Alyssa Peterson v. Hannah Woldeyohannes (2013)

MEMORANDUM OF DECISION RE APPLICATION FOR TURNOVER ORDER PURSUANT TO C.G.S. SECTION 52–356B (# 225)

The plaintiff, Alyssa Peterson, who obtained a judgment in this matter against the defendant, Hannah Woldeyohannes, requests that the court enter a turnover order pursuant to General Statutes § 52–356b, requiring the defendant to satisfy a portion of the judgment she has failed to pay by instructing the defendant to turn over the assets of A to Zee, LLC by executing the form “Interim Notice of Change of Manager/Member” from the Secretary of State's Office which would substitute the plaintiff for the defendant as the sole manager/member of A to Zee, LLC.

By way of background, by decision dated November 13, 2009, after a hearing in damages, the court entered judgment against the defendant.  (Court file document, # 199.10.) There the court noted that A to Zee was not a party to the action but plaintiff's allegations that the defendant is the alter ego of A to Zee was deemed admitted and the court found that the defendant was the sole member of A to Zee. (Id., pp. 2–3.)   The decision continued an order prohibiting the defendant from assigning or encumbering her interest in A to Zee and transferring and/or encumbering the units owned by A to Zee to allow the plaintiff to file an application under General Statutes § 34–171 if she chose.  (Id., p. 16.)   On September 29, 2010 she filed such an application which was subsequently noted withdrawn by court order dated June 25, 2012.   (Court file document, # 209.)   On June 18, 2012 the plaintiff filed an application for turnover order pursuant to General Statutes § 52–356b.   (Court file document, # 219.)   On June 25, 2012, it was denied without prejudice because no execution had been applied for or issued.   The plaintiff subsequently applied for an execution which was issued and returned unsatisfied.  (Court file document, # 223.)   She then filed this motion.

General Statutes § 52–356b provides, in part,:  “(a) If a judgment is unsatisfied, the judgment creditor may apply to the court for an execution and an order in aid of the execution directing the judgment debtor, or any third person, to transfer to the levying officer either or both of the following:  (1) Possession of specified personal property that is sought to be levied on;  or (2) possession of documentary evidence of title to property of, or a debt owed to, the judgment debtor that is sought to be levied on. (b) The court may issue a turnover order pursuant to this section, after notice and hearing or as provided in subsection (c) of this section, on a showing of need for the order.   If the order is to be directed against a third person, such person shall be notified of his right pursuant to section 52–356c to a determination of any interest claimed in the property ․”

An “application for a turnover order ․ [is] a mechanism for collecting the already acquired judgment against the defendants, not a mechanism for determining the plaintiff's rights against the defendants.”  Nemeth v. Gun Rack, LTD., 38 Conn.App. 44, 50 (1995).

The defendant originally objected to the motion in part because the defendant was in bankruptcy and the plaintiff needed to receive relief from the automatic stay in order to proceed with the motion.   Therefore, at the first hearing of this motion on November 30, 2012, the matter was continued so that the plaintiff could clarify that the motion is not subject to the bankruptcy stay.   Subsequently, on January 16, 2013, the plaintiff obtained an order from the Bankruptcy Court which states that “the automatic stay of § 362(a) is modified pursuant to § 362(d) to permit the Movant [Alyssa Peterson] to pursue recovery of her interests in the Debtor's [Hannah Woldeyohannes] wholly-owned Connecticut limited liability company known as A to Zee, LLC (hereinafter, ‘A to Zee’), and any assets of A to Zee, including condominium property and bank accounts held under injunction by order of the Connecticut Superior Court since May 21, 2012 ․” Consequently, the plaintiff may properly pursue this motion.   Further argument in support and in opposition to the motion was held on February 4, 2013.   The defendant filed a supplemental memorandum on February 7, 2013.   Later the Bankruptcy Court order was amended on February 14, 2013, to delete the phrase “wholly owned” and adding in its place the phrase “ownership interest in the.”

The defendant continues to oppose the motion for a number of reasons.   First she argues that the plaintiff is not seeking a sale by a marshal as described in § 52–356a(b)(1) but asks the court to force the defendant to sign over her membership interest in her limited liability company to the plaintiff.   The defendant claims that there is no authority for a court order requiring a sole member of a limited liability company to transfer her interest in the company directly to a judgment creditor.   The court agrees.   In Goldberg v. Winogradow, Superior Court, Judicial District of Middlesex at Middletown, Docket No. CV 00 0093186 S (Oct. 12, 2006),

Here the plaintiff is seeking an order that “Hannah Woldeyohannes ․ the 100% owner of A to Zee LLC, a Connecticut Limited Liability Company, execute the form ‘Interim Notice of Change of Manager/Member ․ and have ․ a state marshal file it with the CT Secretary of State therewith, thereby effectively turning over the Defendant Debtor's personal property interest in the asset known as A to ZEE LLC and its holdings that was judicially determined to be worth $120,000.00, to the Judgment Creditor Alyssa Peterson, in partial satisfaction of the judgment.”  (Proposed Turnover Order attached to motion.)   As noted in Goldberg this order is beyond the authority of the court.   In addition, the court has no authority to effectively transfer the assets of the LLC, not a party to the judgment, to the plaintiff.   Although General Statutes § 52–356b does allow for the court to issue an order to a third person, such as A to Zee, LLC, the statute requires that the third person be notified of his rights under Section 52–356c.¹  That has not been done here.

Second, the defendant argues that even if the court found it appropriate to allow such a property transfer the statute requires that it be sold by a marshal.   The court agrees.   The statute provides that the court may order that the property “sought to be levied on” be transferred to the levying officer, not the plaintiff.  “Goods are levied as part of the process of execution of a judgment.   Execution is a remedy afforded by law for the enforcement of a judgment, its object being to obtain satisfaction of the judgment on which the writ is issued ․ The execution of a writ of execution consists of two acts, the levy, or taking property into possession of the sheriff for sale, and the execution sale itself.”  (Internal quotation marks and citations omitted.)   Nemeth v. Gun Rack, LTD., 38 Conn.App. 44, 53 (1995).

Third, the defendant argues that the assets of A to Zee, LLC are fully encumbered and therefore are valueless, and consequently there is no “need” within the meaning of the statute for the order.   The plaintiff argues that the defendant continues to deplete her assets and therefore the turnover order is necessary.   In addition, the defendant argues, the plaintiff cannot show a need for such an order because the plaintiff holds real estate attachments against the real property owned by A to Zee, LLC in the amount of $152,000.   On September 21, 2011, the court in the matter of Peterson v. Hume, Superior Court, judicial district of Hartford at Hartford, Docket No. 11–5035694, ordered that a prejudgment remedy be allowed in favor of the plaintiff here in the amount of $152,000 as to the real estate of A to Zee, LLC. In addition, on May 21, 2102 in that same litigation the court enjoined A to Zee, LLC from paying out any funds to any claimant except to pay current and past due operating fees.   The court also ordered that a mortgage recorded in September 2010 be excluded from being an operating expense for purposes of the order.   Thus it appears that the plaintiff already has the assets of A to Zee, LLC sufficiently encumbered to protect her interests so there is no “need” for the turnover order.²

For all the foregoing reasons, the motion is denied.

Jane S. Scholl, J.

FOOTNOTES

FN1. For purposes of General Statutes § 52–356b, General Statutes § 52–350a(14) defines “person” as including a limited liability company..  FN1. For purposes of General Statutes § 52–356b, General Statutes § 52–350a(14) defines “person” as including a limited liability company.

FN2. Even if the court were to consider this request as in the nature of a request for a charging order pursuant to General Statutes § 34–171, any right the defendant has to receive income from A to Zee, LLC has been encumbered in the Peterson v. Hume matter..  FN2. Even if the court were to consider this request as in the nature of a request for a charging order pursuant to General Statutes § 34–171, any right the defendant has to receive income from A to Zee, LLC has been encumbered in the Peterson v. Hume matter.

Scholl, Jane S., J.