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!

2018 - Mississippi - PNC Bank

 

PNC Bank v. Walnut Grove Office Gardens, LLC, N.D.Miss. 17-MC-17 (Oct. 5, 2018).

 

PNC BANK, NATIONAL ASSOCIATION, Plaintiff,

v.

WALNUT GROVE OFFICE GARDENS, LLC, et al., Defendants.

No. 3:17-MC-17-DMB.

 

United States District Court, N.D. Mississippi, Oxford Division.

October 5, 2018.

 

PNC Bank, National Association, Plaintiff, represented by Evan Nicholas Parrott, MAYNARD, COOPER & GALE, P.C..

 

ORDER

 

DEBRA M. BROWN, District Judge.

 

Before the Court is PNC Bank, National Association's "Motion for Charging Order." Doc. #2.

 

I

 

Procedural History

 

On March 19, 2013, PNC Bank, National Association, filed a complaint in the Western District of Tennessee against Walnut Grove Office Gardens, LLC; 2900 Kirby Parkway, LLC; Willow Grove, LLC; and Walter D. Wills, III. PNC Bank, Nat'l Assoc. v. Walnut Grove Office Gardens LLC, No. 2:13-cv-2174, at Doc. #1 (W.D. Tenn. Mar. 9, 2013). The complaint alleged claims for breach of contract based on allegations that the three corporate defendants took out commercial loans from PNC Bank, that each of the loans were guaranteed by Wills, and that the defendants defaulted on the loans. The complaint sought recovery of the amounts due under the loans and appointment of a receiver.

 

On August 22, 2013, United States District Judge John T. Fowlkes, Jr. granted PNC Bank's request for a receiver. Id. at Doc. #22. On September 29, 2014, Judge Fowlkes issued an order granting summary judgment in favor of PNC Bank on the breach of contract claims. Id. at Doc. #45. The same order found liability against (1) Walnut Grove and Wills in the amount of $1,601,087.81; (2) Willow Grove and Wills in the amount of $3,878,179.23; and (3) 2900 Kirby Parkway and Wills in the amount of $1,914,521.05. The Court also granted attorneys' fees and expenses against all the defendants in the amount of $137,160.84.

 

On September 28, 2017, Judge Fowlkes terminated the receivership and entered judgment in favor of PNC Bank ("Original Judgment"). Id. at Doc. #76, Doc. #77. The judgment stated, "this action is dismissed with prejudice in accordance with the Order Terminating Receivership.. . ." Id. at Doc. #77. Approximately one week later, on October 4, 2017, Judge Fowlkes entered an amended judgment which states, "this action is dismissed with prejudice in accordance with the Order Granting Plaintiff's Motion for Summary Judgment . . . as well as the Order Terminating Receivership" ("Amended Judgment"). Id. at Doc. #78.

 

On November 2, 2017, PNC Bank registered the Amended Judgment in this Court. Doc. #1. Approximately seven months later, PNC Bank filed a "Motion for Charging Order." Doc. #2.

 

II

 

Analysis

 

In its motion, PNC Bank asks this Court to charge the amount of $4,015,340.07[1] against Wills' interests in four Mississippi entities: (1) AG Pipeline, LP d/b/a Arlington Energy Partners 1993, LP; (2) Kirby-Willis Plantation, LP; (3) KWP Sayle, LLC; and (4) KWP Utility Company, LLC. Doc. #2 at 1-2.

 

Once obtained,

 

    [a] money judgment is enforced by a writ of execution, unless the court directs otherwise. The 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, but a federal statute governs to the extent it applies.

 

Fed. R. Civ. P. 69(a)(1). Where, as here, a party desires to enforce a judgment in a district other than the issuing court, "28 U.S.C. § 1963 . . . provides for the registration of one federal district court's money judgment in another federal district court as the precursor to enforcement of the original judgment in the latter court." Home Port Rentals, Inc. v. Int'l Yachting Grp., Inc., 252 F.3d 399, 404 (5th Cir. 2001).

 

Taken together, "Rule 69 and 28 U.S.C. § 1963 contemplate that [a plaintiff may] register [a] district court's final judgment in another federal district court and initiate collection proceedings there. . . ." Hoffart v. Wiggins, 577 F. App'x 384, 387 (5th Cir. 2014). Accordingly, in evaluating PNC Bank's request for relief, the Court must answer two separate questions: (1) whether the Amended Judgment has been properly registered under § 1963; and (2) whether this Court may charge the amount of the Amended Judgement against Wills' interests in the listed entities.

 

28 U.S.C. § 1963 provides, in relevant part:

 

    A judgment in an action for the recovery of money or property entered in any court of appeals, district court, bankruptcy court, or in the Court of International Trade may be registered by filing a certified copy of the judgment in any other district or, with respect to the Court of International Trade, in any judicial district, when the judgment has become final by appeal or expiration of the time for appeal or when ordered by the court that entered the judgment for good cause shown. Such a judgment entered in favor of the United States may be so registered any time after judgment is entered. A judgment so registered shall have the same effect as a judgment of the district court of the district where registered and may be enforced in like manner.

 

Under the plain language of the statute, a judgment may be properly registered when it "has become final by appeal or expiration of the time for appeal or when ordered by the court that entered the judgment. . . ."

 

Here, there was no appeal of the amended final judgment, and there is no indication registration was ordered. Accordingly, the question is whether, at the time it was registered, the Amended Judgment was final by "expiration of the time for appeal." See Monge v. Rojas, 150 F.Supp.3d 1244, 1251 (D.N.M. 2015) ("The Monges were therefore not entitled to register the Final Judgment in the District of New Mexico to execute on that Final Judgment against the Defendants until their appeal was final or until they obtained a court order from the District Court for the Western District of Texas authorizing them to register the judgment.").

 

Generally, "[i]n a civil case . . . the notice of appeal . . . must be filed with the district clerk within 30 days after entry of the judgment or order appealed from." Fed. R. App. P. 4(a)(1)(A). Here, the Amended Judgment was entered on October 4, 2017, and was registered in this Court twenty-nine days later on November 2, 2017—when the time for the defendants to appeal had not yet run.[2] Accordingly, the registration was premature and may not form the basis for the enforcement PNC Bank seeks here. PNC Bank's motion [2] for a charging order, therefore, is DENIED without prejudice. PNC Bank may renew its motion after properly registering the Amended Judgment in compliance with § 1963.

 

SO ORDERED.

 

[1] This sum appears to be the amount of the Amended Judgment related to the Walnut Grove loan, plus the awarded attorney's fees and expenses.

 

[2] In reaching this conclusion, the Court notes that the time to appeal an amended judgment runs from the time the amended judgment is entered, not the original judgment, unless the amended judgment does not "substantively change[] the last prior judgment in a manner adverse to the party" seeking to appeal. Harrell v. Dixon Bay Transp. Co., 718 F.2d 123, 129 (5th Cir. 1983). Here, the Amended Judgment substantively altered the Original Judgment by adding the terms of the order granting PNC Bank's motion for summary judgment, which created millions of dollars of liability against the defendants, including Wills.

 

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More Articles On Charging Orders click here

 

LAW REVIEW ARTICLES

by Jay Adkisson

 

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

OTHER INFORMATIONAL WEBSITES

by Jay Adkisson

 

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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.