In 2014, Florida’s Fourth District Court of Appeal in Sargeant v. Al-Saleh held that a trial court does not have authority to order a debtor to turn over stock certificates located abroad in order to satisfy a judgment under Fla. Stat. § 56.29(6), which reads as follows:
The court may order any property of the judgment debtor, not exempt from execution, or any property, debt, or other obligation due to the judgment debtor, in the hands of or under the control of any person subject to the Notice to Appear, to be levied upon and applied toward the satisfaction of the judgment debt. The court may enter any orders, judgments, or writs required to carry out the purpose of this section, including those orders necessary or proper to subject property or property rights of any judgment debtor to execution, and including entry of money judgments as provided in ss. 56.16-56.19 against any person to whom a Notice to Appear has been directed and over whom the court obtained personal jurisdiction irrespective of whether such person has retained the property, subject to applicable principles of equity,
The highly criticized decision in Sargeant fell out of line with a long-established principle—recognized by the US Supreme Court and several states, including Florida—that courts with personal jurisdiction over a defendant may order that defendant to act on property located outside of the court’s jurisdiction so long as the court does not affect title while the property remains in the foreign jurisdiction. But in May of 2022—nearly eight years later—the Florida Supreme Court in Shim v. Buechel rejected the decision in Sargeant. Instead, in Shim, the Florida Supreme Court held that Fla. Stat. § 56.29(6) provides trial courts the authority to act on any property, including property located abroad.
Proceedings Supplementary and Sargeant
In Florida, proceedings supplementary have been defined as “useful, efficacious, and salutary remed[ies] at law” which allow judgment creditors to discover assets that may be subject to the judgment, allowing a “speedy and direct proceeding in the same court in which the judgment was recovered.” Notably, Fla. Stat. § 56.29(6) provides in part that “[t]he court may order any property of the judgment debtor, not exempt from execution . . . in the hands of or under the control of any person . . . to be applied toward the satisfaction of the judgment debt” (emphasis added). But judgment creditors faced a virtually insurmountable obstacle after the Sargeant decision.
In Sargeant, Plaintiff Mohammad Anwar Farid Al-Saleh moved for commencement of proceedings supplementary to execution pursuant to Fla. Stat. § 56.29(5) (the text of which has since been transferred to § 56.29(6)) after obtaining a $28 million judgment against Defendants Harry Sargeant III, Mustafa Abu-Naba’a, and International Oil Trading Company, LLC. The plaintiff sought stock certificates located in the Bahamas, the Netherlands, Jordan, the Isle of Man, and the Dominican Republic to satisfy the judgment. The defendants opposed the motion, arguing, inter alia, that there is no legal basis to compel the production of certificates of foreign entities and that the laws of the foreign states do not permit the plaintiff to enforce the court’s judgment. In support, they cited affidavits written by foreign lawyers in the target jurisdictions, which stated that their respective jurisdictions did not recognize US judgments. The trial court entered an order granting the plaintiff’s motion, which the defendants appealed.
On appeal, the defendants focused on case law that supported their central argument in the lower court: because Florida courts have no jurisdiction over property located outside of the state, the plaintiff must use the foreign jurisdictions’ applicable law. The plaintiff, in turn, challenged a point ignored by the defendants: the trial court has personal jurisdiction over the defendants and, therefore, has the power to enter an order compelling the turn-over of the certificates. The defendants argued that the plaintiff’s personal jurisdiction argument is “not the law,” citing the 1976 Florida Fourth DCA case Fla. Boca Raton Hous. Ass’n, Inc. v. Malone which analyzed the issue of “whether the court had authority to order the issuer [of a lost or unaccounted for stock certificate] to issue a new certificate in place of the original certificate which was outside the jurisdiction of the court” (emphasis added). This argument was inapposite at best, as the plaintiff in Sargeant sought the handover of currently existing stock certificates, not the issuance of new certificates.
The court in Sargeant began its analysis by stating that Florida courts do not have in rem or quasi in rem jurisdiction over foreign property. The court then cited the 1995 Florida Third DCA decision General Electric Capital Corp. v. Advance Petroleum, Inc which tracked the plaintiff’s argument. The court quoted directly:
It has long been established in this and other jurisdictions 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 (emphasis added).
The court went on to distinguish General Electric from Sargeant, stating that the creditor in General Electric “had a perfected lien on the property that the trial court ordered the debtor to return to the State of Florida.”
The court also analyzed Koehler v. Bank of Bermuda Ltd (2009), a case in which the New York Court of Appeals considered whether a New York court may order a bank over which it has personal jurisdiction to deliver stock certificates (owned by the judgment debtor) to a judgment creditor. Similar to the General Electric, the plaintiff’s line of reasoning was affirmed by the state court. However, the Sargeant court distinguished the case by stating that the trial court in the New York case “had personal jurisdiction over the bank holding the foreign assets.” Thus, the Sargeant court departed from precedent. The court instead agreed with the “policy” underlying the dissent in Koehler, which focused on the “practical implications” of allowing courts in the state to order judgment debtors to turn over assets located outside of Florida. The Sargeant court agreed that “allowing trial courts to compel judgment debtors to bring out-of-state assets into Florida would effectively eviscerate the domestication of foreign judgment statutes.” The court also highlighted potential challenges that courts would face, such as competing claims to the foreign assets.
Following the Sargeant decision, the Florida Supreme Court declined to accept jurisdiction to hear the appeal and denied the petition for review. Practitioners disapproved of the appeals court’s ruling, calling it “dubious” and “hardly near the point,” with some courts declining to follow the holding. The ultimate demotion of Sargeant was delivered by the Florida Supreme Court in Shim v. Buechel.
Shim disapproves of Sargeant
In Shim, two individuals who prevailed in a lawsuit against Shim (the judgment debtor) discovered that Shim held a $4 million check in his South Korea home. The judgment creditors sought the turnover of the check under Fla. Stat. § 56.29(6). The trial court denied the motion (in line with Sargeant), but the Florida Fifth District Court of Appeal reversed. The district court took an opportunity to state that the public policy analysis in Sargeant was misplaced: “Any public policy considerations raised by section 56.29 are for the legislative branch, not a court.”
On appeal before the Florida Supreme Court, creditors confronted Shim’s argument that the lower court was applying a Florida statute extraterritorially. They argued that the trial court’s undisputed in personam jurisdiction over Shim allows it to compel Shim to transfer the $4 million to Florida and to creditors thereafter. The Florida Supreme Court agreed, and it disapproved of Sargeant early in its analysis:
Citing policy concerns, the Sargeant court rejected the argument that a court may rely on its exercise of in personam jurisdiction to order that a judgment debtor’s foreign property be used to satisfy a judgment debt… However, when determining the meaning of a statute, courts do not reach policy considerations where the statute’s meaning is clear. See State v. Peraza… “[W]hen the language of a statute is clear and unambiguous and conveys a clear and definite meaning, there is no occasion for resorting to the rules of statutory interpretation and construction; the statute must be given its plain and obvious meaning.”
The Court went on to analyze Fla. Stat. § 56.29(6), holding that the statute “unambiguously provides a trial court broad authority” to order any property of judgment debtors to be applied to satisfy a judgment debt. The Court quoted the statute itself, implying its clear, direct, meaning.
Effects of Shim
As an initial matter, if the Florida Supreme Court had held in line with Sargeant, any given statute or rule’s extraterritorial application would come under scrutiny. Creditor’s counsel in Shim made this point in oral argument, using Fla. R. Civ. P. 1.350 as an example: if the court found that Fla. Stat. § 56.29(6)’s broad language did not encompass its extraterritorial effect, a defendant in a discovery dispute could move relevant documents to another state and claim that it does not have to produce them because Fla. R. Civ. P. 1.350 does not apply extraterritorially.
Equally important, a trial court’s power to compel a defendant to act on property located outside of its jurisdiction necessitates a case-by-case analysis of the property in question. The judgment creditor in Shim explained this point, stating that if the $4 million check in Shim had been used to purchase a set of automobiles, creditor would have to analyze the extent of any lien on the vehicles and the cost of transporting them to the US, among other factors.
The Florida Supreme Court’s decision in Shim relied on the power and reach of in personam jurisdiction. By resetting a balance related to judgment enforcement in the state, the court empowered judgment creditors and disincentivized judgment debtors from simply moving their assets abroad to avoid satisfying a judgment in proceedings supplementary.
Edward H. Davis, Jr. is a founding shareholder of Sequor Law, P.A., in Miami, Florida. Alejandro Vanzetti serves as law clerk to the firm. Sequor Law represents companies and individual clients in the areas of asset recovery, financial fraud, insolvency, and financial services litigation. Davis and other attorneys of Sequor Law (formerly known as Astigarraga Davis) represented appellee Mohammad Anwar Farid Al-Saleh in the Sargeant v. Al-Saleh matter described herein. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views of the firm or its clients.
Suggested citation: Edward H. Davis, Jr. and Alejandro Vanzetti, How Florida’s Supreme Court Overturned a Ruling that Barred Recovery of Foreign Assets to Satisfy Judgments, JURIST – Professional Commentary, February 3, 2023, https://www.jurist.org/commentary/2023/02/how-floridas-supreme-court-overturned-ruling-that-barred-recovery-of-foreign-assets-to-satisfy-judgments/.