Opinion
No. FST CV 114020107
November 7, 2011
MEMORANDUM OF DECISION AND ORDER RE AMENDED APPLICATION PURSUANT TO GENERAL STATUTES § 52-356b (116.00)
I. BACKGROUND
This matter was heard on the October 3, 2011 special proceedings calendar, and the parties filed post-hearing memoranda on October 24, 2011. The procedural background leading up to the hearing is largely uncontested. The plaintiff/applicant Choice Hotels International, Inc. (Choice) obtained a judgment of approximately $15 million (including postjudgment interest) against the defendant Klein in the Circuit Court for Montgomery County, Maryland in January 2011. A certified copy of the judgment was filed in this court pursuant to Connecticut's version of the Uniform Enforcement of Foreign Judgment Act, General Statutes §§ 52-604 et seq. Although there appears to be a typographical error in the certified copy, it is clear that the amount of the judgment, not including postjudgment interest, is $14,439,991.45.
The Maryland judgment is being appealed in Maryland, but there has been no stay of enforcement issued by a Maryland court. Under General Statutes 52-606(a) this court may order a stay of enforcement upon a showing that the judgment debtor has furnished security in the satisfaction of the judgment. No such showing has been made in this case. Therefore, the Maryland judgment is entitled to full faith and credit and may be treated in the same fashion as a judgment of a Connecticut court. U.S. Constitution, Article IV, Section 1; General Statutes § 52-605(b); Segal v. Segal, 264 Conn 498, 500-501 (2003).
II. DISCUSSION
On July 28, 2011 Choice made an amended application under General Statutes § 52-356b for an execution and an order in aid of execution ordering the judgment debtor to turn over to the levying officer personal property and/or documents of title to property. Such an order may be issued after notice and hearing and a "showing of need for the order." Section 52-356b(a)(b).
In its application Choice asserts that a personal property execution was served on Klein in another action, Choice Hotels International, Inc. v. PLC Partners, LLC, also registered in Connecticut pursuant to Section 52-604 et seq. This execution was in the same amount as sought in this proceeding, and the execution was returned totally unsatisfied. The file in this case shows that Choice has filed a judgment lien on the land records in Greenwich, Connecticut liening real estate located at 131 Pecksland Road in the name of Klein. The court file also shows that an execution levied on assets at Patriot Bank was returned unsatisfied.
At the hearing on October 3, 2011 Zachary Berge, an attorney employed by Choice, testified that a certain amount of the judgment against Klein had been collected, namely under $1 million held in an escrow account in New York State. Transcript October 3, 2011 (hereafter A "Tr.") 36-37. Subsequently, Choice reports that an additional sum has been received from the escrow account and that Choice has now received "approximately $1.1 million" of the judgment total. Plaintiff's Memorandum, October 24, 2011 (hereafter "P. Memo.") n. 4. Berge further testified there are no other collection actions proceeding in New York State or any other state other than Connecticut, except a proceeding in Delaware that has been indefinitely stayed. Tr. 38, 41-42.
Using the figures given by Berge and those in the P. Memo, the amount received could be as much as slightly under $1.35 million, although it seems more likely that Berge's figures were a little off and the actual figure is closer to $1.1 million.
According to Berge, executions on Connecticut banking institutions have been unsuccessful. However, arrangements have been made with a tenant on Klein's property to hold in escrow monthly rental payments. Tr. 38, 41.
In his post-hearing memorandum dated October 24, 2011 Klein makes two major contentions. First, it is argued that Choice has not made the necessary showing of need required by Section 52-356b(b). Second, Klein points out that many of the assets targeted by Choice's application are not solely owned by him or are subject to prior liens.
The court finds that Choice has made the necessary showing of need. Neither party has provided any authority defining "need" as used in Section 52-356b(b) and there does not seem to be much judicial interpretation available on the subject. At least one Superior Court case appears to hold that if there are other collection activities likely to result in payment of the judgment at issue, a "turn over" order is not needed. Caruso v. Perlow, Superior Court, judicial district of New Haven at Meriden, CV 05 4005085 (April 7, 2006 Taylor, J.). The defendant argues that Nemeth v. Gun Rack Ltd., 38 Conn.App. 44 (1995), "suggests" that there must be a transfer of assets by the judgment debtor to justify a turnover order. That case makes no such suggestion and is not applicable. The defendant then argues there should be evidence of an intent to flee or conceal assets by the judgment debtor akin to what is required by General Statutes § 52-278e(1) for an ex parte prejudgment remedy. The court cannot agree with this argument or analogy because, as its name implies, a prejudgment remedy is designed to tie up assets before any liability is determined and the remedy sought here is after liability has been established. Indeed, the Connecticut statutory framework makes it clear that no such showing of flight or removal of property is required under Section 52-356b(b); that type of showing is only required when the plaintiff wants to obtain a turnover order without notice or a hearing. General Statutes § 52-356b(c).
The court determines that the required showing "of need for the order" of turnover is met when it is established that the value of the defendant's assets sought to be turned over are not likely to exceed the amount of the unsatisfied judgment with due regard to Connecticut's statutory exemptions set out in General Statute § 52-352b. In this case the evidence presented by Choice shows less than ten (10) percent of the judgment has been satisfied. The evidence of value attaching to the specific items of personal property sought by Choice's application shows an aggregate value far less than the unsatisfied judgment, and Klein has not produced any evidence to the contrary.
Although subpoenaed to the October 3, 2011 hearing, Klein did not appear.
Klein's contention that the plaintiff has not met its burden of proof that he is the sole owner of property sought to be turned over is misplaced. The Connecticut Supreme Court has said a judgment creditor can execute on property in which the judgment debtor has a cognizable interest. Fleet Bank Connecticut NA. v. Carillo, 240 Conn. 343, 349 (1997). Further, the Appellate Court has pointed out that a turnover order may enter where the debtor has chosen not to rebut evidence of ownership. Sarasota CCM, Inc. v. Golf Marketing, LLC, 94 Conn.App. 34, 40 (2006). In any case, General Statutes §§ 52-356a and 356c provide procedures for securing the rights of others in property turned over as well as resolving disputes over ownership. Therefore, the court finds that Choice is entitled to an order of turnover of assets up to the amount of the unsatisfied judgment.
III. CONSIDERATION OF ASSETS AND ORDER OF TURNOVER
At the October 3, 2011 hearing the court ordered Klein to answer and respond to Choice's interrogatories and document requests fully and completely within thirty days. No order of contempt was issued. Tr. 126-130; see also Tr. 95. It is likely that the discovery information from Klein will reveal additional facts about what assets he owns or does not own. Nevertheless, the plaintiff, which has not received any discovery to date despite several court orders, is entitled to proceed with its application as scheduled.
A. Motor Vehicles. Choice seeks to have Klein turn over four vehicles: (1) a 2003 Ferrari Spyder, (2) a 2008 Mercedes, (3) a 2005 Jeep vehicle and (4) a Range Rover vehicle. Klein stated he owned the Ferrari and the Mercedes in a June 17, 2011 affidavit submitted in an objection filed on his behalf in a federal court proceeding entitled Bank of America, N.A. v. Samuel Klein (3:10-CV00987 MRK, D. Conn.). Exhibit 3 (the affidavit is Exhibit E to the objection). The affidavit states there are loans outstanding on both cars. In a deposition in May 2011 in the Bank of America case Klein testified he possessed a Range Rover with a lease on it. Exhibit 2, Klein Deposition, 134. Klein has not produced a copy of the lease. The 2005 Jeep was identified as, remaining with Klein in his January 2008 Separation Agreement with his former wife; Exhibit 1; and on Klein's financial affidavit in connection with his divorce proceedings. Exhibit 2 (Affidavit is Exhibit D within Exhibit 2 and the Jeep is noted on page 6 of 10). There is no evidence before the court that Klein's ownership of this vehicle has ceased. Therefore, Klein is ORDERED to turn over the four vehicles along with any documents evidencing his ownership or possessory interest in the vehicles, subject to his rights pursuant to General Statutes § 52-352b(j).
B. Wine Collection. Choice seeks an order directing turnover of a wine collection that is located at the Pecksland Road residence which Klein retained ownership after his divorce. The wine collection was the subject of several provisions in the Separation Agreement which was incorporated in a divorce decree. The provisions regarding the security of and access to the collection are evidence that it may have a value above the contents of the average homeowner's liquor cabinet. See Exhibit 1, ¶ 5.2.6.f. Klein has not denied ownership of this collection, and he is ORDERED to turn over the collection to the levying officer.
C. 10 Mayfair Lane, Greenwich. This property is owned by Klein and rented or leased to one Barbara Macdonald for $4,200 per month. The monthly payments for July through October 2011 have been held in an escrow account of MacDonald's attorney Seth Arnowitz, Esq. There is no dispute that Klein owns the rental property, and the court will ORDER Attorney Arnowitz to turn over the four months of payments he is holding, and any future rental payments he receives from MacDonald. MacDonald is ORDERED to turnover any future rent owed on 10 Mayfair Lane to the levying officer, and she is requested to notify Klein and plaintiff's attorney of any problems with the property that could lead to a hold back of future rent. She is also notified of her rights pursuant to General Statutes § 52-356b(b).
D. Purported Renoir Painting. Choice seeks an order of turnover with respect to a painting supposedly by Renoir. Ownership of the painting is unclear. In a list of non-exempt assets of Klein dated April 2011 that his attorney provided to Bank of America in ongoing litigation Klein claims "100%" ownership of paintings in his Pecksland Road residence. Exhibit 2. In a deposition Klein said the painting was scheduled on his homeowner's insurance, but he also stated that he had transferred ownership to "Weiss Brothers" about two years ago. There is sufficient evidence to support a turnover order as to the painting. Klein has also testified that questions have arisen as to whether the painting in question is an authentic Renoir. Nevertheless, the work is insured for $230 — $250,000. Klein is ORDERED to turnover the purported Renoir painting to the levying offices.
E. Other Artwork. Choice seeks turnover of various art work in Klein's possession. Klein admits "100%" ownership of art work at the 131 Pecksland Road residence. Exhibit 2. Christie's Inc. filed a UCC Financing Statement with the Connecticut Secretary of the State in 2008 identifying two artworks put up as collateral by Klein: a water color "La Lampe" by Juan Gris and a pastel, "Les Cordonniers" by Ca'mille Pissarro. Exhibit 4. In addition to the above, Choice has identified a drawing by Paul Klee, prints by El Lissitzky and a photograph by Andre Kertesz. To the extent these works can be located in Klein's residence in Greenwich Klein is ORDERED to turn them over to the levying officer.
F. Watches. In his affidavit in the divorce matter Klein identified one or more watches of some value (Exhibit 1) and earlier this year he stated that he owned 100% of miscellaneous jewelry at the Pecksland Road residence. Klein is ORDERED to turnover any watch with a value of more than $1,000.
G. Term Life Insurance. A $15 million term life insurance policy issued by Massachusetts Mutual was identified in Klein's 2008 affidavit (Exhibit 1) and Choice contends there is no evidence he no longer owns the policy. This is not quite so. The affidavit indicates a "LJA" life insurance trust owns the policy and Klein's three children are the policy beneficiaries. Choice is not entitled to a turnover of this policy.
I. Other Household Furnishings and Antiques. Choice has sought a turnover order for a long list of household furnishings at the Pecksland Road address. This list is derived for the most part, if not entirely, from a proof of claim filed in a bankruptcy matter in the Southern District of New York involving a debtor, Agrippa LLC, an entity created by Klein which was billed by an interior designer Randall Ridless for over $300,000 of furnishings for the Pecksland Road residence. This documentation was admitted into evidence as Exhibit 5 on October 3, 2011. There was considerable argument as to the admissibility of Exhibit 5, and the court now determines that it is not admissible under the hearsay exception set out in the Connecticut Code of Evidence § 8-3(7) (public record and reports). Therefore, the document marked as Exhibit 5 provides no evidentiary basis that Klein owns the specific items of home furnishings identified therein. Nevertheless, Klein has specifically stated or clearly indicated on two occasions that he owns at least some of the furnishings. Exhibit 2, Klein deposition, May 18, 2011, 131-132; Exhibit 2, Klein Affidavit, June 17, 2011.
The court believes it would be precipitous to order turnover of the furnishings at this time. Exhibit 5 indicates that there might be a pending law suit in New York State Supreme Court against Klein by Ridless claiming in excess of $300,000 in furnishing the Pecksland Road property. In addition, Exhibit 5 shows there is a pending proof of claim by Ridless in the Agrippa bankruptcy proceeding based on the same claim. Until these claims are sorted out an order of turnover is premature. The court reiterates its order that Klein not transfer ownership of, or remove from Connecticut, any furnishings located at the Pecksland Road residence.
J. Stock Interest in Payton Lane Nursing Home, Inc. Klein has stated in his list of non-exempt assets that he owns a "majority interest" in the above business identified as a "New York corporation." Exhibit 2.
Choice seeks a turn over of documentary evidence of this ownership interest. Klein has cited to Winslow v. Fletcher, 53 Conn. 390 (1886), which at least suggests that the court lacks jurisdiction to effect a transfer of stock on Payton Lane's books. The plaintiff did not brief this issue, undoubtedly because the parties were ordered to file simultaneous briefs and the issue had not been raised beforehand. The court ORDERS a turnover of documentary evidence of Klein's ownership interest in Payton Lane. However, this documentation shall not be sold at auction or otherwise conveyed until further briefing on the jurisdiction issue is submitted.
NOTICE IS GIVEN THAT FAILURE TO COMPLY WITH ANY TURNOVER ORDER CONTAINED HEREIN MAY SUBJECT THE PERSON TO BEING HELD IN CONTEMPT OF COURT.