Employment Development Department v. Union Bank

Opinion

NEWSOM, J. The present appeal concerns the timeliness of appellants’

third party claim to funds levied upon by the Employment Development Department of the State of California. For reasons discussed herein, we agree with the trial court’s determination that the third party claim was barred as untimely.

In January of 1981, appellants Beltz and Aviles sold their business to James W. and Kangja Greer (hereafter referred to as Debtors). Debtors’ installment note was secured by a security interest in the assets of the [544]business, including bank accounts, contracts and accounts receivable. A UCC-1 financing statement referring to the security interest was filed with the Secretary of State on March 26, 1981. On July 1, 1981, Debtors incorporated the business under the name of GSP Security, Inc.

On July 14, 1982, Employment Development Department (hereafter referred to as EDD) served a notice of levy for delinquent state employment taxes on the bank where the account of GSP Security, Inc. was located. On July 23, 1982, EDD served a notice of levy on Mt. Diablo Unified School District for an account receivable of GSP Security, Inc. On July 22 and August 16, 1982, the proceeds from the two levies were deposited in the employment tax account of GSP Security, Inc.

On October 5, 1983, appellants served a third party claim on EDD. On October 20, 1983, EDD filed a petition for hearing on the third party claim. At the hearing, the trial court determined that the third party claim was not filed in a timely manner and denied the claim.

Timeliness of the Third Party Claim

Appellants argue that their claim should be considered under the pre-1983 attachment law. (Code Civ. Proc., § 689.) Under that law, the argument continues, a third party claim is not late unless there is prejudice to the levying creditor. This argument is based solely upon the case of National Bank of New Zealand v. Finn (1927) 81 Cal.App. 317 [253 P. 757].1 In that case, it was determined that although Code of Civil Procedure section 689 did not specify the time within which a third party claim could be made, the claim must be made before the levying officer has sold the property or subjected it to satisfaction of the debt by other means. (Id., at p. 337.) The facts are clear in the instant case that the funds obtained by the levy were paid to satisfy the debtor’s tax obligation over a year before appellants’ claim.