Controversial Florida Case Blocks Creditor from Enforcing Judgment Against Foreign Assets
A recent opinion from Florida's Fourth District Court of Appeal held that a Florida court does not have jurisdiction to compel a judgment debtor to turn over stock certificates located outside the state of Florida to satisfy a judgment. Sargeant v. Al-Saleh, 137 So. 3d 432 (Fla. Dist. Ct. App. 2014). While this opinion has been heavily criticized by many in the legal community, the case should serve as a warning to creditors seeking to enforce judgments against debtors in Florida.
In this case, the creditor sued the debtors for breach of an agreement to ship oil across Jordan for use by the United States military in Iraq. At trial in a Florida court, judgment was entered against the debtors for $28.8 million. In order to execute on the judgment, the creditor filed a motion to compel the debtors to turn over all stock certificates memorializing their ownership interest in any corporation. The debtors opposed the motion, arguing that the stock certificates concerned assets located abroad, and therefore, the trial court lacked jurisdiction to compel the turnover. The trial court did not agree with the debtors, however, and entered an order compelling the debtors to turn over the stock certificates. The debtors appealed.
On appeal, the debtors once again took the position that the trial court lacked jurisdiction to compel turnover of the stock certificates. They argued that Florida law does not apply extraterritorially and that in order to execute on the judgment against their foreign assets, the creditor must proceed under the laws of the foreign jurisdictions where the stock certificates are located. The creditor argued that the trial court had the authority to compel turnover of the stock certificates by virtue of its in personam jurisdiction over the debtors.
In reversing the trial court's ruling, the District Court of Appeal began its analysis by examining Florida law which authorizes a judge to “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.” Florida law further empowers courts to “enter any orders required to carry out” this purpose “to subject property or property rights of any defendant to execution.”
The court continued its analysis by distinguishing two cases relied upon by the creditor in his argument that the trial court had jurisdiction to order the debtors to turn over the stock certificates. In the first case, General Electric Capital Corp. v. Advance Petroleum, Inc., 660 So. 2d 1139 (Fla. Dist. Ct. App. 1995), Florida's Third District Court of Appeal held that “a court which has obtained in personam jurisdiction over a defendant may order that defendant to act on property that is outside of the court's jurisdiction, provided that the court does not directly affect the title to the property while it remains in the foreign jurisdiction.” The court distinguished this case because the creditor in General Electric Capital had a perfected lien on the property that the trial court ordered the debtor to return to Florida.
In the other case, Koehler v. Bank of Bermuda Ltd., 911 N.E.2d 825 (N.Y. 2009), the New York Court of Appeals held that under New York law, a court located in New York may order a bank over which it has personal jurisdiction to deliver to a judgment creditor stock certificates owned by a judgment debtor that are located outside New York. The New York court noted that the applicable New York statute “contains no express territorial limitation barring the entry of a turnover order that requires a garnishee to transfer money or property into New York from another state or country.” Although the Florida District Court of Appeal recognized that Florida law likewise does not contain any express territorial limitation on the court's ability to order a judgment debtor to transfer money or property into Florida, the court declined to follow Koehler because it found that the decision turned on a broad reading of the applicable New York statute. The court further distinguished the case because the trial court in Koehler had personal jurisdiction over the bank holding the foreign assets. The court also noted a lack of Florida statutes or cases that specifically authorized the action taken by the court in Koehler or by the trial court in the present case.
The District Court of Appeal concluded its analysis by discussing its perceived consequences of allowing Florida trial courts to compel judgment debtors to turn over out-of-state assets. The court observed that there could be competing claims to a foreign asset that the court believed should be decided in the jurisdiction in which the asset is located. The court also stressed its belief that domestication of foreign judgment statutes would be effectively eliminated if trial courts were permitted to compel judgment debtors to bring foreign assets into Florida.
Based on the court's inability to find any controlling case law and its policy concerns, the court reversed the trial court's decision and held that the trial court did not have the authority to order the debtors to turn over the foreign stock certificates.1
If this decision stands, it could cause significant obstacles for creditors seeking to enforce judgments against Florida debtors. Fortunately, other states with similar statutes generally find that so long as the court has personal jurisdiction over a judgment debtor, the court can order the debtor to turn over foreign assets to satisfy a judgment. Therefore, when dealing with Florida debtors, creditors should be careful to ensure that their documents choose, whenever possible, jurisdiction and venue in one of these more creditor-friendly states where they can successfully enforce their judgments.
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1The creditors recently requested the Florida Supreme Court to review the District Court of Appeal's decision. The request is still pending, and such review is rarely granted.