Court Opinion

ID: 2826944
Source: CourtListenerOpinion
Date Created: 2015-08-13 14:06:55.000309+00
Date Added: 2024-06-11T11:31:23.779730
License: Public Domain

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             DISTRICT OF COLUMBIA COURT OF APPEALS

                                 No. 14-CV-1194

                    JOHN C. FLOOD OF MD, INC., APPELLANT,

                                        v.

                         JERRY BRIGHTHAUPT, APPELLEE.

                      Appeal from the Superior Court of the
                              District of Columbia
                                (CAB-9997-11)

                       (Hon. Robert D. Okun, Trial Judge)

(Argued May 19, 2015                                   Decided August 13, 2015)

      Albert Wilson, Jr., with whom Lily A. Graves was on the brief, for appellant.

      Natalie S. Walker for appellee.

      Before FISHER and BLACKBURNE-RIGSBY, Associate Judges, and BELSON,
Senior Judge.

      BELSON, Senior Judge:      John C. Flood of MD, Inc. (Flood of MD),

appellant, appeals the denial of its emergency motion to quash a writ of attachment

and the denial of its Rule 59 (e) motion to reconsider the denial of its above-

mentioned motion. Jerry Brighthaupt, appellee, obtained and served a writ of
                                        2

attachment against Flood of MD in an attempt to satisfy a judgment rendered in his

favor against John C. Flood of D.C., Inc. (Flood of DC). Brighthaupt had reason to

believe that Flood of DC fraudulently conveyed its assets to Flood of MD to avoid

the judgment.    Flood of MD argues on appeal that, inter alia, the writ of

attachment was ineffective against it because Flood of DC, rather than Flood of

MD, was the named defendant against which judgment was rendered and that the

District of Columbia writ of attachment laws, D.C. Code § 16-501 (2012 Repl.), as

applied, violated appellant’s right to due process under the Fifth Amendment of the

U.S. Constitution. We affirm.

                                        I.

      Brighthaupt had worked some years ago for Flood of DC. In 2011, he filed

a complaint against Flood of DC alleging that it violated the D.C. Wage Payment

and Collection Act (WPCA), D.C. Code § 32-1301 (2012 Repl.). Two years later,

on October 22, 2013, the trial court entered a $12,366.08, plus costs and interest,

judgment in his favor against Flood of DC. On February 20, 2014, the trial court

entered an amended judgment of $13,602.28 (costs included), plus interest, and

$29,673.00 in fees.
                                          3

      At oral argument, Brighthaupt explained that he learned of Flood of DC’s

fraudulent conveyance through a post-judgment discovery hearing that occurred

after entry of judgment against Flood of DC, but before he obtained the writ of

attachment against Flood of MD.1 On April 8, 2014, Brighthaupt served a writ of

attachment in the District of Columbia, signed by a deputy clerk of the court, on

SunTrust Bank, Inc. (SunTrust), for two bank accounts, one each for Flood of DC

and Flood of MD, to satisfy the WPCA judgment. The writ of attachment listed

only Flood of DC as a judgment debtor. Brighthaupt did not attach an affidavit

and did not post a bond. SunTrust responded that it was holding $13,602.28 from

the Flood of MD account and increased that amount upon notification of the award

of attorney’s fees that was an additional basis for attachment.

      On May 2, 2014, Brighthaupt filed a motion for judgment of recovery and to

set aside fraudulent conveyances made to Flood of MD with the following factual

allegations:

                     5. Post-judgment discovery obtained by Plaintiff
               demonstrates that shortly before the Court’s entry of the
               Judgment against Defendants, Defendant Melville Davis,
               along with his two daughters Sherianne Mccoy ([née]

      1
         Brighthaupt did not include in the record on appeal a transcript or other
record created at the post-judgment discovery hearing.
                                          4

               Davis), President of [Flood of MD], and Joanne Smiley,
               President of [Flood of DC], incorporated a new entity,
               [Flood of MD], and transferred all of [Flood of DC’s]
               assets to the new company. Notably, all of the accounts
               receivable, such as credit card payments, which were
               previously deposited into the Suntrust account of [Flood
               of DC], were redirected to the Suntrust account of [Flood
               of MD]. As of June 2013, Defendants stopped making
               any further deposits into the Suntrust account for [Flood
               of DC].
                      6.     Defendant Melville R. Davis is controlling
               both companies, through his daughters Sherianne Mccoy
               ([née] Davis) and Joanne Smiley, and has directed the
               above fraudulent actions be undertaken to evade payment
               of Plaintiff’s judgment.
                      7.     The transfer of cash and business assets
               from [Flood of DC] to [Flood of MD] constitutes an
               unlawful fraudulent conveyance in violation of D.C.
               Code §§ 28-3101 et seq.

Brighthaupt attached several exhibits to his motion which established that, inter

alia, Flood of MD was incorporated on May 7, 2013, during the pendency of

Brighthaupt’s action, and, within two months of Flood of MD’s incorporation,

Flood of DC no longer received customer checks and credit card payments. Prior

to the abrupt end of deposits, Flood of DC regularly moved over $100,000 in

deposits per month through its account, and immediately after the abrupt end of

those deposits, Flood of MD moved over $100,000 in deposits per month through

its account.

      On May 8, 2014, Flood of MD filed an emergency motion to quash the writ
                                          5

of attachment that Brighthaupt served on its SunTrust bank account on the ground

that “a judgment creditor may not attach the assets or proceeds of a nonparty, non-

judgment debtor without an order from the Court.” The motion also stated, “Even

if we assume that plaintiff is correct [that Flood of DC fraudulently transferred

assets to Flood of MD], D.C. law still does not allow plaintiff to attach the funds in

[Flood of MD’s] bank account without a court order.” The trial court denied the

emergency motion to quash the writ of attachment and, citing D.C. Code § 16-529

(a) (2012 Repl.),2 concluded that a “[p]laintiff is permitted by D.C. law to attach

property in the hands of another party when he believes that the property was

fraudulently conveyed.”

      After considering Flood of MD’s subsequent Rule 59 (e) motion to alter or

amend judgment—arguing that the trial court improperly relied on D.C. Code

§ 16-529 and that Brighthaupt should have filed an affidavit and posted a bond

before the clerk’s office issued the writ of attachment—the trial court entered an

omnibus order on October 1, 2014, denying the motion to alter judgment. The trial

      2
        “(a) Where the ground upon which an attachment is applied for is that the
defendant has assigned, conveyed, or disposed of his property with intent to hinder,
delay, or defraud his creditors, the attachment may be levied upon the property
alleged to be so assigned or conveyed in the hands of the alleged fraudulent
assignee or transferee, as a garnishee.” D.C. Code § 16-529.
                                          6

court changed its analysis, shifting its reliance from § 16-529 to D.C. Code § 16-

547 (2012 Repl.), set forth on page *10 infra, to deny the motion to alter judgment.

It reasoned that the writ of attachment could attach where assets are held by “the

garnishee in the name of or for the account of a person other than the defendant,”

which would include Flood of MD’s SunTrust account.

      The trial court upheld the efficacy of the writ in its November 11, 2014

order, finding that Flood of DC “transferred its business and all of its assets to

Flood [of] MD with an ‘intent to hinder, delay or defraud any creditor of the

debtor.’” This finding allowed Brighthaupt to execute the judgment for recovery

against Flood of MD, although the original judgment was against Flood of DC.

Flood of MD appeals both the July 21, 2014, (initial) and October 1, 2014,

(omnibus) orders, but not the November 11, 2014, order.3

      3
          Even though the trial court granted Brighthaupt’s motion to execute its
judgment against Flood of DC on Flood of MD, a ruling that Flood of MD does not
appeal, this appeal is not moot because Flood of MD may be entitled to costs and
reasonable fees from Brighthaupt if the writ of attachment was improperly issued.
D.C. Code § 16-529 (a) (“[T]he attachment may be levied upon the property
alleged to be so assigned or conveyed in the hands of the alleged fraudulent
assignee or transferee, as a garnishee.” (emphasis added)); D.C. Code § 16-551
(2012 Repl.) (“A garnishee or stranger to the action who may make claim to the
property attached may file an answer defending against the attachment.”); D.C.
Code § 16-553 (2012 Repl.) (“[W]here judgment is rendered for the garnishee, the
plaintiff shall be adjudged to pay to the garnishee, in addition to the taxed costs, a
reasonable attorney’s fee.”); see Corto v. Nat’l Scenery Studios, Inc., 705 A.2d
                                                                        (continued…)
                                          7

                                         II.

      We first address Flood of MD’s argument that the trial court improperly

denied appellant’s emergency motion to quash the writ of attachment because a)

the writ attached the bank account of a non-party transferee without a court order

b) the trial court improperly relied on D.C. Code § 16-547 when denying the

motion to quash and c) the writ did not name Flood of MD on the writ itself.

Given that Flood of MD did not properly present the third issue to the trial court,4

 (…continued)
615, 621 n.10 (D.C. 1997) (“Although we agree that the property that was subject
to the writ can no longer be affected by a ruling of this court, we cannot conclude
that the issue is necessarily moot, . . . . It may be that the Kennedy Center’s claim
against Corto for expenses and fees it incurred in responding to the writ of
attachment could be affected if the writ had been improperly issued.”).
      4
          Flood of MD seems to concede that the third argument was not raised
before the trial court and therefore should not be addressed on appeal; however,
Flood of MD counters its own concession and argues that this issue is purely one
of law and was “passed upon” by the trial court, thus warranting consideration by
this court. Flood of MD then goes on to list every tangentially-related instance
where it raised defects with the writ of attachment. Flood of MD presents five
examples where the trial court “passed upon” the issue. The first three examples
are actually citations not to an argument, but rather to a “Material Facts” section of
Flood of MD’s Emergency Motion to Quash Writ of Attachment. The fifth
example is equally unavailing because it cites to a passing reference in Flood of
MD’s Motion to Alter or Amend Judgment which was not sufficient to place the
trial court on notice that it intended to challenge the writ for failing to name Flood
of MD on the writ itself. See Jenkins v. United States, 483 A.2d 660, 662-63 (D.C.
1984) (“We find unpersuasive appellant’s contention that his IAD claims were
                                                                          (continued…)
                                         8

we address only a combination of the first and second arguments: whether a post-

judgment writ of attachment obtained pursuant to § 16-547 can reach the assets of

a transferee when the creditor has a reason to believe that a fraudulent transfer

occurred. We answer in the affirmative and accordingly affirm the trial court’s

orders.

      The law of the District reflects a fundamental distinction in writs of

attachment: those obtained before judgment and those obtained after judgment.

The pre- and post-judgment writ of attachment distinction is important because it

balances two competing economic interests—protection of innocent parties from

unlawful attachment on the one hand and a creditor’s easy access to a debtor’s

assets on the other. Writs obtained before judgment are issued in anticipation of

litigation and those obtained after judgment are issued to enforce a judgment.

 (…continued)
preserved for appeal . . . . Although appellant’s memorandum supporting his
motion to suppress cited two IAD cases and mentioned his right to contest his
transfer under the Agreement, we are of the belief that appellant’s vague references
to the IAD were insufficient to place the trial court on notice . . . .”). The fourth
example, a citation to the argument section of Flood of MD’s motion to quash is
sufficient to preserve only the first issue—Flood of MD’s argument that “the writ
of attachment must be quashed because plaintiff attached the assets of a nonparty,
non-judgment debtor without a court order.”

      Given that Flood of MD failed to allege before the trial court that the writ of
attachment was ineffective because it did not list Flood of MD on its face, we
decline to consider it on appeal. The trial court did not “pass” on this issue.
                                         9

Generally speaking, pre-judgment writs of attachment are available only in limited

circumstances because of the significant risk of improper attachment. Moreover, a

creditor must comply with additional procedural safeguards, such as filing an

affidavit and posting a bond to protect the debtor against an unlawful writ, before

executing the pre-judgment writ of attachment. Post-judgment writs of attachment

are more freely available, without such procedural safeguards, because the risk of

an unlawful attachment is much lower given that a factfinder has already found in

favor of the creditor. The circumstances of this case raise the question of whether

a writ of attachment that includes the bank account number of a nonparty, in the

absence of a judicial finding of a fraudulent conveyance, should be treated as a pre-

judgment writ of attachment obtained against a new party or may be treated as a

post-judgment writ of attachment obtained against a transferee that is fraudulently

holding assets for a debtor.

      The chapter of the D.C. Code governing writs of attachment is divided into

three subchapters:    Subchapter I, “Attachment and Garnishment Generally”;

Subchapter II, “Attachment and Garnishment After Judgment in Aid of

Execution”; and Subchapter III, “Attachment and Garnishment of Wages, Etc.”

D.C. Code §§ 16-501-33 (Subchapter I); D.C. Code §§ 16-541-56 (Subchapter II);

D.C. Code §§ 16-571-84 (Subchapter III). Subchapter I applies to all civil actions
                                        10

for the recovery of specific personal property, a debt, or damages for the breach of

contract. D.C. Code § 16-501 (a) (2012 Repl.). Subchapter II applies after a

judgment is rendered. D.C. Code § 16-541 (2012 Repl.). Subchapter III applies to

the garnishment of wages and related procedures, and thus is not applicable in the

instant case. See D.C. Code § 16-571 (2012 Repl.). Given the scope of each

subchapter, Subchapters I and II appear to overlap. We do not attempt a broad

resolution of any potential overlap in coverage, but instead focus our analysis on

§ 16-547, the provision the trial court ultimately relied upon in denying the motion

to quash the writ of attachment.

      D.C. Code § 16-547 is located in Subchapter II, titled “Attachment and

Garnishment After Judgment in Aid of Execution.” It reads:

             Where the property or credits attached or sought to be
             attached are held by the garnishee in the name of or for
             the account of a person other than the defendant, the
             garnishee shall retain the property or credits during the
             period pending determination by the court of the
             propriety of the attachment or the rightful owner of the
             property or credits. During that period the garnishee
             shall incur no liability whatsoever for the retention.
                                        11

D.C. Code § 16-547. There is another provision, D.C. Code § 16-511 (b) (2012

Repl.),5 identical to § 16-547, that is located in Subchapter I (Attachment and

Garnishment Generally). The enactment of these dual provisions suggests that

§ 16-511 (b) is designed to apply to pre-judgment writs of attachment and § 16-547

is designed to apply to post-judgment writs of attachment.

      Given the language of § 16-547, it follows that a post-judgment creditor

must be allowed to attach the assets of a non-party when it has reason to believe

that a fraudulent conveyance occurred. As a general proposition, a court order

establishing the ownership of property is not needed prior to executing a post-

judgment writ of attachment against a debtor’s property in possession of a third-

party and thus is properly treated as still owned by the debtor. Compare D.C.

Code § 16-501 (pre-judgment), with D.C. Code § 16-542 (2012 Repl.) (post-

judgment).   The execution of the writ of attachment would set in motion

proceedings that would allow the third-party to contest the ownership of the

property and allege that the writ of attachment was unlawfully issued. D.C. Code

      5
          “(b) Where the property or credits attached or sought to be attached are
held by the garnishee in the name of or for the account of a person other than the
defendant, the garnishee shall retain the property or credits during the period
pending determination by the court of the propriety of the attachment or the
rightful owner of the property or credits. During that period, the garnishee shall
incur no liability for the retention.” D.C. Code § 16-511 (b).
                                         12

§ 16-551 (“A garnishee or stranger to the action who may make claim to the

property attached may file an answer defending against the attachment.          The

answer may be considered as raising an issue without any reply, and any issue of

fact thereby made may be tried with a jury if any party so desires.”); cf. Hegna v.

Islamic Republic Of Iran, 376 F.3d 226, 234 (4th Cir. 2004) (applying Maryland

law). We see no reason that assets fraudulently conveyed, and thus still owned by

the debtor, to a transferee should be exempt from post-judgment writs of

attachment on the ground that a court had not previously decided the ownership of

the asset in question, given that ownership of the property could promptly be

questioned in any case involving a third party.

      Flood of MD’s contrary argument that § 16-547 is designed to protect a

garnishee when a creditor seeks to enforce a writ of attachment on a joint

account—such as a bank account held by a debtor and a spouse—is not persuasive.

Flood of MD is correct in that § 16-547 does provide protections to a garnishee,

but this provision does not govern jointly-owned property. Instead of stating

“jointly owned,” the statute instead covers property held “in the name of or for the

account of a person other than the defendant,” which suggests only one owner.

D.C. Code § 16-547. This reading of § 16-547 is bolstered by again looking to

other provisions of the D.C. Code. A different provision, § 16-514, applies when
                                          13

“the garnishee holds a credit or property for two or more persons, including the

person whose credit or property is sought to be attached . . . .” This wording

indicates that it applies to jointly-owned property. D.C. Code § 16-514 (2012

Repl.). There is no analogous provision under Subchapter II, so this provision

apparently applies to both pre- and post-judgment writs of attachment.            The

language of the provision does not suggest otherwise.

      At oral argument, Flood of MD presented for the first time another

counterargument—Brighthaupt should have sought remedies under the D.C.

Uniform Fraudulent Transfer Act, to set aside the conveyance, as opposed to

executing a writ of attachment on the assets of a transferee. We do not consider

this argument as it was raised for the first time at oral argument, but it is useful to

an understanding of the statute governing writs of attachment to explain briefly the

interplay between the D.C. Uniform Fraudulent Transfer Act and post-judgment

writs of attachment.

      The D.C. Uniform Fraudulent Transfer Act of 1995, D.C. Law 11-83, D.C.

Code § 28-3101-11 (2012 Repl.), provides several remedies for judgment
                                        14

creditors.6 As stated in subsection (a)(2), a creditor may utilize § 16-547 and

execute a post-judgment writ of attachment on transferees to reach fraudulently

conveyed assets. The attachment and fraudulent conveyance statutes are designed

to work in tandem to provide a strong remedy against debtors who seek to

fraudulently convey assets, and should be applied accordingly.

      Under the circumstances, we are satisfied that Brighthaupt followed a

correct procedure by attempting to execute a post-judgment writ of attachment

against Flood of MD on the ground that he believed Flood of DC had fraudulently

conveyed its assets to Flood of MD. While there may be some risk that permitting

the use of this procedure may open the door to improper use by creditors of the

generous post-judgment writ of attachment procedure to the detriment of non-

      6
          “(a) In an action for relief against a transfer or obligation under this
chapter, a creditor, subject to the limitations in section 28-3108, may obtain:

            (1) Avoidance of the transfer or obligation to the extent necessary
            to satisfy the creditor’s claim;
            (2) An attachment or other provisional remedy against the asset
            transferred or other property of the transferee in accordance with the
            procedure proscribed by sections 16-501 through 16-584;
            (3) Subject to applicable principles of equity and in accordance
            with applicable rules of civil procedure. . . .

       (b) If a creditor has obtained a judgment on a claim against the debtor, the
creditor, if the court so orders, may levy execution on the asset transferred or its
proceeds.” D.C. Code § 28-3107 (2012 Repl.).
                                        15

parties, the likelihood of such misuse of the procedures to satisfy a judgment is

minimized because it exposes overzealous creditors to potential penalties in the

form of damages and attorney’s fees for improper attachment. D.C. Code § 16-

553. The requirement of obtaining a judgment against the original debtor, and the

penalty provision for unlawfully attaching assets, should sufficiently deter a

judgment creditor from attaching the assets of innocent third parties. Accordingly,

we are satisfied that the trial court properly relied on § 16-547 to deny the motion

to quash Brighthaupt’s execution of a writ of attachment on Flood of MD’s bank

account.

                                        III.

      Flood of MD next argues, again for the first time on appeal, that the

District’s writ of attachment laws, as applied to Flood of MD, violated Flood of

MD’s right to due process under the Fifth Amendment of the United States

Constitution. Specifically, Flood of MD contends that its right to due process, as

established in Connecticut v. Doehr, 501 U.S. 1 (1991), was violated because D.C.

law “required (1) no advance notice to the property owner; (2) no opportunity to be

heard before the attachment; (3) no posting of a bond; or (4) no judicial review
                                         16

before the approval of a pre-judgment attachment.”7 Even though Brighthaupt

does not argue that Flood of MD forfeited this argument by failing to raise it before

the trial court,8 we rule sua sponte that Flood of MD did so. Given the fact-

specific nature of an as-applied due process challenge, we see no reason to depart

from the well-established appellate principle that we do not decide issues on appeal

that were “neither raised nor decided” in the trial court. Miller v. Avirom, 127 U.S.

App. D.C. 367, 369, 384 F.2d 319, 321 (1967).

      7
          Doehr applies only to pre-judgment writs of attachment. Flood of MD
makes no argument about how its due process rights were violated in light of
Griffin v. Griffin, 327 U.S. 220, 233-34 (1946), which addressed post-judgment
writs of attachment.
      8
           Brighthaupt’s brief on appeal addressed the merits of an as-applied due
process challenge to the November 2014 order, which Flood of MD did not raise in
the trial court. In addition, Brighthaupt does not argue that Flood of MD failed to
raise the due process argument before the trial court.

       Flood of MD did raise a facial due process challenge before the trial court,
but a facial due process challenge is not sufficient to preserve an as-applied due
process challenge on appeal. See Pickelman v. Mich. State Police, 31 F. App’x
298, 303 (6th Cir. 2002) (unpub.) (“[W]e are ill-equipped to address [the as-
applied and other] challenges because the record below is not developed in those
areas and lacks crucial facts needed to determine these claims.”); DeRose v. United
States, 315 F.2d 482, 487 (9th Cir. 1963) (“One who asserts that a statute,
particularly one that has been held valid in other cases, is invalid when applied to
his case, has a duty to make a record that will properly present the point.”).
                                      17

                                   *****

      For the foregoing reasons, we affirm the trial court’s denial of Flood of

MD’s emergency motion to quash the writ of attachment and subsequent motion to

reconsider.

                                    So ordered.