Treadwell v. Bischoff

Robert C. Treadwell et al. v. William Bischoff et al.

No. HHDCV174085491

Superior Court of Connecticut, Judicial District of Hartford, Hartford

March 22, 2019

UNPUBLISHED OPINION

Judge (with first initial, no space for Sullivan, Dorsey, and Walsh): Graham, James T., J.

MEMORANDUM OF DECISION RE APPLICATION FOR TURNOVER ORDER

James T. Graham Superior Court Judge

In Rockingham County, New Hampshire on April 27, 2016, the Superior Court entered a stipulated judgment in the amount of $411, 537.60 plus interest in favor of the plaintiffs here (Robert C. Treadwell individually and as trustee) against the defendants, William A. Bischoff (Bischoff) and Genesis Investment Group, LLC (Genesis), jointly and severally. On July 12, 2017, that judgment was certified to this court and registered as a foreign judgment by the plaintiffs. Following an unsuccessful attempt to satisfy the judgment by a property execution in the amount of $430, 655.75, issued on October 13, 2017, the plaintiffs filed their application for a turnover order in aid of execution, dated March 23, 2018. Said application sought an order that third-party garnishee Universal Waste Management, Inc. (UWM) turn over twelve notes owed to Genesis.

Those notes are eleven demand promissory notes (Demand Notes) and one monthly amortized note. The latter is known as the Whitt Note for historical reasons (Whitt note) and is dated December 3, 2016 in the face amount of $149, 000 and payable to Genesis Investment Group Ltd. In response to the service of execution papers, UWM escrowed payments on the Whitt note. On June 5, 2018 UWM filed a motion for determination of interests in dispute property, specifically the twelve notes. On June 29, 2018 at the request of all appearing parties the court (Peck, J.) ordered that all funds held in escrow by UWM or NLR pertaining to the Whitt note, and all future payments due on same, be held by UWM’s counsel in an attorney trust account. The order did not provide that it be an interest bearing account.

Notice was provided to three other possible claimants to the Whitt note, as well as to Michelle Robbins (MR) as a possible claimant to the demand notes. The defendants also received notice. Bischoff filed a pro se appearance, filed an exemption claim and then withdrew the latter. He did not appear for the turnover and determination of interests hearing. Genesis had notice, as Bischoff was its sole owner but it did not appear. Besty Bischoff, (BB) a possible claimant to the Whitt note and Michelle Robbins, a possible claimant to all the notes, were found to have actual notice of these proceedings and it was ordered that their claims would be waived unless filed within 10 days by Budzik, J. on October 16, 2018. They filed no claims, failed to appear at the hearing and they are deemed to have waived any claims pursuant to Budzik, J.’s order.^[1]

The third claimant to the Whitt note, Kristin Steinke (KS) appeared through counsel and filed her own claim for determination of interests in the Whitt note on June 26 2018. The hearing on the combined turnover application and motions for determination of interests, in which the plaintiffs, UWM and KS participated, was heard on November 2, 2018. The last court ordered brief was filed on November 26, 2018.

I have weighed the testimony, drawn reasonable inferences from it, assessed the credibility of the witnesses, reviewed the exhibits, considered the post-trial briefs, determined the facts and applied the relevant law and burdens of proof as to this proceeding.

I find that, as to the demand notes, all eleven reflect Genesis as the payee and UWM as the maker and all eleven are subordinated by Genesis^[2] to UMW’s asset based primary lender.^[3] They are in the dates and face amounts of: 10/24/14 — $10, 000; 10/30/14 — $25, 000; 10/31/14 — $13, 818.48; 11/12/14 — $9, 000; 11/13/14 — $4, 500; 11/19/14 — $6, 000; 11/21/14 — $21, 000; 12/11/14 — $2, 500; 1/29/15 — $60, 000; 2/23/15 — $60, 000 and 4/23/15 — $5, 000.

Interest continues to accrue as to these notes and UMW is uncertain when they will be paid off although its CEO expressed confidence they would eventually be satisfied.

"General Statutes § 52-356b, the turnover statute, sets forth a postjudgment procedure permitting a judgment creditor to (a) ... 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. "The court may issue a turnover order pursuant to [this section], after notice and hearing ... on a showing of need for the order." General Statutes § 52-356b(h). JPMorgan Chase Bank, N.A. v. Herman, 175 Conn.App. 662, 666-67, 168 A.3d 514, 518 (2017).^[4]

"The law of turnover orders is entirely statutory ... General Statutes § 52-356b(a) authorizes a court, at the request of an unpaid judgment creditor, to direct "any third person, to transfer to the levying officer [p]ossession of specified personal property that is sought to be levied on ..." ... This] statute ha[s] not been extensively litigated. In Fleet Bank Connecticut, N.A. v. Carillo, 240 Conn. 343, 691 A.2d 1068 (1997), our Supreme Court considered whether a judgment creditor was entitled to a turnover order for the entire balance of a joint bank account even though only one of the co-holders was a judgment debtor. In furtherance of the legislature’s intent to allow a judgment creditor to execute against all forms of a judgment debtor’s assets, the court concluded that such a creditor was entitled to reach any property in which the judgment debtor had a cognizable interest." (Citation omitted.) Sarasota CCM, Inc. v. Golf Mktg., LLC, 94 Conn.App. 34, 37-38, 891 A.2d 72, 73-74 (2006).

"Although the turnover statute is governed by statute, it has been characterized by our supreme court as having an equitable nature." (Internal quotations omitted.) Simko v. LaMorte, 222 Conn. 793, 798 (1992). The plaintiffs have shown a need for a turnover order in aid of the unsatisfied execution, and there is clearly a need to determine contested priorities.

A. The Demand Notes

As between the parties noticed for the hearing, judgment debtor Genesis has a 100% interest in the debt memorialized by the demand notes. Bischoff, KS, BB, MR have no interest in any of the demand notes. Only the revolving credit lender for UMW, North Mill Capital, may have a superior interest to the plaintiffs in such notes. It lacked notice of this hearing.

Under the unusual realities of these notes, as to their lack of current payment and uncertain date of future payment, their market value for resale is questionable. Therefore, as requested by the plaintiffs, in the interest of UMW and its lender and consistent with the equitable exercise of the court’s powers, the court orders as follows: The plaintiffs are found to be the lawful holders of the eleven demand notes, subject only to any valid and enforceable subordination agreement with UWM’s lender, North Mill Capital, LLC. Within 30 days, defendants, and/or UMW shall transfer possession of the original notes or, if such are lost, a missing note affidavit. If and when any payments become due under the notes, UWM shall make same to the levying officer and, upon receipt by same, such payments will be credited to Genesis. Should plaintiffs desire to sell or assign the demand notes, they must first attempt to reach an agreement as to the details of same with UWM and North Capital Mill, LLC. Any sale or assignment must be commercially reasonable and the details of same noticed to UMW, North Capital Mill, LLC and the judgment debtors 30 days before such sale. Any party to this action or noticed entity may move for the court to review the proposed sale or assignment within 10 days of receiving notice. The court retains jurisdiction to approve or disapprove such assignment or sale.

B. The Whitt Note

KS has the burden of proving by a preponderance of the evidence her ownership of the 1/2 interest in the Whitt note. She has done so. As to this twelfth note, the Whitt note (Defendant’s exhibit 8) the evidence shows that intervener KS paid $60 000 consideration by wire transfer for a 1/2 interest in the Whitt note on February 24, 2017, when it was not in default. The funds were paid, as requested, to Bischoff/Genesis. Bischoff had communicated with KS by emails which consistently showed his name and proclaimed his role as the managing partner of Genesis Investment Group. At the time of the transaction, she had no reason to distrust Bischoff.

Defendant’s exhibit 6 clearly shows the assignment of the note to be from payee/assignor Genesis Investment Group Ltd to KS and recites consideration of the $60, 000 payment to Genesis. Under these facts the court concludes that KS in good faith paid consideration to Genesis by paying Bischoff in his capacity as the managing partner of Genesis.^[5]

There is no evidence that the plaintiff had executed upon the notes before then. The maker of the note, UMW, through its wholly owned subsidiary, NLR, made payments directly to KS in March April, May, June, July, August, September and October of 2017. During that same time period it made payments to BB. Previously it had made payments on the note to Bischoff. No party presented credible evidence as to the validity, or lack thereof, of payments to BB and Bischoff upon...