Opinion
NOT TO BE PUBLISHED
APPEAL from an order of the Superior Court of the County No. MC015968, of Los Angeles, Carlos P. Baker, Jr., Judge. Retired judge of the Corcoran Justice Court, assigned by the Chief Justice pursuant to art. VI, § 6 of the Cal. Const.
Law Office of Mary E. Lockington, Mary E. Lockington for Defendants and Appellants.
John H. Lieberg for Plaintiff and Respondent.
MOSK, J.
INTRODUCTION
The respondent, a judgment creditor, obtained a Writ of Execution against the appellate debtor and sought to levy upon appellant’s individual retirement account (IRA). Appellant asserts that the trial court should have upheld his claim of exemption, which claim he based on the assertion that the IRA contained funds rolled over from an exempt retirement account and that the funds were necessary to pay for support for retirement and for federal and state income taxes attributable to the use of funds to pay his judgment creditor. We affirm the trial court’s denial of the exemption. Appellant failed to introduce evidence supporting the claimed exemptions.
BACKGROUND
Crystal Point, LLC. (Crystal Point) obtained a judgment against appellant Jack Schneider (Schneider) for $1,454,187.60. A Writ of Execution issued on that judgment, plus past interest and costs, for a total amount of $1,634,554.40. Crystal Point levied, inter alia, on Schneider’s rollover IRA account with T.D. Ameritrade. T.D. Ameritrade, in a Memorandum of Garnishee, declined to deliver to the levying officer the amount of the account, which was $666,258.87, because Schneider insisted the funds were exempt under Code of Civil Procedure section 704.115, subdivision (a)(3) and section 704.115, subdivision (b). Schneider had claimed an exemption under those code sections—presumably because the IRA was a result of a rollover from an exempt retirement account. Crystal Point filed a notice of opposition to the claim of exemption, asserting that Schneider had not met his burden of proof in that he had not established that the IRA account is necessary for his retirement. At the hearing Schneider asserted that amounts were necessary for retirement, including the amount necessary to pay federal and state income taxes on the amount of an IRA used to satisfy a debt, and therefore are exempt from execution. (Code Civ. Proc., § 704.115, subd. (e).)
The trial court denied the request for any exemption. Schneider filed a notice of appeal. Crystal Point moved to dismiss the appeal on the ground that it is moot. The parties also disputed the effectiveness of a claimed exemption by Schneider’s wife with regard to Schneider Family Trust accounts. The appeal by Elaine Schneider, Schneider’s wife, of the trial court’s refusal to exempt funds in the trust is not being pursued. Thus we affirm the trial court’s order in connection with the appeal of Elaine Schneider.
DISCUSSION
A. Moot
Crystal Point’s motion to dismiss is premised on the notion that because there has been execution on the account and delivery of the funds to Crystal Point, the appeal is now moot. That an appealable order or judgment is appealed and execution on the order or judgment has occurred, does not make the appeal moot. If Schneider should prevail, his funds that have been delivered to Crystal Point must be restored to him. (Cf. Gutierrez v. Superior Court of San Francisco (1895) 106 Cal. 171, 172.) The motion to dismiss is denied.
B. Exemption
In connection with enforcement of judgments, Code of Civil Procedure section 704.115 provides as follows: “(a) As used in this section, ‘private retirement plan’ means: (1) Private retirement plans, including, but not limited to, union retirement plans. (2) Profit-sharing plans designed and used for retirement purposes. (3) Self-employed retirement plans and individual retirement annuities or accounts provided for in the Internal Revenue Code of 1986, as amended, including individual retirement accounts qualified under Section 408 or 408A of that code, to the extent the amounts held in the plans, annuities, or accounts do not exceed the maximum amounts exempt from federal income taxation under that code. (b) All amounts held, controlled, or in process of distribution by a private retirement plan, for the payment of benefits as an annuity, pension, retirement allowance, disability payment, or death benefit from a private retirement plan are exempt. [¶]... [¶] (d) After payment, the amounts described in subdivision (b) and all contributions and interest thereon returned to any member of a private retirement plan are exempt. (e) Notwithstanding subdivisions (b) and (d), except as provided in subdivision (f), the amounts described in paragraph (3) of subdivision (a) are exempt only to the extent necessary to provide for the support of the judgment debtor when the judgment debtor retires and for the support of the spouse and dependents of the judgment debtor, taking into account all resources that are likely to be available for the support of the judgment debtor when the judgment debtor retires. In determining the amount to be exempt under this subdivision, the court shall allow the judgment debtor such additional amount as is necessary to pay any federal and state income taxes payable as a result of the applying of an amount described in paragraph (3) of subdivision (a) to the satisfaction of the money judgment.”
In McMullen v. Haycock (2007) 147 Cal.App.4th 753, the court held that the full exemption for private retirement plans under section 704.115, subdivisions (b) and (d), rather than the limited exemption for IRA’s under subdivision (e), applies to assets rolled over into an IRA from a fully exempt retirement plan. Schneider asserts that he is entitled to the full exemption because the funds in the IRA account had been rolled over from a fully exempt retirement plan.
Code of Civil Procedure section 703.580 provides as follows: “(a) The claim of exemption and notice of opposition to the claim of exemption constitute the pleadings, subject to the power of the court to permit amendments in the interest of justice. (b) At a hearing under this section, the exemption claimant has the burden of proof. (c) The claim of exemption is deemed controverted by the notice of opposition to the claim of exemption and both shall be received in evidence. If no other evidence is offered, the court, if satisfied that sufficient facts are shown by the claim of exemption (including the financial statement if one is required) and the notice of opposition, may make its determination thereon. If not satisfied, the court shall order the hearing continued for the production of other evidence, oral or documentary. (d) At the conclusion of the hearing, the court shall determine by order whether or not the property is exempt in whole or in part. Subject to Section 703.600, the order is determinative of the right of the judgment creditor to apply the property to the satisfaction of the judgment. No findings are required in a proceeding under this section.”
Code of Civil Procedure section 703.080 provides: “(a) Subject to any limitation provided in the particular exemption, a fund that is exempt remains exempt to the extent that it can be traced into deposit accounts or in the form of cash or its equivalent. (b) The exemption claimant has the burden of tracing an exempt fund. (c) The tracing of exempt funds in a deposit account shall be by application of the lowest intermediate balance principle unless the exemption claimant or the judgment creditor shows that some other method of tracing would better serve the interests of justice and equity under the circumstances of the case.”
At the hearing, Crystal Point argued that there was no evidence that the amount in the IRA came from an exempt plan. The trial court was amenable to receiving additional evidence. There is no indication in the record that Schneider submitted anything further or sought to submit any additional evidence. Schneider does not in his appellate briefs indicate any facts from which one can discern that funds in the IRA account came from an exempt plan. Thus, Schneider has not carried his burden to establish that the IRA account is fully exempt.
Purportedly, in order to have the IRA account qualify as exempt under the limited exemption provided for by Code of Civil Procedure section 704.115, subdivision (e), Schneider submitted to the trial court a declaration in which he said he was 75 years old, had health problems, supports himself with Social Security payments and the funds he withdraws from his IRA account; and the IRA was established after he married his wife.
Crystal Point filed evidence regarding properties in which Schneider and his wife had an interest and his wife’s business. According to the evidence, the properties had an “acquisition value” of $3,597,500 and assessed value of $3,050,626. Some of the properties were transferred to or acquired in the name of an entity the Schneiders formed called Karlata Investments LLC.
As pointed out by the court in Schwartzman v. Wilshinsky (1996) 50 Cal.App.4th 619, 626, “Orders granting or denying a claim of exemption are appealable. (Code Civ. Proc., § 703.600.) A judgment or order of the trial court is presumed correct, and must be upheld if it is supported by substantial evidence, no matter how slight it may be. [Citation.] Further, all evidence must be viewed in the light most favorable to the prevailing party, and all conflicts in evidence or in inferences must be resolved in favor of upholding the trial court's judgment or order. [Citations.] Where sufficiency of the evidence is questioned, the duty of an appellate court begins and ends with a determination that there is in the record evidence legally sufficient to support the judgment or order. [Citation.] Where there is no conflict in the evidence, or an issue is presented on appeal upon undisputed facts, the appellate court is free to draw its own conclusions of law. [Citation.]”
There is substantial evidence to support the trial court’s denial of the exemption. That evidence consists of the submissions concerning Schneider’s real estate holdings and family business, along with the paucity of information about Schneider’s finances supplied by him. Schneider had the burden to show the amount necessary to provide for himself and his family “taking into account all resources that are likely to be available for” his support when he retires. (Code Civ. Proc., § 704.115, subd. (e).) The trial court had substantial evidence that Schneider did not meet that burden.
Schneider contends that under Code of Civil Procedure section 704.115, subdivision (e), in determining the amount of the exemption for the amount necessary for support, the court “shall allow the judgment debtor such additional amount as is necessary to pay any federal and state income taxes payable as a result of the applying of an amount described in paragraph (3) of subdivision (a) to the satisfaction of the money judgment.” An amount contributed to a private retirement plan can be deductible, but when the deductible amount is distributed, it is treated as taxable income. An amount in a retirement account used for the satisfaction of a debt would be treated as taxable income. Thus, the levy here would have tax implications for Schneider.
Schneider, however, submitted no evidence to suggest the amount of taxes, if any, for which he might be liable. The statute provides that in determining the amount of the exemption under Code of Civil Procedure section 704.115, subdivision (e), the court should allow the judgment debtor such “additional amount as is necessary to pay any federal or state income taxes payable” (italics added) as a result of the amount used to satisfy the money judgment. Schneider has not shown what, if any amount of taxes are payable, and thus has not established that any amount can be exempt under Code of Civil Procedure section 704.115, subdivision (e). Thus, the trial court was justified in not exempting any sums for taxes.
Had Schneider submitted evidence, including financial statements, he might have been able to show he was entitled to exempt monies in his rollover IRA. And with more evidence, perhaps he could have shown that he qualified for an exemption. But he did not submit the necessary evidence. Accordingly, we affirm the trial court’s order.
DISPOSITION
The order of the trial court denying Schneider’s claim of exemption is affirmed. Crystal Point shall recover its costs.
We concur: TURNER, P. J., ARMSTRONG, J.