FINAL UNTIL TIME EXPIRES TO FILE MOTION FOR REHEARING AND
DISPOSITION THEREOF IF FILED
appeal from the Circuit Court for Okaloosa County. John T.
E. Harper, III, T. A. Borowski, Jr., Darryl Steve Traylor,
Jr., of Borowski & Traylor, P.A., Pensacola, for
William L. Ketchersid, David L. Powell, of Ward &
Ketchersid, P.A., Destin, for Appellee Christy Richards.
Bank challenges the trial court's order finding that an
Alabama divorce judgment obtained by former wife Christy
Richards constitutes a charging order that has priority over
the charging order issued to Capstone Bank in this
proceeding, each regarding the former husband's
membership interest in Perry-Clifton Enterprises, LLC, a
Florida limited liability company.
charging order is "a remedy that a creditor of a member
in an LLC (or of a partner in a limited partnership) can
receive from a court that instructs the entity to give the
creditor any distributions that would otherwise be paid to
the partner or member from the entity." Alan S. Gassman,
After Olmstead: Will a Multiple-member LLC Continue to
Have Charging Order Protection?, 84 Fla. B.J. 10,
(December 2010); see also Krauth v. First Cont'l
Dev-Con, Inc., 351 So.2d 1106, 1108 (Fla. 4th DCA 1977)
("The charging order is a flexible court-supervised
substitute for the more disruptive process of execution by
the sheriff."); Trawick, Fla. Prac. & Proc. §
27:11 (2016-2017 ed.) ("A charging order is the method
used to collect a judgment when the judgment debtor has
partnership or limited liability company assets.").
April 14, 2015, the Circuit Court of Etowah County, Alabama
issued a Final Judgment of Divorce (the "Alabama
Judgment") which included reference to the membership
interest of the former husband, Christopher Richards, in
Perry-Clifton Enterprises, LLC. The Judgment provides that:
In consideration for the property settlement awarded to
Christy, Chris shall receive all right, title and interest in
and to all business entities (Richard Motors, Inc.; Sunroc
Properties, LLC; Economy Auto Mart, LLC; Perry-Clifton
Enterprises; etc.), real property, automobiles, motorcycles,
boats, aircraft and any future BP settlement proceeds, not
otherwise awarded to the wife. However, the property
settlement, unpaid alimony, or other financial obligations
ordered payable by Chris for the benefit of Christy shall act
as a lien against Chris' interest in all property awarded
to him until paid in full.
Alabama Judgment stated: "Each party shall execute any
and all documents necessary to carry out the intent of this
Order." Christy Richards recorded the Alabama Judgment
in the Public Records of Okaloosa County, Florida and filed
an affidavit stating that she remained unpaid. She did not
seek issuance of a charging order.
September 22, 2015, the trial court in Okaloosa County,
Florida granted Capstone Bank's motion for a charging
order against the membership interests of Christopher L.
Richards and John Eric Richards in Perry-Clifton Enterprises,
LLC. In response, on November 4, 2015, Christy Richards made
a motion to intervene and a motion to stay the bank's
charging order. The trial court determined that the Alabama
Judgment itself constituted a charging order and was obtained
prior to Capstone Bank's charging order, thereby giving
Christy Richards priority in the membership interest of
Christopher L. Richards in Perry-Clifton Enterprises, LLC.
question is whether the Alabama Judgment is a de facto
charging order under Florida law, such that its entry by the
Alabama court before entry of the competing charging order of
Capstone Bank grants it priority. We start by noting that
under Florida law a charging order requires application to a
court for its issuance. Section 605.0503(1), Florida Statutes
(2014), provides: "On application to a court of
competent jurisdiction by a judgment creditor of a member or
a transferee, the court may enter a charging order against
the transferable interest of the member or transferee for
payment of the unsatisfied amount of the judgment with
interest." (Emphasis added). This language requires that
a judgment creditor must file a motion for a charging order
in order for one to be issued. See also Trawick,
Fla. Prac. & Proc. § 27:11 (2016-2017 ed.) (citing
Fla. R. Civ. P. Rule 1.100(b)) ("The judgment creditor
must file a motion for a charging order and allege the
judgment, that it has not been paid and the interest that the
judgment creditor seeks to charge."); Regions Bank
v. Alverne Assocs., LLC, 456 S.W.3d 52, 56 (E.D. Mo.
2014) (citing Mo. Rev. Stat. § 347.119 (1993)) ("To
obtain a charging order, the judgment creditor must file an
'application to a court of competent
jurisdiction.'"); Jay D. Adkisson, Charging
Orders: The Peculiar Mechanism, 61 S.D. L. Rev. 440, 454
(2016) (internal citations omitted) (A charging order
"requires that the creditor file a motion for charging
order with the court, serve the debtor and often either the
LLC, or all its members, and then have a hearing before the
court where the merits of the charging order are
need for issuance of a charging order is due to its
exclusivity as a remedy in Florida, whose Legislature
recently enacted a statute making it clear that "a
charging order is the sole and exclusive remedy by
which a judgment creditor of a member or member's
transferee may satisfy a judgment from the judgment
debtor's interest in a limited liability company or
rights to distributions from the limited liability
company" for multiple-member LLCs, the so-called
Olmstead patch. § 605.0503(3), Fla. Stat.
(2014) (emphasis added). Accordingly, a judgment lien alone does
not amount to a charging order. See Branch Banking and
Trust Co. v. Crystal Ctr., LLC, No.
8:15-cv-1462-T-30AAS, 2016 WL 7650655, at *1 (M.D. Fla.
December 12, 2016) (stating "the interest held by a
member in a limited liability company is not subject to
execution under Fla. Stat. § 55.061, and a
judgment-creditor must, instead, seek a charging order
against such interest") adopted in part and reversed
in part, No. 8:15-cv-1462-T-30AAS, 2017 WL 57345 (M.D.
Fla. January 5, 2017).
the language of the Alabama Judgment creates a lien against
the membership interest of Christopher Richards in
Perry-Clifton Enterprises, LLC, for nonpayment of his
obligations therein, but it does not itself rise to the level
of a charging order for which Florida has established a
procedure for issuance. As such, Christy Richards would need
to apply for a charging order against the membership interest
in Perry-Clifton Enterprises, LLC, which is the "sole
and exclusive remedy" available against a limited
liability company of this type. § 605.0503(3), Fla.
Stat. Because Christy ...