Court Opinion

ID: 4271036
Source: CourtListenerOpinion
Date Created: 2018-04-30 15:06:08.219223+00
Date Added: 2024-06-11T14:33:26.046883
License: Public Domain

FIRST DISTRICT COURT OF APPEAL
                STATE OF FLORIDA
                 _____________________________

                         No. 1D17-1327
                 _____________________________

JOHN G. SCHANCK,

    Appellant,

    v.

WILLIAM M. GAYHART and
DEBRA L. BUCHANAN, as Co-
Personal Representatives of the
Estate of Myong-He Gayhart,

    Appellees.
                 _____________________________

On appeal from the Circuit Court for Duval County.
Hugh A. Carithers, Judge.

                         April 30, 2018

B.L. THOMAS, C.J.

     Appellant argues that the trial court exceeded its authority
and improperly exercised jurisdiction over assets located outside
of Florida. The court ordered Appellant to cancel, reissue, and
turn over to his former wife’s estate stock and membership
certificates in Stellar Recovery, Inc., and DataSignals, LLC,
Florida business entities owned solely by Appellant. Because we
conclude the trial court was within its legal and equitable
authority to aid the Estate in executing a monetary judgment
against Appellant, we affirm.
                         I. BACKGROUND

     In 2015, the marriage between Appellant and his late wife
Myong-He Gayhart was dissolved by Consent Final Judgment.
Gayhart waived alimony and claims to her share of certain
assets, including any interest in Stellar Recovery, Inc., in
exchange for an equalizing payment of $2.5 million, to be paid by
Appellant in monthly installments. Thus, Appellant was able to
retain 100% interest in Stellar.

    As Gayhart was terminally ill, the settlement agreement
specifically provided that the payments would survive her death
and could be enforced by her estate. But following Gayhart’s
death, Appellant failed to make payments to the Estate. A
judgment for $207,862.64, covering five consecutive missed
payments, was entered December 20, 2016. Appellant paid this
judgment on February 9, 2017, but by that time had failed to
make payments due in January and February 2017, and a second
judgment for $74,475.81 was entered on February 27, 2017.

     At his deposition in February 2017, Appellant testified that
he did not know where the stock certificates were located. The
Estate then filed a motion seeking a court order to aid in
executing the judgment against Appellant. The motion requested
that the court order Appellant to turn over the stock and
membership certificates in Stellar Recovery, Inc. and
DataSignals, LLC, and that if the certificates had been lost or
were unable to be located, to order Appellant to reissue the
certificates and turn them over to the Estate.

     Appellant did not appear at the hearing on the Estate’s
motion, but the parties stipulated to his affidavit his testimony.
Appellant asserted that in December 2016 or January 2017, the
Stellar and DataSignals certificates had been transported to his
new wife’s residence in Canada. Although this change in location
occurred only weeks before Appellant’s deposition, where he
testified that he did not know where the certificates were located,
he provided no explanation for his change in testimony.
Appellant’s counsel stated that she had only recently learned the
certificates were in Canada and that the location was “a surprise
to all of us.”

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     Appellant’s counsel conceded that the law permitted a
creditor to take a debtor’s interests in a single-member LLC or a
corporation fully owned by the debtor, but contended that,
because the certificates were located outside Florida, the court
lacked jurisdiction. Appellant further argued that because the
certificates were in a foreign jurisdiction, the Estate was required
to seek relief in the foreign jurisdiction. The Estate argued that,
while the court did not have in rem jurisdiction over the
certificates, it had in personam jurisdiction over Appellant and
could order him to take action with respect to the certificates.
The Estate relied on section 678.1121(5), Florida Statutes, which
broadly authorizes the court to give aid to a creditor to reach a
certificated security interest.

     The court, concluding that the certificates “could not be
located,” and disagreeing with Appellant that a “loophole in the
law” required the Estate to pursue the certificates in other
jurisdictions, ordered Appellant to cancel the existing stock and
membership certificates in Stellar and DataSignals, reissue them
in his name, and deliver them to counsel for the Estate. In his
motion for rehearing and reconsideration, Appellant argued that
Stellar and DataSignals were necessary parties to effectuate the
court’s order and that there was insufficient evidence that he had
the authority or ability to personally cancel and reissue the
certificates. The court denied the motion and this appeal follows.

                           II. ANALYSIS

     Appellant first argues the relief granted violates due process
because it was not requested in the Estate’s motion. Second, he
argues that the court lacked jurisdiction to take action affecting
the certificates and that section 678.1121, Florida Statutes, does
not authorize the reissuance of stock and membership
certificates. Finally, Appellant argues that he cannot personally
effectuate the court’s order, and that Stellar and DataSignals
were necessary parties.

                          A. Due Process

    It is well-settled that where a particular form of relief is not
requested by the parties and the matter is not tried by consent,
the granting of such relief violates due process. See, e.g.,
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Wachovia Mortg. Corp. v. Posti, 166 So. 3d 944, 945 (Fla. 4th
DCA 2015). In its motion, the Estate requested that if the
certificates “have been lost or cannot be located,” such that
Appellant could not be compelled to turn them over, the court
order their reissuance. Appellant contends that, because he
disclosed the location of the certificates before the hearing, and
the Estate had not specifically requested reissuance of
certificates at a known location outside the court’s jurisdiction, he
was not on notice that the relief of cancellation and reissuance
could be granted.

     The Estate requested cancellation and reissuance as an
alternative remedy if its primary request that the court order
Appellant to turn over the certificates could not be effected.
Appellant then changed his testimony to reveal the supposed
location of the certificates, and argued this deprived the court of
jurisdiction to order him to turn them over. * Appellant cannot
legitimately contend that he was without notice of this possible
remedy. See Cruz v. Domenech, 905 So. 2d 938, 940 (Fla. 3d DCA
2005) (explaining that the issue of whether a particular form of
relief has been properly invoked “must be guided by whether the
pleadings provided the parties with sufficient notice that matters
related to such relief would be at issue, and by the breadth and
context of the hearing which grows out of those pleadings”). We
hold that the order complied with due process.

             B. Jurisdiction and Statutory Authority

     Appellant’s substantive argument is that the court lacked
jurisdiction to take action with respect to the certificates located
in Canada, and that even if it had jurisdiction, it lacked authority
under section 678.1121 to order their reissuance.

    Appellant relied below on Sargeant v. Al-Saleh, 137 So. 3d
432 (Fla. 4th DCA 2014), for the proposition that, despite having

    *   As discussed further below, the court did have personal
jurisdiction over Appellant to order him to turn over the
certificates, notwithstanding their location in Canada, but it also
had authority to order the alternative remedy of cancellation and
reissuance.

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personal jurisdiction over a debtor, the court cannot order the
debtor to turn over assets located outside the state. In Sargeant,
the Fourth District reversed a judgment compelling the turnover
of stock certificates located in foreign countries, concluding that
the lower court lacked in rem jurisdiction over the certificates,
and that the in personam jurisdiction over the debtors did not
confer upon the court the power to enter an order affecting the
certificates. Id. at 434-35.

     Although the Estate argued that a court may use its
personal jurisdiction to order a defendant to act on foreign
property, the trial court was persuaded by Sargeant and believed
it could not direct Appellant to return the certificates to Florida
and turn them over to the Estate. Instead, the court determined
it could grant the alternative relief of cancellation and
reissuance. Appellant argues that, under Sargeant, the court
lacked jurisdiction to order action affecting the certificates in this
alternative manner for the same reason it could not order him to
return them, i.e., the court lacked in rem jurisdiction.

     This Court has recognized that it is permissible for a trial
court to direct a defendant over whom it has personal jurisdiction
to act on property located outside its jurisdiction, if the title to
the property is not directly affected while the property remains in
the foreign jurisdiction. See, e.g., Ciungu v. Bulea, 162 So. 3d
290, 294 (Fla. 1st DCA 2015). In Ciungu, this Court held that a
probate court had authority to direct a party to effect distribution
of property located in Romania by virtue of its personal
jurisdiction over the party:

    ‘It has long been established . . . 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.’

Id. (quoting Gen. Elec. Capital Corp. v. Advance Petroleum, Inc.,
660 So. 2d 1139, 1142 (Fla. 3d DCA 1995)) (emphasis in original).

    In General Electric, the Third District affirmed an order
requiring a lien debtor to return an aircraft to Florida based on
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the court’s personal jurisdiction over the debtor. 660 So. 2d at
1142-43. The Third District explained that “the trial court’s
proper assertion of in personam jurisdiction over GECC entitles
the court to act on GECC’s possessory interest over the aircraft
without directly acting on the aircraft itself.” Id.

     In reaching the opposite conclusion in Sargeant, the Fourth
District recognized the holding of the Third District in General
Electric, but attempted to distinguish General Electric on grounds
that the creditor there had a perfected lien on the property at
issue. 137 So. 3d at 434-35. But this Court made no such
distinction when relying on General Electric in Ciungu, nor do we
see a basis to do so here. Rather, as in General Electric and
Ciungu, the action directed here, to a party over whom the court
had undisputed personal jurisdiction, did not directly affect title
to the assets while they remained outside the court’s jurisdiction.
See Ciungu, 162 So. 3d at 294. Accordingly, while the only issue
before us is whether the court properly ordered the alternative
relief of reissuance, we observe that the court had jurisdiction to
either order Appellant to return or reissue the certificates, as
neither remedy would directly affect title to the certificates while
they remained in Canada. See id.

     Appellant contends, however, that even if the certificates
were within the court’s jurisdiction, there is no express authority
in section 678.1121, Florida Statutes, whereby the court can
order the cancellation and reissuance of stock and membership
certificates. Section 678.1121 outlines the procedure by which a
creditor may reach a debtor’s security interests:

    (1) The interest of a debtor in a certificated security may
    be reached by a creditor only by actual seizure of the
    security certificate by the officer making the attachment
    or    levy,    except    as     otherwise     provided   in
    subsection (4). . . .

    ...

    (4) The interest of a debtor in a certificated security for
    which the certificate is in the possession of a secured
    party . . . may be reached by a creditor by legal process
    upon the secured party.
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    (5) A creditor whose debtor is the owner of a certificated
    security . . . is entitled to aid from a court of competent
    jurisdiction, by injunction or otherwise, in reaching the
    certificated security . . . or in satisfying the claim by
    means allowed at law or in equity in regard to property
    that cannot readily be reached by other legal process.

(Emphasis added.)

     Appellant argues that section 678.1121 requires actual
seizure of the certificates and does not authorize a court to order
cancellation and reissuance. As Appellant notes, the Fourth
District found no statutory basis for reissuance of a certificate
taken outside the court’s jurisdiction by a judgment debtor.
Florida Boca Raton Hous. Ass’n, Inc. v. Malone, 325 So. 2d 22, 23
(Fla. 4th DCA 1976). The Malone court concluded that, although
the securities were wrongfully taken outside the court’s
jurisdiction, “in an attempt to circumvent the rights of the
judgment creditor, there is no legal or decisional basis for the
court to order the reissue of a new stock certificate.” Id.

     However, the Fifth District later disagreed with the Malone
decision, concluding that where one debtor refused to respond to
discovery and the other indicated she did not know where the
stock was, the trial court could order the corporation to reissue
the stock certificate. House v. Williams, 573 So. 2d 1012, 1012
(Fla. 5th DCA 1991). The Fifth District concluded that the broad
statutory language allowing a creditor to seek aid from the court
“by injunction or otherwise, in reaching the security or in
satisfying the claim by means allowed by law or in equity in
regard to property that cannot readily be reached by ordinary
legal process,” authorized the court to require reissuance of the
certificates. Id. at 1012-13.

     Appellant attempts to distinguish House based on the fact
that the location of the certificates was unknown in that case,
while here their location had been disclosed, albeit in
contradiction to Appellant’s sworn deposition testimony. We
decline to distinguish House on that basis. As in House, the
securities here could not “readily be reached by ordinary legal
process,”—that is, by seizure of the certificates. We hold that
section 678.1121(5) authorizes a court to aid the creditor “in
                                7
reaching the security or in satisfying the claim by means allowed
by law or in equity,” including by ordering their reissuance,
regardless of whether securities cannot be seized because their
location is unknown or because the debtor has attempted to move
them outside the court’s reach,

              C. Impleader of the Business Entities

     Finally, Appellant argues that because stock and
membership certificates are issued by a corporation or limited
liability company, not by shareholders or members, see sections
607.0603(1) and 605.0502(4), Florida Statutes, the court was
required to direct its order to Stellar and DataSignals rather
than to him, and these entities needed to be made parties to the
case. We disagree.

     The issuer of a certificated security must reissue a certificate
upon request from the owner of the certificate. See § 678.4051,
Fla. Stat. (providing procedure for reissuance of a lost, destroyed,
or wrongfully taken security certificate). Appellant undisputedly
owns and controls 100% of both Stellar and DataSignals.
Notably, when Gayhart sought to add Stellar as a party during
the dissolution proceedings, Appellant represented that he
would—and thus could—provide discovery on Stellar’s behalf “as
if Stellar were a party” to the action. As such, we reject
Appellant’s contention he lacks the ability to comply with the
court’s order, both on statutory and equitable grounds.

                         III. CONCLUSION

     The trial court properly exercised its personal jurisdiction
over Appellant to order relief authorized under the broad
language of section 678.1121(5), Florida Statutes. Appellant is
capable of complying with the court’s order and had sufficient
notice that reissuance of the certificates was a potential remedy.

    AFFIRMED.

BILBREY and JAY, JJ., concur.

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                _____________________________

    Not final until disposition of any timely and
    authorized motion under Fla. R. App. P. 9.330 or
    9.331.
               _____________________________

Stephanie A. Sussman of Bledsoe, Jacobson, Schmidt, Wright &
Sussman, Jacksonville; Gideon I. Alper and Jonathan B. Alper of
Alper Law, PLLC, Oviedo, for Appellant.

Paul J. Battista, William Barry Blum and Heather L. Harmon of
Genovese Joblove & Battista, P.A., Miami, for Appellees.

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