Court Opinion

ID: 2783682
Source: CourtListenerOpinion
Date Created: 2015-03-03 20:04:16.759215+00
Date Added: 2024-06-11T11:02:49.960231
License: Public Domain

FIRST DIVISION
                            PHIPPS, C. J.,
                   ELLINGTON, P. J., and MCMILLIAN, J.

                   NOTICE: Motions for reconsideration must be
                   physically received in our clerk’s office within ten
                   days of the date of decision to be deemed timely filed.
                              http://www.gaappeals.us/rules/

                                                                  February 19, 2015

In the Court of Appeals of Georgia
 A14A1940. MAHALO INVESTMENTS III, LLC et al. v. FIRST
     CITIZENS BANK & TRUST COMPANY, INC.

      MCMILLIAN, Judge.

      This appeal presents an issue of first impression – whether under OCGA § 14-

11-504 (a), an order charging a member’s interest in a limited liability company with

payment of an unsatisfied judgment must be initiated as a separate action against the

limited liability company. As more fully set forth below, we discern no error in the

issuance of the charging order by the trial court that also entered judgment on the

underlying debt and therefore affirm.

      Pertinent to the issues presented here, the record shows that on August 18,

2011, appellee First Citizens Bank & Trust Company, Inc. (“FCB”) obtained a

judgment in excess of three million dollars (hereinafter referred to as the “original
judgment”) against Mahalo Investments III, LLC (“Mahalo”), Mark B. Epstein, and

Andrew Kelly (hereinafter collectively referred to as “appellants”) in the State Court

of Cobb County. Appellants appealed to this Court, and we affirmed the original

judgment without opinion pursuant to our Rule 36. See Mahalo Investments III v.

First Citizens Bank & Trust Company, Inc., 319 Ga. App. XXVII (January 24, 2013)

(unpublished opinion).1

      Following remittitur, FCB engaged in discovery in an effort to collect its

judgment. During their post-judgment depositions, both Epstein and Kelly revealed

they owned interests in several limited liability companies (the “LLCs”), and FCB

filed an application under OCGA § 14-11-504 (a) seeking an order charging their

interests in the LLCs with payment of the unsatisfied judgment. FCB filed its

application in the same court under the same file number assigned to the original civil

action in which the original judgment was rendered, and appellants opposed FCB’s

request for a charging order on the basis that, inter alia, OCGA § 14-11-504 (a)

requires the judgment debtor seeking a charging order to initiate a separate

proceeding, apart from the proceeding in which the judgment establishing the debt

      1
       Although our opinion may be found in the section listing unpublished written
opinions issued under our Rule 33 (b), we decided this case under Court of Appeals
Rule 36, which governs judgments which are affirmed without an opinion.

                                          2
was rendered. Following a hearing, the trial court issued a charging order against

appellants’ interests in the LLCs, without specifically addressing whether the

application had been properly filed in that court.

      On appeal, appellants contend the trial court erred by entering the charging

order against their interest in the LLCs as part of the same action in which the original

judgment was entered, and without first establishing that venue and jurisdiction over

the LLCs was proper.2 Appellants argue that their position is supported by both the

“statutory text and structure of the charging order remedy” as it relates to limited

liability companies, limited partnerships, and partnerships, and our Supreme Court’s

decision in Prodigy Centers/Atlanta No. 1 v. T-C Assoc., 269 Ga. 522 (501 SE2d 209)

(1998).

      We begin with the premise that in construing a statute, we look at its terms,

giving words their plain and ordinary meaning, and “[w]here the plain language of

a statute is clear and susceptible of only one reasonable construction, we must

construe the statute according to its terms.” Atlanta Independent School System v.

      2
        Appellants do not appear to contest FCB’s general entitlement to a charging
order against their interests in the LLCs.

                                           3
Atlanta Neighborhood Charter School, Inc., 293 Ga. 629, 631 (748 SE2d 884)

(2013).

         Under OCGA § 14-11-504, a judgment creditor of a member of a limited

liability company has a statutory right to collect a judgment debt from the member’s

distributional interests in a limited liability company by obtaining a charging order

and diverting payments to the creditor which would otherwise have been made to the

member. Subsection (a) of that section sets out the procedure for obtaining a charging

order:

         On application to a court of competent jurisdiction by any judgment
         creditor of a member or of any assignee of a member, the court may
         charge the limited liability company interest of the member or such
         assignee with payment of the unsatisfied amount of the judgment with
         interest. . . .

         The court that can issue a charging order is mentioned twice in this provision.

First, subsection (a) makes it clear that the application must be filed with a court of

competent jurisdiction. Appellants do not assert on appeal that the state court does not

have subject matter jurisdiction over an application for a charging order.3 The second

         3
        Although in the proceedings below appellants argued that a charging order
is an equitable remedy that can only be imposed by a superior court, they have not
pressed this argument on appeal.

                                            4
reference to court simply refers to “the court,” and grammatically refers back to the

“court of competent jurisdiction,” which received the application. Thus, under the

plain language and unambiguous language of OCGA § 14-11-504 (a), we can discern

no basis for disallowing the court that entered the underlying judgment to also enter

the charging order so long as that court is a “court of competent jurisdiction.” See

Couch v. Red Roof Inns, Inc., 291 Ga. 359, 363 (729 SE2d 378) (2012) (“Instead,

what a legislature normally does, if it wants to make sure that readers understand that

a word with a broad ordinary meaning does not include something within that

meaning, is to expressly define that thing out of the category.”).

      Appellants point to slightly different language in the Georgia Uniform

Partnership Act’s charging order provision to support their argument that the

judgment creditor must initiate an action in a separate court to obtain a charging

order. OCGA § 14-8-28 (a) provides:

      On due application to a competent court by any judgment creditor of a
      partner . . ., the court which entered the judgment, order, or decree, or
      any other court, may charge the interest of the debtor partner . . . with
      payment of the unsatisfied amount of such judgment debt with interest
      thereon. . . .

                                          5
Relying on the language “the court which entered the judgment, order, or decree,”

appellants assert that these charging order provisions must be read in pari materia

and the absence of this language in OCGA § 14-11-504 (a) means that the court that

entered the judgment is not permitted to also enter the charging order.

      Pretermitting the question of whether the charging order provisions are related

statutes for purposes of applying the in pari materia rule, we disagree that the

Georgia Uniform Partnership Act’s charging order provision has any bearing on

construing the plain and unambiguous language in OCGA § 14-11-504 (a). It has

long been held that “[e]ven statutes in pari materia may not be resorted to where the

language of the statute under consideration is clear.” Corey Outdoor Advertising, Inc.

v. Board of Zoning Adjustments of the City of Atlanta, 254 Ga. 221, 222 (1) (327

SE2d 178) (1985) (citing Ryan v. Commrs. of Chatham County, 203 Ga. 730, 732 (48

SE2d 86) (1948)).

      The reason for this rule is obvious – construing statutes together that separately

are plain and unambiguous may create ambiguities where none exist. In this case, the

Georgia Uniform Partnership Act’s charging provision specifies that the charging

order may be issued by “the court which entered the judgment, order, or decree, or

any other court.” If, as appellants argue, the absence of the language “which entered

                                          6
the judgment, order, or decree” in OCGA § 14-11-504 (a) means that such courts are

prohibited from issuing charging orders, then the same rule ought to apply to the term

“or any other court,” which is also absent from subsection (a). But construing the

statutes together to prohibit in one what is expressly mentioned in the other would

mean that under OCGA § 14-11-504 (a), no court could issue a charging order, an

absurd result that has no basis in the text.

      In addition to the statutory textual argument, appellants also assert that their

interpretation of the statute is supported by our Supreme Court’s decision in Prodigy

Centers/Atlanta v. T-C Assoc. Ltd., 269 Ga. 522 (501 SE2d 209) (1998). In Prodigy,

the issue was whether an interest in a limited liability partnership constitutes a chose

in action under Georgia law. The underlying facts were that T-C Associates (“TCA”)

first obtained a monetary judgment against Prodigy Child Development Centers

(“PCDC”) in the Superior Court of Fulton County. TCA then filed a judgment lien

and an application for a charging order against PCDC’s interests in several limited

partnerships in the Superior Court of DeKalb County. Id. at 522-523. However,

before TCA’s judgment lien was recorded or a charging order was issued, the Internal

Revenue Service filed a federal tax lien against PCDC in the Superior Court of Fulton

County. The case was subsequently removed to federal court, where the federal

                                           7
government argued that its federal tax lien should have priority over TCA’s lien

because its lien was recorded prior to TCA’s lien. On the other hand, TCA contended

it should have priority because it obtained its judgment before the federal tax lien was

filed. The government responded to this contention by asserting that the debtor’s

partnership interest is a chose in action, which requires a charging order, garnishment,

or some other collateral proceeding in order for the judgment to attach, which had not

taken place at the time the federal government filed its tax lien. The district court

granted summary judgment to TCA, and this ruling was appealed to the United States

Court of Appeals for the Eleventh Circuit, which certified the question to our

Supreme Court. Id. at 522, (citing Prodigy Centers/Atlanta v. T-C Assoc., 127 F3d

1021, 1022 (11th Cir. 1997)). Our Supreme Court answered that question in the

affirmative, supporting its conclusion in part by reference to the charging order

statutes under the limited liability partnership acts and the Georgia Uniform

Partnership Act:

      [e]ach statute provides a means by which a judgment creditor or a
      partner may cause the diversion of monetary payments the partner
      expects to receive from the partnership to the partner’s judgment
      creditor. Under both statutory schemes, the judgment creditor must
      initiate a collateral proceeding in which the creditor seeks a court order
      charging the debtor partner’s partnership interest with payment of the

                                           8
       unsatisfied amount of the judgment, or serves process of garnishment on
       the partnership. (OCGA §§ 14-9-703 (a); 14-9A-52 (a); 14-8-28 (a)). A
       judgment creditor must initiate the identical collateral proceedings in
       order to attach a lien to a chose in action. [Cit.]

Id. at 526 (4).

       Appellants argue that the Court’s use of the phrase “initiate a collateral

proceeding” means that the application for a charging order must be filed in a wholly

separate action. However, we are not persuaded that Prodigy stands for the

proposition urged by appellants. First, the question of whether an entirely new

proceeding, meaning, according to appellants, a separate proceeding under a different

case number and possibly in a different court, must be initiated by a judgment creditor

to obtain a charging order against a member’s interests in a limited liability entity was

not at issue in Prodigy. Our appellate courts have “repeatedly cautioned that our

decisions stand only for the points raised by the parties and decided by the court.

Questions which merely lurk in the record, neither brought to the attention of the

court nor ruled upon, are not to be considered as having been so decided as to

constitute precedents.” (Citations and punctuation omitted.) Holton v. Physician

Oncology Svcs., L.P., 292 Ga. 864, 869-870 (2) (742 SE2d 702) (2013).

                                            9
      Moreover, appellants’ own statutory textual argument is antithetical to its

interpretation of Prodigy. In referencing “collateral proceedings” to obtain a charging

order, Prodigy cited to the charging order statutes under the limited liability

partnership acts and the Georgia Uniform Partnership Act. But both Georgia’s

Uniform Limited Partnership Act, OCGA § 14-9A-52 (a), (“ULPA”) and Georgia’s

Revised Uniform Limited Partnership Act, OCGA § 14-9-703 (a), (“RULPA”)4

contain language similar to the language used in OCGA § 14-11-504 (a), authorizing

a judgment creditor to bring an application for a charging order in “a court of

competent jurisdiction,” or a “competent court,” respectively, and each of these

statutes refers generally to “the court” that may issue the charging order.5 In addition,

Prodigy cited the Georgia Uniform Partnership Act’s charging order provision,

OCGA § 14-8-28, which appellants rely on, without distinguishing it from the limited

      4
       Georgia’s ULPA applies to limited partnerships existing before 1988, unless
the pre-existing limited partnership elects to adopt the provisions of Georgia’s
RULPA in writing. OCGA § 14-9A-2.1; Prodigy, 269 Ga. at 524, n.1.
      5
         OCGA § 14-9A-52 (a) provides: “On due application to a court of competent
jurisdiction by any judgment creditor of a limited partner, the court may charge the
interest of the indebted limited partner with payment of the unsatisfied amount of the
judgment debt. . . .” OCGA § 14-9-703 (a) provides: “On application to a competent
court by a judgment creditor of a partner or of any assignee of a partner, the court
may charge the partnership interest of the partner or such assignee with payment of
the unsatisfied amount of the judgment, with interest. . . .”

                                           10
partnership charging order statutes, implying that the language should be read

consistently.

      Thus, the language cited by appellants in Prodigy merely confirms that, beyond

obtaining a judgment establishing a debt, a creditor must initiate an additional

proceeding, collateral to the one establishing the debt, and request a separate order

from the court to charge a debtor’s interests in a limited liability company, limited

liability partnership, or partnership. See generally Brown v. King, 266 Ga. 890, 891

(1) (472 SE2d 65) (1996) (“a contempt action to enforce court-ordered child support

payments is an independent proceeding that is ancillary to the divorce action and not

a new civil action”). And the charging order statutes further direct that the additional

proceeding be initiated by a written application filed in a court of competent

jurisdiction.

      However, that conclusion merely brings us to the ultimate issue in this case –

what is meant by a “court of competent jurisdiction” as that term is used in OCGA §

14-11-504 (a). And more specifically, whether jurisdiction and venue over the

judgment debtor and member of the limited liability company is sufficient or whether,

as appellants contend, a court is competent to issue a charging order only if

jurisdiction and venue over the limited liability company is proper.

                                          11
      As to this issue, we begin again with the charging order statute and the remedy

that it provides to a judgment creditor vis-à-vis the limited liability company. As an

initial matter, we note that OCGA § 14-11-504 (a) is silent as to whether the limited

liability company is to be made a party to the proceeding initiated by the application

for a charging order.

      Instead, subsection (a) focuses on the judgment debtor/member’s interest in the

limited liability company, limits the rights of the judgment creditor under the

charging order: “[t]o the extent so charged, the judgment creditor has only the rights

of an assignee of the limited liability company interest,” and makes it clear that “[t]his

chapter does not deprive any member of the benefit of any exemption laws applicable

to his or her limited liability company interest.” OCGA § 14-11-504 (a). See also

OCGA § 14-11-502 (concerning assignment of a limited liability company interest).

Moreover, under OCGA § 14-11-504 (b), unless provided in the articles of

organization or in a written operating agreement, “a judgment creditor shall have no

right under this chapter or any other state law to interfere with the management or

force dissolution of a limited liability company or to seek an order of the court

requiring a foreclosure sale of the limited liability company interest.” See generally

L. Andrew Immerman & Bryan N. Baird, The Georgia LLC Act: Recent

                                           12
Developments and Future Possibilities, 6 John Marshall L. J. 565, 597 (2013) (“The

amendment to section 14-11-504 (b) of the Georgia LLC Act clarifies that when a

creditor receives a judgment against a member or an assignee of an LLC interest, the

creditor is not thereby granted leave to interfere in the management of the LLC or to

take certain other actions that would be disruptive to the company’s business.”).

      We glean from these provisions that the charging order is a mechanism by

which a judgment creditor can attach a member’s limited liability company interest

to satisfy an unpaid judgment, but that the charging order does not permit the

judgment creditor to replace the member or otherwise interfere in the governance of

the limited liability company. Moreover, it is the judgment debtor’s right to

possession of distributions in the future that is essentially being levied or charged.

Thus, from the limited liability company’s standpoint, it is business as usual except

that any distributions to the member subject to the charging order are diverted to the

judgment creditor. Because the limited liability company has no right or direct

interest that is affected by the charging order, we see no reason why it must be added

as a party to the proceeding to obtain the charging order. See Bank of America, N. A.

v. Freed, 983 N.E.2d 509, 520-521 (Ill. App. Ct. 2012) (rejecting contention that a

court must obtain jurisdiction over a limited liability company or partnership in order

                                          13
to charge a judgment debtor’s distributional interest in those entities under similar

charging order statutes). Thus, we hold that under Georgia’s limited liability company

act, it is only necessary for a court to have jurisdiction over the judgment debtor to

have the authority to enter charging orders against the judgment debtor’s interest.

      In the present case, there is no contention that the court that entered the

charging order did not have jurisdiction over Epstein and Kelly. Accordingly, and

because appellants assert no other error warranting reversal, we hereby affirm the

order of the trial court charging Epstein and Kelly’s interests in the named LLCs.

      Judgment affirmed. Phipps, C. J., and Ellington, P. J., concur.

                                         14