McCready v. Whorf

Filed 3/24/15

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SIX

MARY J. McCREADY, 2d Civil No. B253164 (Super. Ct. No. 56-2012- Plaintiff and Appellant, 00421480-CU-CO-VTA) (Ventura County) v.

WILLIAM F. WHORF,

Defendant and Respondent.

Sometimes it's not over when it's over. A bankruptcy extinguished defendant debtor's liability on a judgment in favor of plaintiff. But here it did not extinguish plaintiff's lien on the bankrupt's business from which plaintiff was entitled to the assets and profits of the business. Shortly before his death, plaintiff's husband sold a business to defendant. Defendant defaulted on the purchase contract payments. Plaintiff sued and obtained a money judgment and a lien on the assets of the business including all profits. Defendant then declared bankruptcy, terminating his personal liability on the judgment, but the lien survived. Plaintiff brought an action for money had and received to recover post-bankruptcy profits from the business. The trial court found for defendant on the ground that plaintiff's remedy was through the laws applicable to the enforcement of judgments. We reverse.

FACTS In 2007 Mary McCready's husband sold his business, BMIP Billy Bags Design ("Billy Bags"), to William H. Whorf. McCready's husband died after the sale. Whorf failed to make the payments on the sale. McCready brought an action against Whorf to recover the sales price. On July 6, 2011, McCready obtained a judgment against Whorf in the amount of $134,927.36. The judgment provided, "In addition Mary J. McCready is awarded an equitable lien on the assets and profits of [Billy Bags]." On July 17, 2011, Whorf filed a petition under Chapter 7 of the Bankruptcy Code. The petition showed Whorf had an average net monthly income of $10,487.72 from Billy Bags. Whorf named McCready as a creditor. On October 24, 2011, personal liability on Whorf's debts was discharged in bankruptcy. The lien, however, remained on the assets and profits of Billy Bags. On July 27, 2012, McCready brought the instant action against Whorf for money had and received. The complaint alleged that Whorf had been receiving $10,487.72 per month profit from Billy Bags; that McCready has a lien against those profits; and therefore profits received from the filing of the bankruptcy petition to the time of trial were monies belonging to McCready. The complaint prayed for $134,927.36 in damages, the same amount as the original judgment against Whorf. This was a court trial in which no oral testimony was taken. Instead, the court took judicial notice of documents, including the bankruptcy petition. The settled statement recites that there was evidence after bankruptcy that Whorf had receipts from Billy Bags but made no payments to McCready. The trial court found for Whorf. The court's ruling states in part: "[McCready's] remedy, if any, was to seek to enforce the judgment that created the lien through the use of laws applicable to the enforcement of judgments."