nebraska sand dunes
Judges typically do not take action unless requested to do so by one of the litigants. However, in some cases, a judge may decide that something needs to be done about a case that no one has asked for.This is known as Sua Sponte Action, which roughly translates as “of one’s own will.” Actions taken by the court may be very minor, such as resetting a hearing, or they may be very significant. In that case, the outcome is usually very bad for at least one of the litigants.
A company called CRABAR/GBF, Inc. (Crabar) obtained a $1 million judgment against Wright Printing and a $1.75 million judgment against Mark Wright personally. The sentence was handed down in the U.S. District Court for the District of Nebraska. Wright (and presumably Wright Printing) appealed the judgment on the merits. Meanwhile, Crabble has decided to carry out the sentence pending Wright’s appeal.
It is important to know that simply filing an appeal will not stop the judgment creditor from attempting to enforce the judgment while the appeal against the judgment is pending. If a debtor wants to stop a creditor from enforcing a judgment, the debtor must file an appeal bond (also known as a bail bond) with the court. replace bonds) An amount sufficient to pay the judgment, interest accrued during the appeal, and costs of the appeal. Such appellate bonds are sold by insurance companies and require the debtor to post sufficient collateral to secure the insurance company’s own guarantee. The debtor loses the case and the insurance company has to pay the deposit. As discussed below regarding Mark Wright, it is often difficult for debtors to provide collateral.
Wright owned interests in two Nebraska LLCs: 121 Court, LLC and 11616 “I” Street, LLC. Mr. Crabar applied to the court for an order charging Mr. Wright’s interests in these two LLCs. Mr. Wright challenged the charging order, and then Mr. Wright and Wright Printing jointly sought a stay of execution without posting an appeal bond. Wright and Wright Printing stated that Wright intends to sell some of the real estate owned by 121 Court LLC to raise funds for the appeal bond, and that the charging order sought by Claver requires that Wright raise that money. He argued that it would effectively prevent the Resolution of these issues leads to a U.S. District Court memorandum and order. CRABAR/GBF, Inc. v. Wright2023 WL 8110737 (D.Neb., November 22, 2023), which is discussed next.
The court first noted that an important factor in determining whether to grant a stay of execution of a judgment is whether the debtor has funds available to pay the judgment. Here, the court found that even if 121 Court LLC sold the property, Wright would have had access to the cash long after the bond was issued, given that the other members of 121 Court LLC would have to distribute the sale proceeds. I had doubts as to whether I would be able to enter. The light was also uncertain. But the biggest consideration is that it has been several months since the judgment was handed down, and Mr. Wright has not provided any explanation as to why he did not try to get 121 Court LLC to sell the property and extract the cash. Was that. In other words, it appeared to the court that Wright was deliberately slowing things down. Under these circumstances, the court refused to stay the execution.
This brings us to Wright’s objection to Carver’s application for a charging order against Wright’s interests in two LLCs. Because the U.S. District Court was located in Nebraska, Nebraska law applied to the application for a charging order. As in most other states, the imposition of a charging order is a discretionary power, and here Mr. Wright said that the court has the discretion not to invoke a charging order so that he can obtain the security necessary to obtain an appellate bond. He argued that the right should be exercised.
And this is exactly where things quickly start to go south for Wright, the court noted:
“Crabble has represented that Mark Wright is actively concealing assets in order to prevent Crabble from collecting the judgment, and has submitted receipts to prove it. [] Such evidence indicates that a charging order is appropriate. [] Indeed, such evidence indicates that additional steps may be warranted to ensure that Clabar recovers the judgment. [] Federal law allows the court to appoint a receiver in such cases “in accordance with the historical practice of the federal courts or local rules.” []”
The court further held that the appointment of a receiver is an exceptional remedy available only in extreme circumstances, and the court should first consider whether a less drastic remedy exists and whether appointing a receiver would He pointed out that it is necessary to consider whether many effects can be obtained. More harm than good. Nevertheless, the court found that:
“The current situation meets the criteria for an ‘extraordinary situation,'” Crabble said. provided evidence of “imminent danger.” [] Crabar has evidence that Mark Wright violated the Uniform Void Transactions Act. []. And, if a judgment debtor uses an LLC, a receivership is necessary to protect assets and income from creditors by keeping assets undistributed or out of reach. There is a possibility that it will be.” [] That seems to be exactly what Mark Wright is doing here. []”
The court did not immediately appoint a receiver, but essentially urged Mr. Claver to request the appointment of a receiver and encouraged the parties to discuss appointing a mutually agreeable receiver in this case. Meanwhile, the court rejected Mr Wright’s objection to Mr Crabble’s application for an order of indictment, which was subsequently granted.
analysis
This is a situation where the debtor’s objection to the creditor’s remedy (charging order) not only failed, but also made matters worse for the debtor. If Wright had not objected to the indictment, the court would not have considered any evidence that Claver submitted to the court, and the court would not have begun to consider the receivership. The lesson here for the debtor is to not only oppose everything the creditor tries to do, but also to get the creditor to grant whatever relief the court will likely grant.
Indeed, a charging order is a remedy within the court’s discretion, in contrast to the likes of levies and garnishments, which are not discretionary powers but are naturally available to creditors. The first sentence of Section 503(a) of the Uniform Limited Liability Company Act states:
“On the application of a member or assignee judgment creditor, the court may make an order charging the judgment debtor’s transferable interest for the amount of the judgment.”
Use of terminology May indicates that the item is voluntary and not mandatory. However, there are very few cases in which the court has refused to order prosecution on its own discretion. Courts will typically refuse to enter into a charging order if the creditor cannot prove that the debtor has an interest in the LLC or partnership in which interest is being charged. Other situations in which a charging order is refused are much rarer. Good arguments can be made (and I often argue on drafting committees) that charging orders should be mandatory rather than discretionary, but I have never heard a convincing argument to the contrary. Notice what you can’t say.
Importantly, it is highly unlikely that Wright will be able to successfully oppose a charging order. His motion to stay execution so he could raise collateral to post the appeal bond also had a very short deadline. If a debtor does not want his assets taken away and sold during an appeal, he will typically obtain an appeal bond as described above. If the debtor does not have sufficient assets to post as collateral for an appeal bond for the full judgment, the debtor may request a reduction in the bond by showing the court that his or her resources are limited. be able to. But if a debtor wants to make such a claim, it needs to do so now and not dawdle for months as Wright did here. Otherwise, the court will wonder (as here) why the debtor did not file a claim. Immediate action. This means that if a debtor is looking to write down their appeal bond, they should start the day after the verdict (or judgment of liability) is returned and not mess around.
So what options do lights have now? If the court is going to appoint a receiver anyway, and it seems certain that this judge will do so, then, at least in theory, the Wright defendants could ask the judge that the 121 Court LLC. They may ask the trustees to instruct them to facilitate the sale of the property. All proceeds made to Wright will be used to post the appeal bond. I’ve never heard of this being done, but again, I haven’t investigated this issue and it’s within the realm of possibility. Mr. Crabble probably does not want to wait for payment on the judgment and will object, but the judge may take into account the possibility that Mr. Wright will succeed on appeal, in which case Mr. Crabble will be able to pay on appeal bond. The full amount (including interest) will be paid. Alternatively, Wright could ask the judge to instruct the recipients to keep the money they collected pending an appeal. This is also within the realm of possibility.
The court did not elaborate on what Mr. Wright did after his sentencing, but it appears to be pretty damning.What Wright has to note here is that depending on the state, principle of deprivation of rights This allows the Court of Appeal to dismiss the appeal on equitable grounds if the party seeking to appeal commits an offense after the judgment has been made, which means ‘don’t come to the Court of Appeal with dirty hands’. It corresponds to a theory like Unless otherwise stated, the Court of Appeals, by judicial statute, prohibits a party from both appealing and concealing assets at the same time. I don’t know about Nebraska law, but perhaps Mr. Claver’s attorney will look into this matter.
All of this makes it extremely difficult to represent debtors in post-judgment proceedings, especially when debtors seek to appeal on the merits. Whether or not a creditor objects to the specific relief sought, the longer post-judgment proceedings drag on, the more a judge will typically become angry with a debtor wasting court time, so generally There are many things to consider, including staying away from court. (A court can just as easily condemn a creditor, unless the creditor is totally incompetent).
We probably haven’t heard the outcome of this case yet, so stay tuned.
