.) 

The exemption laws are designed to facilitate the debtor’s financial rehabilitation and have the effect of shifting social welfare costs from the community to judgment creditors.  (See Recommendation Relating to Enforcement of Judgments Law, 16 Cal. Law Revision Com. Rep. (1982) p. 1079.)  Consequently, the exemption statutes should be construed to the benefit of the judgment debtor. (Ford Motor Credit Co., 166 Cal.App.4th Supp. at 8.) 

The process of determining an exemption -- or whether a levy may be made on certain property of the judgment debtor -- is begun with a claim of exemption.  The exemption claimant has the burden of proof.  (Civ. Proc. Code §703.580.)   

The claim of exemption is deemed controverted by the notice of opposition to the claim of exemption and both shall be received in evidence.  (Id.)  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.  (Id.)  If not satisfied, the court shall order the hearing continued for the production of other evidence, oral or documentary.  (Id.)  At the conclusion of the hearing, the court shall determine by order whether or not the property is exempt in whole or in part.  (Id.)   

DISCUSSION 

Malaga Account  

Defendant claims her Malaga account is exempt from levy because it is an IRA account.  Code Civ. Proc. §704.115 provides an exemption for IRA accounts, but the exemption is qualified.  Such funds are “exempt only to the extent necessary to provide for the support of the judgment debtor.”  (Code Civ. Proc. §704.115.)  The purpose of the exemption set forth in CCP §704.115 is to safeguard a source of income for retirees at the expense of creditors.  (Yaesu Electronics Corp. v. Tamura (1994) 28 Cal.App.4th 8, 13.).   

For Defendant to prove the amount that is necessary for support, she is required to sign under oath and attach a financial statement of income and assets.  (Code Civ. Proc. §703.530.)  “If property is claimed as exempt pursuant to a provision exempting property to the extent necessary for the support of the judgment debtor and the spouse and dependents of the judgment debtor, the claim of exemption shall include a financial statement.”  (Id.)   

The financial statement must be executed under oath by the judgment debtor and must include all of the following information:  “(1) The name of the spouse of the judgment debtor; (2) The name, age, and relationship of all persons dependent upon the judgment debtor or the spouse of the judgment debtor for support; (3) All sources and the amounts of earnings and other income of the judgment debtor and the spouse and dependents of the judgment debtor; (4) A list of the assets of the judgment debtor and the spouse and dependents of the judgment debtor and the value of such assets; (5) All outstanding obligations of the judgment debtor and the spouse and dependents of the judgment debtor.”  (Id.)   

Defendant has provided a financial statement signed under oath, and therefore, her claim of exemption is procedurally proper.  Plaintiff has objected to the financial statement as untimely.  The Court exercises its discretion to consider the financial statement even though it was not filed with the claim of exemption.     

In assessing what portion of a debtor’s retirement account is ‘necessary’ for the debtor’s support, the statute directs a court to “tak[e] into account all resources that are likely to be available for the support of the judgment debtor when the judgment debtor retires.”  (Code Civ. Proc. §704.115.)   

In making this determination, the court should consider various factors including (1) the debtor’s present and anticipated living expenses and income; (2) the age and health of the debtor and his or her dependents; (3) the debtor’s ability to work and earn a living; (4) the debtor’s training job skills and education; (5) the debtor’s other assets and their liquidity; (6) the debtor’s ability to save for retirement, and (6) any special needs of the debtor and his or her dependents.  (O’Brien v. AMBS Diagnostics (2019) 38 Cal.App.5th 553, 563-564.) 

Here, Defendant is 85 years old and retired.  She lives on a fixed income.  Given her age, she has numerous “future liabilities” such as medical care, living assistance and increased costs of living.  Moreover, given her age, she has no earning potential or ability to increase her retirement savings.   

Plaintiff argues Defendant does not use the Malaga account because the balance on the account has stayed the same.  Plaintiff argues Defendant’s monthly social security of ($1947) and pension payments (of $233.75) are sufficient to cover her current monthly expenses of $2,000 a month.  Plaintiff ignores that the Court is required to consider not only Plaintiff’s current living expenses but also her anticipated living expenses which include substantial health care costs.     

In re Dalaimo (1988) 88 B.R. 268, is instructive.  There, the court found that while the debtors had sufficient current income to pay their current expenses, the IRA account was reasonably necessary for the debtor’s future anticipated living expenses.  The court considered the age of the debtors, “inevitable forces of inflation,” “no ability to rejuvenate their accounts” due to retirement, and future liabilities such as “ill health and cost of health care.”  (Id. at 272-273.)  Given these factors, the court determined the funds in the debtors’ “IRA security blanket to be reasonably necessary, regardless of the lack of a present need to meet current expenses.”  (Id. at 273.)   

In re Switzer (1992) 146 B.R. 1 is also illustrative.  There, the debtor was a 60 year old married man who worked as the vice president of a furniture company.  (Id. at 2.)  He was earning $120,000 but had health issues, was likely to be laid off, and also intended to retire in the near future.  (Id. at 3.)  His wife was unemployed.  (Id.)  In its analysis, the court took into consideration that “exemption statutes are to be liberally construed in favor of the debtor” and focused on the debtor’s ability to rebuild retirement savings.  (Id. at 6.)  The court reasoned that “if risks of future disruption in [d]ebtor’s income arising from [debtor’s] unstable employment situation and inability to obtain alternative employment, current and future medical costs due to advanced age, and [d]ebtor’s tax obligations are taken into account, [d]ebtors do not have the ability to rebuild their retirement assets in the short amount of time before retirement.”  (Id.)  The court concluded that $500,000 of the debtor’s IRA was exempt under Section 704.115(e).  (Id. at 7.) 

Based on the foregoing, the Court concludes Defendant’s Malaga account is exempt from levy pursuant to Code Civ. Proc. §704.115. 

Wells Fargo Account 

Code of Civil Procedure §704.080 provides that an account into which Social Security payments are directly deposited “is exempt to the extent that it consists of payments of public benefits or social security benefits.” (Code Civ. Proc., § 704.080, subd. (c).)   A debtor need not file a claim of exemption if the amount of the claim is $3,500 or less.  (Code Civ. Proc., § 704.080, subd. (b).) 

When the amount exceeds $3,500, the judgment debtor has the burden of proving that the excess amount is exempt.  (Code Civ. Proc. § 704.080, subd. (e)(4).)  Thus, the amount of a deposit account that exceeds the exemption provided in § 704.080, subd. (b) is not treated as consisting of exempt Social Security payments unless the judgment debtor proves they constitute Social Security payments.  (Code Civ. Proc. § 704.080, subd. (c).) 

Here, there is evidence that the Wells Fargo account contained not only social security payments, but also nonexempt funds.  Defendant has been receiving -- directly deposited into the Wells Fargo account – a bonus salary of approximately $25,000 a year from her son’s company.  (Ex. 3, Checking Account).   

Defendant has also been transferring a substantial amount of nonexempt funds into her checking account.  For example, Defendant deposited $5,048.12 into the Wells Fargo checking account, which was previously in a CD at Malaga Bank.  Defendant also transferred $15,000 from a brokerage account to a savings account and then to the Wells Fargo checking account.  (Ex. 2, Brokerage Account at 205; Ex. 3 Checking Account at 3-2.) 

Defendant has not disputed any of Plaintiff’s claims that non-exempt funds were transferred into the Wells Fargo account.  Defendant only argues that social security benefits were deposited into the account, while failing to address the argument that other amounts were also being transferred into the account.  Defendant has not met her burden to show the Wells Fargo checking account contains only social security benefits.  The Court, therefore, denies Defendant’s claim of exemption as to the Wells Fargo checking account.   

CONCLUSION 

The Court considered the evidence in support of and in opposition to the Claims of Exemption.  Defendant’s Claim of Exemption as to the Malaga account is granted, but the Claim of Exemption as to the Wells Fargo account is denied.  The levying officer is directed to release any monies held in the Wells Fargo account to Plaintiff for payment on the Judgment. The Order Determining Claims of Exemption is signed and filed on this date.  The clerk is to give notice to the levying officer. 

IT IS SO ORDERED. 

DATED: March 2, 2023 ___________________________ 

Edward B. Moreton, Jr. 

Judge of the Superior Court