SARA ROSENBERG, etc. v. U.S. BANK, N.A. ( 2023 )

Third District Court of Appeal
State of Florida
Opinion filed May 3, 2023.
Not final until disposition of timely filed motion for rehearing.
________________
No. 3D21-1065
Lower Tribunal No. 18-1348
________________
Sara Rosenberg, etc., et al.,
Appellants,
vs.
U. S. Bank, N. A.,
Appellee.
An Appeal from the Circuit Court for Miami-Dade County, Michael A.
Hanzman, Judge.
Genovese Joblove & Battista, P. A., and W. Barry Blum; Burns, P.A.,
and Thomas A. Burns (Tampa), for appellants.
Shutts & Bowen LLP, and Jason B. Gonzalez, John W. Bustard,
Patrick G. Brugger, and Peter H. Levitt, for appellee.
Before LOGUE, SCALES, and HENDON, JJ.
LOGUE, J.
Sara Rosenberg files this appeal in her capacities as Trustee of the
Douglas Rosenberg 2004 Trust and personal representative of the estate of
her husband, Maury Rosenberg. She challenges the trial court’s amended
summary final judgment awarding U.S. Bank, N.A. a money judgment
against the Trust in proceedings supplementary based on Mr. Rosenberg’s
fraudulent transfer of his asset, a money judgment, to the Trust. Finding no
error, we affirm.
BACKGROUND
This appeal involves the Bank’s long and winding efforts to collect
debts owed by Maury Rosenberg and Rosenberg’s resilient resistance. At
the heart of this dispute are three judgments – two obtained by the Bank
against Rosenberg and one obtained by Rosenberg against the Bank. As
one federal district court wryly observed, this “litigation has resembled a
tennis match, bouncing back and forth between various forums in multiple
jurisdictions.” U.S. Bank, Nat’l Ass’n v. Rosenberg, No. 12-723, 2015 WL
13620423, at *1 (E.D. Pa. Sept. 3, 2015). According to another court, this
and related matters have generated over forty-seven separate written
decisions across various levels of the federal courts, not counting the
litigation in two separate states’ courts. In re Nat'l Med. Imaging, LLC, No.
AP 14-250, 2023 WL 2246725, at *7 n.17 (Bankr. E.D. Pa. Feb. 27, 2023).
At this point, even a basic statement of the facts is far from basic.
2
The Bank obtained judgments in 2015 and 2016 from a federal district
court in Pennsylvania against Maury Rosenberg after he defaulted on a 2003
personal guarantee of loans to his company. See U.S. Bank, Nat'l Ass'n v.
Rosenberg, No. 12-723, 2015 WL 13620423, at *10; U.S. Bank, Nat'l Ass'n
v. Rosenberg, 581 B.R. 424, 427 (E.D. Pa. 2018), aff'd, 741 F. App’x 887 (3d
Cir. 2018). Before obtaining these judgments, the Bank unsuccessfully
attempted to force Rosenberg and his company into involuntary bankruptcy.
As a result, Rosenberg won a judgment in 2013 for damages and attorney’s
fees against the Bank. Rosenberg v. DVI Receivables XIV, LLC, 818 F.3d
1283, 1286 (11th Cir. 2016). The Bank then moved the court that had
entered its 2015 and 2016 judgments to set off the parties’ judgments. In a
decision that reinvigorated already overheated litigation, the court declined.
U.S. Bank, Nat’l Ass’n v. Rosenberg, 581 B.R. at 430.
Meanwhile, on the day after he obtained the 2013 Judgment,
Rosenberg transferred the judgment to the Trust, which he created to benefit
his son. Because setoff was denied, the Bank paid Rosenberg’s 2013
Judgment and attempted to execute on its 2015 and 2016 judgments. It
domesticated its judgments in Florida, where Rosenberg lived. Unable to
uncover Rosenberg’s assets, the Bank filed the underlying proceedings
supplementary. The Bank asserted that Rosenberg’s transfer of the 2013
3
Judgment to the Trust was a fraudulent transfer to an insider intended to
delay, hinder, or defraud creditors under subsections 56.29(3) and (6) of the
Florida Statutes. The trial court agreed and entered summary judgment for
the Bank, which we now review.
In its final summary judgment, the trial court determined that the Bank
established a prima facie case of fraud, which Rosenberg and the Trust
failed to rebut as required by subsection 56.29(3)(a). Its order states:
The transfer was to an insider, the Trust; the transfer was
made after Rosenberg had been sued by U.S. Bank; the
transfer was of substantially all of Rosenberg’s assets;
Rosenberg was insolvent or became insolvent shortly after
the transfer was made; and Rosenberg retained possession
or control of the transferred asset, the 2013 Rosenberg
Judgment, as well as the transferee, the Trust (and its
assets).
Regarding Rosenberg’s control of the transferred asset, the trial court
indicated that the record revealed no dispute of fact concerning the following:
[T]he Trust owns the apartment (located at the Four
Seasons in downtown Miami) where Rosenberg has lived
since 2004 or 2005; pays all of the expenses for the
apartment as well as Rosenberg’s other living expenses
(meals, etc.) since at least 2010; and owns the vehicle
(currently a Land Rover) that Rosenberg and his wife, Sara,
use whenever needed. Rosenberg then clearly continued to
enjoy use of the Trust’s assets, including the fruits of the
2013 Rosenberg Judgment, after transfer.
In addition, Rosenberg, through counsel, has admitted in
open court that, even though he was not a named trustee or
beneficiary, he nevertheless controlled the Trust, that no
one else could make any decisions for the Trust, and that
4
he could put money in and take money out of the Trust as
he wanted. Douglas Rosenberg, the grantor of the Trust and
Rosenberg’s son, confirmed this fact, having testified at the
deposition in May 2012 that his father, Maury Rosenberg,
controls the Trust’s cash.
It further ruled that the Bank was entitled to a money judgment in the amount
of the 2013 Judgment transferred to the Trust.
ANALYSIS
On appeal, Appellant argues that the trial court’s entry of judgment in
these circumstances violated Florida law governing proceedings
supplementary and federal bankruptcy law governing setoffs. We address
each argument in turn.
I. Florida’s Proceedings Supplementary to Execution.
A. Introduction.
Appellant contends the trial court erred when it set aside the transfer
of Rosenberg’s 2013 Judgment to the Trust as fraudulent and entered a
money judgment. This was error, Appellant maintains, because the
fraudulent transfer provision in subsection 56.29(3) of the Florida Statutes
(1) has a four-year statute of limitations different from the life-of-the-judgment
limit that applies to other proceedings supplementary; (2) does not allow for
a money judgment as a remedy for a fraudulent transfer; and (3) does not
5
apply to the fraudulent transfer of funds. We reject these arguments as
contrary to the plain text of section 56.29.
B. Subsection 56.29(3)’s statute of limitations extends for the
life of the judgment.
Appellant first argues that the trial court erred in entering a judgment
because the statute of limitations had run. Rosenberg transferred his 2013
Judgment to the Trust on March 15, 2013. The Bank commenced
proceedings supplementary to set aside the transfer as fraudulent under
subsection 56.29(3) in April 2018. Appellant argues that the filing of
proceedings supplementary was untimely because a claim of a fraudulent
transfer under subsection 56.29(3) is governed by the four-year statute of
limitations contained in the Uniform Fraudulent Transfer Act, Chapter 726,
Florida Statutes, not the life-of-the-judgment limitations that applies to other
proceedings supplementary.
In support, Appellant cites to McGregor v. Fowler White Burnett, P.A.,
332 So. 3d 481 (Fla. 4th DCA 2021). In McGregor, a judgment creditor
attempted to use proceedings supplementary to void a debtor’s transfer of
funds to a trust account where the moneys were ultimately spent to benefit
the debtor. Id. The Fourth District held that the fraudulent transfer remedy
under subsection 56.29(3) did not extend for the life of the judgment but only
6
for four years as applied to actions under the Uniform Fraudulent Transfer
Act, Chapter 726, Florida Statutes. Id. at 488-90.
At the outset, the Fourth District acknowledged that “[u]nder the pre-
2014 version of section 56.29, a judgment creditor could bring fraudulent
transfer claims in proceedings supplementary for the life of the judgment,
notwithstanding [Chapter 726’s] much shorter limitations period.” Id. at 489.
Indeed, that fraudulent transfer claims under proceedings supplementary
could traditionally be brought for the life of the judgment is beyond dispute.
Biel Reo, LLC v. Barefoot Cottages Dev. Co., LLC, 156 So. 3d 506, 507-08,
511 (Fla. 1st DCA 2014). See also Uoweit, LLC v. Fleming, 300 So. 3d 1201,
1203 (Fla. 4th DCA 2020) (“Historically, a judgment creditor could start
proceedings supplementary for the life of the judgment.”); Fla. R. Civ. P.
1.550(a) (“Executions on judgments shall issue during the life of the
judgment . . . . [E]xecution or other final process may be issued on special
order of the court at any time after judgment.”); § 56.021, Fla. Stat. (“When
issued, an execution is valid and effective during the life of the judgment,
order, or decree on which it is issued.”).
The Fourth District noted, however, that “[i]n 2014, for the first time, the
Florida legislature specifically incorporated the provisions of chapter 726 and
applicable rules of civil procedure in connection with claims concerning the
7
judgment debtor’s assets brought under chapter 726.” McGregor, 332 So.
3d at 489. In this manner, the Fourth District concluded, subsection 56.29(3)
lost its longer statute of limitations and became subject to Chapter 726’s
shorter statute of limitations. Id.
Any other interpretation, the Fourth District reasoned, would “lead to
an absurd result whereby section 56.29 would simultaneously provide for
one cause of action for money judgments for fraudulent transfers subject to
[Chapter 726’s] statute of repose (under 56.29(9)) and an identical cause of
action for money judgments for fraudulent transfers that is not subject to
[Chapter 726’s] statute of repose (under a combination of 56.29(2), 56.29(3),
and 56.29(6)).” Id. at 492 (emphasis added).
We respectfully disagree with this argument for two reasons. First, in
its current form, even after the 2014 and 2016 amendments, the Legislature
clearly maintained the fraudulent transfer remedy under subsection 56.29(3)
as separate and distinct from the fraudulent transfer remedy under Chapter
726.
The fraudulent transfer remedy under subsection 56.29(3) maintains
the characteristics unique to proceedings supplementary. It is available only
to the limited class of creditors who hold valid judgments. § 56.29(3)(a), Fla.
Stat. It is commenced by filing a motion and affidavit in the case where the
8
judgment was entered. § 56.29(1), Fla. Stat. It is not a new case but simply
a continuation of the case in which the judgment was entered. Third parties
are brought into the subsection 56.29(3) fraudulent transfer proceedings by
simply serving a “Notice to Appear” like in other proceedings supplementary.
§ 56.29(2) & (3), Fla. Stat. (both using the term “Notice to Appear”). 1 The
third party must respond, not with an answer, but with “an affidavit . . . stating
why the property, debt, or other obligation should not be applied to satisfy
the judgment.” § 56.29(2), Fla. Stat. Subsection 56.29(3) also shifts the
burden of proof regarding transfers to the responding party in a manner that
has no counterpart in Chapter 726. § 56.29(3)(a), Fla. Stat. (“the judgment
debtor has the burden of proof to establish that such transfer or gift was not
made to delay, hinder, or defraud creditors”).
In contrast, the fraudulent transfer remedy under Chapter 726, first
enacted in 1987, has none of the characteristics unique to proceedings
supplementary. Chapter 726 is broadly available to all creditors, including
those who have not reduced their claim to a judgment. Thus, it is available
1
The Legislature expressly added the term “Notice to Appear” in subsection
56.29(3)(b) in the 2016 Amendments. Ch. 2016-33 §18, Laws of Florida;
compare § 56.29(3)(a) & (b) (2022), with § 56.29(3)(a) & (b) (2014). This
amendment indicates that “Notices to Appear” continued as the means to
add third parties to the 56.29(3) proceedings even after the recodification
and reorganization accomplished in the 2014 and 2016 amendments.
9
to a greater number of creditors than subsection 56.29(3). Also, that larger
class consists mainly of creditors with unproven claims who have a very
different status than the creditors with valid judgments at issue in subsection
56.29(3). See generally Chapter 87-79, Laws of Florida; §§ 726.102,
726.105, Fla Stat.; Friedman v. Heart Inst. of Port St. Lucie, Inc., 863 So. 2d
189, 193 (Fla. 2003). It is commenced by filing a complaint subject to the
rules of civil procedure. § 726.108, Fla. Stat. See also § 56.29(9), Fla. Stat.
It requires the defendant file pleadings as required by the rules of civil
procedure. § 726.108, Fla. Stat.. See also § 56.29(9), Fla. Stat. It leaves the
burden of proof squarely on the creditor filing the action. See generally
Chapter 726, Fla. Stat. Thus, a review of the specific features of the two
fraudulent transfer remedies as they exist after the 2014 and 2016
amendments confirms they are not “identical.”
In fact, the fraudulent transfer remedy in subsection 56.29(3)
maintains, in large part, the same form it has had since at least 1949. See
§§ 55.56 & 55.57, Fla. Stat. (1949) (earlier versions with virtually identical
language). The 2014 and 2016 amendments did not substantially change
any of the text of subsection 56.29(3). 2 In this form, the fraudulent remedy
2
The 2014 and 2016 amendments to subsection 56.29(3) merely
renumbered it, replaced the term “defendant” with “judgment creditor,” and
added the term “Notice to Appear” to subsection 56.29(3)(b). See Ch. 2014-
10
provision of subsection 56.29(3) has served as the most utilized provision of
proceedings supplementary. 3 The Legislature’s reenactment of the language
of subsection 56.29(3) in its long-established form cannot be reconciled with
the claim that the remedy contained in this language is “identical” to the
remedy provided by Chapter 726.
In contending the two remedies are identical, the Fourth District relies
upon subsection 56.29(9)’s reference to Chapter 726. McGregor, 332 So. 3d
at 489. Subsection 56.29(9) provides, “[t]he court [hearing proceedings
supplementary] may entertain claims . . . brought under chapter 726 . . .
Claims under chapter 726 . . . shall be initiated by a supplemental complaint
. . . subject to chapter 726 and the rules of civil procedure.” This language
simply authorizes the judge hearing proceedings supplementary to also hear
related actions brought under Chapter 726. This language is merely
procedural, as the Legislature itself indicated. 4 It does not merge the
183 §17, Laws of Florida; Ch. 2016-33 §18, Laws of Florida; compare §
56.29(3)(a) & (b) (2022), § 56.29(3)(a) & (b) (2016), with § 56.29(6)(a) & (b)
(2012).
3
“[P]roceedings supplementary that involve fraudulent transfers … is when
§ 56.29 is most often used.” Biel Reo, LLC, 156 So. 3d at 510 (citing
Padovano, Florida Civil Practice § 13:6).
4
Although unnecessary to our analysis, we note the Legislature expressly
declared the 2014 amendments “are remedial in nature, [and] are intended
to clarify existing law.” Chapter 2014, Laws of Florida, section 18 (June 20,
11
fraudulent transfer remedy in subsection 56.29(3) with the remedy in Chapter
726. It maintains the unique characteristics that distinguish one from the
other. It does not make the two remedies “identical.”
While it might be “absurd” to have different statutes of limitations for an
“identical cause of action for money judgments for fraudulent transfers,” it is
not absurd to have different statutes of limitations for different remedies.
Certainly, there is nothing absurd in allowing judgment creditors in
proceedings supplementary to have the benefit of a statute of limitations that
extends for the life of the judgment. That has always been the law in Florida.
See, e.g., Young v. McKenzie, 46 So. 2d 184, 185 (Fla. 1950) (holding the
statute of limitations for proceedings supplementary to execution should
extend throughout “the period of efficacy of an execution”); Biel Reo, LLC,
156 So. 3d at 507-08, 511; Uoweit, 300 So. 3d at 1203; Fla. R. Civ. P.
1.550(a); § 56.021, Fla. Stat.
In sum, nothing in the text supports Appellant’s assertation that
subsection 56.29(3)’s fraudulent transfer remedy is “identical” to Chapter
2014). The Senate Judiciary Committee’s bill analysis of the 2016
amendments stated, “these changes are procedural and do not represent
substantive changes to any part of chapter 56, F.S.” Judiciary Committee,
Bill Analysis CS/SB 1042 (Fla. Senate Jan. 19, 2016). Thus, even in the
wobbly area of legislative history, we find no support for Appellant’s
argument that the Legislature intended the 2014 and 2016 amendments to
result in major changes to existing law.
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726’s fraudulent transfer remedy. The fraudulent transfer remedy in
proceedings supplementary therefore extends for the life of the judgment, as
the Legislature intended.
C. The available remedies for a fraudulent transfer under
subsections 56.29(3) and 56.29(6) include a money
judgment.
Appellant next argues that the trial court erred in entering a money
judgment in proceedings supplementary as a remedy for a fraudulent
transfer under subsection 56.29(3). We reject this argument because the
plain text of section 56.29 contradicts it. Subsection 56.29(6) expressly
authorizes money judgments as remedies in proceedings supplementary in
general, including claims for fraudulent transfers.
In support, Appellant again cites the Fourth District’s opinion in
McGregor, which reasoned that the “power to enter money judgments under
subsection (6) does not extend to relief sought under subsection (3)(b)”
because “subsection (3)(b) specifically limits the available relief to turnover
of the fraudulently transferred personal property to the sheriff. This is
consistent with the fact that subsection (3)(b) provides a narrow exception to
the requirements of subsection (9) that fraudulent transfer claims be pursued
by complaint, in which case money judgments may be obtained consistent
with chapter 726.” McGregor, 332 So. 3d at 490 (quoting In re British Am.
13
Ins. Co. Ltd., 607 B.R. 753, 757 n.1 (Bankr. S.D. Fla. 2019) (emphasis
removed)). The Fourth District concluded this result best reconciles “the text
of section 56.29 taken as a whole.” Id.We respectfully disagree based on two textual arguments and long-
standing case law. Subsection 56.29(6) authorizes the court in proceedings
supplementary to enter money judgments against “any person to whom a
Notice to Appear has been directed . . . whether such person has retained
the property . . .” § 56.29(6), Fla. Stat. (emphasis added). At the same time,
subsection 56.29(3) also expressly references “Notices to Appear” as the
means to bring into the proceeding the person to whom the debtor
fraudulently transferred the asset. § 56.29(3)(b), Fla. Stat. It follows that
subsection 56.29(6)’s authority to issue money judgments against “any
person to whom a Notice to Appear has been directed” includes persons to
whom a “Notice to Appear” was directed under subsection 56.29(3). In fact,
the Legislature added the term “Notice to Appear” in subsection 56.29(6)’s
grant of authority to issue money judgments at the same time it added the
reference to a “Notice to Appear” in subsection 56.29(3)’s fraudulent transfer
provision. Ch. 2016-33 §18, Laws of Florida. This text cannot be reconciled
with Appellant’s argument.
14
Moreover, subsection 56.29(6) authorizes issuance of a money
judgment for the purposes of “this section.” Throughout section 56.29, the
Legislature carefully used the term “section” when referring to the whole of
56.29 and “subsection” when referring to a specific subsection. See §
56.29(6), Fla. Stat. (using at different points for different meanings the terms
“section” and “this subsection”); § 56.29(2) & (6), Fla. Stat. (referring to
“subsection 1”). Given the Legislature’s careful distinction between these
terms, when the Legislature authorized money judgments “to carry out the
purpose of this section,” it meant the entire statute, not just select
subsections. McGregor’s interpretation essentially deletes the word “section”
and replaces it with the words “subsection (2) but not subsection (3).” An
interpretation that requires this level of rewriting is not persuasive or
permissible. Hayes v. State, 750 So. 2d 1, 4 (Fla. 1999) (“[Courts] are not at
liberty to add words to statutes that were not placed there by the
Legislature.”).
In fact, even before the addition of express language authorizing
money judgments, the general provision of the proceedings supplementary
statute authorizing the court “to enter any orders . . . required to carry out the
purpose of this section” was interpreted to allow a money judgment as a
15
remedy for fraudulent transfers. 5 We do not see how the addition of express
references to money judgments can be read as making them less available
than they were before the express references were added. To the contrary,
under basic principles of statutory construction, the addition of express
authorizations for money judgments is best read as a ratification of these
interpretations. Fla. Highway Patrol v. Jackson, 288 So. 3d 1179, 1183 (Fla.
2020) (“‘[W]hen judicial interpretations have settled the meaning of an
existing statutory provision, repetition of the same language in a new statute
indicates, as a general matter, the intent to incorporate its judicial
5
See, e.g., Biel Reo, LLC, 156 So. 3d at 509 n.2 (recognizing a money
judgment could be entered to remedy a fraudulent transfer); Pollizzi v.
Paulshock, 52 So. 3d 786, 789 (Fla. 5th DCA 2010) (“The trial court properly
concluded that, under the facts of this case, such liberal construction enabled
it to enter a money judgment against DAA's shareholders/corporate officers
who were found to have improperly transferred monies from the corporation's
accounts to themselves.”); Mejia v. Ruiz, 985 So. 2d 1109, 1114 (Fla. 3d
DCA 2008) (recognizing a money judgment could be entered to remedy a
fraudulent transfer); Allied Indus. Int'l, Inc. v. AGFA-Gevaert, Inc., 688 F.
Supp. 1516, 1521 (S.D. Fla. 1988), aff'd sub nom. Allied Indus. Int’l, Inc. v.
AGFA-Gevaert, 900 F.2d 264 (11th Cir. 1990), and aff'd sub nom. Allied
Indus. Int’l Inc. v. AGFA-Gevaert, 900 F.2d 264 (11th Cir. 1990) (holding an
impleaded defendant to be liable in the amount of $30,000.00 when she
failed to meet her burden under 56.29(3) requiring to a transferee who is “on
confidential terms with the defendant” to establish that a transfer of the
defendant's property was not made to delay, hinder, or defraud creditors.”).
Note these cases involved versions of subsection 56.29(3) that were largely
identical to its current version except they were numbered subsection
56.29(6). Compare 56.29(3)(a) & (b) (2022), with 56.29(6)(a) & (b) (2012).
16
interpretations as well.’” (quoting Rowe v. N.H. Motor Transp. Ass'n, 552
U.S. 364, 370 (2008))).
Finally, Appellant’s interpretation is particularly unpersuasive because
the Legislature’s purpose when enacting proceedings supplementary has
always been understood to give the circuit court the authority to grant “the
most complete relief possible in satisfying [a creditor's] judgment.” Riley v.
Fatt, 47 So. 2d 769, 772 (Fla.1950). See also State ex rel. Phoenix Tax Title
Corp. v. Viney, 163 So. 57, 60 (Fla. 1935). Appellant’s interpretation turns
this understanding on its head by depriving the circuit court of one of the
most useful tools to remedy a fraudulent transfer. We therefore conclude that
money judgments are a remedy for a fraudulent transfer under subsections
56.29(3) and 56.29(6).
D. 56.29(3) reaches choses in action and funds.
Appellant next argues that the trial court erred in entering summary
judgment because subsection 56.29(3) is not available to set aside the
fraudulent transfers of funds. This argument fails from the outset because
the asset fraudulently transferred, Rosenberg’s 2013 Judgment, was a
chose in action. “By the great weight of authority a judgment is regarded as
a cause of action or a chose in action.” Crane v. Nuta, 26 So. 2d 670, 671
17
(Fla. 1946). 6 “A chose in action belonging to the judgment debtor has
generally been considered a property right reachable by a judgment creditor
in proceedings supplementary.” Donan v. Dolce Vita Sa, Inc., 992 So. 2d
859, 860 (Fla. 4th DCA 2008); Myd Marine Distrib., Inc. v. Int'l Paint Ltd., 201
So. 3d 843, 845 (Fla. 4th DCA 2016) (“A ‘chose in action’ is ‘property’ within
the meaning of section 56.29(5) [since renumbered to 56.29(6)]”); Gen.
Guar. Ins. Co. of Fla. v. DaCosta, 190 So. 2d 211, 213–14 (Fla. 3d DCA
1966) (“[S]upplementary proceedings are ordinarily available to reach
‘choses in action.’”).
Appellant’s argument regarding funds is also contrary to the plain text
of subsection 56.29(3) and a long line of cases interpreting it. Appellant
argues that subsection 56.29(3) cannot be used to reach funds because it
uses the terms “personal property” and “levy,” and it references the court
“direct[ing] the sheriff to take the property to satisfy the execution.” In
support, she again cites the Fourth District’s decision in McGregor where the
court held, without extended discussion, that the types of property reachable
6
See, e.g., Spa Creek Servs., LLC v. S.W. Cole, Inc., 239 So. 3d 730, 732
n.1 (Fla. 5th DCA 2017) (“A judgment also constitutes a cause of action or
chose in action.”); Marsh v. Patchett, 788 So. 2d 353, 355 (Fla. 3d DCA
2001) (“Under Florida law, a judgment is a chose in action.”); Griffin v. Zinn,
318 So. 2d 151, 152 (Fla. 2d DCA 1975) (referring to an Ohio judgment as
“a chose in action”).
18
under subsection 56.29(3) do not include funds. McGregor, 332 So. 3d at
487-88. We again respectfully disagree.
Subsection 56.29(3) refers to “personal property” subject to execution
and levy. The term “personal property” is most often understood as the
opposite of “real property.” Bryan A. Garner, Garner’s Dictionary of Legal
Usage 671 (3d ed. 2011). Broadly defined, “personal property” includes both
tangible and intangible personal property. Id. Intangible personal property
normally is understood to include funds. See, e.g., § 192.001(11)(b), Fla.
Stat. (2017) (defining “intangible personal property” to include “money”).7
Moreover, fraudulently transferred personal property in proceedings
supplementary has always been interpreted to encompass funds. For
example, Biel Reo, LLC, 156 So. 3d at 507, was a section 56.29 fraudulent
7
§ 56.09, Fla. Stat. (allowing execution on a corporate judgment debtor’s
“current money”); Philip J. Padovano, Trawick’s Florida Practice and
Procedure § 28:1 (2022 ed.) (an issued execution “can be levied on lands,
tenements, chattels, goods, equities of redemption in land, corporate stock,
equitable interests under security agreements, and money.”) (emphasis
added); Hillsborough Cnty. v. Dickenson, 169 So. 734, 737 (Fla. 1935) (“The
rule is general that a debtor's interest in a trust fund created either by himself
or another may be reached to satisfy a judgment against him by a creditor's
bill.”); Monroe Cnty. v. McCormick, 752 So. 2d 1239, 1240-41 (Fla. 3d DCA
2000) (holding that attorney’s fees owed to a party were “personal property”
and therefore subject to a code enforcement lien).
19
transfer case in which the judgment debtors “transferred millions of dollars
into newly established irrevocable family trusts” on which the judgment
creditor sought to execute. Similarly, Pollizzi, 52 So. 3d at 788, was a section
56.29 fraudulent transfer case where it was alleged that “the third-party
defendants ‘fraudulently and otherwise improperly transferred, among other
things, approximately $150,000.00 in funds from DAA's operating account’
to themselves and to entities they owned and controlled.”
Further, Mejia, 985 So. 2d at 1111, was a section 56.29 fraudulent
transfer case in which it was alleged that the judgment debtor corporation
sold the corporation’s assets and distributed the proceeds to its two
shareholders, leaving the debtor corporation insolvent. See also Crawford v.
U.S. Fid. & Guar. Co., 139 So. 2d 500, 503 (Fla. 1st DCA 1962) (in
proceedings supplementary, trial court “was well within its proper sphere in
ordering Crawford Construction Company to file its statement under oath
showing what funds said corporation owed James F. Crawford, individually,
and subjecting same to levy by the judgment creditor.”). 8 In these cases, the
8
Note these cases involved versions of 56.29(3) that were virtually identical
to its current version except they were codified under different subsections
and sections. Compare §56.29(3)(a) & (b) (2022), with §56.29(6) (a) & (b)
(2012), and with §§ 55.56 & 55.57, Fla. Stat. (1949).
As discussed earlier, the 2014 and 2016 amendments to subsection 56.29(3)
did not substantively change the text of what is now codified at subsection
20
courts recognized that a judgment creditor could use subsection 56.29(3) or
its earlier versions to set aside a fraudulent transfer of funds.
We see no justification for breaking with such longstanding precedent
and black letter law to adopt Appellant’s restrictive interpretation of “personal
property.” Such a limiting definition is particularly unwarranted because, as
mentioned before, the Legislature’s purpose in enacting proceedings
supplementary to execution has always been understood to provide the
circuit court the authority to grant “the most complete relief possible in
satisfying [a creditor's] judgment.” Riley, 47 So. 2d at 772.
II. The denial of setoff is not a legal bar to the Bank executing on
its judgment.
After domesticating its judgments, the Bank had a well-recognized right
under Florida law to execute on any of Rosenberg’s non-exempt assets.
Chapter 56, Fla. Stat. Appellant argues Rosenberg’s 2013 Judgment is
“exempt” from execution by the Bank under federal bankruptcy policy. U.S.
Bank, Nat’l Ass’n, 581 B.R. at 430. The federal bankruptcy policy that
allowed the federal district court to deny the Bank’s motion to set off its
56.29(3). See note 2, supra. None of these amendments abrogate the
holdings of the cases interpreting the language of subsection 56.29(3) as
authorizing the setting aside of the fraudulent transfer of funds. See Jackson,
288 So. 3d at 1182–83 (stating that the Legislature’s re-enactment of
language interpreted by the courts is generally understood to reflect the
Legislature’s intent to adopt those judicial interpretations).
21
judgments 9 against Rosenberg’s 2013 Judgment, 10 Appellant argues, should
be extended or expanded to a rule of law that binds a judge both to deny a
setoff and to prohibit future execution by the Bank against the proceeds of
that type of judgment. We are not persuaded by this argument. It glosses
over the difference between setoff and execution, two very different methods
to collect a judgment. Also, if accepted, it would deprive bankruptcy courts
of the flexibility innate in discretion, discretion being the basis to deny setoffs
in the first place.
For obvious reasons, setoffs are highly favored in the law and highly
valued by creditors. They reflect the commonsense idea that when entities
owe each other money, they should apply their mutual debts against each
other to avoid “the absurdity of making A pay B when B owes A.” Studley v.
Boylston Nat. Bank of Bos., 229 U.S. 523, 528 (1913). Congress expressly
directed that the bankruptcy code be interpreted to not interfere with state
law rights to setoff, save for certain exceptions. 11 U.S.C. § 553. At issue
here is a court-created addition to Congress’ list of circumstances where a
bankruptcy court could interfere with a setoff.
9
The judgments for Rosenberg’s breach of his loan guarantees.
10
The judgment for damages for the Bank’s wrongful petition for involuntary
bankruptcy.
22
The bankruptcy code allows creditors to force failing debtors into
involuntary bankruptcy. 11 U.S.C. § 303. If such an action is unsuccessful,
however, the bankruptcy code permits the debtor to seek damages and
attorney’s fees. Id. If the debtor is awarded such damages, some cases have
held that a bankruptcy court has discretion to deny the creditor that initiated
the involuntary bankruptcy a setoff. U.S. Bank, Nat'l Ass'n v. Rosenberg, 741
F. App'x 887, 890 (3d Cir. 2018). The bankruptcy court’s power to interfere
with a setoff in this circumstance serves as a sanction to discourage creditors
from prematurely forcing debtors into an involuntary bankruptcy, which can
damage debtors and other creditors. Id. 11
On this basis, the federal district court that issued the Bank’s 2015 and
2016 judgments denied the Bank’s request to set off its judgments against
Rosenberg’s 2013 Judgment. Appellant argues that the prior decision to
deny setoff also, by implication, made Rosenberg’s 2013 Judgment exempt
from execution.
11
The law in this area is not entirely settled. In re Better Care, Ltd., 97 B.R.
405 (Bankr. N.D. Ill. 1989) (allowing a creditor to set off its judgment against
a judgment the debtor had obtained due to a petition for involuntary
bankruptcy). See generally Law. v. Siegel, 571 U.S. 415, 421 (2014)
(reversing a sanction created by a bankruptcy court outside those expressly
authorized by Congress because “[c]ourts' inherent sanctioning powers are
likewise subordinate to valid statutory directives and prohibitions [contained
in the bankruptcy code].”).
23
Appellant first argues this point as a matter of res judicata or collateral
estoppel. The problem with this argument is that the federal district court’s
ruling arose only in the context of the Bank’s motion for a setoff. The decision
is limited to denying the setoff. As framed by the decision itself, the question
of whether to prohibit the Bank from executing on a judgment in a
subsequent state court proceeding occurring years later was not before the
court. U.S. Bank, Nat'l Ass'n v. Rosenberg, 581 B.R. 424. The same is true
of the circuit court opinion upholding the district court’s decision. U.S. Bank,
Nat'l Ass'n v. Rosenberg, 741 F. App'x 887. We therefore reject Appellant’s
collateral estoppel and res judicata arguments.
Nevertheless, citing the Supremacy Clause, U.S. Const. art. VI, cl. 2,
Appellant next argues that the equitable principles that allow courts to deny
setoffs in these circumstances also require courts to prohibit a creditor from
paying one judgment and executing on the other. Appellant maintains in her
Initial Brief that, “federal bankruptcy policy forbids [the creditor] from
offsetting or executing against proceeds from a § 303(i) judgment paid to the
debtor.” This is so, Appellant argues, because setoff and execution are
essentially identical.
In support, Appellant cites In re National Medical Imaging, LLC, 644
B.R. 94 (Bankr. E.D. Pa. 2022), an interim decision in a pending matter that
24
was decided in an unusual posture. 12 The bankruptcy court in that case
sought to explain a prior order, which expressly denied a setoff and
prohibited execution in facts similar but not identical to those here, by
reasoning that the creditor’s attempt to execute in those circumstances was
“the functional equivalent of a setoff attempt” and was “nearly the exact same
kind of transaction.” Id. at 125.
We must respectfully take exception to this reasoning. To begin with,
Appellant fails to direct us to, and we cannot find, any other court that has
held that setoff is identical to execution in this context or any other context.
Instead, it is generally recognized that “[a]ttachment and execution are
fundamentally different from setoff.” Banco Cent. de Reserva del Peru v.
Riggs Nat. Bank of Washington, D.C., 919 F. Supp. 13, 17 (D.D.C. 1994).
12
Appellant cites National Medical Imaging for its discussion equating
setoffs and execution discussed infra. The National Medical Imaging order
was issued in a proceeding involving a creditor’s involuntary petition for
bankruptcy filed in 2008 and dismissed in 2009. The issue being decided in
the 2022 order concerned the debtor’s claims for attorney’s fees for
successfully obtaining the 2009 dismissal. In re Nat’l Med. Imaging, LLC, 644
B.R. at 103.
In particular, the legal matter before the court was the creditor’s motion
for partial summary judgment to bar some of the debtor’s pending attorney’s
fees claims relating to the 2009 dismissal. Id. The ruling of National Medical
Imaging was to deny the creditor’s motion because disputed issues of
material fact precluded summary judgment. Id. at 127. National Medical
Imaging’s discussion regarding setoffs and execution relied upon by the
Appellant does not appear necessary to that ruling.
25
Setoff and execution are just two of many distinct and different methods to
collect debts. See, e.g., 31 U.S.C. § 3711 (listing setoff and execution among
many of the different methods for the federal government to collect debts).
Suggesting that the two methods are identical glosses over important
differences. Setoff sounds in equity, execution in law. Banco Cent. de
Reserva del Peru, 919 F. Supp. at 17. The grounds for granting each are
different. 13 As this case illustrates, they usually arise at different ends of the
collection process. But the vital differences become apparent when one
considers them from the viewpoints of the creditor and debtor, which are the
relevant viewpoints in debt collection.
A setoff offers the creditor and confronts the debtor with quick, easy,
and certain satisfaction of the creditor’s judgment. In contrast, the remedy of
paying one judgment and executing on the other often launches a hapless
creditor into a lengthy and frequently futile chase. Because of the difference,
creditors, who already have the right to execute on a judgment, expend
considerable time and resources to obtain setoffs; while debtors, who are
13
A judicial setoff in bankruptcy “is permissive, not mandatory; its application
rests in the discretion of the court[.]” Newbery Corp. v. Fireman's Fund Ins.
Co., 95 F.3d 1392, 1399 (9th Cir. 1996). In contrast, execution on a judgment
is normally a matter of right. See generally Chapter 56, Fla. Stat.; Ratner v.
Bernabo, 495 So. 2d 839, 840 (Fla. 3d DCA 1986).
26
already exposed to execution, expend considerable time and resources to
prevent setoffs. See, e.g., U.S. Bank, Nat’l Ass’n, 581 B.R. at 430.
To understand these differences, one need look no further than this
case. If setoff had been granted, this dispute would have been over half a
decade ago. Instead, it is still going strong. As this record shows, neither
from the perspective of the creditor or debtor can these two very different
remedies be equated.
Finally, the federal district court here denied the Bank the right to a
setoff as an exercise of discretion for the purpose of deterring the filing of
premature petitions for involuntary bankruptcy. Particularly in the context of
levels of discretionary sanctions in creditor and debtor relations, it appears
to us that the denial of only a setoff is not the functional equivalent of denying
both a setoff and execution. Denial of the setoff serves as a sanction
because it bars the creditor from the most efficient and secure remedy
although it leaves the creditor an alternative remedy less efficient and less
certain of outcome. Denial of both is a higher level of sanction than just
denying a setoff.
One can easily imagine circumstances where a court in equity
weighing different sanctions could decide it was an adequate sanction to
deny the creditor the more favorable method of setoff without considering
27
whether or intending to prohibit the creditor from using less favorable
methods such as execution, which is what we believe happened here. If
adopted, Appellant’s argument that “federal bankruptcy policy forbids [the
creditor] from offsetting or executing” would deprive the bankruptcy courts of
the very discretion which is the basis of the bankruptcy courts’ authority to
depart from Congress’ section 553 directive to allow setoffs in the first place.
For these reasons, we reject Appellant’s argument that the federal
bankruptcy policy at issue should be extended or expanded from an
allowance of judicial discretion to deny the type of setoff at issue here to a
rule of law that binds a judge both to deny a setoff and to prohibit future
execution by the creditor against the proceeds of the type of judgment at
issue here. The discretion to deny a setoff includes the discretion to grant a
setoff. It also includes the flexibility to deny a setoff and allow execution, as
occurred here.
Affirmed.
28