Sa'ad El-Amin v. Carolyn Adams

COURT OF APPEALS OF VIRGINIA
Present: Chief Judge Moon, Judge Coleman and Senior Judge Hodges
Argued at Richmond, Virginia
SA'AD EL-AMIN
v. Record No. 0282-94-2 MEMORANDUM OPINION *
BY JUDGE SAM W. COLEMAN III
CAROLYN ADAMS MAY 16, 1995
FROM THE CIRCUIT COURT OF THE CITY OF RICHMOND
Robert L. Harris, Sr., Judge
(Sa'ad El-Amin; Beverly D. Crawford; El-Amin &
Crawford, P.C., on brief), for appellant.
David D. Hopper (Mezzullo & McCandlish, on brief),
for appellee.
Sa'ad El-Amin appeals a circuit court order entered in a
debtor interrogatory proceeding, Code § 8.01-506, that directed
him to deposit with the court his stock certificates in a
professional law corporation. The debtor interrogatory
proceeding was an ancillary procedure to enforce a judgment
against El-Amin for spousal and child support arrearages.
El-Amin contends the court erred, for a number of reasons, in
ordering him to deposit his stock with the court. For the
reasons that follow, we affirm the trial court.
I.
The Court of Appeals has subject matter jurisdiction over
"[a]ny final judgment, order or decree of a circuit court
involving . . . divorce [and] . . . spousal or child support."
*
Pursuant to Code § 17-116.010 this opinion is not
designated for publication.
Code §§ 17-116.05(3)(b) and (d). Because the debtor
interrogatory proceeding is an ancillary measure to enforce
support provisions of a divorce decree, this Court has subject
matter jurisdiction. See Code §§ 17-116.05(3)(b) and (d).
Furthermore, the Court of Appeals has jurisdiction over
"[a]ny interlocutory decree or order entered in any [case
involving divorce, spousal or child support] adjudicating the
principles of a cause." Code § 17-116.05(4). To adjudicate the
principles of a cause, an order must "respond to the chief object
of the suit." Pinkard v. Pinkard, 12 Va. App. 848, 852, 407
S.E.2d 339, 341-42 (1991) (quoting Beatty v. Beatty, 105 Va. 213,
215, 53 S.E. 2, 3 (1906)). The trial court's order requiring El-
Amin to deliver his stock certificate to the court, presumably to
liquidate El-Amin's interest in the corporation to satisfy the
judgment, is a determination that would necessarily affect his
property rights and, therefore, "would of necessity affect the
final order in the case." Pinkard, 12 Va. App. at 851, 407
S.E.2d at 341. Accordingly, an appeal of the interlocutory order
is authorized.
II.
El-Amin contends that the trial court lacked authority to
require him to deliver his stock certificate and to require him
to cause the stock certificates to be re-issued in his name
individually, rather than in his and his wife's name as tenants
by the entireties. Code § 8.01-507 states:
Conveyance or delivery of property disclosed
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by interrogatories. . . . [A]ny money, bank
notes, securities, evidences of debt, or
other personal estate, tangible or
intangible, which it may appear by such
[interrogatory] answers are in possession of
or under the control of the debtor or his
debtor or bailee, shall be delivered by him
or them, as far as practicable, to such
officer, or to some other, or in such manner
as may be ordered by the commissioner or
court.
(emphasis added). This section expressly empowered the circuit
court to require that El-Amin deliver his property, including
stock certificates, to the court.
El-Amin cites Code §§ 13.1-549.3 and 13.1-550 as prohibiting
him from transferring his stock in a professional legal
corporation to the court. Former Code § 13.1-549.3 states:
Special provisions for law corporations as to
qualifications of shareholders.—A
professional corporation engaged in the
practice of law may issue shares of its
capital stock to individuals duly licensed to
practice law in Virginia or another state.
This section specifically deals with the issuance of capital
stock by the corporation. The section says nothing about
prohibiting a court from effectuating a transfer or liquidation
of stock.
Code § 13.1-550 states:
Transfer of shares.—No shareholder of a
corporation organized under this chapter may
sell or transfer his shares in such
corporation except to said corporation or
another individual who is eligible to be a
shareholder of such corporation.
(emphasis added).
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Code § 13.1-549.3 restricts the authority of a professional
legal corporation to issue capital stock to anyone other than
licensed attorneys. Code § 13.1-550 places a similar restriction
upon shareholders. While the statutes may have a bearing upon
the disposition that a court may make of the stock, the statutes
do not preclude a court of proper jurisdiction from seizing or
taking control of the stock and liquidating it as authorized by
law. The statutes do not prohibit the liquidation or alienation
of stock in a legal professional corporation; the statutes only
provide that the stock may only be transferred to the corporation
or to "another individual who is eligible to be a shareholder."
The trial court's order did not direct that legal title or
ownership of the stock certificates be transferred to the court.
The court ordered that El-Amin "transfer" the stock "to this
court." We construe the order to mean that El-Amin was required
to deliver physical control and custody of the stock certificates
to the court. While the record does not make clear what the
court intended to do with the stock certificates, delivery of the
certificates to the court was a necessary step to protect the
status quo. The court's physical custody of the instruments of
ownership was required for the court to take the steps necessary
to liquidate the stock and transfer ownership or to pursue such
other remedies as are available to a judgment creditor.
A circuit court has authority under debtor interrogatory
proceedings, Code § 8.01-506, when accompanied by a writ of fieri
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facias, to identify and levy upon the personal property of a
judgment debtor. While the market for stock in a professional
legal corporation may be limited, the shares of stock are not
sheltered from the debts of the shareholder. See Street v.
Sugarman, 202 So. 2d 749 (Fla. 1967); Gulf Mortgage and Realty
Investments v. Alten, 422 A.2d 1090 (Pa. Super. Ct. 1980);
McAllester v. Andrews, 14 B.R. 356 (Bankr. M.D. Tenn. 1981). The
trial court had statutory authority to order El-Amin, a judgment
debtor, to deliver stock certificates in his possession or
control, including those in a professional legal corporation, so
that El-Amin's interest could be liquidated according to law.
III.
El-Amin next contends that the trial court erred by finding
that he and his wife did not own the stock in the professional
corporation as tenants by the entirety. At the time the debtor
interrogatory proceeding was filed, the corporation had not
issued the stock certificates to its shareholders. At the
October 11, 1993, debtor interrogatory, El-Amin testified that he
owned fifty percent of the stock in the professional corporation
and that his wife, Beverly Crawford, owned the other fifty
percent.
The evidence proved that during various discussions
concerning ownership and formation of the professional
corporation, El-Amin made no mention that the stock was owned as
tenants by the entirety. Similarly, when he was ordered to
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deliver or transfer the stock to Adams and then to the court, he
did not mention that the stock was owned as tenants by the
entirety. Thus, credible evidence supports the trial judge's
finding that El-Amin and Beverly Crawford individually owned
fifty percent of the stock in the professional corporation and
had not intended to own the stock as tenants by the entirety with
the right of survivorship as at common law. The evidence
supported the trial judge's finding that El-Amin had fifty
percent of the stock issued in this manner after the
interrogatories in an effort to defeat his judgment creditor.
Thus, we affirm the trial judge's order directing El-Amin to have
the stock certificate reissued by the corporation in his name
individually, and to deliver the certificate to the court.
IV.
El-Amin finally contends that the trial court erred by
"ordering" him and El-Amin & Crawford, P.C., to make no
expenditures of more than $3,000 or any expenditures out of the
ordinary course of business. The court's order states:
4. ORDERED that El-Amin shall prevent
El-Amin and Crawford, P.C. from making any
expenditures outside the ordinary course of
business until a final determination as to
the disposition of the stock; and it is
further
5. ORDERED that any payment of salary by
El-Amin & Crawford, P.C. of more than $3,000
per month to any employee shall be deemed by
the Court a payment outside the ordinary
course of business in violation of this
order; . . . .
The trial court had personal jurisdiction over El-Amin. It
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had no jurisdiction over the professional legal corporation,
El-Amin & Crawford, P.C., and did not attempt to exercise any
control over the corporation. However, El-Amin is a principal
and shareholder in El-Amin & Crawford, P.C. The court's order
directed him to use the means available to him as a principal of
El-Amin & Crawford, P.C. to prevent expenditure of the
corporation's assets outside the ordinary course of business. As
a principal and major shareholder in the corporation, El-Amin is
entitled to share in the corporate profits and owns an interest
in the corporate assets. The trial judge did not err in ordering
that El-Amin, as a principal in the corporation, take reasonable
measures to assure that the assets of the corporation would not
be depleted while still enabling the corporation to carry on its
regular course of business.
Paragraph No. 5 of the court's order states that payments in
excess of $3,000 per employee per month for salary "shall be
deemed" to be an expenditure outside the ordinary course of
business. The order in this respect is directory and does not on
its face restrict or require El-Amin & Crawford, P.C., over whom
no jurisdiction exists, to perform any act. However, we find
that the trial court did not abuse its discretion by entry of the
order. Only upon El-Amin's failure to make a good faith effort
to comply with the order may sanctions be imposed against him.
V.
Because the appeal is of right, rather than a petition for
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appeal, Code § 8.01-676.1(E), and because no increase in the
amount of the appeal bond had been ordered at an earlier stage in
the appeal process, we deny the request at this stage to require
El-Amin to post an appeal bond for the amount of the judgment.
For the foregoing reasons, we affirm the trial court and
remand this case for such further proceedings as are necessary.
Affirmed and remanded.
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