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Aggressive Collection Strategies: Using Proceedings Supplementary to get Paid
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Aggressive Collection Strategies: Using Proceedings Supplementary to get Paid

October 11, 2017 Banking & Financial Services Industry Legal Blog

Reading Time: 6 minutes

In Florida, Proceedings Supplementary are begun utilizing the procedure found in Fla. Stat. 56.29.  The Proceedings Supplementary statute was enacted prior the adoption of the Florida Rules of Civil Procedure.  In the recent past this created a lot of confusion with lawyers and the Judiciary as the procedure set forth in the initial Proceedings Supplementary statute was so bare and so different from the process in the Florida Rules of Civil Procedure for initiating litigation that many attorneys and Judges questioned whether the statute afforded adequate due process.  Because of these perceived problems with the initial Proceedings Supplementary statute, the statute went through a complete redraft, effective July 1, 2016.    Although this article won’t discuss in detail the differences between the old Proceedings Supplementary statute and the new Proceedings Supplementary statute, some of the main changes are 1) due process must be established via personal service of process instead of actual notice; 2) there is a statutory right to a jury trial; and 3) proceedings supplementary are begun by issuing a Notice to Appear (which is similar to a summons).

So what are Proceedings Supplementary?  Proceedings Supplementary are essentially new legal proceedings that are initiated as a continuation of the existing lawsuit.  Once a Final Judgment is obtained, Proceedings Supplementary allow a judgment creditor to pursue the property of the judgment debtor in the hands of a third party.  Proceedings Supplementary can also likely be utilized for the purpose of foreclosing a judgment lien, which often occurs as a separate lawsuit.  I have also seen Proceedings Supplementary utilized to institute a coverage action against an insurer when part of a settlement is the assignment of a judgment debtor’s insurance coverage claim.

The procedure for Proceedings Supplementary is fairly simple and set forth in Fla. Stat. 56.29.  To begin Proceedings Supplementary, a judgment creditor merely needs to file an affidavit stating the Judgment is valid, outstanding and unsatisfied and file a Motion identifying the property of the judgment debtor in the hands of any person or due to any person.  If the person holding the property of the judgment debtor is not the judgment debtor then that person or entity can be impled into the existing case as an impleader defendant.  If a person or entity is being impled into the existing case then the Court will issue a Notice to Appear to the person or entity, which directs the recipient of the Notice to Appear to file an affidavit, within seven (7) business days, stating why the property, debt or other obligation should not be applied to satisfy the Judgment.  Legal defenses must be served contemporaneous with the affidavit.  The Notice to Appear must be served in the same manner as a summons.  The Court can refer the final hearing to a general or special magistrate and can confer all powers of the Court on the magistrate.  Any party or witness in this matter is not entitled to refuse to answer on the basis that their answer may show them guilty of a crime.  Any answer given by a party or witness cannot be used as evidence against that person in any criminal proceeding.  Costs and reasonable attorney’s fees associated with the Proceedings Supplementary shall be taxed against the Judgment Debtor (not the Impleader Defendant).

There is a dearth of legal authority addressing Fla. Stat. 56.29 since the redraft of the statute became effective on July 1, 2016.  However, there are many cases addressing the old statute and the reason the statute was enacted.  “Proceedings subsequent to judgment to aid a judgment creditor in collecting his judgment against the judgment debtor.” Rosenfield v. TPI International Airways, 630 So.2d 1167, 1169 (Fla. 4th DCA 1993).  “Proceedings Supplementary are equitable in nature and should be liberally construed.” Amjad Munim, M.D., P.A. v. Azar, 648 So.2d 145, 151 (Fla. 4th DCA 1994).  There doesn’t even have to be a fraudulent transfer to utilize Proceedings Supplementary.  Proceedings Supplementary can be utilized to pursue an impleader defendant on a theory of veil piercing or alter ego as long as there is an allegation of improper conduct or improper purpose.  See Sanchez v. Renda Broadcasting Corp., 127 So.3d 627, 629 (Fla. 5th DCA 2013) (“The statute does not require a judgment creditor to allege a fraudulent transfer in order to use proceedings supplementary to aid in the execution of its judgment.”)

The power granted to a judgment creditor in Proceedings Supplementary is immense.  The process is intended to be an abbreviated proceeding in which the final hearing is often granted just a few months after the impeader defendant has been impled.  However, Proceedings Supplementary offer the opportunity to obtain a Judgment against an impleader defendant just as if a new lawsuit was filed.  In addition to that aforementioned, Proceedings Supplementary are equitable in nature and intended to be liberally construed to help the judgment creditor be fully compensated for his Judgment.  As seen by the cases cited above, there doesn’t have to even be a transfer of money or assets to utilize Proceedings Supplementary.  It seems to reason that anyone that aids in a fraudulent transfer or aids in hiding assets may have liability under some civil conspiracy theory.

Collection actions are often difficult because it only takes a few hours to close a bank account and transfer the cash to another bank account.  So the process is often one in which a judgment debtor moves the money before it can be garnished.  Of course, less fungible assets like real property or vehicles are more difficult for the judgment debtor to transfer but those assets are sometimes expensive to foreclose upon or levy.   Proceedings Supplementary gives more teeth to the judgment creditor, allowing greater ability to enforce his/her Judgment.  Often, third parties are involved with hiding assets or helping hid assets.  With Proceedings Supplementary a judgment creditor has an efficient means of pursuing anyone that may have fraudulently received assets or may have attempted to help hide assets.  Shifting the focus from pursuing bank accounts to pursuing people is often a more effective means of getting the attention of the judgment debtor so that an adequate payment resolution can be achieved.

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