When a judgment lien is entered against a judgment debtor, California law lays out a specific process whereby a court-appointed receiver can take control of a liquor license that the debtor holds.
Then, the court-appointed receiver can sell the liquor license and apply the proceeds of the sale to the satisfaction of a judgment.
When Can a Receiver Seize a Liquor License?
California Code of Civil Procedure § 708.630(b) provides oversight regarding a receiver’s role in seizing a liquor license from a judgment debtor. If the debtor has been non-compliant or otherwise failed to satisfy the pending civil judgment, then the receiver can begin to seize assets.
In addition to bank and investment accounts, seizable assets include:
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Inheritance
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Assets owned by the debtor’s spouse
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Personal property
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Real property, including personal and rental properties
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Vehicles
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Business equipment
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A portion of the debtor’s wages
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Assets recently transferred to someone else
The receiver may also transfer an alcoholic beverage license pursuant to California Business and Professions Code Division 9 Chapter 6 Article 5 Section 24070.
When Is a Receiver Prohibited from Seizing a Liquor License?
In some circumstances, the debtor owes multiple creditors at once. They may also have significant amounts of delinquent taxes owed to the state or federal government.
In this scenario, the debtor may demonstrate to the court that the sale of the liquor license should be applied to those back taxes or other higher-priority creditors. If that is the case, then the receiver will not be able to seize the liquor license, pursuant to California Business and Professions Code Section 24049 and Section 24074.
Working with the ABC
California’s Department of Alcoholic Beverage Control oversees the manufacture, sale, purchase, possession, and transportation of alcoholic beverages throughout the state.
Therefore, the ABC holds statutory control over liquor licenses.
Types of retail liquor licenses include:
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On-Sale General. Someone who holds this license may sell all types of alcoholic beverages for consumption on the premises, and the sale of beer and wine for consumption off the premises.
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Off-Sale General. This license authorizes the sale of all alcoholic beverages for consumption off the premises, as long as they are sold in original, sealed containers.
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On-Sale Beer and Wine. License-holders are able to sell all kinds of wine and malt beverages for consumption on and off premises.
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Off-Sale Beer and Wine. If a proprietor carries this license, they can sell wine and malt beverages for consumption off premises, but only in original, sealed containers.
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On-Sale Beer. This license authorizes only the sale of malt beverages, but allows on or off-premises consumption.
Regardless of the type of license, the receiver will need to work with the ABC to ensure that the transfer is aligned with all applicable laws.
The receiver should communicate with the appointing party (or the party’s attorney) to ensure that the court’s appointing order gives the receiver the authority to take control of the license and sell it.
An application to transfer the license to the buyer must be filed with the ABC. After approval, the proceeds from the transfer will need to be placed in escrow. From there, the receiver will make a distribution to the creditor.
The appointment order will need to include language that provides the receiver the authority to:
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Open an escrow account
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Sign escrow documents and amendments
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Sign sale documents
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Hire a broker to market the license to potential buyers
Which Creditor Gets to Sell the Liquor License?
What if multiple creditors are seeking to receive as much as possible of the debt they are owed?
CA Business & Professions Code § 24074 lays out the order of priority for distributing proceeds from any seized and sold assets.
This is the order of priority for payments that will be made by the debtor:
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Payments to the US government and state tax authorities for delinquent taxes
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Payment of wages, salaries, and benefits of employees
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Payments to secured creditors
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Claims on mechanics’ liens
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Payment of escrow fees and prevailing brokerage fees for services rendered (as well as reasonable attorneys’ fees)
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Payment of claims for goods sold and delivered or services rendered
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Payment of other court-ordered claims, such as child support
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Payment of all other claims
Griswold Law Knows How to Recover Debts from Uncooperative Judgment Debtors
Richardson “Red” Griswold has been appointed by over 150 California courts to serve as a receiver across multiple practice areas.
