Adkisson's CHARGING ORDERS The Creditor's Remedy Against A Debtor's Interest In An LLC Or Partnership Caution state law variances! Check currency of statutes!

Branch Banking

 

Branch Banking & Trust Co. v. Crystal Centre, 2017 WL 57345 (M.D.Fla., Jan. 5, 2017).

 

United States District Court, M.D. Florida, Tampa Division.

 

Branch Banking and Trust Company, Plaintiff,

 

v.

 

Crystal Centre, LLC, Oswald P. Carrerou and Bank of America, N.A., Defendants.

 

Case No: 8:15–cv–1462–T–30AAS

 

Signed 01/05/2017

 

ORDER

 

JAMES S. MOODY, JR., UNITED STATES DISTRICT JUDGE

 

*1 THIS CAUSE came on for consideration upon the Report and Recommendation submitted by Magistrate Judge Amanda Arnold Sansone (Dkt. #192) and Leah and Oswald Carrerou’s Partial Objection to Report and Recommendation as to Motion for Charging Order Against Oswald Carrerou’s Interests in Limited Liability Companies (Dkt. #194).

 

 

 

After careful consideration of the Report and Recommendation of the Magistrate Judge, the Partial Objection, and in conjunction with an independent examination of the file, the Court is of the opinion that the Magistrate Judge’s Report and Recommendation should be adopted in part and reversed in part.

 

 

 

Specifically, the Report and Recommendation is adopted to the extent that the Magistrate Judge concluded that six of the limited liability companies (Bretton Ridge LLC, Carrerou Enterprises, LLC, Luxury Apartment Living LLC, Casa Acquisitions, LLC, Premier Construction A/C & Electrical LLC, and Premier Construction LLC) are held by Defendant Mr. Carrerou and Mrs. Carrerou as tenancy by the entireties; thus, the motion for charging order as to those limited liability companies must be denied.

 

 

 

The Report and Recommendation is also adopted to the extent that the Magistrate Judge concluded that Lake Sears Shores, LLC is not held by Mr. Carrerou and Mrs. Carrerou as tenancy by the entireties and is thus subject to a charging order.

 

 

 

However, the Report and Recommendation is reversed as to the Magistrate Judge’s conclusions regarding the following entities: Idylwild Luxury Homes, LLC, Mid–Horizon Investments, LLC, and Sands Aviation, LLC. The Objection attaches corporate documents from each of these entities that show Mr. Carrerou and Mrs. Carrerou as obtaining membership units together, as tenancy by the entirety. Notably, this is the first time Mr. Carrerou has provided this evidence. The Magistrate Judge, at the time that she issued her report and recommendation, was without the benefit of these documents. Although one could argue that this evidence is untimely, it is highly material to the issue at hand and the Court finds it necessary to reach the merits of the issue.

 

 

 

In sum, a charging order will be issued as to Mr. Carrerou’s interest in Lake Sears Shores, LLC.

 

 

 

ACCORDINGLY, it is therefore, ORDERED AND ADJUDGED:

 

 

 

1. The Report and Recommendation (Dkt. #192) of the Magistrate Judge is adopted in part and reversed in part, and, to the extent adopted, it is made a part of this order for all purposes, including appellate review.

 

 

 

2. Plaintiff’s Motion for Charging Order against Oswald P. Carrerou’s Interests in Limited Liability Companies (Dkt. #145) is GRANTED as to Defendant Carrerou’s interests in Lake Sears Shores, LLC. A Charging Order as to Lake Sears Shores, LLC will be entered.

 

 

 

3. The Motion (Dkt. #145) is DENIED without prejudice as to Defendant Carrerou’s interests in Bretton Ridge LLC, Carrerou Enterprises, LLC, Luxury Apartment Living LLC, Casa Acquisitions, LLC, Premier Construction A/C & Electrical LLC, Premier Construction LLC, Idylwild Luxury Homes, LLC, Mid–Horizon Investments, LLC, and Sands Aviation, LLC, but Plaintiff is permitted to file a renewed motion, if appropriate, should further post-judgment discovery reveal evidence rebutting a presumption of tenancy by the entireties as to these nine limited liability companies.

 

 

 

*2 4. The Motion (Dkt. #145) is GRANTED as to Plaintiff’s request for reasonable attorneys’ fees and costs incurred in connection with filing this Motion.

 

 

 

DONE and ORDERED in Tampa, Florida, this 5th day of January, 2017.

 

= = = = = = = = = =

 

UNITED STATES DISTRICT COURT

 

MIDDLE DISTRICT OF FLORIDA

 

TAMPA DIVISION

 

BRANCH BANKING AND TRUST

 

COMPANY,

 

Plaintiff,

 

v. Case No.: 8:15-cv-1462-T-30AAS

 

CRYSTAL CENTER, LLC, et al.,

 

Defendant.

 

______________________________________/

 

REPORT AND RECOMMENDATION

 

Before the Court are Plaintiff Branch Banking and Trust Company’s (“Plaintiff’s”) Motion for Charging Order Against Oswald P. Carrerou’s Interests in Limited Liability Companies (Doc.145) and Defendant Oswald Carrerou’s (“Defendant Carrerou’s”) and Leah Carrerou’s Response in Opposition to Plaintiff’s Motion for Charging Order Against Oswald P. Carrerou’s Interests in Limited Liability Companies (Doc. 149).

 

A. Background

 

On August 4, 2016, the Court entered judgment against Defendant Carrerou in the amount of $927,149.53 plus post-judgment interest. (Doc. 45). The Court subsequently awarded attorney’s fees and costs in the amount of $64,918.35. (Doc. 103). Plaintiff now seeks a charging order against Defendant Carrerou’s interests in ten (10) Florida limited liability companies.1 Defendant and Mrs. Carrerou object to the entry of a charging order and assert that Defendant Carrerou’s ownership interests in the limited liability companies at issue are held as tenancies by the entireties with Mrs. Carrerou. fn1 Plaintiff identifies the following ten Florida limited liability companies: Bretton Ridge LLC; Carrerou Enterprises, LLC; Casa Acquisitions, LLC; Idylwild Luxury Homes, LLC; Lake Sears Shores, LLC; Luxury Apartment Living LLC; Mid-Horizon Investments, LLC; Premier Construction A/C & Electrical LLC; Premier Construction LLC; and Sands Aviation, LLC. (Doc. 145 at 3).

 

B. Discussion

 

Pursuant to the Federal Rules of Civil Procedure, “[t]he procedure on execution—and in proceedings supplementary to and in aid of judgment or execution—must accord with the procedure of the state where the court is located[.]” Fed. R. Civ. P. 69(a)(1). In Florida, after being awarded a judgment, the judgment-creditor acquires a judgment lien certificate by filing a judgment lien certificate with the Florida Department of State. Fla. Stat. § 55.202(2)(a). In so doing, the judgment-creditor obtains a judgment lien on the “judgment-debtor’s interest in all personal property in this state subject to execution under [Fla. Stat. §] 56.061, other than fixtures, money, negotiable instruments, and mortgages.” Fla. Stat. § 55.202(2).

 

However, the interest held by a member in a limited liability company is not subject to execution under Fla. Stat. § 56.061, and a judgment-creditor must, instead, seek a charging order against such interest. See Fla. Stat. § 605.0503(3)(except in the case of a limited liability company having only one member, see Fla. Stat. §§ 605.0503(4), (5), “a charging order is the sole and exclusive remedy by which a judgment creditor of a member or member’s transferee may satisfy a judgment from the judgment debtor’s interest in a limited liability company or rights to distributions from the limited liability company.”).

 

“A charging order is a court-supervised substitute for the process of execution by the sheriff.” Regions Bank v. Hyman, No. 8:09–CV–1841–T–17MAP, 2015 WL 1912251, at *6 (M.D. Fla. Apr. 27, 2015) (citing Krauth v. First Continental Dev-Con, Inc., 351 So.2d 1106 (Fla. 4th DCA 1977)). As to limited liability companies, Florida law provides,

 

On application to a court of competent jurisdiction by a judgment creditor of a member or a transferee, the court may enter a charging order against the transferable interest of the member or transferee for payment of the unsatisfied amount of the judgment with interest. Except as provided in subsection (5), a charging order constitutes a lien upon a judgment debtor’s transferable interest and requires the limited liability company to pay over to the judgment creditor a distribution that would otherwise be paid to the judgment debtor.

 

Fla. Stat. § 605.0503(1).

 

But, Section 605.0503 “does not deprive a member or transferee of the benefit of any exemption law applicable to the transferable interest of the member or transferee.” Fla. Stat. § 605.0503(2). Property held as a tenancy by the entireties is one possible exemption. If property is held as a tenancy by the entireties, as Defendant Carrerou and Mrs. Carrerou allege in this case, it “belongs to neither spouse individually, but each spouse is seized of the whole.” Beal Bank, SSB v. Almand & Assocs., 780 So. 2d 45, 53 (Fla. 2001). As a result, creditors cannot reach property held as a tenancy by the entireties to satisfy the obligation of only one of the spouses; property held as a tenancy by the entireties may be attached only by creditors of both spouses jointly. Id.

 

A tenancy by the entireties requires six characteristics: unity of possession, unity of interest, unity of title, unity of time, survivorship, and unity of marriage. Id. at 52. When a husband and wife jointly own property, either real or personal, a presumption arises that the property is held as a tenancy by the entireties. See id. at 57 (“Although we understand the considerations that originally led to this Court’s decision not to adopt a presumption of a tenancy by the entireties in personal property similar to that in real property, we conclude that stronger policy considerations favor allowing the presumption in favor of a tenancy by the entireties when a married couple jointly owns personal property.”); see also, e.g., In re Matthews, 307 F. App’x 266, 268-69 (11th Cir. 2009) (applying Beal Bank presumption to married couple’s ownership of stock).

 

Here, Defendant Carrerou and Mrs. Carrerou filed affidavits stating that Defendant Carrerou’s interests in the ten limited liability companies identified by Plaintiff are held as a tenancy by the entireties with Mrs. Carrerou. (Doc. 149 at 7, 10-11). Importantly, as to six of the limited liability companies (Bretton Ridge LLC, Carrerou Enterprises, LLC, Luxury Apartment Living LLC, Casa Acquisitions, LLC, Premier Construction A/C & Electrical LLC, and Premier Construction LLC), public records2 identify both Defendant and Mrs. Carrerou as members, supporting Defendant and Mrs. Carrerou’s tenancy by the entireties assertions as to those six limited liability companies. Therefore, the undersigned recommends denying the motion for charging order as to those limited liability companies as there is a presumption, further supported by the Carrerous’ affidavits, that those six limited liability companies are held jointly as tenenacy by the entireties.

 

As to the remaining four limited liability companies (Lake Sears Shores, LLC, Idylwild Luxury Homes, LLC, Mid-Horizon Investments, LLC, and Sands Aviation, LLC), Defendant and Mrs. Carrerou contend, as with the other entities, that after they were married they obtained ownership interests, as tenancies by the entireties, in the companies, that they have joint ownership and control over their ownership interests, and that their interests are identical and originated at the same time and from the same instrument. However, the public records available for those entities do not reference Leah Carrerou as a member.

 

Given the accuracy required for the filing of limited liability company records with the 2 “The court may judicially notice a fact that is not subject to reasonable dispute because it: (1) is generally known within the trial court’s territorial jurisdiction; or (2) can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned.” Fed. R. Evid. 201(b).

 

Pursuant to Rule 201, Fed. R. Evid., the Court takes judicial notice of the public records available on the Florida Department of State, Division of Corporations website, http://dos.myflorida.com/sunbiz/, for the ten limited liability companies identified by Plaintiff. Florida Department of State, see e.g., Fla. Stat. 605.0205(3) (“An individual who signs a record authorized or required to be filed under this chapter affirms under penalty of perjury that the information stated in the record is accurate.”), the Court concludes that the presumption that Defendant Carrerou’s interests are held as tenancy by the entireties does not apply to those limited liability companies. See In re Daniels, 309 B.R. 54, 59 (Bankr. M.D Fla. 2004) (extending the presumption “only in the absence of any controlling statute, express agreement, account statement, or other governing indicia that explicitly establishes a form of ownership other than tenancy by the entireties”). Defendant Carrerou and Mrs. Carrerou were provided the opportunity when filing the required limited liability company records to reflect Mrs. Carrerou’s alleged ownership interest in Lake Sears Shores, LLC, Idylwild Luxury Homes, LLC, Mid-Horizon Investments, LLC, and Sands Aviation, LLC, but, notably, none of the current records filed with the Florida Department of State reference any ownership interest by Mrs. Carrerou. Consequently, the Court recommends that the motion for charging order be granted as to those four limited liability companies, as the Court should not presume that they are held as tenancy by the entireties when the state records establish other ownership.

 

Accordingly, based on the current record and evidence before the Court, it is RECOMMENDED that:

 

(1) Plaintiff’s Motion for Charging Order Against Oswald P. Carrerou’s Interests in Limited Liability Companies (Doc. 145) be GRANTED as to Defendant Carrerou’s interests in Lake Sears Shores, LLC, Idylwild Luxury Homes, LLC, Mid-Horizon Investments, LLC, and Sands Aviation, LLC, that the Court enter the proposed Charging Order attached to this Report and Recommendation as to those limited liability companies, and that the Court reserve jurisdiction to enter further orders as necessary to enforce the Charging Order; that

 

(2) the motion be DENIED without prejudice as to Defendant Carrerou’s interests in Bretton Ridge LLC, Carrerou Enterprises, LLC, Luxury Apartment Living LLC, Casa Acquisitions, LLC, Premier Construction A/C & Electrical LLC, and Premier Construction LLC, but that Plaintiff be permitted to file a renewed motion, if appropriate, should further post-judgment discovery reveal evidence rebutting a presumption of tenancy by the entireties as to these six limited liability companies; and that

 

(3) the motion be GRANTED as to Plaintiff’s request for reasonable attorneys’ fees and costs incurred in connection with filing this motion.

 

Date: December 12, 2016

 

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LAW REVIEW ARTICLES

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For more on the historical background of Charging Orders and contemporary issues involving the same, see Jay Adkisson's article, Charging Orders: The Peculiar Mechanism, 61 South Dakota Law Review 440 (2016). Available at SSRN: https://ssrn.com/abstract=2928487

WEBSITE CONTENTS

 

General Information

 

Analysis of Uniform Limited Liability Company Act Sections re Charging Orders

  • Charging Orders (Section 503) contains the general charging order provisions.
  • Transfers of Transferable Interests (Section 502) includes definitions of "transfer" (102(23)), "transferable interests" (102(24)), and "transferees" (102(25)) defines to what the charging order attaches.
  • Definition of Distribution (Section 102(4)) specifies the economic right obtained through a charging order lien and/or foreclosure.

 

The Uniform Acts re Charging Orders and Transferable Interests (without Jay's comments):

 

Effect of Bankruptcy On The Debtor-Member's LLC Interest here

 

 

Collected Court Opinions On Charging Orders here and below

 

Charging Order Example Sample Form

 

TOPICAL RESEARCH

 

 

Appeal - Issues relating to the appeal of a charging order

 

Bankruptcy - Treatment of the debtor/member's interest in bankruptcy

 

Compliance - Issues for the LLC and non-debtor members in complying with a charging order

 

Conflicts-Of-Law - Determining which state's laws apply to a charging order dispute

 

Creditor Rights Restrictions - Limitations on creditors' management and informational rights

 

Distributions - Creditors rights to distributive payments

 

Economic Rights - Limitation of charging order and foreclosure to debtor's economic rights

 

Exclusivity - The charging order as the sole remedy available to creditors and exceptions

 

Exemptions - Available state and federal protections that may apply to charging orders

 

Foreclosure - Liquidation by judicial sale of the debtor's right to distributions

 

Foreign Entities - Charging orders against out-of-state entities

 

Information Rights - Creditors' ability to access information about the LLC

 

Intra-Member Disputes - Where one member obtains a charging order against another

 

Jurisdiction - Issues relating to the court's authority over out-of-state debtors and LLCs

 

Lien - The lien effect of a charging order and priority issues

 

Management & Voting Rights - Rights of creditor after charging order issued

 

Order Form Generally - Most issues to the form of the charging order

 

Order Form Future Interests - How the charging order affects subsequently-acquired interests

 

Prejudgment Relief - Freezing the interest and distributions pending judgment

 

Procedure - The procedure for obtaining a charging order and ancillary provisions

 

Receiver - The role of the receiver in charging order proceedings

 

Repurchase/Redemption Rights - Third-parties' ability to purchase the charged interest

 

Single-Member LLCs - Enforcing the judgment against an LLC with a sole member

 

Taxes - Tax issues relating to charging orders for all involved parties

 

Unknown Interest - Where the debtor's interest, if any, has not been ascertained

 

Voidable Transactions/Fraudulent Transfers - Issues relating to avoidable transfers of interests

 

= = = = =

 

Additional Court Opinions About charging orders (unsorted)

 

THE CHARGING ORDERS PRACTICE GUIDE

 

The Charging Order Practice Guide: Understanding Judgment Creditor Rights Against LLC Members, by Jay D. Adkisson (2018), published by the LLCs, Partnerships and Unincorporated Entities Committee of the Business Law Section of the American Bar Association, click here for more

 

Available for purchase directly from the ABA at https://goo.gl/faZzY6

 

Also available from Amazon at https://www.amazon.com/Charging-Orders-Practice-Guide-Understanding/dp/1641052643

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  • Creditor-Debtor Law - An overview of judgment enforcement tools and their uses by creditors, and possible defenses by debtors. Related topics include:

 

  • Voidable Transactions - Discussion of the Uniform Voidable Transactions Act (a/k/a 2014 Revision of the Uniform Fraudulent Transfers Act) and fraudulent transfer law in general.

 

  • California Enforcement of Judgments Law - Considers the topic of judgment enforcement in California, including the California Enforcement of Judgments Law and other laws related to California creditor-debtor issues.

 

  • Private Retirement Plans - An exploration of a unique creditor exemption allowed under California law which can be very beneficial but is often misused.

 

  • Protected Series - An examination of the single most complex statutory legal structure yet created, with particular reference to the Uniform Protected Series Act of 2017.

 

  • Asset Protection - The all-time best-selling book on asset protection planning by Jay Adkisson and Chris Riser.

 

 

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© 2020 Jay D. Adkisson. All Rights Reserved. No claim to government works or the works of the Uniform Law Commission. The information contained in this website is for general educational purposes only, does not constitute any legal advice or opinion, and should not be relied upon in relation to particular cases. Use this information at your own peril; it is no substitute for the legal advice or opinion of an attorney licensed to practice law in the appropriate jurisdiction. This site is https://chargingorder.com Contact: jay [at] jayad.com or by phone to 702-953-9617 or by fax to 877-698-0678.