ALLIED INDUSTRIES INTERN. v. AGFA-Gevaert, Inc.

• Decision Date: 13 May 1988
• Docket Number: No. 86-1804-Civ.,86-1804-Civ.
• Citation: 688 F. Supp. 1516
• Court: U.S. District Court — Southern District of Florida
• Parties: ALLIED INDUSTRIES INTERNATIONAL, INC., formerly known as Worldwide Video; MSR, Inc., and Worldwide Auto Export, Inc., Plaintiff, v. AGFA-GEVAERT, INC., a foreign corporation, Defendant, v. Michael RUBIN, Diana Rubin, Cargill Boyd, and United Video International, Inc., Third Party Defendants.

688 F. Supp. 1516

ALLIED INDUSTRIES INTERNATIONAL, INC., formerly known as Worldwide Video; MSR, Inc., and Worldwide Auto Export, Inc., Plaintiff, v. AGFA-GEVAERT, INC., a foreign corporation, Defendant, v. Michael RUBIN, Diana Rubin, Cargill Boyd, and United Video International, Inc., Third Party Defendants.

No. 86-1804-Civ.

United States District Court, S.D. Florida.

May 13, 1988.

Jerry Kahn, Miami Beach, Fla., for Allied & Michael Rubin.

Thomas Meeks, Floyd Pearson Richman Greer, Weil Zack & Brumbaugh, Miami, Fla., for Agfa-Gevaert.

David Horr, Miami, Fla., for United Video and Cargill Boyd.

H. Matthew Fuqua, Miami, Fla., for Diana Rubin.

ORDER ON MOTION FOR SUPPLEMENTARY PROCEEDINGS IN AID OF EXECUTION

ATKINS, District Judge.

THIS CAUSE is before the court on the defendant/third party plaintiff's motion for post judgment relief. After careful consideration of all submitted reports and after a hearing on the matter, it is

ORDERED AND ADJUDGED that the motion is GRANTED as follows:

The judgment creditor, AGFA-GEVAERT, INC. ("AGFA"), obtained a judgment against the plaintiff/third party defendant Allied Industries International, Inc. ("Allied") on a counterclaim for an amount including costs and attorneys' fees that totals approximately $177,478.41. AGFA filed this motion for supplementary proceedings in aid of execution after it was unable to collect any portion of the outstanding judgment. In its motion, AGFA sought to implead as third party defendants Michael Rubin, Diana Rubin, Cargill Boyd, and United Video International, Inc. ("United"). This court allowed the named parties to be impled as involuntary counterclaim defendants and they were ordered, as transferees of the judgment debtor Allied, to show cause why they should not be subject to AGFA's judgment.

Under Fed.R.Civ.P. 69, state law concerning supplementary proceedings will govern to the extent that they are not preempted by federal law. In this case, Fla.Stat. § 56.29 will control. By enacting section 56.29, the Florida legislature intended that creditors have "a swift, summary disposition of issues," while "preserving the equitable character of both proceedings and the remedies available." Mission Bay Campland, Inc. v. Sumner Financial Corp., 72 F.R.D. 464, 466 (M.D.Fla.1976) (citing Ferguson v. State Exchange Bank, 264 So.2d 867, 868 (Fla.Dist.Ct.App.1972). Resort to equity is permitted when remedies provided for satisfaction of a judgment prove inadequate. The judgment creditor may then utilize supplemental proceedings to reach property not subject to levy. Gantz v. First National Bank of Miami, 138 So.2d 367 (Fla.Dist.Ct.App.1962). The judgment creditor AGFA exhausted its legal remedies and now turns to this court seeking equitable relief through supplementary proceedings in aid of execution.

In Wieczoreck v. H & H Builders, Inc., 450 So.2d 867 (Fla.Dist.Ct.App.1984), the court outlined the procedure by which third party defendants may be impleaded. Under decisional law interpreting section 56.29, the two jurisdictional prerequisites for supplementary proceedings are (1) an unsatisfied writ of execution, and (2) an affidavit averring that the writ is valid and unsatisfied along with a list of persons to be impleaded. Once these jurisdictional requirements are met, the statute must be given a liberal construction to afford a judgment creditor the most complete relief possible. Wieczoreck, 450 So.2d at 871 (citing Richard v. McNair, 121 Fla. 733, 164 So. 836 (1935)). AFGA properly met the stated requirements and established a prima facie case, see Wieczoreck, 450 So.2d at 872, and therefore this court has the authority and in fact a duty to implead third parties. See Mission Bay Campland, 71 F.R.D. 432; Richard v. McNair, 121 Fla. 733, 164 So. 836. As noted by the court in Wieczoreck, such impleading does not in itself establish liability on the part of the impleaded third parties. Wieczoreck, 450 So.2d at 871. Rather it gives them an opportunity to raise their defenses and protect their interests consistent with the requirements of due process.

In its motion for supplementary proceedings and again in its memorandum of law in support of post judgment relief, AGFA asserts that United is the alter ego of the allegedly defunct Allied and is therefore liable for the full amount of the judgment entered against Allied. AGFA argues that, should United not be found to be Allied's alter ego, alternatively, United, as the recipient of assets belonging to Allied for no consideration, should be liable for the judgment. AGFA also contends that Cargill Boyd, as sole shareholder and president of United, is individually liable to AGFA for the full amount of the judgment. As the sole shareholder of United, he received the full value of all of Allied's assets received by United. Because United was created to continue the operations of Allied without paying AGFA's judgment, the corporate form may not be used to protect him from individual liability. AGFA also asserts that both Michael and Diana Rubin should be individually liable to the extent of the value of assets that they received from Allied within one year of AGFA's judgment in what amounted to preferential transfers. Michael Rubin transferred approximately $140,000.00 worth of property to himself by repossessing property in preference of other creditors therefore breaching his fiduciary duty as director, president, and sole shareholder to Allied's creditors. AGFA, alternatively, seeks the value of the property from Diana Rubin who now claims ownership of the repossessed property.

In July of 1986, Allied sued AGFA for breach of contract in the circuit court of Florida. After removing the action to this court, AGFA counterclaimed for goods sold and delivered. A verdict was rendered in favor of AGFA on Allied's breach of contract claim and on AGFA's own counterclaim. The court awarded AGFA $128,684.12 plus post judgment interest at the rate of 6.09%. In addition, AGFA was given costs of $9,482.13, attorneys' fees of $11,431.25, and prejudgment interest of $20,011.26. AGFA has recovered none of this judgment to date. Michael Rubin testified that Allied is, in effect, insolvent and unable to pay its debts.

Michael Rubin was the sole shareholder, president, and director of Allied. After the verdict was returned, he declared his intention of preventing AGFA from collecting any of its judgment. The verdict was returned on March 31, 1987; Allied, according to Rubin, ceased operations on April 1, 1987. Cargill Boyd, president of United, testified that United began to "wind tape" on April 2, 1987. On the day the verdict was returned, Michael Rubin directed Allied's employees to tell its customers that Allied was no longer in business. The callers were given United's telephone number which rang at the same desk and was answered by the same receptionist as phone calls placed to Allied.

United began its business and continues using the same winding machines used by Allied, the same computer equipment that Allied used and it occupies Allied's former office space. The office space was rented furnished and so United also uses furniture, telephones, and for several months, all of the typewriters formerly used by Allied. Most of Allied's former employees now work for United at the same or similar jobs at exactly the same weekly salary. Prior to their "dismissal" from Allied, the employees were informed that they would be "hired" by United. The only indication of a change in employment was the name appearing at the top of the paycheck. The employees who remained with United worked without interruption between "jobs."

Although Cargill Boyd holds all of the outstanding stock of United, he was not responsible for any of the start up capital for the corporation. In fact, the evidence does not show a financial investment of any sort by Mr. Boyd. United was financed through loans on which Michael Rubin was the primary obligor despite the fact that he allegedly dismantled Allied because he was unable to compete in the business. Michael Rubin also claimed that Allied's business was negligible and that it was financially pressed, yet, to secure loans for United, Rubin gave the lending institution financial data that showed Allied holding substantial assets. Information given to Eagle National Bank showed Allied's sales for the first quarter of 1987 totaling $403,438.01 with a gross profit of $201,718.74, and a net profit of $126,983.64. In a sworn statement for Eagle National, Mr. Rubin valued his stock in Allied at $500,000.00 three weeks after the judgment despite having stated that Allied lacked appreciable assets.

United subleases its office space from a corporation named DER Duplicating ("DER"). DER was incorporated by Michael Rubin after the verdict against Allied was rendered. Its office is located at the same site as United, uses the same receptionist and the same telephone. In fact, nothing distinguishes the companies' visually from one another. Although DER occupies the majority of the floor space, it pays only a nominal rent. United bears the larger portion of the total $1,820.00 per month, paying $1,500.00. Testimony indicated that Michael Rubin, not Cargill Boyd, has "the final say" at United. Although Boyd is president and sole shareholder, Diana Rubin's salary exceeds his by $300.00 per week. She also receives $2,500.00 per week in a "commission" under a purchase order agreement with Video Loaders, Inc., United's largest customer and a former Allied customer. Michael Rubin helped Video Loaders to establish letters of credits, the method of payment on the purchase order. Mrs. Rubin's "commission" approximates Michael Rubin's salary at Allied and is deposited in an account held jointly by Michael and Diana Rubin.

Mr. Boyd demonstrated no special expertise or even particular experience in the tape business; he testified that his employment at Allied was comprised of performing "special projects" to...