Opinion
No. LLI CV 07 5002529S
December 21, 2009
MEMORANDUM OF DECISION RE APPLICATION FOR TURNOVER ORDER #113
I. FACTS PROCEDURAL HISTORY
In a complaint filed on January 13, 2003, Anthony Kosloski, the plaintiff in the present matter, was named as a defendant in a foreclosure action, Norfolk v. Greenwoods Associates, LLC, Docket No. CV 03 0089420, along with Greenwoods Associates, LLC, the defendant in the present matter. In that foreclosure action, the town of Norfolk sought to foreclose its tax liens against Greenwoods Associates, LLC. Kosloski was named as a defendant because of a claimed interest in the foreclosed premises by virtue of a mechanic's lien. After the court entered a judgment in favor of the town of Norfolk, the property was sold on February 3, 2007.
Meanwhile, on August 22, 2007, Kosloski became a plaintiff in the present matter when he filed an application for prejudgment remedy against Greenwoods Associates, LLC, which the court later denied. In a subsequent complaint, Kosloski alleged that he performed structural repair work on Greenwoods Theater, pursuant to a contract with Greenwoods Associates, LLC, for which he was never fully compensated. The underlying foreclosure matter was ongoing at the time Kosloski filed his complaint. In fact, in an order dated November 9, 2007, the court ruled on a motion for supplemental judgment in which it determined various parties' priorities in the foreclosure sale proceeds. In its order, the court found that the town of Norfolk's tax liens were prior in right to the liens and claims of all of the defendants and made a determination as to the amounts due to the town and Nalette Elevator, Inc., another defendant. The court ordered the court clerk to retain the remaining proceeds of $54,433.71 pending further order in that foreclosure matter.
Kosloski was not mentioned in the court's order.
On May 16, 2008, in the direct action that constitutes the basis of the matter now before the court, after a trial to the court without a jury, Kosloski secured a judgment against Greenwoods Associates, LLC in the amount of $13,266. Following that judgment, on March 30, 2009, Kosloski filed a motion for supplemental judgment in the underlying foreclosure matter in an attempt to satisfy his judgment in the instant matter out of the $54,433.71 proceeds being retained by the court clerk in that matter. On July 7, 2009, however, the court denied Kosloski's motion for supplemental judgment without prejudice. In its order, the court noted that the "remaining proceeds of $54,433.71 may be distributed to general creditors after full hearing of all such claims by such creditors." Then, on August 7, 2009, the court entered an execution order in favor of Kosloski in the present matter in the amount of $13,828, which includes the judgment amount plus fees and costs.
Before trial, the court granted Kosloski's motion for default due to Greenwoods Associates, LLC's failure to appear. Although Maura Smithies, an owner of the company, filed an appearance, Kosloski alleged that Smithies' appearance was a nullity under General Statutes § 51-88 and Triton Associates v. Six New Corporation, 14 Conn.App. 172, 540 A.2d 95, cert. denied, 208 Conn. 806, 545 A.2d 1104 (1988). The court granted the motion for default. Greenwoods Associates, LLC appealed the issue of whether it could be represented by Smithies, a non-attorney. On January 14, 2009, the Appellate Court dismissed the appeal, and on March 5, 2009, the Supreme Court denied the petition for certification.
On September 9, 2009, Kosloski (hereinafter the plaintiff) filed the application for turnover order that is presently before the court. In that application, the plaintiff alleges that on August 31, 2009, he served Brian J. Murphy, chief clerk of the Superior Court for the judicial district of Litchfield, with the court's August 7, 2009 execution order pursuant to General Statutes § 52-356b. The plaintiff alleges that the clerk is in possession of funds belonging to Greenwoods Associates, LLC, the judgment debtor, and that he has refused to turnover those finds without an order from the court. Specifically, he alleges that the clerk is in possession of the $54,433.71 in supplemental proceeds from Norfolk v. Greenwoods Associates, LLC, Docket No. CV 03 0089420. Thus, the plaintiff asks this court to order the clerk to turnover sufficient funds from those supplemental foreclosure proceeds to satisfy the plaintiff's judgment against Greenwoods Associates, LLC (hereinafter the defendant) together with interest, costs and marshal fees. The court heard oral argument on October 27, 2009, during which the plaintiff cited Segal v. Segal, 86 Conn.App. 617, 863 A.2d 221 (2004), and Tadros v. Tripodi, 87 Conn.App. 321, 866 A.2d 610 (2005), in support of its turnover order. Neither party filed memoranda on the present issue.
Despite the Appellate Court's earlier dismissal of an appeal by one of the defendant's members on whether the limited liability company could be represented by its member, a non-attorney, the defendant attempted again, unsuccessfully, to appear without counsel through one of its members.
II. DISCUSSION
"The process of a foreign attachment, or garnishment, is appropriate when the property of a party against whom a judgment or decree may be rendered is concealed in the hands of a third party . . . [General Statutes] § 52-329 states in relevant part: [w]hen the effects of the defendant in any proposed or pending civil action in which a judgment or decree for the payment of money may be rendered are concealed in the hands of his agent or trustee so that they cannot be found or attached . . . the plaintiff may insert in his writ . . . a direction to the officer to leave a true and attested copy thereof . . . with such agent, trustee or debtor of the defendant . . . and from the time of leaving such copy all the effects of the defendant . . . shall be secured in the hands of the garnishee to pay such judgment as the plaintiff may recover." (Citation omitted; internal quotation marks omitted.) Shenker v. World Wrestling Entertainment, Inc., Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. X05 CV 00 0180933 (December 14, 2004, Rogers, J.) [ 38 Conn. L. Rptr. 384].
"The service of a writ of garnishment does not operate as a physical attachment of any property belonging to the defendant described in the writ, but as notice to the garnishee to retain in its hands any effects belonging to or any indebtedness due the defendant . . . The foreign attachment procedure is an appropriate method for providing such notice to a garnishee, even though the garnishee may dispute whether or not property in its possession actually belongs to the debtor. Because a garnishment does not act as a physical attachment of the debtor's property, in order to obtain physical custody of the garnished property, Connecticut provides for specific post-judgment procedures at which time the garnishee can dispute the garnishment and contest ownership over the property." (Citation omitted; internal quotation marks omitted.) Id.
An application for turnover order is one of the postjudgment remedies available to those who seek to garnish property. "In order to demand that a garnishee turnover garnished assets, a plaintiff must obtain either a bank or personal property execution within sixty days of a final judgment, and then properly serve the garnishee with the execution." (Internal quotation marks omitted.) Superior Block Supply Co. v. C M Masons, Inc., Superior Court, judicial district of New Britain, Docket No. CV 472867 (January 19, 1999, Skolnick, J.) ( 23 Conn. L. Rptr 666, 667). "The law of turnover orders is entirely statutory . . . [Turnover] statutes have not been extensively litigated . . . The Appellate Court has noted that the trial court has supervisory control over the process of a property execution. See Anthony Julian Railroad Construction Co. v. Mary Ellen Drive Associates, 50 Conn.App. 289, 294, 717 A.2d 294 (1998)." (Citations omitted; internal quotation marks omitted.) Goldberg v. Winogradow, Superior Court, judicial district of Middlesex, Docket No. CV 00 0093186 (October 12, 2006, Dubay, J.).
General Statutes § 52-356b governs turnover orders and provides in relevant 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 . . ." "Superior court judges who have considered the application of this statute have found that an order of execution is a condition precedent to a turnover order under General Statutes § 52-356b." (Internal quotation marks omitted.) Caruso v. Perlow, Superior Court, judicial district of New Haven at Meriden, Docket No. CV 05 4005085 (April 7, 2006, Taylor, J.).
Since the plaintiff seeks a portion of surplus proceeds resulting from a foreclosure sale, § 49-27 is also implicated. Section 49-27 governs the distribution of foreclosure proceeds and provides in relevant part: "The proceeds of each such sale shall be brought into court, there to be applied if the sale is ratified, in accordance with the provisions of a supplemental judgment then to be rendered in the cause, specifying the parties who are entitled to the same and the amount to which each is entitled . . ." "The distribution of a surplus from a foreclosure sale lies within the equity jurisdiction of the court." Bryson v. Newtown Real Estate Development Corp., 153 Conn. 267, 273, 216 A.2d 176 (1965).
The general and longstanding rule is that property held in the government's custody cannot be attached or garnished. See generally Stillman v. Isham, 11 Conn. 124, 127 (1835). "[T]he doctrine of sovereign immunity in Connecticut . . . encompass[es] attachments served on an officer of the state, and does not limit the application of the doctrine of sovereign immunity to suits against the state involving the state's direct pecuniary interest in the outcome." Herzig v. Horrigan, 34 Conn.App. 816, 821, 644 A.2d 360 (1994). In Herzig, the plaintiff obtained a judgment against the defendant for his failure to pay rent. Id., 817. The defendant's only asset was a state lottery prize that was payable in annual installments. Id. As a result, the plaintiff filed a motion to garnish the defendant's lottery payments by serving a property execution on the state lottery director, the executive director of the division of special revenue, the state deputy treasurer, an associate attorney general and an officer of the office of the state comptroller. Id., 817-18. The trial court granted the state's motion to dissolve the garnishment and property execution, and the plaintiff appealed that order to the Appellate Court. Id., 818. The issue on appeal was whether the motion to dissolve was proper and whether "the doctrine of sovereign immunity protects the state from honoring a property execution on a judgment debtor's state lottery winnings." Id., 818.
Before reaching a decision, the court provided an overview of the doctrine of sovereign immunity, providing that its purpose rested "not on arguably ancient and outdated concepts, but, rather, on the purpose of preventing serious interference with governmental functions and the imposition of enormous fiscal burdens on the state by subjecting its government to private litigation . . . The bar of actions against the state is not absolute, however, and has been modified by both statutes and judicial decisions." Id., 819. "Although subsequent decisions have further defined and modified the doctrine of sovereign immunity, neither the substance of nor the basic reasoning behind the Stillman holding has been abrogated by the appellate courts of this state. The practical implications of abolishing sovereign immunity as a defense to garnishment still exist. The number of potential judgment debtors whose funds may be held by the state is immense . . . Until such time as the legislature grants judgment creditors the right to reach such sums held by the state for such winners and vendors, the courts should continue to apply the doctrine of sovereign immunity." Id., 821-22. After noting that the applicable statutes do not expressly permit a "judgment to be served on the state or enforced against the property of the judgment debtor in possession of the state," the court held that the "doctrine of sovereign immunity prevents the plaintiff from garnishing the lottery winnings of the defendant while they are in the possession of the state." Id., 822.
Since Herzig, however, the Appellate Court has distinguished at least two cases involving court clerks and concluded that sovereign immunity was not implicated when property execution orders were served on court clerks. The court reached this conclusion after determining that the alleged garnishments were not garnishments at all. In Segal v. Segal, 86 Conn.App. 617, 863 A.2d 221 (2004), a case involving an underlying marriage dissolution where a home was sold and the proceeds partitioned, one of the specific issues was whether the "doctrine of sovereign immunity bars an order of a court to a court clerk to distribute partition proceeds deposited with the clerk pursuant to § 52-502(b) and whether such an order is a writ of garnishment against the court clerk." Id., 635. The Appellate Court held that such an order was not a garnishment and therefore was not barred by the doctrine of sovereign immunity. Id., 637. The court reasoned: "In this case, the court clerk came into possession of the partition proceeds as a direct result of a court order enforcing the judgment of the court in a partition action pursuant to § 52-502(b). There is only one disbursement to be made by only one clerk . . . The [defendant] has not presented any factual basis for concern that a one-time payment of the fund will cause the clerk any administrative difficulty. Indeed, . . . [h]e merely holds the funds for the court with no claim to or interest in them. Under the circumstances of this case, [this] was not a garnishment order. The partition statute . . . conferred authority on the court to order a court clerk to disburse the proceeds of the partition proceedings to the [defendant]." (Internal quotation marks omitted.) Id.
Likewise, in Tadros v. Tripodi, 87 Conn.App. 321, 866 A.2d 610 (2005), the Appellate Court distinguished the facts from Herzig and held that an order requiring the court clerk to hold the proceeds from a foreclosure sale as a prejudgment remedy was not a garnishment and was, therefore, permissible. Id., 336. In reaching this conclusion, the Appellate Court noted that the question of whether a court can order a court clerk to hold the proceeds of a foreclosure sale as a prejudgment remedy "occurs at the intersection of legal and equitable doctrines" because both sovereign immunity and the distribution of a foreclosure sale surplus were implicated. Id., 335. Then the court concluded: "[T]he funds at issue were brought into the court and held by the court pending further distribution by order of the court and, as such, the concerns that support the principle of sovereign immunity do not apply . . . In this case, the court simply ordered its clerk to hold, rather than to distribute, funds. Thus, there is no concern with interference with governmental functions or the imposition of any fiscal burdens on the state . . . [As in Segal], this [is] not a garnishment implicating sovereign immunity concerns . . . This case, furthermore, is not the typical one of a third party garnishing his debtor's assets. The parties in interest in the foreclosure action are the same parties in interest in the consolidated cases we affirm in parts I through III [of this opinion]. We accordingly conclude that the court's order with respect to the funds from the foreclosure sale was not a garnishment of funds held by the court clerk and that the court had the authority to order the clerk to hold rather than to distribute the funds pending the outcome of this and any further appeal." (Internal quotation marks omitted.) Id., 335-36.
The aforementioned appellate decisions provide significant guidance on the issue here: whether a turnover order served on a court clerk in an effort to obtain surplus proceeds from a foreclosure sale in another matter to satisfy a judgment in the present matter constitutes a garnishment barred by sovereign immunity per Herzig and its progeny. Although the plaintiff relies on Segal and Tadros to support the proposition that ordering a court clerk to distribute a portion of surplus proceeds from a foreclosure sale is not a garnishment and sovereign immunity is not implicated, the present matter is distinguishable from both Segal and Tadros and is more akin to Herzig. Unlike the orders in both Segal and Tadros, a turnover order in the present matter, if granted, would constitute a garnishment. While the court clerk in the present matter came into possession of the foreclosure funds as a result of a court order, and he holds them without a claim or interest in them, as in Segal, this case is distinguishable from Segal because the court has yet to determine how the supplemental proceeds will be distributed in the underlying foreclosure action and all of the parties in the underlying action are not parties to the present action. This case is also distinguishable from Tadros for the latter reason. Moreover, the court clerk in Tadros was specifically ordered to hold the surplus foreclosure funds, not disburse them, and the court concluded that such an order was not a garnishment for that reason.
Granting the plaintiff's application for turnover order would result in significant administrative difficulty, something the Appellate Court sought to avoid in Herzig. While the funds at issue do not belong to the court clerk, it is not yet clear to whom they belong because the court has yet to hold a hearing on the issue. Some or all of the funds may be due to multiple general creditors, while some may be left for the judgment debtor. Moreover, even if the plaintiff was entitled to a portion of those funds, they cannot be dispersed at this time because an order in this matter could interfere with future orders in the underlying foreclosure matter. This is particularly so because the defendant's other creditors are not a party to this action.
Moreover, § 52-356b "do[es] not explicitly permit a property execution [or turnover order] pursuant to a money judgment to be served on the state or enforced against property of the judgment debtor in possession of the state." Herzig v. Horrigan, supra, 34 Conn.App. 822. The construction of a statute in derogation of the doctrine of sovereign immunity must be strict and when, as here, the statute is silent as to the abrogation of the doctrine, this court will not import such authority into the statute.
III. CONCLUSION
The court clerk has no authority to distribute the foreclosure surplus to the plaintiff because turning over such funds would constitute a garnishment. As in Herzig, the plaintiff cannot garnish the foreclosure surplus while it is in the state's possession because such an action is barred by the doctrine of sovereign immunity. The plaintiff's application for turnover order is denied.