Proceedings Supplementary Statute Can Prevent Debtors from Delaying, Hindering or Defrauding Creditors


Section 56.29 Florida Statutes provides a statutory basis authorizing a court, for the benefit of judgment creditors, to issue notice or process, adjudicate, levy, and sell assets in the hands of non-parties ("proceedings supplementary"). The statute is designed to provide a focused and expedient process to attach a judgment debtor's assets that have been transferred to non-parties to delay, hinder or defraud creditors.

Please read on to learn more about proceedings supplementary, recent changes to the law governing proceedings supplementary and a recent court decision explaining the statute of limitations applicable to proceedings supplementary. If you are a creditor, a debtor or a third party who has received property from a debtor do not hesitate to call me for assistance at (561) 953-6662.

Revision of Florida Statutes § 56.29 – Proceedings Supplementary

Effective on July 1, 2014, section 56.29, Florida Statutes, which governs proceedings supplementary, was revised to clarify existing law and provide guidance to the courts, judgment creditors and judgment debtors, as well as third parties who may be subjected to collection actions based on transfers made by judgment debtors.

Section 56.29, Florida Statutes, establishes "proceedings supplementary" to execution providing a speedy and direct means for "the holder of a valid and outstanding execution to ferret out what assets the judgment debtor may have . . . or [that others] may have received from him to defeat the collection of the lien or claim that might be subject to the execution." See Young v. McKenzie, 46 So. 2d 184, 185 (Fla. 1950); Zureikat v. Shaibani, 944 So. 2d 1019, 1022-23 (Fla. 5th DCA 2006).

Under § 56.29, a judgment creditor may (1) pursue assets held by the debtor; (2) pursue assets held by another, so long as the property is not exempt from execution; or (3) void any transfer to a spouse or third party that was made for purposes of delaying, hindering, or defrauding a creditor.

Proceedings supplementary are intended to give "the most complete relief possible in satisfying [a creditor's] judgment." Riley v. Fatt, 47 So. 2d 769, 772 (Fla. 1950). ). "The Florida courts have consistently held that [S]ection 56.29[, Fla. Stat.,] must be given a liberal construction in order to afford a judgment creditor the most complete relief possible." Pollizzi v. Paulshock, 52 So.3d 786, 789 (Fla. 5th DCA 2010).

Courts have broad powers in proceedings supplementary over personal property transferred to a third party by a debtor "'whether in the name or possession of third parties or not.'" Schwartz v. Capital City Nat'l Bank, 365 So. 2d 181, 183 (Fla. 1st DCA 1978).

Section 56.29(6)(a), shifts the burden to the defendant (or third party transferee) in proceedings supplementary to prove that a transfer made within one year before service of process is not fraudulent as to creditors. It states:

When, within 1 year before the service of process on him or her, defendant has had title to, or paid the purchase price of, any personal property to which the defendant's spouse, any relative, or any person on confidential terms with defendant claims title and right of possession at the time of examination, the defendant has the burden of proof to establish that such transfer or gift from him or her was not made to delay, hinder, or defraud creditors.

Section 56.29 provides a procedural mechanism to assist judgment creditors in reaching assets of judgment debtors, Florida's Uniform Fraudulent Transfer Act, Chapter 726, Florida Statutes ("UFTA") has codified the law concerning what constitutes a fraudulent transfer. Under section 56.29, it is the burden of the defendant to prove that a transfer was not a fraudulent transfer. The manner in which a defendant may prove that a transfer was not fraudulent is governed by case law and the UFTA. Morton v. Cord Realty, Inc., 677 So.2d 1322 (Fla. 4th DCA 1996).

Biel Reo, LLC v. Barefoot Cottages Dev. Co.

In a recent First District Court of Appeal of Florida case, Biel Reo, LLC v. Barefoot Cottages Dev. Co., ___So.3d___, 2014 WL 7010427 (Fla. 1st DCA 2014), the court held that the statute of limitations under Florida's Uniform Fraudulent Transfer Act (UFTA) did not bar the initiation of a proceeding supplementary due to the fact that a proceeding supplementary can be filed for the life of the judgment. As a result, the court held that the statute of limitations was effectively 20 years (the entire length of the judgment), and that the four year statute of limitations under the UFTA did not apply.

What is required for a judgment creditor to initiate proceedings supplementary to execution is to file a motion and an affidavit averring specific information about the judgment or judgment lien and the existence of an unsatisfied execution. § 56.29(1), Florida Statutes. When third parties are impleaded, the affidavit should also list the parties to be impleaded. Once these prerequisites are met, a judgment creditor "is entitled to the proceedings supplementary," § 56.29(1); a court cannot deny a motion that meets the statutory prerequisites. Biloxi Casino Corp. v. Wolf, 900 So. 2d 734 (Fla. 4th DCA 2005).

Revisions to § 56.29(1), Florida Statutes, clarify the court's authority to order any property of the judgment debtor, not exempt from execution, in the hands of any person, or any property, debt, or other obligation due to the judgment debtor, to be applied toward the satisfaction of the judgment debt. The court may also entertain claims concerning the judgment debtor's assets brought under the UFTA, and enter any order or judgment, including a money judgment against any initial or subsequent transferee, in connection therewith, irrespective of whether the transferee has retained the property. The amended statute further provides that the court may enter a money judgment against any impleaded defendant, irrespective of whether such impleaded defendant has retained the property, subject to sections 56.18 and 56.19, Florida Statutes, applicable equitable principles, and in accordance with Chapters 76 and 77, Florida Statutes and the applicable Florida rules of civil procedure.

Proceedings supplementary to execution on a judgment are a powerful tool for securing the fruits of the labor invested in obtaining a final judgment against a debtor. Used effectively, proceedings supplementary can make the difference between collecting and not collecting on a final judgment. It is important for both attorneys and their clients to understand proceedings supplementary which impact creditors, debtors and third parties who are or become involved in a creditor's attempt to collect on a judgment or court order when money or property is transferred to a third party before, during or after a lawsuit.

Consult Gregg H. Glickstein, P.A. for Debtor-Creditor Disputes in Boca Raton

The Boca Raton office of Gregg H. Glickstein, P.A., provides counsel and representation for creditors and debtors throughout Palm Beach County and the surrounding areas. As a Boca Raton business attorney, I know creditors' and debtors' rights and assist my clients in pursuing repayment of debts that are owed them and in any other debtor-creditor dispute. I am an AV® rated attorney by Martindale-Hubbell® and have 35 years of experience in the area of business litigation. You can trust me to protect your rights.

Contact me today at (561) 953-6662 to schedule your initial consultation.

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