BIEL REO, LLC v. Barefoot Cottages Development etc. , 156 So. 3d 506 ( 2014 )

IN THE DISTRICT COURT OF APPEAL
FIRST DISTRICT, STATE OF FLORIDA
BIEL REO, LLC, NOT FINAL UNTIL TIME EXPIRES TO
FILE MOTION FOR REHEARING AND
Appellant, DISPOSITION THEREOF IF FILED
v. CASE NO. 1D14-46
BAREFOOT COTTAGES
DEVELOPMENT COMPANY
LLC, A FLORIDA LIMITED
LIABILITY COMPANY,
CURTIS H. GWIN AND H. RAY
SHOULTS, WHITNEY
NATIONAL BANK, ET AL.,
Appellees.
_____________________________/
Opinion filed December 12, 2014.
An appeal from the Circuit Court for Okaloosa County.
John T. Brown, Judge.
Craig S. Barnett of Greenberg Traurig P.A., Fort Lauderdale, for Appellant.
Louis K. Rosenbloum, Pensacola, James L. Dye, and David P. Healy, Tallahassee,
H. Bart Fleet, and Whitney Leigh Smith, Shalimar, for Appellees.
OSTERHAUS, J.
This case involves proceedings supplementary to execution, section 56.29,
Florida Statutes, which for almost 100 years has afforded an efficient and direct way
for judgment holders in Florida to identify a debtor’s assets and satisfy an execution.
Curtis H. Gwin and H. Ray Shoults guaranteed a commercial loan from a bank
to their development company for a project near Port St. Joe. Then within weeks of
the company defaulting on the loan in 2008, Gwin and Shoults transferred millions
of dollars into newly established irrevocable family trusts (“Family Trusts”). The
Family Trusts named Gwin and Shoults as beneficiaries as co-tenants by the entirety
with their wives. And their wives were named as the trustees. Later, after the bank
obtained a $4.5 million judgment against Gwin and Shoults (“Debtors”) in 2010,
appellant Biel Reo, LLC, the assignee of the judgment, initiated proceedings
supplementary to satisfy the execution; and they impleaded the trustees. The
Trustees—Appellee Rita C. Gwin, as Trustee of the Gwin Family Irrevocable Trust,
and Appellee Marion Buckley Shoults, as Trustee of the Shoults Family Irrevocable
Trust—moved for summary judgment, which the trial court granted on the basis that
Biel Reo’s Family Trust-related claims were barred by laches and the Uniform
Fraudulent Transfer Act’s statute of limitations and could not otherwise survive. Biel
Reo appealed.
We now reverse because proceedings supplementary may be initiated by a
judgment holder for the life of the judgment, “[w]hen any person or entity holds an
unsatisfied judgment or judgment lien” and files the requisite affidavit. § 56.29(1),
Fla. Stat. Because Biel Reo holds a valid, unsatisfied execution and § 56.29(6)
2
entitles judgment creditors to proceedings supplementary in circumstances
involving felicitous transfers of personal property to spouses, Biel Reo’s action
involving the Family Trusts is timely and can proceed.
I.
A.
We review the grant of summary judgment de novo. See Volusia Cnty. v.
Aberdeen at Ormond Beach, L.P., 760 So. 2d 126, 130 (Fla. 2000). Summary
judgment is appropriate only “if there is no genuine issue of material fact and if the
moving party is entitled to a judgment as a matter of law.” Id. (citing Menendez v.
Palms West Condo. Ass’n, 736 So. 2d 58 (Fla. 1st DCA 1999)).
B.
Section 56.29, Florida Statutes (2012), establishes “proceedings
supplementary” to execution providing a speedy and direct means for “the holder of
a valid and outstanding execution to ferret out what assets the judgment debtor may
have . . . or [that others] may have received from him to defeat the collection of the
lien or claim, that might be subject to the execution.” See Young v. McKenzie, 46
So. 2d 184, 185 (Fla. 1950); Zureikat v. Shaibani, 944 So. 2d 1019, 1022-23 (Fla.
5th DCA 2006).1 These proceedings are “equitable in nature,” Ferguson v. State
1
Section 56.29, Florida Statutes (2012), provides in relevant part that:
Section 56.29 Proceedings supplementary. --
3
Exchange Bank, 264 So.2d 867, 868 (Fla. 1st DCA 1972); “collateral to the main
action at law,” Young, 46 So. 2d at 185; and designed “‘to avoid the necessity of the
judgment creditor initiating an entirely separate action for a creditor’s
bill.’” Fundamental Long Term Care Holdings, LLC v. Estate of Jackson ex rel.
Jackson-Platts, 110 So. 3d 6, 7-8 (Fla. 2d DCA 2012), reh’g denied (Feb. 8, 2013),
(1) When any person or entity holds an unsatisfied judgment or judgment
lien obtained under chapter 55, the judgment holder or judgment lienholder
may file a motion and an affidavit so stating, identifying, if applicable, the
issuing court, the case number, and the unsatisfied amount of the judgment or
judgment lien, including accrued costs and interest, and stating that the
execution is valid and outstanding, and thereupon the judgment holder or
judgment lienholder is entitled to these proceedings supplementary to
execution. * * *
(5) The judge may order any property of the judgment debtor, not exempt
from execution, in the hands of any person or due to the judgment debtor
to be applied toward the satisfaction of the judgment debt.
(6)(a) When, within 1 year before the service of process on him or her,
defendant has had title to, or paid the purchase price of, any personal
property to which the defendant’s spouse, any relative, or any person on
confidential terms with defendant claims title and right of possession at the
time of examination, the defendant has the burden of proof to establish that
such transfer or gift from him or her was not made to delay, hinder, or
defraud creditors.
(b) When any gift, transfer, assignment or other conveyance of personal
property has been made or contrived by defendant to delay, hinder or
defraud creditors, the court shall order the gift, transfer, assignment or
other conveyance to be void and direct the sheriff to take the property to
satisfy the execution. This does not authorize seizure of property exempted
from levy and sale under execution or property which has passed to a bona
fide purchaser for value and without notice. Any person aggrieved by the
levy may proceed under ss. 56.16-56.20.
4
review denied, 118 So. 3d 220 (Fla. 2013) (quoting Regent Bank v. Woodcox, 636
So. 2d 885, 886 (Fla. 4th DCA 1994)). The proceedings are intended to give “the
most complete relief possible in satisfying [a creditor’s] judgment.” Riley v. Fatt, 47
So. 2d 769, 772 (Fla. 1950). And courts may “enter any orders required to carry out
the purpose of this section to subject property or property rights of any defendant to
execution.Ӥ 56.29(9), Fla. Stat. (2012) (emphasis added).2
What is required for a judgment creditor to initiate proceedings supplementary
to execution is to file a motion and an affidavit averring specific information about
the judgment or judgment lien and the existence of an unsatisfied execution.
§ 56.29(1), Fla. Stat. The same applies when third parties are impleaded, Regent
Bank v. Woodcox, 636 So. 2d at 886, in which case, the affidavit should also list the
parties to be impleaded. Mejia v. Ruiz, 985 So. 2d 1109, 1112 (Fla. 3d DCA 2008).
Once these prerequisites are met, a judgment creditor “is entitled to the proceedings
supplementary,” § 56.29(1); a court cannot deny a motion that meets the statutory
prerequisites. See Biloxi Casino Corp. v. Wolf, 900 So. 2d 734 (Fla. 4th DCA 2005).
After initiation of proceedings supplementary, a judgment creditor may
pursue assets held by the debtor, § 56.29(1)-(2); pursue the debtor’s assets held by
2
Effective July 1, 2014, Section 56.29(9) was amended to expressly include what
has long been the law in Florida, that “entry of any orders” includes “entry of money
judgments against any impleaded defendants[.]” The parties haven’t argued that the
amendment effects the issues here.
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another, so long as the property is not exempt from execution, § 56.29(5);3 or seek
to void and execute upon debtor assets transferred to a spouse or other third party
for purposes of delaying, hindering, or defrauding a creditor, §
56.29(6). See, e.g., Treated Timber Prods., Inc. v. S & A Assocs., 488 So .2d 159,
160 (Fla. 1st DCA 1986); see also State v. Viney, 163 So. 57, 60 (Fla. 1935). “Most
often, . . . the procedure is used to challenge the fraudulent transfer of property that
would otherwise be subject to execution.” Philip J. Padovano, Florida Civil Practice
§ 13:6 (2014 ed.). Courts have broad powers in proceedings supplementary over
personal property transferred to a third party by a debtor “‘whether in the name or
possession of third parties or not.’” Schwartz v. Capital City Nat’l Bank, 365 So. 2d
181, 183 (Fla. 1st DCA 1978) (quoting Viney, 163 So. at 60). But the rights of a
third party must be respected by means of bringing them into the case:
[N]o rights of such third parties should be adjudged to be affected,
impaired, or finally cut off . . . unless [they] have been first fully
impleaded and brought into the case as actual parties to the proceeding,
and, as such, given an opportunity to fully and fairly present their
claims as parties[.]
Viney, 163 So. at 60; see also Pollizzi v. Paulshock, 52 So. 3d 786, 789 (Fla. 5th
DCA 2010); Mejia v. Ruiz, 985 So. 2d at 1112-13.
3
The legislature amended §56.29(5), effective July 1, 2014, but, again, the parties
haven’t argued that these changes effect the issues here.
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II.
In 2012, Biel Reo initiated proceedings supplementary under § 56.29(5) and
(6) and impleaded the Trustees. It hoped to satisfy its $4.5 million execution against
the large sums that the Debtors had transferred from formerly revocable trusts into
irrevocable Family Trusts after defaulting on the loan they had guaranteed. 4 The trial
court found Biel Reo’s Family Trust-related claims to be time-barred because
§ 56.29(6) makes use of substantive provisions of the Uniform Fraudulent Transfer
Act (UFTA), see § 726.105, Fla. Stat., and § 56.29(5) makes use of substantive
portions of § 736.0505, Fla. Stat. (involving creditor claims against trusts). The
UFTA and § 736.0505 have shorter statutes of limitations that the trial court
determined to have expired.5
The problem we have with the Trustees’ statute of limitations argument is that
it does not comport with the text of §56.29, or with the cases construing it. The first
4
The record reflects that Shoults transferred over $3 million in assets to his Family
Trust. The record does not reflect the amount of Gwin’s transfer.
5
Whether these statutes of limitations expired remains disputed by the parties here,
but is unnecessary for us to resolve because we do not find them applicable.
Biel Reo also argues that the Family Trusts were reachable directly in
proceedings supplementary under subsection (5) as self-settled trusts. But we agree
with the trial court’s reading of the terms of the trusts and affirm on this point. See,
e.g., Amsouth Bank of Fla. v. Hepner, 647 So. 2d 907, 908 (Fla. 1st DCA 1994) (“A
joint tenant whose interest is by the entireties, . . . does not have an interest that is
subject to execution on a judgment lien.”). Consequently, this opinion focuses more
narrowly on Biel Reo’s subsection (6)-based argument that the UFTA’s statute of
limitations does not apply.
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sentence of § 56.29(1) expressly addresses when a creditor is entitled to avail itself
of the statute’s processes: “When any person or entity holds an unsatisfied judgment
or judgment lien obtained under chapter 55 [and files the requisite motion and
affidavit] thereupon the judgment holder or judgment lienholder is entitled to these
proceedings supplementary to execution.” (Emphasis added.) According to the
Florida Supreme Court in Young, 46 So. 2d at 185—a case involving an allegedly
fraudulent transfer—once the requisite affidavit is filed by a creditor:
That sets the machinery in motion which secures to him an
examination of the defendant and, if the circumstances warrant it, of
others who have been involved in gifts, transfers, or assignments of
the defendant’s property. Upon the information so obtained, the
judge may order such property in the hands of the judgment debtor
himself or others as the evidence justifies to be applied toward the
satisfaction of the debt.
In Young, the Court linked the timeliness of initiating proceedings supplementary to
“the period of efficacy of an execution,” concluding that proceedings supplementary
could be brought for the twenty-year life of the judgment. Id. at 185-86.
The Trustees would have us apply a different statute of limitations for
proceedings supplementary that involve fraudulent transfers under §56.29(6) (which
is when § 56.29 is most often used, see Padovano, Florida Civil Practice § 13:6). But
we find no good reason to depart from Young. More recent cases continue to
follow Young’s lead. In Zureikat v. Shaibani, 944 So. 2d 1019, 1022-23 (Fla. 5th
DCA 2006), for instance, a judgment debtor allegedly transferred funds and assets
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to his family and purchased homestead property against which the judgment creditor
sought execution under § 56.29. The debtor argued the UFTA and § 95.11(3)’s
limitations periods barred proceedings supplementary. But the Fifth District rejected
the argument, concluding that proceedings supplementary could be initiated during
the life of the judgment and that “even the passage of over six years will not prevent,
by operation of statute of limitations, a judgment creditor from initiating proceedings
supplementary.” Zureikat, 944 So. 2d at 1023.
Likewise in Ferre v. City Nat’l Bank of Miami, 548 So. 2d 701 (Fla. 3d DCA
1989), the Third District rejected statute of limitations and laches arguments made
by an impleaded spouse who received more than a million dollars from her debtor
husband. Almost a dozen years had passed between the entry of judgment against
the debtor and the initiation of proceedings supplementary, but the court looked to
the life of the judgment:
The Supreme Court of Florida long ago indicated that an action to
enforce a judgment involving fraudulent conveyances to a member of
the judgment debtor’s family, particularly when the judgment debtor
continued to enjoy the benefits of the transferred asset, was viable for
the life of the judgment. See Robinson v. The Springfield Co., 21 Fla.
203 (1885) and Isaacs v. Mulray, 112 Fla. 197, 150 So. 232 (1933).
Id. at 703-04 (emphasis added).
The cases cited by the Trustees do not compel the application of a different
statute of limitations. Although the Trustees are correct that the manner of proving
and defending fraudulent transfer claims under § 56.29 borrow substantively from
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the UFTA, 6 this fact does not require the adoption of the UFTA’s much shorter
limitations period, because § 56.29’s contrary scheme and precedent broadly
establish the availability of proceedings supplementary for the life of the judgment,
when a valid, unsatisfied execution exists.
III.
We therefore reverse the trial court’s grant of summary judgment insofar as it
found Biel Reo’s proceedings supplementary to be time-barred and remand for
further proceedings supplementary under § 56.29(6). We affirm, however, the
judgment below on the issue of whether the Family Trusts were self-settled and
reachable by way of § 56.29(5).
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.
VAN NORTWICK, J., and FENSOM, JAMES B., ASSOCIATE JUDGE,
CONCUR.
6
See, e.g., Mejia, 985 So. 2d at 1112-13 (explaining that for purposes of §
56.29(6)(b), “[w]hether a defendant’s actions are made or contrived to ‘delay,
hinder, or defraud’ must be determined with reference to section 726.105(1)
[UFTA].”); Nationsbank, N.A. v. Coastal Utilities, Inc., 814 So. 2d 1227, 1229 (Fla.
4th DCA 2002) (noting that the UFTA applies in determining whether a transfer to
a third party is invalid); Morton v. Cord Realty, Inc., 677 So. 2d 1322, 1324 (Fla.
4th DCA 1996) (“Under section 56.29, it is the burden of the defendant to prove that
a transfer was not a fraudulent transfer. The manner in which a defendant may prove
that a transfer was not fraudulent is governed by case law and the UFTA.”).
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