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Ask Dave Kennett Your Own Question
Dave Kennett
Dave Kennett, Lawyer (JD)
Category: Legal
Satisfied Customers: 27689
Experience:  25 years experience in general law, including real estate, criminal, traffic, and domestic relations
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we filed a lawsuit against a corporation in November of 2011.

Customer Question

we filed a lawsuit against a corporation in November of 2011. However we realized just now that this corporation has now separated its functions, assets etc. into three. When we filed the lawsuit they were one single entity and now they are not. What happens when we secure a judgement against them. Is this legal and how can we take action now if at all? Our trial date is later on this year
Submitted: 3 years ago.
Category: Legal
Expert:  Dave Kennett replied 3 years ago.
What is the nature of your lawsuit?
Did the corporation start 3 new corporations or just different divisions?
Did they transfer assets since your suit was filed?
Customer: replied 3 years ago.

Its a breach of contract. They are 3 separate corporations now and they have the parental corporation as a "dummy". They have shifted all their operations and I assume their assets etc. to the newly formed corporations and the one that we sued like I said is just an empty shell.

Customer: replied 3 years ago.

I responded to your question

Expert:  Dave Kennett replied 3 years ago.
Dear JACUSTOMER - If assets were transferred after the suit was filed and you obtain a judgment you can claim a "transfer to avoid creditors" and go after the assets of the corporations to which assets were transferred. I am assuming the contract that is the subject of the suit was with the "shell" corporation so there would be no contact with the 3 new corporations on which to base a suit. But whenever anyone or any corporation is being sued and the defendant transfers assets after the suit is file then that is what is referred to as a "transfer to avoid creditors" and if and when a judgment is taken against the original corporation the plaintiff can then seek the assets that were transferred after the suit was filed. This happens frequently and many defendants believe they can simply give their assets to a friend or family member or another business and protect their assets from a suit but that is not the case. So you can proceed with your suit and if you win then you can collect against not only the defendant but the other corporations to which assets were transferred.
Customer: replied 3 years ago.

I would like to know how complicated this is to do after we win the judgement; How much time can this take for us to collect? Also can we put a lien on all three corporations bank accounts ? How can that be accomplished if they are all separated now

Expert:  Dave Kennett replied 3 years ago.
Until you win your lawsuit you cannot put a lien on anyone so the first objective is to prevail in the case. If there was real estate transferred you can file a "lis pendens" action with the county recorder which places notice on the title that there is some dispute as to the real estate and if you win your case you can file an action of "transfer to avoid creditors" in order to attach the other bank accounts. The other option is to add the other corporations as party defendants to the current suit and claim that they have received assets in an attempt to avoid creditors. All of this is somewhat complicated and all I can do from this website is to try to explain your options. It is always much easier to win a judgment than it is to collect one but until you get the judgment there's no way to collect. You can also conduct discovery through depositions to get the information on where the assets were transferred and in what form. That way you will know where the assets are located and in what form when it comes time to initiate collection proceedings.
Customer: replied 3 years ago.

we have reached our discovery cut off date so I don't believe we can do much vis a vis depos. any more. Yes I am only talking about collection if we win. The lengths that this corporation has gone to avoid collection is making me nervous. "The transfer to avoid creditors" that you talked about - Is that a motion that we would need to file after the judgement and how long will that take?

I don't believe we can add the other parties to the law suit now because our last date to amend is long over. Can we still do so? Let me know.

Expert:  Dave Kennett replied 3 years ago.
You can file a motion for leave to amend or to add parties based on new information and the fact that assets have been transferred to avoid creditors. I can't guarantee you that the court will sustain such a motion but it certainly would bring the issue to the attention of the court and be a basis for an appeal if the motion to add parties is denied. The motion to add parties, if sustained, will very likely cause the date of any trial to be reset and it would open up an entire new round of discovery. If the motion is denied then you would have to proceed to trial against the original corporation and then when you try to collect you would have to file your collection actions against both the defendant corporation and the others and claim the "transfer to avoid creditors". I can't tell you how long a court case will take since it always depends on what is filed in opposition or how difficult it is to locate assets etc.

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