Fraudulent transfers beware! The Florida legislature has revamped the statute governing proceedings supplementary. The changes will go into effect July 1, 2016. The good news for creditors is that all the same avenues to attempt collection are still viable, including debtor examinations and actions for fraudulent transfers. In addition, the changes clarify that the statute of limitations for fraudulent transfers remains 20 years as opposed to 4 as set forth in the Uniform Fraudulent Transfer Act ("UFTA"). The revisions will streamline an often confusing process both with attorneys and the courts in Florida. There is also good news for debtors and third parties. Now, instead of blanket motions for proceedings supplementary followed by a fishing expedition for transfers and assets, the creditor must describe property being held by the third party before impleading that party. This will require that the creditor have a legitimate reason before dragging a potential third party recipient of a fraudulent transfer into court. The new rules also require that the third party be served with a notice to appear and directs the third party to file an affidavit explaining why the asset transferred should not be turned over to the creditor. This procedure provides the court with a process and a quick resolution of the issue. If the third party fails to comply presumably the court will enter an order requiring the asset be turned over.
A recent Third District Court of Appeal decision clarifies when a shareholder may bring an action on his or her own behalf against a third-party or must bring the action on behalf of the corporation as a derivative shareholder suit. A derivative action is one brought by a shareholder on behalf of a corporation for damages sustained by the corporation. An example would be when an action of a third-party causes the devaluation of the stock of the corporation. Only the corporation can bring suit for that and any collection must be shared between all shareholders. Obviously, a shareholder would prefer to bring such an action in his or her own right so that any judgment would then only be in favor of the shareholder and he or she would not have to share the award with the other shareholders.
My firm was recently successful in collections by having a stock transfer from a husband to his second wife set aside as fraudulent. The husband was in a bitter divorce with his former wife and had many judgments entered against him in favor of his ex-wife. During the divorce proceedings, he remarried and transferred 50% of his ownership in his company to his second wife. As a result, we filed a motion to implead the second wife as a third-party defendant to have the transfer to her set aside, which the court granted. As long as a creditor has an outstanding judgment and files the requisite affidavit pursuant to the proceedings supplementary statute (Fla. Stat. §56.29(1)), the creditor is entitled to proceedings supplementary against any recipient of a fraudulent transfer from the debtor.
I often get asked if its possible to collect on a judgment against a dissolved Florida corporation when the same principal has opened up a new company. If the new company is similar to the previous company, a judgment creditor can attempt collection in Florida against the new company under the legal theory that the new company is a "mere continuation" of the judgment debtor.