On December 19, 2014, a California Appeals Court affirmed a trial court鈥檚 ruling that amended a judgment against a law firm in bankruptcy to add a former name partner as an additional debtor.
In Danko v. O鈥橰eilly, attorney Michael Danko filed suit against his former law firm, O鈥橰eilly & Collins, for breach of contract and other actions and won a multi-million dollar judgment at trial. Subsequently, Danko filed a motion to add name partner Terry O鈥橰eilly as an additional judgment debtor, alleging that O鈥橰eilly used firm funds for personal use and transferred other assets to evade execution on the judgment.
The trial court granted Danko鈥檚 motion, finding that O鈥橰eilly bore responsibility for Danko鈥檚 claims against the defunct firm and had used firm funds for personal expenditures rather than to satisfy the judgment.
On appeal, the First Appellate District ruled that the trial court was authorized under the Code of Civil Procedure 搂187 to amend the judgment to include additional debtors. The appellate court also found that the post-judgment amendment did not violate the bankruptcy鈥檚 court鈥檚 automatic stay since a bankruptcy stay does not apply to corporate officers, affiliates, codefendants, general partners or guarantors.
In addition, the appeals court found that if the bankruptcy trustee does not enforce the automatic stay, no one else may do so in the trustee鈥檚 stead. In this case, the trustee deemed the amended judgment to be legitimate and included it in the bankruptcy settlement. The bankruptcy court also agreed, approving the settlement and denying a motion by the defendant to void the amended judgment.
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