Court Opinion

ID: 2689134
Source: CourtListenerOpinion
Date Created: 2014-08-01 15:02:23.561972+00
Date Added: 2024-06-11T15:21:15.760832
License: Public Domain

NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING
                      MOTION AND, IF FILED, DETERMINED

                                                 IN THE DISTRICT COURT OF APPEAL

                                                 OF FLORIDA

                                                 SECOND DISTRICT

WINDERTING INVESTMENTS, LLC,                     )
a Florida limited liability company, and         )
HELEN EMILY KWOK, an individual,                 )
                                                 )
              Petitioners,                       )
                                                 )
v.                                               )      Case No: 2D14-6
                                                 )
GREGORY FURNELL, an individual,                  )
DARLENE BRADEN, an individual,                   )
and JAMIE JOHNSTON, n/k/a JAMIE                  )
TANNER, an individual,                           )
                                                 )
              Respondents.                       )
                                                 )

Opinion filed August 1, 2014.

Petition for Writ of Certiorari to the Circuit
Court for Polk County; John M. Radabaugh,
Judge.

Thomas C. Saunders and Alan L. Perez
of Saunders Law Group, Bartow, for
Petitioners.

Daniel F. Pilka and Dixie T. Brady of
Pilka & Associates, P.A., Brandon, for
Respondents.

WALLACE, Judge.

              Helen Emily Kwok, a nonparty in the proceedings in the circuit court, and

Winderting Investments, LLC (Winderting), seek review by certiorari of an order denying
a motion for a protective order seeking to prevent the discovery of Mrs. Kwok's personal

financial information by three judgment creditors of KMPB Group USA, Inc. (KMPB).

Because the judgment creditors failed to establish any facts demonstrating that the

discovery of Mrs. Kwok's personal financial information was reasonably calculated to

identify or to lead to the discovery of assets that could be reached to satisfy the

judgment, we grant the writ and quash the circuit court's order.

                I. THE FACTUAL AND PROCEDURAL BACKGROUND

              In January 2005, Mrs. Kwok and Michael Kwok formed two entities in

Florida: KFSL Investments, Inc. (KFSL), and Imperial Management Group, Inc. KFSL

was converted to a limited liability company with a similar name in 2010. In May 2008,

the name of Imperial Management Group, Inc., was changed to KMPB Group USA, Inc.

For the sake of clarity, we will refer to this entity as KMPB in the remainder of this

opinion.

              The principal asset of KFSL was a hotel located in Lakeland known as the

"Imperial Swan Hotel & Suites" (the Hotel). KMPB managed the Hotel in accordance

with a written contract with KFSL. Because KMPB was a single purpose entity formed

to manage the Hotel, it had little or no hard assets. Michael Kwok served as the

registered agent and president or sole managing member of KFSL until 2010. In 2012,

Mrs. Kwok became the registered agent and sole managing member of KFSL. Mrs.

Kwok was the president of KMPB until 2011. The record does not disclose the identities

of the shareholders of these companies, but Mrs. Kwok seems to have had some

association with or connection to both of them.

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              In 2006 and early 2007, Gregory Furnell, Darlene Braden, and Jamie

Johnston, n/k/a Jamie Tanner (the judgment creditors), became employed at the Hotel.

KMPB issued the paychecks to the judgment creditors for their services. On December

8, 2008, the judgment creditors filed an action alleging a variety of employment and

related claims against "KMPB Group, USA D/B/A Imperial Swan Hotel & Suites" and

against an individual named Sherman Clark. Following service of process, the trial

court entered defaults against both defendants and subsequently conducted a nonjury

trial on damages. The judgment creditors ultimately recovered a judgment for

$3,000,773 against KMPB. Of this amount, the trial court ordered Mr. Clark to pay

$250,000 to Jamie Johnston, n/k/a Jamie Tanner.

              On March 1, 2012, at a time when the judgment remained unpaid, KFSL

executed a special warranty deed transferring ownership of the Hotel property to

Winderting. Mrs. Kwok was then the sole member/manager of KFSL and Winderting;

she was also the registered agent and the sole officer of KMPB. At this point in the

narrative, the reader should bear in mind that the judgment was entered against KMPB,

the management company, not against KFSL, the owner of the Hotel property.

              On November 6, 2012, after the judgment creditors discovered the

transfer of the ownership of the Hotel property from KFSL to Winderting, they filed an

"Emergency Motion for Temporary Restraining Order and to Appoint Receiver." In this

motion, the judgment creditors moved for the appointment of a "receiver for the Imperial

Swan Hotel & Suites to take all actions necessary to collect the judgment." The

judgment creditors also alleged that: (1) the transfer of the ownership of the Hotel is

void; (2) the Kwoks created Winderting for the sole purpose of attempting to defraud

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creditors; (3) the Kwoks were always the sole owners of the Hotel and held themselves

out as such; (4) the Kwoks were still in the possession of the Hotel; (5) Mrs. Kwok, Mr.

Kwok, KFSL, and Winderting should be impleaded as defendants in proceedings

supplementary; (6) Mrs. Kwok and Mr. Kwok dominate and control KMPB, KFSL, and

Winderting in such a way that these entities are merely the "alter egos" of each other

and are used for the personal benefit of Mrs. Kwok and Mr. Kwok; and (7) the judgment

"is enforceable and may be executed against the property currently owned by

Winderting."

               The appendices provided by the parties do not include an order

specifically granting the "Emergency Motion for Temporary Restraining Order and to

Appoint Receiver." Insofar as we can tell, the trial court did not enter a restraining order

or appoint a receiver of the Hotel property. However, on December 10, 2012, the trial

court entered an order titled "Order on Plaintiffs' Motion to Add Defendant." This order

states that Winderting is added "as a party defendant to this lawsuit." The status of

Winderting in the proceedings as a result of this order is uncertain. There is no order

reopening the underlying action or initiating proceedings supplementary under section

56.29, Florida Statutes (2012). One thing is clear—the trial court did not amend the

judgment to add Winderting or any other person or entity as a judgment debtor.

               From this point on, the parties appear to have treated the Emergency

Motion as a supplemental pleading under Florida Rule of Civil Procedure 1.190(d). The

judgment creditors commenced a new round of discovery. Here, we arrive at the

subject of the petition for certiorari filed by Mrs. Kwok and Winderting. The judgment

creditors issued subpoenas duces tecum without deposition to three nonparties. The

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subpoenas were directed to Bank of America, TD Bank, and Westpac Bank. The

subpoena to Bank of America sought all bank account records for KMPB as well as all

checking and savings account records for Mrs. Kwok from January 1, 2006, to the

present. The subpoenas to TD Bank and Westpac Bank sought only Mrs. Kwok's bank

account records for the same period.

              Mrs. Kwok1 and Winderting moved for a protective order blocking the

production of Mrs. Kwok's financial information from the three banks. No objection was

made to the production of the financial records of KMPB, the judgment debtor. In the

motion, Mrs. Kwok and Winderting observed that they had already provided "a litany of

banking information," including bank statements for every company involved in the

case. Mrs. Kwok and Winderting objected solely to the production of Mrs. Kwok's

personal financial information. After a hearing, the circuit court entered an order

denying the motion for a protective order. This petition for certiorari followed.

                    II. THE AVAILABILITY OF RELIEF BY CERTIORARI

              A petition for certiorari is appropriate to review a discovery order when the

"order departs from the essential requirements of law, causing material injury to a

petitioner throughout the remainder of the proceedings below and effectively leaving no

adequate remedy on appeal." Allstate Ins. Co. v. Langston, 655 So. 2d 91, 94 (Fla.

1995) (citing Martin-Johnson, Inc. v. Savage, 509 So. 2d 1097, 1099 (Fla. 1987)). An

order compelling the production of documents by a nonparty is reviewable by certiorari

because he or she has no adequate remedy by appeal. Price v. Hannahs, 954 So. 2d
1At   this point, Mrs. Kwok was known as Helen Emily James. In the
interest of clarity, we will continue to refer to her as Mrs. Kwok.

                                            -5-
97, 100 (Fla. 2d DCA 2007) (citing Nussbaumer v. State, 882 So. 2d 1067, 1072 (Fla.

2d DCA 2004)). Thus, in order to obtain relief, the petitioner must demonstrate a

departure from the essential requirements of law and material injury. See id. (citing

Syken v. Elkins, 644 So. 2d 539 (Fla. 3d DCA 1994), approved, 672 So. 2d 517 (Fla.

1996)).

                              III. THE APPLICABLE LAW

              Florida Rule of Civil Procedure 1.560(a) provides as follows: "In aid of a

judgment, decree, or execution the judgment creditor or the successor in interest, when

the interest appears of record, may obtain discovery from any person, including the

judgment debtor, in the manner provided in these rules." "A judgment creditor should

be allowed broad discovery into the debtor's finances." Jim Appley's Tru-Arc, Inc. v.

Liquid Extraction Sys. Ltd. P'ship, 526 So. 2d 177, 179 (Fla. 2d DCA 1988). The

matters relevant to postjudgment discovery "are concerned with information that will

enable the judgment creditor to collect the debt." Regions Bank v. MDG Frank

Helmerich, LLC, 118 So. 3d 968, 969 (Fla. 2d DCA 2013) (citing Citibank, N.A. v.

Plapinger, 461 So. 2d 1027 (Fla. 3d DCA 1985)). In cases that have already proceeded

to the entry of a money judgment,

              The creditor has the right to discover any assets the debtor
              might have that could be subject to levy or execution to
              satisfy the judgment, or assets that the debtor might have
              recently transferred. Broad discovery of a debtor's assets is
              permitted postjudgment—the debtor's assets, whether held
              individually or jointly, are relevant to collecting the debt
              owed.

Id. at 970 (citations omitted). "If a proper predicate is laid, someone other than the

judgment debtor may be required to submit to financial discovery." Gen. Elec. Capital

                                           -6-
Corp. v. Nunziata, 124 So. 3d 940, 943 (Fla. 2d DCA 2013); see also Jim Appley's Tru-

Arc, 526 So. 2d at 179 ("[W]e do agree with the trial court's rulings insofar as they

prohibited discovery into the separate income and assets of [the judgment debtor's

wife], individually, until a proper predicate has been shown.") (citing Rose Printing Co. v.

D'Amato, 338 So. 2d 212 (Fla. 3d DCA 1976)). When a judgment creditor seeks to

discover the personal financial information of a nonparty, he or she bears the burden of

proving that the information sought is relevant or is reasonably calculated to lead to the

discovery of admissible evidence. Rowe v. Rodriguez-Schmidt, 89 So. 3d 1101, 1103

(Fla. 2d DCA 2012) (citing Spry v. Prof'l Emp'r Plans, 985 So. 2d 1187, 1188-89 (Fla.

1st DCA 2008)).

                                     IV. DISCUSSION

              The trial court's order denying the motion for protective order quotes from

Dania Jai-Alai Palace, Inc. v. Sykes, 450 So. 2d 1114, 1117 (Fla. 1984), which states:

"[C]ourts will look through the screen of corporate entity to the individuals who compose

it in cases in which the corporation . . . is a mere instrumentality or agent of another

corporation or individual owning all or most of its stock." (quoting Mayer v. Eastwood,

Smith & Co. 164 So. 684, 687 (Fla. 1935)). The circuit court's reference to the Dania

Jai-Alai case is appropriate as far as it goes. However, standing alone, the circuit

court's reliance on the proposition stated in Dania Jai-Alai overlooks certain larger

principles, which are worth restating here:

                     Every corporation is organized as a business
              organization to create a legal entity that can do business in
              its own right and on its own credit as distinguished from the
              credit and assets of its individual stockholders. The mere
              fact that one or two individuals own and control the stock
              structure of a corporation does not lead inevitably to the

                                              -7-
             conclusion that the corporate entity is a fraud or that it is
             necessarily the alter ego of its stockholders to the extent that
             the debts of the corporation should be imposed upon them
             personally. If this were the rule, it would completely destroy
             the corporate entity [as] a method of doing business and it
             would ignore the historical justification for the corporate
             enterprise system.

                     We therefore hold that in order to justify the issuance
             of a rule directing individual stockholders to show cause why
             they should not be held personally accountable for the
             corporation's debts, there should be a preliminary showing
             that the corporation is in actuality the alter ego of the
             stockholders and that it was organized or after organization
             was employed by the stockholders for fraudulent or
             misleading purposes, or in some fashion that the corporate
             property was converted or the corporate assets depleted for
             the personal benefit of the individual stockholders, or that the
             corporate structure was not bona fidely established or, in
             general, that property belonging to the corporation can be
             traced into the hands of the stockholders.

                     It isn't sufficient merely to show that the corporation
             exists and that there are a limited number of stockholders
             doing business in good faith through the corporate entity.
             From a procedural standpoint we hold that a showing similar
             to that suggested in summary above be made before the
             rule nisi is issued and directed against the individual
             stockholders. If this requirement were not made then every
             judgment against a corporation could be exploited as a
             vehicle for harassing the stockholders and entering upon
             fishing expeditions into their personal business and assets.

Advertects, Inc. v. Sawyer Indus., Inc., 84 So. 2d 21, 23-24 (Fla. 1955).

             Here, the judgment creditors have not made a showing that Mrs. Kwok

formed or used KMPB, KFSL, or Winderting for the purpose of perpetuating a fraud.

Mrs. Kwok may have owned or had an interest in all three of these companies at

various times; the details are not entirely clear from the record. However, there is no

evidence that the corporate formalities for these entities were not observed or that Mrs.

Kwok improperly diverted money or other property from the corporate entities to herself.

                                           -8-
Unproven allegations containing terms such as "alter ego" and "fraud" are not a

substitute for the kind of evidence deemed essential by the Florida Supreme Court in

Advertects to hold stockholders personally liable for corporate debts. Furthermore, the

fact of the transfer of the Hotel property from KFSL to Winderting does not enlarge the

judgment creditors' rights. The judgment creditors did not sue or obtain a judgment

against KFSL. It follows that the judgment creditors were not harmed by KFSL's

transfer of the Hotel property to Winderting.

                                    V. CONCLUSION

              To summarize, the judgment creditors failed to carry their burden of

showing that the discovery of Mrs. Kwok's personal financial information was relevant or

reasonably calculated to lead to the discovery of admissible evidence. The judgment

creditors obtained their three million-dollar judgment against KMPB, a management

company that apparently had insufficient assets to satisfy the judgment. Mrs. Kwok was

associated with both KMPB and KFSL, a separate company that owned the Hotel

managed by KMPB. These facts—without more—did not give the judgment creditors

carte blanche to inquire into Mrs. Kwok's personal financial information. In order to

inquire into the personal financial information of a nonparty such as Mrs. Kwok, the

judgment creditors were required to lay a proper predicate. That predicate would

necessarily include a showing that the proposed financial discovery "would encompass

matters identifying or leading to the discovery of assets available for execution."

Nunziata, 124 So. 3d at 943 (quoting 4 Bruce J. Berman, Berman's Florida Civil

Procedure ¶ 560.03[5] (2013)). Because the judgment creditors failed to lay such a

predicate, the trial court departed from the essential requirements of law in entering the

                                           -9-
order that denied Mrs. Kwok's motion for protective order. For this reason, we grant the

writ and quash the circuit court's order.

              Writ granted; order quashed.

ALTENBERND and SLEET, JJ., Concur.

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