Comerica Bank v. Esshaki et al

Filing 476

OPINION AND ORDER GRANTING PLAINTIFF'S 166 Ex Parte MOTION for Order Prohibiting Transfer of Assets and Compelling Creditor's Examinations - Signed by Magistrate Judge R. Steven Whalen. (CCie)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
COMERICA BANK,
Plaintiff,

No. 17-11019

v.

District Judge George Caram Steeh
Magistrate Judge R. Steven Whalen

JAMES ESSHAKI, ET AL.,
Defendants.
/
OPINION AND ORDER
Before the Court is Plaintiff’s Ex Parte Motion for Orders Prohibiting Transfer of
Assets and Compelling Creditor’s Examinations [Doc. #166], which was referred for
hearing and determination under 28 U.S.C. § 636(b)(1)(A). For the reasons and under the
terms set forth below, the motion is GRANTED.
I.

FACTS

The Defendants are signators and guarantors of loans from Plaintiff Comerica
Bank. They defaulted on these obligations; Plaintiff filed breach of contract claims, and
on March 23, 2018, the Court entered a stipulated amended judgment against the
Defendants as follows [Dkt. #47]:
(a) Defendants James Esshaki, Bernadette Esshaki, the James Esshaki Living Trust
dated April 25, 1991, and Essco, Inc., jointly and severally, for the sum of $4,624,655.44
in principal, plus accrued interest in the amount of $382,364.41 as of February 15, 2018,
plus $13,727.98 in late fees, plus costs and attorney fees, with interest continuing to
accrue.

-1-

(b) Defendants James Esshaki, the James Esshaki Living Trust dated April 25,
1991, Essco, Inc., and Essco International Restaurants, LLC, jointly and severally, for the
sum of $933,942.24 in principal, plus accrued interest in the amount of $77, 217.76 as of
February 15, 2918, plus $2,367.24 in late fees, plus costs and attorney fees, with interest
continuing to accrue.
(c) Defendants James Esshaki and the James Esshaki Living Trust dated April 25,
1991, jointly and severally, for the sum of $433,334.87 in principal, plus accrued interest
in the amount of $35,827.85 as of February 15, 2918, plus $1,102.56 in late fees, plus
costs and attorney fees, with interest continuing to accrue.
(d) Defendants James Esshaki, the James Esshaki Living Trust dated April 25,
1991, and Essco Development-Southgate, LLC, jointly and severally, for the sum of
$316,640.36 in principal, plus accrued interest in the amount of $26,179.62 as of
February 15, 2018, plus $939.93 in late fees, plus costs and attorney fees, with interest
continuing to accrue.
The full amount of the judgment is unsatisfied. James Esshaki appeared for a
creditor’s exam on December 1, 2017, but Plaintiff terminated that proceeding, claiming
that Mr. Esshaki “repeatedly and without merit objected to answering basic questions
about his financial situation....” Plaintiff’s Motion [Dkt. #166, Pg. ID 1138].
Plaintiff now seeks an order compelling the continuation of a creditor’s exam, to
be held in the United States Courthouse under judicial supervision, and to prohibit the
transfer of non-exempt assets.

-2-

II.

LEGAL PRINCIPLES RE: POST-JUDGMENT PROCEEDINGS

Under Fed.R.Civ.P. 69(a)(1), “[a] money judgment is enforced by a writ of
execution.” Further, “[t]he procedure on execution–and in proceedings supplementary to
and in aid of judgment or execution–must accord with the procedure of the state where
the court is located.” Id. Michigan law provides the mechanisms to enforce monetary
judgments. See M.C.R. 2.6 21 (“When a party to a civil action obtains a money judgment,
that party may, by motion in that action or by a separate civil action...obtain relief
supplementary to judgment under MCL 600.6101–600.6143.” “[T]he scope of
postjudgment discovery is very broad.” Unites States v. Conces, 507 F.3d 1028, 1040 (6th
Cir. 2007), quoting F.D.I.C. v. LeGrand, 43 F.3d 163, 172 (5th Cir. 1995). Fed.R.Civ.P.
69(a)(2) provides that a judgment creditor “may obtain discovery from any personincluding the judgment debtor-as provided in these rules or by the procedure of the state
where the court is located.”
The statutory provisions incorporated in M.C.R. 2.621(2) give the court an
expansive range of authority. Under M.C.L. § 6104(1), a court may compel discovery of
any property of the judgment debtor or any property due or held in trust for the debtor.
Under subsection (2) of that statute, a court may “[p]revent the transfer of any property,
money, or things in action, or the payment or delivery thereof to the judgment debtor.”
Under M.C.L. § 600.6110(1), a court can order the judgment debtor to “appear at a
specified time and place” for a creditor’s examination. A judgment creditor is entitled to
“a very thorough examination of the judgment debtor.” Credit Lyonnais, S.A. v. SGC Int'l,
Inc., 160 F.3d 428, 430–31 (8th Cir.1998) (quoting Caisson Corp. v. County West Bldg.
Corp., 62 F.R.D. 331, 335 (E.D.Pa.1974)), and “the presumption should be in favor of
full discovery of any matters arguably related to the [creditor's] efforts to trace [the
-3-

debtor's] assets and otherwise to enforce the judgment.” Id.
Under M.C.L. § 600.6116(1), a court may, as part of an order for a creditor’s
examination, restrain the judgment debtor from transferring nonexempt property:1
“An order for examination of a judgment debtor may contain a provision
restraining the judgment debtor from making or suffering any transfer or
other disposition of, or interference with any of his property, then held or
thereafter acquired by or becoming due to him not exempt by law from
application to the satisfaction of the judgment, until further direction in the
premises, and such other provisions as the court may deem proper.”
III.

DISCUSSION

In their Objections to Plaintiff’s Ex Parte Motion [Doc. #173], Defendant first
argue that Michigan law does not permit ex parte motions, and that this case should be
consolidated with a separate case assigned to Judge Steeh. As to the latter point, at the
time Defendants filed their Objection, this case was assigned to Judge Borman. It has
since been transferred to Judge Steeh, so that issue is moot. In addition, Defendants have
in fact filed a response (objection) to this motion, so it is not, in effect, an ex parte
motion.
Defendants also raise five substantive objections. First, they argue that the relief
requested is overly broad, and does not account for payment of the Esshaki’s ordinary
living expenses. However, as discussed in the preceding section, the Court’s powers to
enforce a judgment and to fashion discovery are extremely broad. In addition, an order
under M.C.L. § 600.6116(1) restraining the transfer of property is limited to nonexempt
property. Defendants have made no proffer that their nonexempt property is insufficient
to meet their ordinary living expenses. I also note that while Defendants opine that “[t]he
common practice in Michigan state courts is to allow such ordinary course exceptions
1

Under M.C.L. § 600.6116(2), the duration of the restraint on transferring property
is two years.
-4-

when a transfer restraint order is entered,” Defendants’ Objection, Pg. ID 1294, they cite
no authority for that proposition. This objection is without merit.
Second, Defendants object that the Plaintiff’s document requests are “overbroad
and unduly burdensome,” and includes information from corporate and other entities that
are not themselves judgment debtors. However, discovery as to non-parties is appropriate
where “the relationship between [the judgment debtor and the non-party] is sufficient to
raise a reasonable doubt about the bona fides of any transfer of assets between them.” Id.,
160 F.3d at 431 (quoting Magnaleasing, Inc. v. Staten Island Mall, 76 F.R.D. 559, 562
(S.D.N.Y.1977)). See also Mountain Dudes, LLC v. Split Rock, Inc. 2013 WL 5435707,
*3 (D.Utah 2013) (“[I]n order to successfully move for discovery against a nonparty the
movant need not prove conclusively that the nonparty is an extension of the judgment
debtor, but need only present evidence sufficient to raise legitimate questions about the
relationship between the judgment debtor and the nonparty, and consequently,
transactions between the two.”); Scioto Constr., Inc. v. Morris, 2007 WL 108906, *2
(E.D. Tenn. 2007) “[T]he judgment creditor must be given the freedom to make a broad
inquiry to discover hidden or concealed assets of the judgment debtor” (internal citations
omitted); O.J. Distributing, Inc. v. Hornell Brewing Co., Inc., 2012 WL 4757940, *2
(E.D. Mich. 2012)(judgment creditor entitled “to obtain information from parties and
non-parties alike, including information about...assets that have been fraudulently
transferred.”).
Third, the Defendants object to the time frame for the production of documents
and, presumably, for the creditor’s examination, stating that they should be given at least
30 days. It does appear that Plaintiff’s document requests are voluminous, and some
additional time is required. The Court will order that Defendants produce the documents
-5-

requested, as set forth in Exhibit 1 of Plaintiff’s motion, within 21 days of the date of this
Order. The creditor’s examination will take place within 21 days of the date required for
production, or such later time as the parties may mutually agree upon.2
Fourth, Defendants object to Mr. Esshaki’s exam as duplicative. It is not; Plaintiff
states that Mr. Esshaki’s first examination was terminated because of obstructionist
conduct. “Sufficient unto the day is the evil thereof.”3 Without addressing the claim of
previous obstructionism, this is a new day, and Mr. Esshaki’s exam will go forward.
Defendants also argue that Mr. Esshaki’s personal exam should be combined with the
examinations of the corporate judgment debtors, of which Mr. Esshaki is the corporate
representative. However, the parties are much better informed than the Court as to what
information is sought from whom, and thus counsel are in a better position to meet,
confer, and mutually decide the most efficient way to proceed. The Court therefore
declines to structure the Plaintiff’s post-judgment discovery.
Finally, Defendants object to the creditor’s examinations taking place in the United
States Courthouse. I agree. The examinations will instead take place either at
Defendants’ counsel’s office or Plaintiff’s counsel’s office. Counsel are aware that
Defendants will answer all questions that concern non-privileged matters, subject to
objections. If a privilege is asserted, the parties can, as an initial matter, telephone the
undersigned Magistrate Judge for a ruling, or, if the matter cannot be resolved on the

2

Now that the Court has ordered the resumption of the creditor’s exam, I
anticipate that the attorneys will work together cooperatively to complete the production
of documents and schedule that exam in a timely and efficient manner. This is a time for
fact-finding, not strategic gamesmanship.
3

Matthew 6:34.
-6-

spot, file an appropriate motion.4
Accordingly, Plaintiff’s Motion for Orders Prohibiting Transfer of Assets and
Compelling Creditor’s Examinations [Doc. #166] is GRANTED under the terms set forth
above.
Plaintiff will submit to the Court a proposed Order Restraining Transfer of Assets
consistent with the terms set forth in Exhibit 1 to its motion, and consistent with M.C.L. §
600.6116.
Defendants will produce the documents requested by Plaintiff, and appear for
creditor’s examinations under the terms discussed above.
IT IS SO ORDERED.
Dated: June 11, 2018

s/R. Steven Whalen
R. STEVEN WHALEN
UNITED STATES MAGISTRATE JUDGE

CERTIFICATE OF SERVICE
I hereby certify on June 11, 2018 that I electronically filed the foregoing paper with
the Clerk of the Court sending notification of such filing to all counsel registered
electronically. I hereby certify that a copy of this paper was mailed to non-registered ECF
participants on June 11, 2018.
s/Carolyn M. Ciesla
Case Manager for the
Honorable R. Steven Whalen

4

Privilege objections which are not made in good faith, are made for purposes of
obstruction, or which are clearly without merit, may result in sanctions.
-7-