1

Filed 3/9/16 Chatman v. Arrowhead Credit Union CA4/2

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for 

publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication 

or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION TWO

GEORGE C. CHATMAN,

Plaintiff and Appellant,

v.

ARROWHEAD CREDIT UNION,

Defendant and Respondent.

E063264

(Super.Ct.No. CIVDS1413324)

OPINION

APPEAL from the Superior Court of San Bernardino County. Thomas S. Garza, 

Judge. Reversed.

George C. Chatman, Plaintiff and Appellant in pro. per.

Anderson, McPharlin & Conners and Colleen A. Déziel for Defendant and 

Respondent.

In response to a withholding order issued by the Franchise Tax Board (Board), 

Arrowhead Credit Union (Arrowhead) allegedly took money from George C. Chatman’s 

account and turned it over to the Board. Chatman then filed this action against 

Arrowhead, claiming that Arrowhead’s action violated due process as well as specified 
2

federal and state statutes. The trial court sustained Arrowhead’s demurrer to the 

operative complaint, without leave to amend, reasoning that, under state statutory law, 

Arrowhead was required to comply with the withholding order and was immune from 

any liability arising out of its compliance.

Chatman appeals. He contends (among other things) that the trial court erred 

because, under the supremacy clause, his claims that are based on due process and federal 

statutory law override the state statutes on which the trial court relied.

We agree. Hence, we will reverse.

I

FACTUAL AND PROCEDURAL BACKGROUND

In September 2014, Chatman filed this action against Arrowhead.

In January 2015, Chatman filed an amended complaint (complaint). It alleged that 

on June 9, 2014, and again on July 22, 2014, Arrowhead notified him that it had received 

a withholding order from the Board. Chatman explained to Arrowhead “that this action 

was a violation of [his] rights and the law.” Nevertheless, Arrowhead took money from 

Chatman’s account and turned it over to the Board.1 This was allegedly unlawful 

because:

1. The withholding order constituted a notice of levy, which is ineffective without 

a writ.

 

1 The complaint does not specify the amount of money taken, but the parties 

agree that it was $440.01.
3

2. The Board, as an administrative agency, could not seize property without 

judicial process.

3. The withholding order was void because it was not on Judicial Council form 

WG-022.

4. The account contained Social Security benefits, which, under 42 United States 

Code section 407(a), are not subject to execution, levy, attachment, garnishment, or other 

legal process.

5. Arrowhead harassed Chatman, misrepresented the status of the debt, and used 

unfair, unconscionable or deceptive means to collect a debt, in violation of the Fair Debt 

Collection Practices Act (15 U.S.C. § 1692 et seq.) and the Rosenthal Fair Debt 

Collection Practices Act (Civ. Code, § 1788 et seq.)

The complaint also alleged that all of Arrowhead’s actions violated due process.

All of these allegations were lumped together as a single cause of action “for 

violation of civil rights of collection of alleged debt.” (Capitalization altered.)

Arrowhead demurred, on grounds including that:

1. Arrowhead was statutorily required to comply with the withholding orders, 

subject to a penalty in the amount of the tax due, under Revenue and Taxation Code 

sections 18670, subdivision (d) and 18672.

2. Arrowhead was statutorily immune under Revenue and Taxation Code section 

18674, subdivision (a).
4

3. The Rosenthal Fair Debt Collection Practices Act did not apply because 

Arrowhead was not trying to collect a consumer debt.

At the hearing on the demurrer, the trial court cautioned Chatman: “[Y]our fight 

. . . would seem to be . . . with the Franchise Tax Board, as opposed to Arrowhead Credit 

Union.” It then sustained the demurrer without leave to amend, citing Revenue and 

Taxation Code sections 18672 and 18674, subdivision (a). Thus, it entered judgment 

against Chatman and in favor of Arrowhead.

II

THE TRIAL COURT’S RULING VIOLATED THE SUPREMACY CLAUSE

The trial court sustained the demurrer for two reasons: (1) Arrowhead was 

required by state statute to comply with the withholding order; and (2) Arrowhead was 

immune by state statute from liability for compliance with the withholding order.

With regard to Arrowhead’s statutory obligation to comply, the trial court cited 

Revenue and Taxation Code section 18672, which, as relevant here, provides: “Any . . . 

person failing to withhold the amount due from any taxpayer and to transmit the same to 

the Franchise Tax Board after service of a notice . . . is liable for those amounts.” (See 

also Rev. & Tax. Code, § 18670, subd. (d) [“Any corporation or person failing to 

withhold the amounts due from any taxpayer and transmit them to the Franchise Tax 

Board after service of the notice shall be liable for those amounts.”].)

With regard to Arrowhead’s statutory immunity, it cited Revenue and Taxation 

Code section 18674, subdivision (a), which, as relevant here, provides: “Any . . . person 
5

paying to the Franchise Tax Board any amount required by it to be withheld is not liable 

therefor to the person from whom withheld . . . .”

Chatman’s brief is not a model of clarity. Nevertheless, fairly read, it adequately 

communicates the contention that the state statutory requirements that Arrowhead take 

his money and give it to the Board violate due process in this case, and thus are invalid 

under the supremacy clause. Thus, for example, he argues: “[A]ny Regulations, Statute 

or Laws that infringes or violates Constitutional Rights, [Arrowhead] were not obligated

to obey . . . .” Likewise, he argues: “[Arrowhead] presumed that no laws can bring 

restriction to their actions because of regulations 18670, 18670(d) of the [Revenue and 

Tax Code] they have to follow but to create this presumption does not mean to escape 

from constitutional restriction . . . .” “The court judgment of favor of [Arrowhead] . . . is 

erroneous because the court ha[s] placed [the Revenue and Tax Code] above and supreme 

to [f]ederal [l]aw . . . .”

He also contends that the taking of his money violated 42 United States Code 

section 407, subdivision (a) (section 407(a)), which, as relevant here, provides that social 

security benefits are not “subject to execution, levy, attachment, garnishment, or other 

legal process . . . .” In this context, too, he at least implicitly relies on supremacy: “The 

Superior Court Judge erred in his decision to favor [Arrowhead] without citing a specific 

statute that negate or nullifies Federal law 42 U.S.C. 407(a) . . . .”

Finally, he cites the supremacy clause expressly: “Without due process of the 

Law, anything in the constitution or Laws of any state to the contrary notwithstanding 
6

Article VI U.S. Constitution, Depriving the Appellant of Life, Liberty and Property by a 

piece of document unsigned, without Legal standing at all subjects [Arrowhead] to . . . 

serious damages.” (Italics added.)

Arrowhead recognizes that Chatman is relying on due process and on section 

407(a). It even acknowledges that “he may be attempting to argue that the California 

Revenue and Taxation Codes somehow contradict or violate the Constitution.” (Italics 

omitted.) However, it does not respond to this argument, other than to dismiss it as 

“irrelevant.” It asserts: “[I]f [Chatman] wanted to question the Constitutionality of the 

statutes . . . , then he should have litigated those issues with the [Board]. . . . 

[Arrowhead] is not the proper party for such challenges.” It cites no authority for this 

proposition.

Assuming that Arrowhead’s actions violate due process, the fact that they were 

compelled by a state statute cannot validate them.2 Quite the contrary — the fact that 

they were compelled is what makes Arrowhead a state actor and thus a proper party to 

this action. A private party’s actions can be attacked as unconstitutional if the state “has 

exercised coercive power or has provided such significant encouragement, either overt or 

 

2 Chatman argued this below. He quoted Miranda v. Arizona (1966) 384 

U.S. 436 to the effect that “[w]here rights secured by the Constitution are involved, there 

can be no rule making or legislation which would abrogate them.” (Id. at p. 491.) But 

the trial court seemed to miss the point. It responded, “[I]t appears that you are 

mischaracterizing certain case law, for example, the Miranda case, which has nothing to 

do with what we have here before us in this case.” “[Y]ou are throwing in civil and 

criminal.”
7

covert, that the choice must in law be deemed to be that of the State. [Citations.]” (Blum 

v. Yaretsky (1982) 457 U.S. 991, 1004; see, e.g., Adickes v. S.H. Kress & Co. (1970) 398 

U.S. 144, 171 [private party could be liable for unconstitutional racial discrimination 

where it acted pursuant to state-enforced statute or custom].) Thus, “where a state statute 

encourages or coerces a private party to act in a manner that deprives the plaintiff of a 

constitutional right . . . state action occurs.” (McKinney v. West End Voluntary 

Ambulance Assn. (E.D. Pa. 1992) 821 F.Supp. 1013, 1020; see, e.g., Duncan v. Peck (6th 

Cir. 1985) 752 F.2d 1135, 1141 [private parties who obtained default judgment and 

execution pursuant to state service-by-publication law, later found to violate due process, 

were state actors].) By contrast, a private party who merely takes advantage of a 

permissive procedure provided by a state statute does not, for that reason, become a state 

actor. (Estades-Negroni v. CPC Hosp. San Juan Capestrano (1st Cir. 2005) 412 F.3d 1, 

6.)

Likewise, assuming that Arrowhead’s actions violate section 407(a), no state 

statue can validate them. “‘ . . . A construction of [a] federal statute which permitted a 

state immunity defense to have controlling effect would transmute a basic guarantee into 

an illusory promise; and the supremacy clause of the Constitution insures that the proper 

construction may be enforced. [Citation.] . . .’ [Citation.]” (Martinez v. California

(1980) 444 U.S. 277, 284, fn. 8.)

Arrowhead argues that, under Hepner v. Franchise Tax Bd. (1997) 52 Cal.App.4th 

1475, 1481-1485, a taxpayer cannot claim exemptions, such as would be available to a 
8

judgment debtor, in response to a withholding order. However, section 407(a) is not a 

state-law “exemption.” Rather, it is an overriding provision of federal law. (Bennett v. 

Arkansas (1988) 485 U.S. 395, 397-398 [state law authorizing seizure of prisoner’s social 

security benefits to pay for prisons violated section 407(a) and supremacy clause].) The 

only disputable issue is whether a withholding order constitutes “legal process” within 

the meaning of section 407(a). (See generally Washington State Dept. of Social & Health 

Services v. Guardianship Estate of Keffeler (2003) 537 U.S. 371, 384-385.) Arrowhead 

did not demur on this ground and raises no such argument on appeal.

There may be some question as to whether Chatman can sue Arrowhead alone, 

without joining the Board. (See Code Civ. Proc., § 389.) There may even be some 

question as to whether the facts alleged by Chatman actually amount to a violation of due 

process or of section 407(a). Again, however, Arrowhead did not demur on any of these 

grounds and has not raised them on appeal.

In sum, then, we need not hold, and we do not hold, that Chatman’s complaint is 

unassailable. However, the particular state law grounds on which Arrowhead demurred, 

and on which the trial court sustained the demurrer, simply do not wash.

III

ALLEGATIONS REGARDING IMPROPER DEBT COLLECTION METHODS

Arrowhead also demurred to Chatman’s allegations concerning the Rosenthal Fair 

Debt Collection Practices Act (Rosenthal Act) on the ground that a consumer debt was 

not involved. It reiterates this argument on appeal.
9

The complaint alleged as part of a single cause of action that Arrowhead’s debt 

collection methods violated not only the state Rosenthal Act, but also the federal Fair 

Debt Collection Practices Act. “A general demurrer does not lie to only part of a cause of 

action.” (Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter 

Group 2015) ¶ 7:42.2.)

Arguably, if these allegations actually constituted two separate causes of action, 

we could disregard the fact that Chatman combined them into one. (See Lilienthal & 

Fowler v. Superior Court (1993) 12 Cal.App.4th 1848, 1854-1855.) However, they did 

not. They alleged the violation of a single primary right — to be free from unfair debt 

collection methods — regardless of the fact that they invoked both state and federal 

statutory law. (Cf. Johnson v. American Airlines, Inc. (1984) 157 Cal.App.3d 427, 432 [a 

cause of action for alleged discrimination is based on a single primary right, whether the 

cause of action relies on federal or state anti-discrimination law].) Arrowhead’s remedy 

would have been a motion to strike (Weil & Brown, Cal. Practice Guide: Civil Procedure 

Before Trial, supra, ¶ 7:42.4), but Arrowhead did not file one.

Accordingly, we need not decide whether Chatman adequately alleged a violation 

of the Rosenthal Act.
10

IV

DISPOSITION

The judgment is reversed. Chatman is awarded costs on appeal against 

Arrowhead.

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

RAMIREZ

P. J.

We concur:

McKINSTER

J.

MILLER

J.