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 Post subject: FT - Livacich v. Livacich (12/3/2001)
PostPosted: Thu Feb 19, 2009 11:53 am 

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Livacich v. Livacich,
2001.CA.0002910 (Cal.App. Dist.4 12/03/2001)


No. G024972


December 3, 2001





Appeal from a judgment of the Superior Court of Orange County, Gary P. Ryan, Judge. Affirmed. (Super. Ct. No. 96D000991)

Dan Near for Plaintiff and Appellant. No appearance for Respondent John Livacich. Jimenez & Small and David G. Jimenez for Third Party Claimant and Respondent John Livacich Produce, Inc.

The opinion of the court was delivered by: O'leary, J.


California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.


Lorraine C. Livacich appeals the order releasing funds seized from accounts of John Livacich Produce, Inc. (the corporation) under a writ of execution. She contends she was entitled to the funds because the evidence showed that the corporation's accounts were held in the name of John R. Livacich and were used for personal purposes. We affirm. *fn1

The Livaciches were divorced, and Lorraine obtained a writ of execution for approximately $280,000 in spousal support she claimed John owed her. *fn2 The writ was served on a bank that held accounts in John's name. The corporation, of which John was president and sole shareholder, filed a third party claim of ownership under Code of Civil Procedure section 720.110 on the ground it owned the bank accounts on which the levies were made. *fn3 Lorraine petitioned for a hearing on the third party claim.

Both parties agreed the accounts were held in John's name. John declared under penalty of perjury they were actually the corporation's accounts, but he had been required to open them in his name because the corporation had problems with overdraft charges and improper use of a bank account. He averred the accounts were used for business purposes and not personal reasons. All funds deposited belonged to the corporation and not to him. Payments from the account were made for business purposes.

The checks bore the name of the corporation. John received a paycheck from the corporation and had his own personal bank account. He did not commingle funds. To John's declaration, the corporation attached appropriate documentation, including representative invoices and checks. It also submitted declarations by two employees to corroborate his averments.

At the initial hearing on the claim, Lorraine contended John had used the accounts for personal transactions. The court continued the hearing to allow her to review all of the corporation's checks for the preceding 120 days. Lorraine's attorney and staff examined 1,000 checks and copied 450.

Of these checks, Lorraine presented approximately 13 to the court as evidence of John's alleged ownership of the accounts. They essentially fall into seven categories of acts allegedly showing ownership: (1) payments to an alleged divorce attorney; (2) payments on time-share homes in Mexico; (3) a check to John's credit line; (4) a check to the IRS for John's personal tax liability; (5) a check to pay the fine in John's criminal case; (6) checks made payable to banks or cash and endorsed by John; and (7) a $107,000 check made payable to cash and endorsed by John.

Through John's testimony, the corporation offered explanations with backup documentation for these checks. The corporation only paid the alleged divorce attorney for corporate work. The time-share homes were used to entertain customers and employees. The check to John's credit line was to reimburse him for a loan to the corporation. Checks to the IRS and the criminal fine payment were made from the corporate account because John's liability and culpability flowed from corporate activities. Checks to banks were to make cash or cashier's check payments to produce suppliers. The $107,000 check was to repay a $100,000 loan John's brother made to the corporation.

After hearing the parties, the court found, "Based on the evidence presented, it is clear that the funds that constitute these checking accounts were derived from the corporation in total. [] There is no evidence of funds being derived from any other source. There are some indications that there may have been some items that are of questionable personal use. Whether the IRS would find them to be a corporate expense or a personal expense, is beyond what I am going to make a determination of. They are questionable. They are not clearly personal. They are not clearly corporate."

The court listed the payments on the time-shares, to the IRS, and for the criminal fine as questionable. It expressly found the $107,000 loan repayment was legitimate. The court granted the claim of ownership and ordered the levied funds returned to the corporation.

"In a proceeding . . . to determine title to property claimed by a third party, the third party claimant is in the position of a plaintiff charged with the burden of proof to establish rights that he claims. . . . [R]review [on appeal, however,] is limited by the rule that all appropriate presumptions and inferences must be indulged in support of the judgment. [Citation.]" (Sherwood v. Cornfield (1963) 216 Cal.App.2d 364, 369; see also ยง 720.360 [burden of proof is on third party].)

"At a hearing on a third party claim, the third party bears the initial burden of proof. [Citations.] `"`"Burden of proof" means the obligation of a party to establish by evidence a requisite degree of belief concerning a fact in the mind of the trier of fact or the court.' [Citation.] The burden of producing evidence is `the obligation of a party to introduce evidence sufficient to avoid a ruling against him on the issue.' [Citation.] [] Initially these burdens coincide. The party having the burden of proof must offer evidence so that the trier may have a basis for finding in his favor. [Citation.] During the course of the trial, however, the burden of producing evidence `may shift from one party to another, irrespective of the incidence of the burden of proof.'"' [Citation.]" (ITT Commercial Finance Corp. v. Tech Power, Inc. (1996) 43 Cal.App.4th 1551, 1557-1558, italics omitted.)

"[Thus,] a party filing a third party claim does not waive the legal requirements of a particular theory a creditor resisting the claim may wish to advance. Section 720.360 was never intended to abrogate the well-established rule concerning the burden of proof required in fraudulent transfer actions. Without specifically saying so, the Legislature would not have repealed this long-standing rule merely because a fraud action is tried within the framework of a third party claim proceeding. [Citation.] " (Whitehouse v. Six Corp. (1995) 40 Cal.App.4th 527, 534.)

"The third party claimant is required to introduce evidence that it owns the attached property. [Citation.] Once the third party accomplishes this, the burden shifts to the creditor to establish [ownership is fraudulent]. [Citation.]" (Whitehouse v. Six Corp., supra, 40 Cal.App.4th at p. 535.)

The corporation produced evidence it owned the accounts in question, even though they had been opened in John's name. Lorraine asserted the ownership was a sham and the accounts were really John's personal accounts. The corporation offered evidence showing all funds deposited into the accounts belonged to it and were used to pay corporate expenses. Only a tiny fraction of its transactions were even arguably for John's personal benefit. Based on this evidence, the trial court found the corporation owned the accounts, and John's possible occasional use of them to pay personal debts did not change that fact.

The court implicitly found the accounts were not a fraudulent sham to protect personal assets. Substantial evidence supports that finding. (See Bowers v. Bernards (1984) 150 Cal.App.3d 870, 874 [defining substantial evidence].)

Lorraine discusses several cases dealing with the corporate alter ego doctrine and fraudulent corporate transfers. (Crocker National Bank v. O'Donnell (1981) 115 Cal.App.3d 264; Economy Refining & Service Co. v. Royal Nat. Bank of New York (1971) 20 Cal.App.3d 434; Platt v. Billingsley (1965) 234 Cal.App.2d 577.) None of these cases alters our conclusion. The trial court was entitled to conclude the corporation was a legitimate, independent concern, and nothing in law or equity mandated a finding the corporation was John's alter ego. *fn4

The judgment is affirmed. The corporation is entitled to its costs on appeal.




Opinion Footnotes

*fn1 Two volumes of reporter's transcripts, not designated as part of the record, were filed without a motion to augment. We deem them to be part of the record.

*fn2 We need not determine the validity of that claim in this appeal.

*fn3 All further statutory references are to the Code of Civil Procedure unless otherwise noted. Section 720.110 states in relevant part: "A third person claiming ownership or the right to possession of property may make a third- party claim under this chapter in any of the following cases if the interest claimed is superior to the creditor's lien on the property: [] . . . [] (b) Where personal property has been levied upon under a writ of attachment, a writ of execution, a prejudgment or postjudgment writ of possession, or a writ of sale."

*fn4 Our conclusion makes it unnecessary to consider whether res judicata or collateral estoppel regarding a San Bernardino Superior Court involving a similar determination precluded Lorraine from contesting the ownership issue.

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