March 11, 2014

Fourth DCA: Florida Courts Lack Jurisdiction to Order Debtor to Turn Over Property Located Outside of Florida to Satisfy Judgment Debt

Fourth DCA: Florida Courts Lack Jurisdiction to Order Debtor to Turn Over Property Located Outside of Florida to Satisfy Judgment Debt

Harry Sargeant III, Mustafa Abu-Naba’a, and International Oil Trading Co., LLC v. Mohammed Anwar Fari Al-Saleh, Case No. 4D13-1447

The Fourth District Court of Appeal (“Fourth DCA”) recently decided an important case regarding the power of a Florida court to compel a judgment debtor to turn over property located outside of Florida to satisfy a judgment debt.

The judgment creditor obtained the judgment in a suit for breach of contract. The creditor then brought proceedings supplementary to execution. The creditor obtained an order from the trial court that required the judgment debtors to turn over all stock certificates or other documents evidencing ownership in any corporation. The stock certificates and corresponding assets were located in foreign jurisdictions outside of the United States.

On appeal, the judgment debtors argued that Chapter 56, Florida Statutes, did not apply outside of Florida, and proceedings were necessary in the jurisdictions in which the assets were held. The judgment creditors maintained that the trial court’s order was correct because the trial court’s in personam jurisdiction over the debtors gave it the power to order turnover of the stock certificates.

The Fourth DCA reviewed the issue de novo and agreed with the judgment debtors. The court noted the broad language of section 56.29(5) and 56.29(9), Florida Statutes, pertaining to the property the court may order to be applied to the debt and the orders the court may issue for that purpose. However, the court stated the law that Florida courts have no in rem or quasi in rem jurisdiction over foreign property, citing Paccioco v. Young, Stern, & Tannenbaum, P.A., 481 So. 2d 39, 39 (Fla. 3d DCA 1985).

The Fourth DCA noted an absence of controlling case law. The court distinguished the two cases on which the judgment creditors relied. It distinguished General Electric Capital Corp. v. Advance Petroleum, Inc., 660 So. 2d 1139 (Fla. 3d DCA 1995) on the grounds that the judgment creditor in that case had a perfected lien on the foreign property the trial court had ordered the debtor to return. The Fourth DCA also distinguished Koehler v. Bank of Bermuda Ltd., 911 N.E.2d 825 (N.Y. 2009) on the grounds that the trial court in that case had personal jurisdiction over the bank holding the foreign assets. Finally, the Fourth DCA noted the potential problems of competing claims to the same asset in the foreign jurisdiction and the danger that the creditors’ interpretation would “effectively eviscerate” the Florida statutes providing for domestication of foreign judgments. The Fourth DCA reversed the trial court’s order.

The court’s decision offers no help to judgment creditors proceeding against judgment debtors with foreign assets. Trial court orders in proceedings supplementary to execution that require the judgment debtor to turn over foreign assets to satisfy the judgment debt will not hold up on appeal. The Fourth DCA’s opinion indicates that judgment creditors can reasonably expect that proceedings in the foreign jurisdiction will be necessary, unless perhaps the creditor has a perfected lien on the debtor’s foreign property or the assets are held by a bank or other institution located within Florida.