Winning in Court, but Missing the Payoff

The most frustrating thing about going to small claims court is winning--and then losing.

That happens when you’ve won your case, but you can’t collect from the defendant you beat.

To the cynical among us, it is no surprise that it is often nearly impossible to collect money owed, even when you deserve it; even when a court of law says you deserve it.

Let that be a lesson to the naive and less cynical. Before venturing into small claims court, or any court for that matter, make sure that the person you are suing will be good for the judgment if you win. In other words, make sure you sue someone with the wherewithal to pay, not someone lawyers call “judgment proof.” Otherwise, you probably shouldn’t bother to sue at all.

This is also known as the “deep pocket” theory of law.

Small claims court is a relatively quick and painless, lawyer-free process in which to assert your legal rights. But as several frustrated readers have complained, the process isn’t over until it is over--and that means the money is in your pocket. Sometimes, winning your case is just the beginning. Then you have to try to collect.

The small claims court can help you gather information to assist in collecting your judgment, but the court won’t, and can’t, become your collection agency. You’ll have to do that yourself. And the effort it takes may not always be worth the money you make. (The maximum you can win in small claims court is $1,500.)

Small claims court is sometimes a good place to resolve serious disputes with neighbors, but only those with cash or assets to cover the cost of the fight. Say a neighbor orally agreed to split the $600 cost of building a fence on the property line, but after the fence is built, reneges on the deal.

Grounds for Suit

You can sue in small claims court on a breach of contract theory. But if your neighbor is a debt-ridden, unemployed sloth about to lose his house to the mortgage company, you better forget about going to court and chalk the lost $300 up as a lesson in the importance of demanding advance deposits.

So, before you sue, seriously evaluate the chances of recovery. Is the potential defendant likely to put up a fight and make it difficult to find his assets? Does he have a well-paying job? (If he lives off government checks such as social security or disability, you won’t be able to go after those sources of income for payment.) Does the person have a bank account, real estate or other assets that can be used to help pay any judgment?

Assuming you’ve decided the principle is worth it, or your adversary does have a steady job with plenty of assets, and you win your case, you can find out where the money is hiding. The loser has to complete a form called the “Judgment Debtor’s Statement of Assets” listing employment, income and other assets. And if he intentionally fails to complete the form and send it to you within the court deadline, you can ask the court to impose penalties.

Bear in mind that the defendant can appeal his losing case to Superior Court, so you only get to try to collect after the appeal is exhausted. Santa Monica attorney Andrew E. Rubin, who sometimes works as a volunteer judge in small claims court, says you must appear at the hearing in Superior Court to argue your case once again.

“The Superior Court hearing is a totally new and independent trial at which nothing that went on (in the small claims court) has any bearing or effect,” he notes.

On the day you win, ask for payment in person. Then try a polite letter. If that doesn’t work, you can use the statement of assets to begin the process of attaching or levying against the loser’s assets. First, you’ll need a “Writ of Execution,” which you can get from the small claims court clerk. Turn several copies of the writ (but keep one for yourself) over to the marshall’s office, with instructions on which assets to go after. You’ll also have to pay a fee to the marshall.

Certain assets, such as cars that are used in business, a portion of the equity in a home that has been homesteaded and other personal property is exempt from attachment, so even if your opponent has some assets, you may be in for a long haul.

Recorder’s Office

It would also be wise to record in the county recorder’s office what is called an “Abstract of Judgment,” which you can get from the court clerk. Recording that in the county where your opponent owns real property will give you a lien against the property, so he will have to pay you before he can sell the property to someone else. Of course, that could mean a 10-year wait to be paid.

There are many good books about small claims court. Ralph Warner’s “Everybody’s Guide to Small Claims Court” has a helpful chapter on collecting judgments. The book is published by Nolo Press, 950 Parker St., Berkeley, Calif. 94710.

But, remember, if you win, and you never collect, don’t complain that if you had known what you were getting yourself into, you would never have sued. Because you’ve just been told.

Attorney Jeffrey S. Klein, The Times’ senior staff counsel, cannot answer mail personally but will respond in this column to questions of general interest about the law. Do not telephone. Write to Jeffrey S. Klein, Legal View, The Times, Times Mirror Square, Los Angeles 90053.