Florida Court Addresses Priority of Charging Orders

Florida Court Addresses Priority of Charging Orders

      In a pair of recent decisions, the Court of Appeals for the First District in the State of Florida has provided guidance with respect to the priority of the lien created by a charging order.  This being a point seldom addressed, the prior guidance largely being restricted to the McClure decision from Colorado, these new decisions provide important guidance.  Capstone Bank v. WinSouth Credit Union, Case No. 01D-16-1484 (Nov. 30, 2017); Capstone Bank v. Perry-Clifton Enterprises, LLC, Case No. 01D-16-1094 (Nov. 30, 2017).

      In the WinSouth Credit Union case, while the facts recited in the opinion are rather sparse, WinSouth applied for a charging order against the interest of John Richards and Christopher Richards, each in an unnamed Florida limited liability company.  Likewise, Capstone Bank had applied for a charging order against the same interest, the question was the priority of the orders.  The charging order issued in favor of WinSouth was based upon a judgment entered by an Alabama court.  Over a dissent, it was determined that the Alabama judgment had not been properly domesticated in Florida before the charging order was issued.  On scanty analysis, the court went on to determine that the WinSouth charging order should not have been issued, leaving that of Capstone with priority.

      While the dissent would challenge the determination that the judgments against John Richards and Christopher Richards were not sufficiently domesticated in Florida, it explained why Capstone would still prevail, that based upon the timing of the application for and receipt of the charging order. 

      In the Perry-Clifton case the dispute again began with an Alabama judgment, this being a divorce decree.  The question was whether a Alabama divorce judgment in favor of Christy Richards constituted a charging order in favor of Christopher Richards’ interest in Perry-Clifton Enterprises, LLC.  The divorce decree awarded to her all of Christopher’s interest in Perry-Clifton Enterprises.  While the divorce decree was filed in Florida, no charging order was at that time requested.

      Thereafter, Capstone requested and received from a Florida court a charging order against Christopher Richards’ interest in Perry-Clifton.  Christy Richards, some six weeks later, sought to intervene in that action and filed a motion to stay the issued charging order.  The trial court determined that the Alabama divorce decree “itself constituted a charging order” and had priority over that issued to Capstone Bank.  That determination would, in this appeal, be reversed.

      On the basis that a charging order, issued by a court on motion, is the “sole and exclusive remedy” against an interest in a Florida LLC, the court concluded that the charging order issued in favor of Capstone Bank would have priority.