SECTIONS 1204-1208 - California Statutes

CODE OF CIVIL PROCEDURE

SECTION 1204-1208

1204. When any assignment, whether voluntary or involuntary, and
whether formal or informal, is made for the benefit of creditors of
the assignor, or results from any proceeding in insolvency or
receivership commenced against him or her, or when any property is
turned over to the creditors of a person, firm, association or
corporation, or to a receiver or trustee for the benefit of
creditors, the following claims have priority in the following order:
(a) Allowed unsecured claims, but only to the extent of four
thousand three hundred dollars ($4,300) for each individual or
corporation, as the case may be, earned within 90 days before the
date of the making of such assignment or the taking over of the
property or the commencement of the court proceeding or the date of
the cessation of the debtor's business, whichever occurs first, for
either of the following:
(1) Wages, salaries, or commissions, including vacation, severance
and sick leave pay earned by an individual.
(2) Sales commissions earned by an individual, or by a corporation
with only one employee, acting as an independent contractor in the
sale of goods or services of the debtor in the ordinary course of the
debtor's business if, and only if, during the 12 months preceding
the date of the making of the assignment or the taking over of the
property or the commencement of the proceeding or the date of the
cessation of the debtor's business, whichever occurs first, at least
75 percent of the amount that the individual or corporation earned by
acting as an independent contractor in the sale of goods or services
was earned from the debtor.
(b) Allowed unsecured claims for contributions to employee benefit
plans arising from services rendered within 180 days before the date
of the making of the assignment or the taking over of the property
or the commencement of the court proceeding or the date of the
cessation of the debtor's business, whichever occurs first; but only
for each employee benefit plan, to the extent of the number of
employees covered by the plan multiplied by four thousand three
hundred dollars ($4,300), less the aggregate amount paid to the
employees under subdivision (a), plus the aggregate amount paid by
the estate on behalf of the employees to any other employee benefit
plan.
(c) The above claims shall be paid by the trustee, assignee or
receiver before the claim of any other creditor of the assignor,
insolvent, or debtor whose property is so turned over, and shall be
paid as soon as the money with which to pay same becomes available.
If there is insufficient money to pay all the labor claims in full,
the money available shall be distributed among the claimants in
proportion to the amount of their respective claims. The trustee,
receiver or assignee for the benefit of creditors shall have the
right to require sworn claims to be presented and shall have the
right to refuse to pay any such preferred claim, either in whole or
in part, if he or she has reasonable cause to believe that a claim is
not valid but shall pay any part thereof that is not disputed,
without prejudice to the claimant's rights, as to the balance of his
or her claim, and withhold sufficient money to cover the disputed
portion until the claimant in question has a reasonable opportunity
to establish the validity of his or her claim by court action, either
in his or her own name or through an assignee.
(d) This section is binding upon all the courts of this state and
in all receivership actions the court shall order the receiver to pay
promptly out of the first receipts and earnings of the receivership,
after paying the current operating expenses, such preferred labor
claims.

1204.5. In any general assignment for the benefit of creditors, the
following claims shall have priority, subordinate to the priorities
for labor claims under Section 1204, but prior to all other unsecured
claims: allowed unsecured claims of individuals, to the extent of
nine hundred dollars ($900) for each such individual, arising from
the deposit, before the commencement of the case, of money in
connection with the purchase, lease, or rental of property, or the
purchase of services, for the personal, family, or household use of
such individuals, that were not delivered or provided. The priority
granted by this section shall be subordinate to that granted by
Sections 18933 and 26312 of the Revenue and Taxation Code.

1205. Upon the sale or transfer of any business or the stock in
trade, in bulk, or a substantial part thereof, not in the ordinary
and regular course of business or trade, unpaid wages of employees of
the seller or transferor earned within ninety (90) days prior to the
sale, transfer, or opening of an escrow for the sale thereof, shall
constitute preferred claims and liens thereon as between creditors of
the seller or transferor and must be paid first from the proceeds of
the sale or transfer.

1206. (a) Upon the levy under a writ of attachment or execution not
founded upon a claim for labor, any miner, mechanic, salesman,
servant, clerk, laborer or other person who has performed work or
rendered personal services for the defendant within 90 days prior to
the levy may file a verified statement of the claim with the officer
executing the writ, file a copy with the court that issued the writ,
and give copies, containing his or her address, to the plaintiff and
the defendant, or any attorney, clerk or agent representing them, or
mail copies to them by registered mail at their last known address,
return of which by the post office undelivered shall be deemed a
sufficient service if no better address is available, and that claim,
not exceeding nine hundred dollars ($900), unless disputed, shall be
paid by the officer, immediately upon the expiration of the time for
dispute of the claim as prescribed in Section 1207, from the
proceeds of the levy remaining in the officer's hands at the time of
the filing of the statement or collectible by the officer on the
basis of the writ.
(b) The court issuing the writ shall make a notation in the
register of actions of every preferred labor claim of which it
receives a copy and shall endorse on any writ of execution or
abstract of judgment issued subsequently in the case that it is
issued subject to the rights of a preferred labor claimant or
claimants and giving the names and amounts of all preferred labor
claims of which it has notice. In levying under any writ of execution
the officer making the levy shall include in the amount due under
the execution all preferred labor claims that have been filed in the
action and of which the officer has notice, except any claims that
may have been finally disallowed by the court under this procedure
and of which disallowance the officer has actual notice. The amount
due on preferred labor claims that have not been finally disallowed
by the court shall be considered a part of the sum due under any writ
of attachment or execution in augmentation of that amount and any
person, firm, association, or corporation on whom a writ of
attachment or execution is levied shall immediately pay to the
levying officer the amount of the preferred labor claims, out of any
money belonging to the defendant in the action, before paying the
principal sum called for in the writ.
(c) If any claim is disputed within the time, and in the manner
prescribed in Section 1207, and a copy of the dispute is mailed by
registered mail to the claimant or the claimant's attorney at the
address given in the statement of claim and the registry receipt is
attached to the original of the dispute when it is filed with the
levying officer, or is handed to the claimant or the claimant's
attorney, the claimant, or the claimant's assignee, must within 10
days after the copy is deposited in the mail or is handed to the
claimant or the claimant's attorney, petition the court having
jurisdiction of the action on which the writ is based, for a hearing
before it to determine the claim for priority, or the claim to
priority is barred. If more than one attachment or execution is
involved, the petition shall be filed in the court having
jurisdiction over the senior attachment or execution. The hearing
shall be held within 20 days from the filing of the petition, unless
the court continues it for good cause. Ten days' notice of the
hearing shall be given by the petitioner to the plaintiff, the
defendant, and all parties claiming an interest in the property, or
their attorneys. The notice may be informal and need specify only the
name of the court, the names of the principal parties to the senior
attachment or execution, and the name of the wage claimant or
claimants on whose behalf it is filed but shall specify that the
hearing is for the purpose of determining the claim for priority. The
plaintiff, the defendant, or any other party claiming an interest
may contest the amount or validity of the claim in spite of any
confession of judgment or failure to appear or to contest the claim
on the part of any other person.
(d) There shall be no cost for filing or hearing the petition. The
hearing on the petition shall be informal but all parties testifying
shall be sworn. Any claimant may appear on the claimant's own behalf
at the hearing and may call and examine witnesses to substantiate
his or her claim. An appeal may be taken from a judgment in a
proceeding under this section in the manner provided for appeals from
judgments of the court where the proceeding occurred, in an action
of the same jurisdictional classification.
(e) The officer shall keep, until the determination of the claim
for priority, any amount of the proceeds of the writ necessary to
satisfy the claim. If the claim for priority is allowed, the officer
shall pay the amount due, including the claimant's cost of suit, from
those proceeds, immediately after the order allowing the claim
becomes final.

1207. Within five days after receiving a copy of the statement
provided for in the next preceding section, either the plaintiff or
the defendant in the action in which the writ issued may file with
the officer a sworn statement denying that any part of such claim is
due for services rendered within ninety days next preceding the levy
of the writ, or denying that any part of such claim, beyond a sum
specified, is so due. Such sworn statement can not be made on
information and belief unless the party swearing to same has actual
information and belief that the wage claim, or the portion thereof
that is contested, is not justly due, and in such case the nature and
source of the information must be given. If a part of the claim is
admitted to be due, and the claimant nevertheless files a petition
for hearing and the court does not allow more than the amount so
admitted, he can not recover costs but the costs must be adjudged
against him, and the amount thereof deducted from the sum found due
him.

1208. If the claims presented under Section 1206 and not disputed,
or, if disputed, established by judgment, exceed the proceeds of the
writ not disposed of before their presentation, such proceeds shall
be distributed among the claimants in proportion to the amount of
their respective claims after the costs incurred by the senior
attaching plaintiff or judgment creditor in such action have first
been taken care of.
If sufficient money to pay in full all preferred labor claims
filed under an attachment or execution does not become available
immediately upon the expiration of the time for dispute of such
claims under Section 1207, any of the claimants, or their assignees,
have the right to proceed directly against the money or other
property levied on in individual or joint actions by themselves or
their assignees against the defendant, and the attachment or
execution under which the preferred claims were filed shall be
considered set aside as far as such claimants, or their assignees,
are concerned so as to enable them, or any of them, or any of their
assignees, to proceed directly against any or all of the money or
other property in question by means of their own attachments or
executions; provided, however, that any money collected on behalf of
any such labor claimant, or his or her assignee, on the basis of such
new attachment or execution shall be shared in by the other
preferred labor claimants who have filed claims that have not been
disputed, or, if disputed, established by judgment, in proportion to
the amount of their respective claims, deducting only the costs in
the action brought by the said labor claimant, or his or her
assignee, and the costs in the original action brought by the senior
attaching plaintiff or judgment creditor.
If such senior attaching plaintiff or judgment creditor requests a
release of his or her original attachment or execution, and the
preferred labor claims filed under same are not released, the officer
who levied the writ must first mail notices of such request to
release to each of the labor claimants who have filed claims, or
their attorneys, which notices must specify that unless the claimants
bring attachment actions of their own and levy on the money or
property in question within five days from the date thereof the money
or property will be released from the attachment or execution;
provided, however, that such officer may instead collect sufficient
money on the basis of the original writ to pay off the preferred
labor claims in full and then release the attachment or execution,
but in no case shall the officer release the attachment or execution
without first taking care of the labor claims until the five-day
period has expired, unless the officer's costs, keepers' fees or
storage charges have not been immediately taken care of by some of
the parties involved. In any case it shall be lawful for a garnishee
to pay over to the officer levying the writ any money held by the
garnishee without waiting for execution to be levied and the officer'
s receipt for the money shall be a sufficient quittance, and the
officer shall collect such money and immediately pay off the
established preferred labor claims in all cases where it is possible
to do so without additional court proceedings on the officer's part.