IN THE SUPREME COURT OF FLORIDA Case No. SC08-1877 Third DCA Case Nos. 3D07-2875 / 3D07-3106 L.T. Case No. 04-17958 CA 15 VALAT INTERNATIONAL HOLDINGS, LTD. Petitioner, vs. MERRILL LYNCH & CO., INC. Respondent. On Review from the Third District Court of Appeal of the State of Florida PETITIONER S AMENDED JURISDICTIONAL BRIEF AND APPENDIX Leoncio E. de la Peña D., Esq. Florida Bar No. 454508 leo@dlp-law.com Otto de Córdoba, Esq. Florida Bar No. 633712 odc@dlp-law.com Tracy Pérez, Esq. Florida Bar No. 860441 tperez@dlp-law.com DE LA PEÑA GROUP, P.A. 601 Brickell Key Drive, Suite 705 Miami, FL 33131 Telephone: 305.377.0909 Facsimile: 305.377.1771 Counsel for Petitioner Valat International Holdings, Ltd.
TABLE OF CONTENTS Page TABLE OF CONTENTS... i TABLE OF AUTHORITIES... ii INTRODUCTION... 1 STATEMENT OF CASE AND FACTS... 1 JURISDICTIONAL STATEMENT AND SUMMARY OF ARGUMENT... 3 ARGUMENT... 4 I. The Decision Expressly and Directly Conflicts with James, Parker, and McCoy... 4 A. Conflict with James... 7 B. Conflict with Central Plaza... 7 C. Conflict with McCoy... 8 II. This Court Should Exercise its Discretion to Review the Decision... 9 CONCLUSION... 9 CERTIFICATE OF SERVICE... 10 CERTIFICATE OF COMPLIANCE... 10 APPENDIX... 11 i
TABLE OF AUTHORITIES CASE UNDER REVIEW Page Merrill Lynch & Co., Inc. v. Valat Int l Holdings, Ltd., 33 Fla. L. Weekly D 1544 (Fla. 3d DCA June 11, 2008)...passim CONFLICT CASES Central Plaza Bank & Trust Co. v. Parker, 300 So. 2d 735 (Fla. 2d DCA 1974)...passim James v. Commercial Bank at Apopka, 310 So. 2d 399 (Fla. 4th DCA 1975)...passim Thomas J. Konrad & Assocs., Inc. v. McCoy, 705 So. 2d 948 (Fla. 1st DCA 1998)...passim OTHER CASES Fehlhaber v. Fehlhaber, 941 F.2d 1484 (11th Cir. 1991)... 6 Florida Star v. B.J.F., 530 So. 2d 286 (Fla. 1988)... 3 Ford Motor Co. v. Kikis, 401 So. 2d 1341 (Fla. 1981)... 3 Ginsberg v. Goldstein, 404 So. 2d 1098 (Fla. 3d DCA 1981)... 6 BellSouth Adver. & Publ g Corp. v. Security Bank, N.A., 698 So. 2d 254 (Fla. 1997)... 7 ii
RULES AND STATUTES Fla. R. App. P. 9.030(a)(2)(A)(iv)... 3 77.06(3), Fla. Stat.... 8 CONSTITUTIONAL PROVISIONS Art. V 3(b)(3), Fla. Const.... 3 iii
INTRODUCTION This petition for review requests that this Court exercise jurisdiction on the grounds that the Third District decision creates express and direct conflict with James v. Comm l Bank at Apopka, 310 So. 2d 399 (Fla. 4th DCA 1975); Central Plaza Bank & Trust Co. v. Parker, 300 So. 2d 735 (Fla. 2d DCA 1974); and Thomas J. Konrad & Assocs., Inc. v. McCoy, 705 So. 2d 948 (Fla. 1st DCA 1998). STATEMENT OF CASE AND FACTS This case stems from a post-judgment garnishment proceeding in the case of Valat International Holdings, Ltd. v. El Salvador Networks et al., Case No, 04-17958 held in the Eleventh Judicial Circuit in and for Miami-Dade County. On September 6, 2006, the trial court entered a money judgment in the underlying lawsuit (the Underlying Judgment ) in amounts ranging between sixteen million to almost thirty million dollars against three foreign corporations from El Salvador that borrowed millions of dollars from Hamilton Bank and four related individuals, all belonging to a prominent Salvadorian family surnamed Safie that guaranteed the loans (collectively the Defendants or Judgment Debtors ). In post-judgment proceedings, the Defendants defied various court orders to answer discovery in aid of execution, attend discovery depositions or otherwise cooperate with the trial court. The trial court thereafter held the Defendants in contempt and issued civil arrest orders against the individual Defendants. The 1
Defendants continuing contempt of the trial court s orders led the Third District to dismiss the Defendants appeal of the Underlying Judgment. On September 20, 2007, Petitioner Valat International Holdings, Inc. ( Valat or Petitioner ) obtained a default final judgment in a post-judgment garnishment proceeding against Respondent-Garnishee, Merrill Lynch & Co., Inc. ( MLC ) in the amount of $1,315,094.13 (the Final Default Judgment ). MLC appealed the Final Default Judgment. The Third District Court of Appeal reversed the trial court s ruling in its June 11, 2008 decision (the Decision ). This Final Default Judgment was correctly entered by the trial court because it was based on evidence that conclusively established that MLC knew that an account held by it in the name of the foreign corporation, Olok Holdings Inc. (the Olok Account ) was equitably and beneficially owned by the Judgment Debtors named in the garnishment writs at all times pertinent to the garnishment. This information was revealed to Petitioner and subsequently to the trial court through discovery conducted after the entry of the clerk s default against MLC and before entry of the Final Default Judgment. This discovery revealed that after the clerk s default was entered, MLC allowed the Judgment Debtors to empty the Olok Account of $1,315,094.13, the amount entered in the Final Default Judgment. MLC appealed the Final Default Judgment, as well as the trial court s denial of its motion for rehearing and motion for relief from final judgment. The 2
Decision concluded that the default was properly entered, but nonetheless reversed the trial court s entry of the Final Default Judgment by ruling that the writs did not extend to the Olok Account. Valat sought rehearing, certification, or clarification of the Decision, which was denied on August 14, 2008. Valat s notice to invoke the discretionary jurisdiction of this Court was timely filed on September 15, 2008. JURISDICTIONAL STATEMENT AND SUMMARY OF ARGUMENT The Supreme Court of Florida has discretionary jurisdiction to review a decision of a district court of appeal that expressly and directly conflicts with a decision of the Supreme Court or another district court of appeal on the same point of law. Art. V 3(b)(3), Fla. Const.; Fla. R. App. P. 9.030(a)(2)(A)(iv). This does not require that the Decision expressly identify the cases with which it conflicts. Ford Motor Co. v. Kikis, 401 So. 2d 1341, 1342 (Fla. 1981). Rather, the Decision need only contain a statement of law or establish a point of law that is in conflict with a decision from this Court or from another district court. Id. See also Florida Star v. B.J.F., 530 So. 2d 286, 288 (Fla. 1988). The Third District studiously avoided mentioning or discussing the conflicting cases cited above. The Third District also avoided any mention of the trial court s findings that MLC knew that the Olok Account was equitably and beneficially owned by the judgment debtors despite the fact that the cited cases and 3
the issue of MLC s knowledge of the Judgment Debtors equitable ownership of the Olok Account constituted the Petitioner s core argument on appeal. Nonetheless, the Decision establishes two related points of law that are in express and direct conflict with the cited cases. These are 1) that a writ of garnishment is not effective against the property of anyone that is not identified as the judgment debtor in the body of the writ, and 2) that in the case of a default, the garnishor is limited to the allegations contained on the face of the writ. For over thirty years, part of the substantive law of garnishment, has been the long-standing doctrine that a garnishment is effective against the judgment debtor s equitably-owned property as opposed to the holder of legal or nominal title regardless of whether or not the holder of the legal or nominal title is named in the writ. Hence, the clear, express, and direct conflict. ARGUMENT I. The Decision Expressly and Directly Conflicts with James, Parker, and McCoy. The Decision expressly and directly conflicts with the decision in James, Parker, and McCoy, each of which concludes that a garnishee has an obligation to garnish or freeze accounts in certain circumstances regardless of whether or not the title holder of the subject account is identified on the face of the writ. The circumstances in each of these cases is that the garnishee was holding property that 4
was beneficially or equitably owned by the judgment debtor even though the garnishment did not name the nominal holder of the account. In reversing the trial court s order, the Decision stated the following: In this case, the trial court held MLC liable for failing to garnish approximately $1.3 million that MLC allegedly held on behalf of Olok. However, it is undisputed that Olok was not mentioned in any of the writs served upon MLC, the writs did not suggest that MLC held accounts for any alter-ego of the named judgment debtors, and the writs did not allege that MLC had knowledge that Olok and any of the judgment debtors were one and the same. By opting to move for the entry of final default judgment more than seven months after MLC s answer, Valat accepted the risks associated with being limited to the allegations contained on the faces of the writs. The writs were the only pleadings properly before the trial court. However, the trial court summarily accepted that Olok was the alter-ego of one of the Safie defendants although no such allegation appeared on the face of the writs.... (Decision at 4-5) (emphases added). As its bottom line, the Third District concluded that MLC did not, and in fact could not, have a duty to freeze the Olok Account because Olok was not specifically mentioned in the writs. 1 In effect, the Decision means that a garnishee can allow a judgment debtor it knows to be the true, equitable and beneficial owner of an account, nominally titled in the name of someone else, to empty the account without any consequence to the garnishee. As set forth in the cited cases, and repeated by the federal courts of this state, the substantive law of Florida garnishment has never limited the effectiveness of a 1 This was concluded despite MLC s admitted knowledge that the Judgment Debtors were the equitable and beneficial owner of the Olok Account. 5
writ of garnishment solely to the property titled to the judgment debtor named in the writ. Rather, a writ of garnishment has always been effective against the equitably-owned property that a garnishee knows it is holding for a judgment debtor regardless of whether or not the legal title holder of the subject account is named in the writ. To this effect, the Eleventh Circuit Court of Appeals in interpreting the substantive law of Florida garnishment in the case of Fehlhaber v. Fehlhaber, explained its understanding of Florida law as follows: [T]he writ of garnishment is effective against the equitable owner not the legal owner of the assets. Fehlhaber, 850 F.2d at 1456..... A financial institution which is aware of the nature of the relationship must freeze and hold all assets to which the judgment debtor has not only a legal but equitable interest. See also Ginsberg v. Goldstein, 404 So. 2d 1098, 1100 (Fla.Dist.Ct.App.1981) (garnishment attaches to real not legal owner of bank accounts); James v. Commercial Bank at Apopka, 310 So. 2d 399, 400 (Fla.Dist.Ct.App.1975) (same). The bank, therefore, clearly violated the obligations imposed by the writ of garnishment. 941 F.2d 1484, 1486 (11th Cir. 1991) (emphases added). As a necessary corollary, the Third District s stated point of law that by proceeding with its default Valat accepted the risks associated with being limited to the allegations contained on the faces of the writs, also hinges and depends on the elimination of the garnishment doctrine that previously permitted holding a garnishee liable for the equitably-held property of a judgment debtor that it knew it was holding title in the name of a third party. Florida law is that a default in garnishment is not only limited by the allegations contained on the face of the 6
writs, but also encompasses the substantive law of garnishment. BellSouth Adver. & Publ g Corp. v. Security Bank, N.A., 698 So. 2d 254 (Fla. 1997). This presumably must include holding a garnishee liable for the equitably-held accounts of a judgment debtor. Therefore, the Third District s Decision, as quoted above is also in conflict with this Court s decision in Security Bank, N.A. A. Conflict with James In the Fourth District case of James, the plaintiff recovered a judgment against Jim James. A writ of garnishment was issued to a bank. The trial court made a factual finding that the assets in the checking account with the garnishee bank under the name of Leasing Systems (wholly owned by M.A. James, Jim James daughter) were subject to the writ of garnishment in the name of Jim James. 310 So. 2d at 399-400. In that case, the Fourth District looked beyond the nominal title of the account and made the garnishee bank liable for assets which were found to be equitably owned by Jim James, the judgment debtor. Id. B. Conflict with Central Plaza In the case of Central Plaza, Central Plaza Bank and Trust Company was served with a writ of garnishment naming L.E. Parker as the defendant. The bank placed a hold on two accounts in the name of L.E. Parker. 300 So. 2d at 735-36. However, the trial court (affirmed by the Second District) found the bank negligent and held it liable for improperly fail[ing] to garnish all of the accounts of L.E. 7
Parker. Id. at 736. The two additional accounts which the bank failed to garnish were in the name of Parker & Sons and Parker & Sons Payroll Account. Id. In affirming that the bank had a duty to garnish accounts equitably owned by L.E. Parker, the Second District held that the bank cannot rely upon any alleged fear of liability for improperly garnisheeing the wrong accounts since Florida Statutes, 77.06(3) protects the bank from any such liability. Id. C. Conflict with McCoy In the First District case of McCoy, the plaintiff recovered a judgment against McCoy, individually. 705 So. 2d at 949. The plaintiff issued a writ of garnishment against Barnett Bank. Id. The trial court dissolved the writ because the account at the bank was jointly held by McCoy and his wife. Id. The First District reversed and remanded 2 the case, and in doing so held as follows: For garnishment purposes, funds on deposit in a financial institution are presumed to belong to the person or entity named on the account. However, this presumption is not conclusive. The determinative issue is where the equitable, as opposed to the bare legal, title to the funds resides. Id. (citations omitted). 2 The case was remanded with directions that the trial court make findings regarding whether McCoy depositing the funds into the account was done with an intent to put the funds beyond the creditor s reach to defraud it. 8
II. This Court Should Exercise its Discretion to Review the Decision. This Court should exercise its discretion to review this case to resolve the conflict and make clear whether the long-standing doctrine that a writ of garnishment extends to accounts that are equitably and beneficially owned by the judgment debtor still applies. It has never been the intent of Florida s garnishment laws to allow a financial institution to ignore the command of a writ when it controls accounts equitably owned by a judgment debtor. Yet, the Decision allowed this and effectively destroyed thirty years of Florida jurisprudence on garnishment. The Decision implicates a change in Florida s garnishment laws allowing judgment debtors to conceal assets, making it exceedingly difficult for creditors to reach judgment debtor s assets to satisfy judgments, and causing uncertainty with garnishees, especially with financial institutions. CONCLUSION For the foregoing reasons, this Court has discretionary jurisdiction to review the decision below, and the Court should exercise that jurisdiction to consider the case on the merits. Respectfully submitted, DE LA PEÑA GROUP, P.A. Attorneys for Petitioner 601 Brickell Key Dr., Suite 705 Miami, Florida 33131 Tel: 305.377.0909 / Fax: 305.377.1771 9
LEONCIO E. DE LA PEÑA D. Florida Bar No. 454508 OTTO DE CORDOBA Florida Bar No. 633712 TRACY PÉREZ Florida Bar No. 860441 CERTIFICATE OF SERVICE I hereby certify that a true and correct copy of this Amended Jurisdictional Brief and Appendix was served on October 9, 2008, via U.S. Mail to Robert Fracasso, Esq., counsel for Respondent, Shutts & Bowen LLP, 1500 Miami Center, 201 South Biscayne Boulevard, Miami, Florida 33131, Katherine E. Giddings, Akerman Senterfitt, 106 East College Ave., Suite 1200, Tallahassee, FL, 32301, J. Thomas Cardwell, Esq., Akerman Senterfitt, 420 South Orange Avenue, Suite 1200 Orlando, FL 32802, and Carolann A. Swanson, Esq., Santos Stokes, LLP, 800 Douglas Road, Suite 105, Coral Gables, Florida 33134. LEONCIO E. DE LA PEÑA D. CERTIFICATE OF COMPLIANCE WITH FLA. R. APP. 9.210(A)(2) I hereby certify that the font used in the Amended Jurisdictional Brief contained herein is in Times New Roman, 14-point font. LEONCIO E. DE LA PEÑA D. 10