Andre Law Firm P.A. wishes you and yours a healthy and prosperous 2022. This particular post is directed at my colleagues who may have acquired judgments or verdicts for their clients this year and have not yet been paid on them.
Threshold Question:
Have you perfected your judgment liens? In a previous post I discussed the importance and practical value of perfecting your client’s judgment lien in order to preserve lien priority as to the judgment debtor’s personal and real property. As a brief recap, to perfect a judgment lien in real property, one must record a certified copy of the final judgment or verdict in the County where the Debtor has real property. To perfect a lien in personal property one must file a judgment lien certificate with the Florida Department of State Division of Corporations.
Even if your practice does not have the desire or bandwidth to engage in active collection of a judgment, these steps are crucial in preserving lien priority. With the current economic times we are in, often judgment debtors have several creditors and preserving lien priority is crucial. In addition, aggressively pursuing collection on the judgment sets you apart from passive creditors and gets your client paid.
Review Your Files:
I urge my legal colleagues to review their files and make sure that the judgments you have worked so hard at acquiring for your clients are properly perfected. For 2022, I further urge you to review your files to see what can be done to get these unpaid judgments collected. My firm would love to help you do this. If you require a review on the potential collectability or assessment of your unpaid judgments, contact us.
Domesticating an International Judgment in Florida
In a prior post I wrote about the process for domesticating a foreign out-of-state judgment in Florida. What many do not know, is that Florida also provides for the recognition and domestication of international judgments.
South Florida especially, is an international melting pot. Foreign nationals from all over the world make South Florida their home, at least part of the time. Furthermore, it is common for wealthy nationals from countries with unstable political or economic conditions to keep valuable assets here in South Florida. Often these assets are most often in the form of real estate or business interests (often holding real estate).
Being that there are a high number of foreign individuals, it stands to reason that often time these individuals are also judgment debtors. Throughout the years, Andre Law Firm has been retained to domesticate and enforce international judgments against such individuals.
Fla. Stat. § 55.601 is the Uniform Out of Country Foreign Money Judgment Recognition Act. This statute governs, recognition of international judgments. As is the case with out-of-state foreign judgments, out-of-country foreign judgments must first be recognized, or domesticated, before being enforced. The burden is first on the judgment creditor to prove that the foreign judgment is valid, final, and conclusive where rendered, and that it grants or denies the recovery of a sum of money.
Similar to the process of domesticating out-of-state judgments, The Judgment Creditor must record a certified/exemplified copy of the judgment (along with certified translations if necessary) along with an affidavit from the judgment creditor attesting to the finality of the judgment and giving the contact information of the judgment debtor. The judgment is recorded simultaneously with the filing of the affidavit, and the clerk mails to the judgment debtor a Notice of Recording of out-of-country foreign judgment and shall make note of the mailing on the record. After service of the Notice of Recording of out-of-country foreign judgment, the judgment debtor shall have thirty days to respond in opposition to the domestication of the foreign judgment, and shall file a Notice of Objection specifying all grounds for nonrecognition or non-enforceability of the same.
The statute enumerates mandatory and discretionary grounds for non-recognition of the foreign judgment, which the debtor can raise during this 30-day objection period. To keep the post short, we will just direct you to Fla. Stat. § 55.605. If the judgment debtor fails to object in the 30 days the judgment will be recognized and subject to enforcement. If they do not object, enforcement is stayed until a hearing (usually evidentiary) is held on the objection.
Use an Experienced Law Firm
These matters can be hotly contested because often these types of judgment debtors have the means to employ attorneys, and often have already employed sophisticated asset-protection measures to protect their local assets. Hiring an experienced firm like Andre Law Firm P.A. is absolutely vital to enforcing such a judgment. Contact us today to discuss the domestication of international judgments, or any other creditor’s rights matter you have questions about.
In our last post, we discussed the process for attaching a Debtor’s interest in a closely held corporation. In that post we discussed the following example. Debtor, an individual, holds a 45% interest (non-controlling) in a corporation that rents luxury properties, and is cash flowing. Your Debtor’s other obvious assets (house and car) are exempt from levy. In that post we discussed what the procedure for attachment of his shares was. What if instead of a corporation the entity was a limited liability company? This poses a different issue, but the interest is attachable (in a way) and we will discuss.
Charging Order
A charging order is the primary way to collect upon the debtor’s business interest in a partnership, limited partnership or limited liability company (LLC). SeeFla. Stat. § 620.8504; Fla. Stat. § 620.1703;Fla. Stat. § 608.433(4)(a). Once a final judgment is entered, and the creditor has knowledge of the debtor’s business interest(s), the Creditor can motion the court for a charging order. The process is very straight forward.
Single Member Multi-Member Distinction
A charging order provides the creditor with only the rights of an assignee as to the Debtor’s interest. This allows the creditor to receive Debtor’s distributions but does not allow Creditor to assert control over the business through the Debtor’s interest. In the case of a partnership and a single-member LLC, however, the charging order creates a lien that Creditor can foreclose upon pursuant to a court-ordered foreclosure sale. See Fla. Stat. § 608.433(6); Fla. Stat. § 620.8504(2). A foreclosure sale via charging order is not available against an interest in a multi-member LLC or a limited partnership. Fla. Stat. § 620.1703(3).
The Supreme Court of Florida ruled in Olmstead v. Federal Trade Commission, 44 So.3d 76 (2010), that a judgment debtor could surrender all right and title in the debtor’s limited liability company to satisfy an outstanding judgment.” 44 So.3d at 78. The Court recognized that a “LLC is a type of corporate entity, and an ownership interest in an LLC is personal property that is reasonably understood to fall within the scope of corporate stock.” Id. at 80. The Court in Olmstead reasoned “the general rule is that where one has an ‘interest in property which he may alien or assign, that interest, whether legal or equitable, is liable for the payment of his debts.’” Id. at 80 (quoting Bradshaw v. Am. Advent Christian Home & Orphanage, 199 So. 329, 332 (1940)).
Conclusion
While the Charging Order Remedy in our example would not allow for Creditor to take over the Debtor’s 45% interest outright, the Creditor would serve a copy of the charging order on the LLC and the business would be forced to pay the distributions that would flow to the debtor to Creditor until the judgment is satisfied. The Charging Order is a great tool when you have a profitable limited liability company or partnership. If you have any questions about the Charging Order process or any collection questions contact Andre Law today.
In our practice, we find garnishing bank accounts to be the single most efficient way to collect on a judgment. While rarely does the amount garnished fully satisfy a judgment (though it happens from time to time), the garnishment’s ability to get the judgment debtor’s attention is indeed where its power lies.
What is a Garnishment?
A garnishment is slightly different from a levy. A garnishment is a collection tool which attaches to the contractual relationship between the judgment debtor and a third party. The relationships that are most often subject to garnishment are that of bank account holder (Debtor) and the bank, and the relationship between employer and employee (Debtor) for salary and wages. Basically, people or entities which owe money to the Debtor can be served with a writ of garnishment, and that money can bypass the debtor to be paid to the creditor directly (with the help of the Court and subject to certain exemptions from the debtor).
Garnishments are governed by Chapter 77 of the Florida Statutes. The Garnishment statute while straight forward, requires strict construction, and attention to detail, as there are many procedural pitfalls that may cause the garnishment to fail.
The basic process for a garnishment is as follows: The Creditor files a motion and has the clerk issue the writ for a small fee (in the case a continuing writ against salary and wages a judge will issue). The Creditor then serves the writ on the Garnishee. Soon thereafter, Creditor must serve a notice of service or notice of garnishment on the Judgment Debtor of the Writ of Garnishment (very important this is done in accordance with the statute or the garnishment will fail); The Debtor than has 20 days from service of the notice to respond and assert any exemption from garnishment. An exemption is a statutory excuse for why the debtor should not be garnished. If an exemption is raised and served by the Debtor, Creditor then has 14 days (or 8 days if the exemption was hand delivered to creditor’s lawyer) to respond to the exemption (by verified motion) or the writ is automatically dissolved by the clerk without any hearing (so beware). In addition, the Garnishee has 20 days from service of the writ to answer. When the Garnishee answers, Creditor must then serve another notice to the debtor attaching a copy of the Garnishee’s answer. Debtor then has 20 days to respond as to whether answer is correct/the garnishment is true. These deadlines overlap and addressing each deadline/response requires a skilled collection lawyer to navigate.
Locating Assets Subject to Garnishment
The beauty of garnishment is that its a streamlined way to enforce a judgment. However, if you do not know where the debtor banks, or where the debtor works (in the case of an individual), a garnishment is useless. In a prior post, we discussed the importance of post-judgment discovery and why it is vital to collecting a judgment. A skilled collection firm like Andre Law can not only help you find such assets, but it also can use tools like garnishment to help collect that judgment. Contact Andre Law today to discuss any questions you have about garnishment or collections.
In a prior post we posed the question of “My Debtor has a Valuable Asset How do I Collect?” In that post we focused on whether the levy of a particular asset was indeed worthwhile, and in that post, we used a 2020 Mercedes AMG GT Coupe (MSRP $116,000) as our example. For this post we are going to assume that Creditor wants to levy that 2020 Mercedes AMG GT Coupe. How exactly does one levy a vehicle in Florida?
Threshold Issue- Perfection
We have discussed in a prior journal post, that judgment lien perfection is the first collection step which should happen immediately after the judgment is entered. In short, a creditor must obtain a judgment lien certificate to perfect a judgment lien on personal property and to preserve judgment lien priority. A vehicle, being personal property (as opposed to real property), is one that would be affected by such a lien interest.
Look to your Sheriff’s Office
While the process for a vehicle levy is uniform throughout the state in large part, the particulars of any specific levy can vary fairly widely from county to county. This is were having a skilled collection law firm like ours is crucial. Each sheriff’s office has different cost deposits, and slightly different requirements for a levy, so it is important that your lawyer know what some of these issues are and how to deal with them.
That being said the basic procedure is as follows:
1) Perfect of your judgment lien
2) Locate the vehicle! (it is the responsibility of the creditor to locate the vehicle not the sheriff)
3) Delivery of Documents to Sheriff. The documents that every sheriff will need for a levy are an original Writ of Execution from the Clerk of Court; Certified copy of the final Judgment; An affidavit of Judgment lien Priority (F.S. 56.27), an Affidavit of outstanding liens, and Levy Instructions for the Sheriff. Every sheriff we ever dealt with also required title work showing that the car is indeed owned by the judgment debtor (this can be ordered from the state of Florida Department of Highway Safety and Motor Vehicles).
4) Publication of Levy by Sheriff.
5) Sale of vehicle by the Sheriff.
Closing
While the basic procedure is easily explainable, total process can be somewhat difficult/labor intensive. The devil is definitely in the details here. One thing we have not discussed here, is the “break order” which you must petition the court for. A break order allows you to access the property you seek to levy if it’s in an enclosure or locked area. It allows the creditor to take reasonable measures (e.g. a locksmith) to access such an enclosure (like a garage in this case). It should also be noted that some sheriff’s offices can make the whole process more tedious than others. Please keep in mind that the deposit required for levying a vehicle can vary wildly (from as low as $700 to as much as $5000) depending on the county you are dealing with. Contact Andre Law Firm today to discuss any collection related issues or questions you might have.
In a recent journal post, I explained how my firm achieved a full settlement when through the aid of discovery, we were able to determine that the judgment debtor closed its old company and started a new one, running the exact same type of business.
This is essentially a fraudulent transfer, but the character of the transfer is a little different from you typical Debtor-conveys-property-to-third-party situation. When a debtor forms a new entity, which is opened for the sake of defrauding a creditor and is essentially the old entity in a different name, you have what is called successor liability.
While there may be legitimate circumstances where a company is transferred or purchased without the purchasing company or transferring company assuming the liabilities of the selling/transferor company, often in our context, we find that these transactions are more often than not just per se fraudulent.
General Rule Regarding Successor Liability
In Bernard v. Kee Mfg. Co., Inc., 409 So.2d 1047 (Fla. 1982), Florida’s Supreme Court adopted the traditional corporate law rule and its exceptions by holding that the liabilities of the selling predecessor will not be imposed on the buying successor company “unless (1) the successor expressly or impliedly assumes obligations of the predecessor, (2) the transaction is a de facto merger, (3) the successor is a mere continuation of the predecessor, or (4) the transaction is a fraudulent effort to avoid liabilities of the predecessor.” 409 So.2d at 1049. This rule is meant to protect companies that sell their businesses in proper arm’s-length transactions. More often than not, entity judgment debtors who try to defraud creditors by opening a new business, start new entities in a much more haphazard fashion without any sort of formality.
De Facto Merger and Mere Continuation
An exception to the above rule in Bernard is the focus of this journal entry. Courts will find successor liability if there is either a De Facto Merger or a Mere Continuation regarding the business entities.
A de facto merger occurs where a business is absorbed by another without complying with the statutory requirements for a merger. Lab. Corp of America, 813 So.2d at 270. In finding de facto merger, a court can look to numerous factors reasonably indicative of commonality or of distinctiveness with the main focus being “whether there has been a change in form, but not in substance.” Id. Courts have identified a few of the more significant factors. “To find a de facto merger there must be continuity of the selling corporation evidenced by the same management, personnel, assets and physical location; a continuity of the stockholders, accomplished by paying for the acquired corporation with shares of stock; a dissolution of the selling corporation; and assumption of the liabilities.” Amjad Munim, M.D., P.A. v. Azar, 648 So.2d 145, 154 (Fla. 4th DCA 1994).
This exception exists when the successor business is merely a “continuation or reincarnation of the predecessor corporation under a different name,” such as when the “purchasing corporation is merely a ‘new hat’ for the seller, with the same or similar entity or ownership.” Bud Antle, Inc. v. Eastern Foods, Inc., 758 F.2d 1451, 1458 (11th Cir. 1985). Thus, some key factors in finding a continuation of the predecessor business include a “common identity of the officers, directors and stockholders in the selling and purchasing corporation.” Munim, 648 So.2d at 154. Florida’s Fourth District Court of Appeal also explained that “while having common attributes does not automatically impose liability on a successor corporation, merely repainting the sign on the door and using new letterhead certainly gives the appearance that the new corporation is simply a continuation of the predecessor corporation.” Lab. Corp. of America, 813 So.2d at 270.
This Mere Continuation theory is what we often find in our collection practice. The principals of the Judgment Debtor “merely repaint” the sign on the door. When this occurs, a creditor can avail itself of Fla. Stat. 726.105 and these factors can be “badges of fraud,” can guide the court in its analysis of whether to unwind the transaction or assess new liability on the transferee. Typically, our firm prosecutes these matters under the umbrella of Fla. Stat. 56.29 (check out our post on that). Our firm is very familiar with this collection situation and would be happy to assist you in such matters. Contact Andre Law Firm today.
Often an out-of-state creditor contacts our firm regarding going after a debtor who lives in Florida. What can a creditor do to obtain relief in Florida Courts? Here is a brief overview:
State Court Judgments
While counties in Florida do the domestication process slightly differently, the overall process is universal. The out of state creditor will require an “exemplified” of the original out of state final judgment. An exemplified copy is essentially a certified copy of a judgment that is also signed by a judge verifying the clerk’s certification. A judgment creditor’s affidavit is also required in support of the domestication. A local attorney should prepare a judgment creditor’s affidavit. The affidavit should offer details about the judgment and the contact information for creditor and debtor. These two items are filed with the local clerk’s office, along with a filing fee. While you can file the judgment in any county in Florida, it is best practice to file in the county in which the assets you would like to seize or take a lien against are located. Having an experienced collection firm like Andre Law is crucial in navigating any potential pitfalls.
The clerk will record the judgment and affidavit in the county official records and send a formal statutory notice to the judgment debtor. The judgment debtor then has 30 days after the notice is provided in which he or she can challenge the validity of the judgment. This will only happen in very rare instances. If the judgment debtor takes no action, the judgment will be considered final and will have the same effect as a judgment made in Florida. No collection activity can occur during this 30-day window, something that the client should be well aware of. After the 30-day window has lapsed, the creditor can use every Florida judicial collection tool at his or her disposal to collect on the judgment.
Federal Court Judgments
“Domesticating” a federal court final judgment rendered in an out-of-state federal court is a bit easier of a process and is governed by federal statute. The process is also referred to as “registering.” Typically, a certified copy of the original final judgment, a form called a “Clerk’s Certification of a Judgment to be Registered in Another District,” along with a small fee is all you technically need to register your judgment in Florida. Again, you should do this in the District Court division that services the area your judgment debtor’s assets can be found in (e.g. for a debtor residing in Boca Raton with assets there, it would be ideal to register in the Southern District of Florida West Palm Beach Division).
Once the judgment is registered, the federal rules of procedure allow the creditor to use either applicable federal procedure or state procedure/laws for the collection of the judgment. Andre Law, with its vast experience in this area, can guide creditors on what procedures or tools are available to best effectuate enforcement of the out-of-state judgment. Learn more about our foreign judgment domestication practice.
