It is common knowledge that judgment debtors can transfer assets to third parties, sometimes trusts owned by family members or newly formed corporations with similar sounding names, in order to avoid judgment creditors. For judgment creditors stuck with unpaid judgments, this little game of cat and mouse can make it challenging to execute on outstanding Florida judgments. Thankfully, a recent Florida case held that judgment creditors can pursue third parties under Florida’s proceedings supplementary statute, Section 56.29, for the life of a judgment.
In Biel Reo, LLC v. Barefoot Cottages Development Co., LLC, the guarantors of a commercial loan transferred millions of dollars within weeks of their company defaulting on the loan into irrevocable family trusts (the “Family Trusts”) where the guarantors were the beneficiaries and their wives were the trustees of the Family Trusts. 156 So. 3d 506, 507 (Fla. 1st DCA 2014).
A couple years later the bank obtained a $4.5 million dollar judgment against the guarantors. The assignee of the judgment, Biel Reo, LLC (“Biel Reo”), initiated a proceedings supplementary action by impleading the wives as trustees of the Family Trusts. Id. This had the effect of making the wives who received the assets, parties to the judgment collection phase.
The Family Trusts moved for summary judgment, alleging that Biel Reo’s claims were barred by doctrine of laches (delay) and the four (4) year statute of limitations in the Uniform Fraudulent Transfer Act. Id. The trial court agreed and so it granted the Family Trusts’ motion for summary judgment. This ruling terminated the case against the trustee wives who were in possession of the transferred assets. Biel Rio filed an appeal.
The Court of Appeals agreed with Biel Reo and reversed the trial court “because proceedings supplementary may be initiated by a judgment holder for the life of a judgment, ‘when any person or entity holds an unsatisfied judgment or judgment lien’ and files the requisite affidavit.” Biel Reo, LLC, 156 So. 3d at 507(quoting §56.29(1), Fla. Stat.).
Moreover, the Court further added that “[b]ecause Biel Reo holds a valid, unsatisfied execution and §56.29(6) 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.” Id. at 507-508.
Proceedings supplementary is an effective tool under the Florida Statutes. It can be used to collect outstanding judgments, especially when judgment debtors attempt to transfer assets prior to collection.
Founded in 1997, Gill Law Firm represents small, medium and large corporations in commercial debt recovery, small business and nonprofit startups throughout the state of Florida. To find out how the firm may help your company, please contact A. Wayne Gill, Esq. via email at firstname.lastname@example.org or by phone at (561) 454-0301.