In California, if the judgment creditor causes the sheriff to serve a Notice of Levy on a third party (for example, a company owing money to the judgment debtor), what are the third party’s obligations under California’s Enforcement of Judgment Laws?
The answer is that, absent “good cause” for refusal, the third party needs to:
1. Deliver to the levying officer property of the judgment debtor levied upon that was in the possession or control of the third person at the time of levy;
2. Provide to the levying officer any documents necessary to transfer title to such property; and
3. If the levy is upon an “obligation” owing to the judgment debtor, pay to the levying officer amounts currently due at the time of the levy and additional money later coming due and payable for the time period that the execution lien is in effect (two years from the date of the writ of execution).
For further information, refer to CCP § 701.010(b).
What constitutes “good cause” for refusing to do the above? The third party’s obligation to turn over money owing to the judgment debtor can be excused by a showing of “good cause.” CCP § 701.010(b). “Good cause” includes, for example, a good faith claim of ownership or the right to possession of the property involved as against the judgment debtor. CCP § 701.010(b)(1).
In evaluating how to collect your judgment, ask whether the judgment debtor is owed money by others (for example, the judgment debtor sold product, but has not yet been paid), or if others are holding money or other assets on behalf of the judgment debtor (for example, the judgment debtor gave an advance fee deposit to a contractor or attorney). If the answer is “yes,” consider instructing the sheriff to serve a Notice of Levy on the third party. It can be an effective way to collect judgments in California.