Caught in the web of Florida's statutory proceedings supplementary: procedural and constitutional problems facing impleaded third parties.

• Author: Brodsky, Benjamin H.

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Consisting of a mere 11 provisions, and designed to provide judgment creditors a "swift, summary" (1) means to execute on the judgments that they have received, Florida's proceedings supplementary statute, F.S. [section]56.29, creates an extremely powerful but profoundly flawed collections procedure. The most important, yet fraught, aspect of that collections procedure is the right of a judgment creditor to implead third parties into the already open and pending matter in which the judgment was entered. The rights of a judgment creditor against impleaded defendants in proceedings supplementary are plenary. Based on the statute's broad grant of authority to enter "any orders required" to marshal assets to satisfy the outstanding judgment, a judgment creditor in proceedings supplementary is entitled to the panoply of remedies available to any civil litigant, including injunctive relief, piercing the corporate veil, and money damages. However, inherent within the abbreviated, expedited, and creditor-friendly nature of proceedings supplementary is a conflict with the constitutional and procedural rights of the third-party impleaded defendants who find themselves unwittingly roped into post-judgment collections proceedings in which their own property rights may be at stake. This constitutional and procedural tension is reflected by splits in the case law covering the proper interpretation and application of the statute.

This article identifies and discusses the various divisions in the case law with respect to three of the statute's primary procedural and constitutional infirmities: 1) the inconsistencies and omissions in the statute regarding the proper procedure for bringing claims against impleaded defendants, which makes prosecuting or defending against such claims an exercise in guesswork and frustration; 2) the imperfectly defined statutory "examination" procedure, and its failure to afford basic procedural protections --including, among others, the right to a jury trial--to impleaded defendants; and 3) the undefined scope of judgment creditor remedies under the statute. After diagnosing the statute's procedural and constitutional problems, the article makes some suggestions to Florida's legislature to resolve the issues so that the statute can provide a truly workable mechanism to assist creditors in collecting on their judgments without unduly infringing on the rights of others. The statute, first enacted nearly 100 years ago, is ripe for reevaluation.

Florida's Proceedings Supplementary Statute

Proceedings supplementary in Florida are creatures of statute and did not exist at common law. The common law procedure for discovering and executing on a judgment debtor's assets was through a creditor's bill in chancery, through which a creditor suing a debtor at law could institute a parallel equitable proceeding to enjoin the fraudulent disposition of the debtor's property prior to the debt being reduced to judgment. (2) The Florida Legislature passed the proceeding supplementary statute in order to provide "a more expeditious and appropriate remedy to reach the concealed assets of the debtor." (3) The statutory procedure was designed to avoid a step required by a creditor's bill, that the judgment creditor initiate an entirely separate action. As explained by the Florida Supreme Court, "[t]hese statutes intended to empower the court to follow through with the enforcement of its judgment, so that there would be no necessity for an independent suit to reach property which legally should be applied to the satisfaction of the judgment." (4)

Since its inception, the proceedings supplementary statute has given circuit courts "broad discretionary powers" to "subject any and all property, or property rights of any defendant in execution, however fraudulently conveyed, covered up, or concealed the same might be, whether in the name or possession of third parties or not, to the satisfaction of an execution outstanding against him." (5) The broad powers granted to circuit courts in proceedings supplementary are entirely consistent with and necessary to effectuate the intent of the statute: to enable a judgment creditor, frustrated in its efforts to satisfy an outstanding judgment, to discover assets that the judgment debtor may be concealing, and to reach equitable interests not subject to levy of execution. (6) Because proceedings supplementary are "equitable in nature," Florida courts have indicated that the statute authorizing their existence should be "liberally construed." (7) However, that liberality of construction--coupled with crucial gaps in the statute, examined below--has resulted in a statutory procedure riddled with inconsistencies and problems.

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The Statute's Procedural and Constitutional Infirmities

* The Murky Procedure for Impleading and Stating Claims Against Third Parties in Proceedings Supplementary --Logically, most proceedings supplementary will involve actions against an impleaded third party, because if the judgment debtor held the assets in his or her own name, then the judgment creditor would simply proceed with levy. (8) By the very nature of the proceedings, then, a third party impleaded into a proceeding supplementary faces the prospect of liability for all or at least part of an existing money judgment. It would seem both necessary and fair that the third party be afforded basic procedural and substantive due process. After all, the impleaded defendant is, at least in name, a stranger to the underlying case. The proceeding supplementary, while brought in the original action, is essentially a new lawsuit against a new party, the impleaded defendant.

Yet, from procedural "square one," the statute is chronically ambiguous or outright silent regarding the most basic steps for impleading and summonsing previously unnamed third parties in proceedings supplementary. For example, the statute sets forth the minimal requirements for initiating proceedings supplementary: The judgment creditor must file an affidavit showing that the sheriff holds an unsatisfied writ of execution on a money judgment and that the unsatisfied execution is valid and outstanding. (9) Notably, the statute is silent as to whether third parties can be impleaded through this process, or whether an additional showing by the judgment creditor is required. In the end, it took the Florida Supreme Court to sort out conflicting appellate decisions on the requirements for impleading third parties into proceedings supplementary. (10) In Exceletech, Inc. v. Williams, 597 So. 2d 275 (Fla. 1992), the Florida Supreme Court agreed with the Fifth District and held that there was no requirement that the judgment creditor be examined orally under oath as a condition precedent to impleading a third party, and that simply filing an affidavit showing the existence of a valid, outstanding, and unsatisfied writ of execution was sufficient.

* The Order to Show Cause and Due Process Considerations--Once this requisite showing is made, the next step to implead a third-party defendant is similarly obscure. It turns out that, after the judgment creditor initiates proceedings supplementary, the court is to issue an order to show cause to the impleaded defendants. The statute references an order to the defendant-in-execution to appear for an examination, but is again silent regarding what sort of pleading must be served on an impleaded defendant. (11) Cases and authorities have read into the statute that an order to show cause is the appropriate method for formally impleading a third party into proceedings supplementary. (12) Such impleading, however, "does not in and of itself imply liability for the underlying judgment on the part of the impleaded third parties." (13) Instead, it provides impleaded defendants with an opportunity to raise their defenses and protect their interests consistent with the fundamental principles of due process. (14)

However, what level of notice must the order to show cause contain to satisfy due process, and what sort of defenses to the sufficiency of that pleading are permitted? The statute is completely silent, while the cases reflect diverging views.

The minority position is exemplified by a decision from the Fourth District Court...