ORANGE COUNTY IN BANKRUPTCY : Fund Crisis Is Tying Up Court Awards

For less than 1,200 bucks, it’s hardly been worth it.

But Ed Schaum believes there is a principle involved here. The way he sees it, he won a judgment, fair and square, in an Orange County small claims court. County officials helped him collect his money from the company he had sued.

The next thing he knew, the county was holding onto the money.

“I was just stunned when I learned they had appropriated money that was never theirs to begin with,” said Schaum, 52, a mortgage broker in Costa Mesa.

The Newport Beach resident is among an unknown number of plaintiffs awaiting perhaps hundreds of thousands of dollars in court judgments that were frozen as a result of the county’s bankruptcy filing, a county official said. The money, seized from defendants by the county marshal’s office, is not being paid out by the auditor-controller’s office.

Such awards range from “small claims fender-bender judgments” to Superior Court judgments against large corporations, said Don Spears of the Orange County marshal’s office. Spears, whose office enforces court orders authorizing seizure of the money from bank accounts and elsewhere, said the vast majority of judgments are well under $100,000. The orders for seizure can come from courts throughout the state.

Spears did not know how much money was being withheld or how many plaintiffs are affected. No one in the auditor-controller’s office could be reached for comment. But Spears said he learned late Wednesday that the office is planning to start releasing money collected after the bankruptcy was filed--including Schaum’s--early next week. The fate of awards collected before Dec. 6 remains unclear.

“There’s been no hue and cry” among plaintiffs yet, Spears said. In fact, before a reporter made an inquiry, Spears thought that the judgments were being paid as usual. Apparently, checks to plaintiffs were being issued immediately after the Dec. 6 bankruptcy filing but were stopped sometime later, he said.

Schaum learned the bad news a few days before Christmas when he called the auditor’s office to inquire about his money. He had wanted the extra cash for the holiday.

“I was just astounded,” he said. “I said, ‘What do you mean you’re not writing any checks?’ They said, ‘We’re broke.’ ”

From the start, this has not been an easy quest for Schaum.

First, the company that owed him a commission for work he did as a contractor had its accounts frozen by court order as a result of a lawsuit by the state attorney general. Then, he pursued a small claims action against the company, Nationwide Mortgage Group, in Harbor Municipal Court to recover $5,015 he was owed.

Schaum said he won the case Oct. 12 and the county marshal’s office seized the only funds it could from a company bank account--$1,146 and change. The money was forwarded Dec. 15 to the county auditor’s office for processing, but the bucks stopped there.

Schaum believes his money should have been held in a separate account so that it would not have been affected by the county’s financial misfortune.

“I think that if an attorney or a real estate agent or somebody in the private sector did this, it would be looked upon as a criminal offense,” he said.