As California commercial collections attorneys representing businesses trying to collect outstanding debts, we have been involved in several cases over years where aggressive litigation tactics taken early in the case have resulted in positive outcomes for our creditor clients years later.
As an example, we recently endured a nearly three-year collection matter with our plaintiff client, a publicly traded distributor of raw materials. Thanks to persistence and diligence prosecuting the claim for the unpaid receivable, our client was rewarded in the end because the priority of our client’s Judgment Lien related back to the date of the Attachment Lien that was issued at the beginning of the case.
Commercial Collection Claim Survives Debtor’s Assignment For Benefit Of Creditors and Avoidable Transfer Strategy
The Defendant had gone out of business. They then implemented an Assignment For The Benefits Of Creditors strategy, and attempted to transfer assets to a successor entity free and clear of our client’s Judgment Lien and many other creditor and investor claims. The successor corporation (essentially the same players) claimed that they owned the assets, free and clear, because the assets were purchased from a foreclosing secured creditor pursuant to a UCC sale. Such a move can wipe out all junior liens and security interests, including our client’s Judgment Lien. To counter this, our partner, Mark Poniatowski, a seasoned Bay Area collection attorney and Superlawyers Designated Creditors Rights attorney, located the assets by issuing a subpoena to three warehouse locations throughout the Bay Area where the assets had been stored (hidden).
Upon review of the Secretary of State search results, we realized that the priority of our client’s Judicial Lien related back to the date of the perfection of its Attachment Lien, which was 29 days prior to the filing of the foreclosing secured creditors UCC-1 financing statement. The authority is Code Civ. Proc. 697.020 (a) and In re Ryan 369 BR 536, 546 (ND CA 2007). Therefore, the Judgment Lien was senior to the foreclosing creditor’s security interest, and the foreclosure sale of the assets to the successor corporation did not terminate (wipe out) our client’s the Judgment Lien.
Once we convinced opposing counsel that the assets remained subject to the Judicial Lien, the successor corporation was eager to settle, since they were soliciting new investors for their new venture and needed the assets free and clear of the Judgment Lien.
Another Example That A Writ Of Attachment Is A Powerful Collection Tool.
This case is another example that a Writ of Attachment is a powerful collection device, essentially converting an unsecured creditor into a secured creditor, which significantly increases the probability of collecting an unpaid receivable both in and out of the bankruptcy context. Sometimes the benefits of the Attachment Lien do not arise until the end of the case after Entry of Judgment as it did in this case, nearly 3 years later.