For a plaintiff, winning a lawsuit is only half the battle. Even after defeating the appeals, a plaintiff still has to find assets to cover the judgment debt. Of course, the defendant saw this coming a mile away, and transferred away his or her assets before the lawsuit even started. For these particularly adroit defendants, Florida created proceedings supplementary. Proceedings supplementary allow a winning plaintiff (i.e. a judgment creditor) to go after property the losing defendant (i.e. a judgment debtor) held within the year before the lawsuit began and up to judgment collection. But winning plaintiffs sometimes mismanage proceedings supplementary, which is governed by an evolving Florida Statutes section 56.29. To facilitate a first go at proceedings supplementary, below is a quick introduction to requirements and pitfalls.   If you have any questions on proceedings supplementary or need help collecting a judgment, please contact Bernhard Law Firm at www.bernhardlawfirm.com, abernhard@bernhardlawfirm.com, 786-871-3349.

Under Florida law, the rights of third parties may not be adjudicated in supplementary proceedings unless the parties have been fully impleaded and given opportunity to defend; thus, to the extent an order in supplementary proceedings could be construed as a finding of liability against unjoined owners of real estate, that order must be set aside. Juno by the Sea Condominium Apartments, Inc., v. Juno by the Sea North Condominium Ass’n (The Tower), Inc., 419 So. 2d 399, 400 (Fla. 4th DCA 1982). Where orders in proceedings supplementary are entered without full due process, fair hearing, and presentation of claims after notice of proper allegations, those orders must be set aside. Sanchez v. Century Everglades, LLC, 946 So. 2d 563, 564 (Fla. 2d DCA 2006) (reversing orders in proceedings supplementary where trial court failed to allow property owner to act as anything but a “spectator”).

To properly allege entitlement to proceedings supplementary, a plaintiff must: (i) identify property of the judgment debtor not exempt from execution (§ 56.29(2)) or property the judgment debtor had within 1 year before service of process on the debtor (§ 56.29(3)(a)); and (ii) identify personal property fraudulently transferred, with no bona fide purchaser for value without notice from the judgment debtor to third parties (§ 56.29(3)(b)). To properly plead or allege a claim of fraudulent transfer, the factual basis for the claim of fraud must be pled with particularity and must specifically identify misrepresentations or omissions of fact, as well as time, place, or manner in which they were made—failure to do so requires dismissal. Cedars Healthcare Group, Ltd. v. Mehta, 16 So. 3d 914, 917 (Fla. 3d DCA 2009) (quashing trial court’s order denying motion to dismiss insufficiently pled fraud claims). Keep reading below picture:

To properly allege a fraudulent transfer under Florida Statutes § 726.105, a plaintiff must allege with particularity the specific facts of: (i) factual misrepresentations; (ii) the time, place, or manner in which they were made; (iii) lack of a reasonably equivalent value in exchange for the transfer; and (iv) facts showing intent, such as insider trading, concealment of the transfer, and other intent factors under § 726.105(2). Id. Where the public record does not convey notice of judgment against a property seller, then the purchaser’s property cannot be made subject to levy or recovery in proceedings supplementary. Bakalarz v. Luskin, 560 So. 2d 283, 286 (Fla. 4th DCA 1990) (holding purchaser justifiably relied on record as disclosed by full and complete search at time of purchase, which did not convey notice that judgment contained affirmative relief against sellers, and thus property was not subject to levy in proceedings supplementary).

If a plaintiff properly alleges a claim of fraudulent transfer, it must then properly show jurisdiction over the third parties and their property. Permenter v. Feurtado, 541 So. 2d 1331, 1332 (Fla. 3d DCA 1989) (holding court lacked personal jurisdiction due to insufficient service of process, quashing service and vacating jurisdiction). Statutory service requirements must be strictly construed, and any improper service of process on a person or corporation requires that service be quashed and the party be dismissed. Morgan Stanley Smith Barney, LLC v. Gibraltar Private Bank & Trust Co., 162 So. 3d 1058, 1061 (Fla. 3d DCA 2015) (quashing improper service on corporation through improper agent); Crystal Springs Partners, Ltd. v. Michael R. Band, P.A., 132 So. 3d 1230, 1231 (Fla. 3d DCA 2014) (quashing improper service through Secretary of State). An appearance or raising improper service in an answer does not waive objections relating to the Court’s exercise of personal jurisdiction. Salinas v. Pascariello, 189 So. 3d 962, 963 (Fla. 3d DCA 2016) (reversing denial of motion to quash after appearance filed); M.T.B. Banking Corp. v. Bergamo Da Silva, 592 So. 2d 1215, 1215 (Fla. 3d DCA 1992) (raising lack of personal jurisdiction in answer and motion for judgment does not constitute waiver).

If a plaintiff seeks to have the Court treat corporations and their owners as alter egos liable for each other’s wrongs, the plaintiff must properly request and prove grounds to pierce the corporate veil. Houri v. Boaziz, 196 So. 3d 383, 390 (Fla. 3d DCA 2016) (holding even if corporation is merely alter ego of its dominant shareholder, corporate veil cannot be pierced so long as corporation’s separate identity was lawfully maintained). Where a plaintiff fails to seek to pierce the corporate veil in its pleadings, with proper allegations, no judgment can be assessed from a shareholder upon its company, and vice versa. Id.

A winning plaintiff should start with the above in initiating proceedings supplementary, then check the latest statutory revisions and case law before filing. If you have any questions on proceedings supplementary or need help collecting a judgment, please contact Bernhard Law Firm at www.bernhardlawfirm.com, abernhard@bernhardlawfirm.com, 786-871-3349. To see Bernhard Law Firm’s successes in proceedings supplementary, see this article on proceedings supplementary [CLICK HERE].

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