Regions Bank v. Alverne Assocs., LLC

• Decision Date: 09 December 2014
• Docket Number: No. ED 101121,ED 101121
• Citation: 456 S.W.3d 52
• Parties: Regions Bank, Plaintiff, v. Alverne Associates, LLC and Rene Gregg, Defendants, and Samuel Berger, Appellant, and RBRE Loan Portfolio, LLC, Respondent.
• Court: Missouri Court of Appeals

456 S.W.3d 52

Regions Bank, Plaintiff

v.Alverne Associates, LLC and Rene Gregg, DefendantsandSamuel Berger, Appellant

and

RBRE Loan Portfolio, LLC, Respondent.

No. ED 101121

Missouri Court of Appeals, Eastern District, DIVISION FOUR .

Filed: December 9, 2014

Motion for Rehearing and/or Transfer to Supreme Court Denied Jan. 27, 2015

Bonnie L. Clair, 8909 Ladue Road, St. Louis, MO 63124, for appellant.

Michael K. Daming, 1401 S. Brentwood Blvd., Magna Place, Suite 875, St. Louis, MO 63144, for respondent.

Patricia L. Cohen, Presiding Judge

Introduction

Samuel Berger appeals a judgment of the Circuit Court of St. Louis County granting RBRE Loan Portfolio's application for a charging order. Berger claims the trial court erred in failing to: (1) provide him at least five days' notice and conduct a hearing before granting RBRE's application for a charging order; and (2) require RBRE to establish the amount of the outstanding judgment and Berger's membership interest in the limited liability companies sought to be charged. We reverse and remand.

Factual and Procedural Background

In 2008, Alverne Associates, LLC obtained a loan from Regions Bank and executed two promissory notes evidencing loans in the original principal amounts of $911,483.24 and $714,250.00. Berger signed the promissory notes on behalf of Alverne Associates as “Samuel Berger, Managing Member of ALVERNE ASSOCIATES, LLC,” and he executed a commercial guaranty to individually and personally secure the notes.¹

Alverne Associates additionally secured the notes by deeds of trust on real estate that it owned in the City of St. Louis.

Alverne Associates failed to make the required payments on the promissory notes, and Regions Bank filed an action against Alverne Associates and Berger for breaches of contract and commercial guaranty. On August 31, 2011, the trial court entered summary judgment in favor of Regions Bank in the amount of $1,775,618.67. The judgment assessed costs against Alverne Associates and Berger and provided that “[p]ost judgment interest continues to accrue at the highest lawful rate.” Regions Bank subsequently assigned the promissory notes and deeds of trust to RBRE, and the trial court granted RBRE's motion for substitution as party plaintiff.

On November 6, 2013, RBRE filed its “Verified Application for Charging Order” (Application) pursuant to Section 347.119.² In the notarized application, RBRE alleged that the trial court entered judgment against Berger and Alverne Associates in the amount of $1,775,618.67 and the judgment remained unsatisfied in the amount of $820,489.58. RBRE requested the court “issue a Charging Order requiring any limited liability company in which Samuel B. Berger has an interest to pay Plaintiff amounts up to the unsatisfied amount of the above judgment with interest from Samuel B. Berger's interest in said limited liability company....” At the bottom of the Application appeared the signature: “Mante Dzakuma, RBRE Loan Portfolio, LLC.” RBRE attached two charts (“Exhibit B”)³ reflecting the alleged outstanding balances on each promissory note and calculations of compound interest “at 9% per annum.”

On the same date, counsel for RBRE filed a notice of hearing set for November 8, 2013 and a “Motion to Shorten Time,” requesting the trial court “[s]horten time and notice requirements for hearing on its Application for Charging Order....” In support of its motion to shorten time, RBRE alleged: (1) the judgment against Berger and Alverne Associates remained unsatisfied in the amount of $820,489.58; and (2) RBRE “has recently been apprised of judgment creditor, Samuel B. Berger's, interest in limited liability companies to which it as judgment creditor may obtain a charging order from this Court....” RBRE requested that the trial court “grant its Motion to Shorten the notice and time requirements regarding hearing on its Application for Charging Order and allow hearing to proceed on Friday, November 8, 2013.” RBRE generally alleged that the reason for its request was “the amount of the outstanding judgment” and averred that “no party will be prejudiced by” and “the interests of justice will be served by this Court shortening the notice and time requirements for hearing” on the Application.

Berger filed objections to RBRE's motion to shorten time, asserting that Rule 44.01(d) requires that parties serve motions and notices of hearings five days prior to the scheduled hearing. Berger contended that the grounds RBRE asserted for shortening the time for notice of the hearing—namely, “the amount of the outstanding judgment”—did not justify shortening the notice to two days and that less than five days' notice would prejudice him. Berger also filed objections to the Application alleging, among other things, that the Application: incorrectly calculated the outstanding balance on the judgment; improperly calculated post-judgment interest on a compounding basis; failed to identify the LLC to be charged or Berger's membership interest in that LLC; and requested relief in excess of that authorized by Section 347.119.

On November 8, 2013, counsel for both RBRE and Berger appeared before the trial court. Without ruling on the motion to shorten time, the trial court granted RBRE's Application and entered a charging order. The order, in its entirety, stated:

Cause called on Plaintiff, RBRE Loan Portfolio, LLC's Application for Charging Order. The Court being duly advised hereby grants Plaintiff's application for Charging Order and assesses a charging order pursuant to R.S.Mo. § 347.119 against Defendant, Samuel B. Berger's membership interests in TMF Holdings, LLC, 816 Geyer, LLC and Maccabee Investments, LLC. TMF Holdings, LLC, 816 Geyer, LLC and Maccabee Investments, LLC are hereby ordered to pay all disbursements, draws and other monies otherwise owed to Samuel B. Berger to RBRE Loan Portfolio, LLC up to the unsatisfied amount of the outstanding judgment in the above matter with interest.

The record does not reflect whether Berger sought to present either evidence or an offer of proof at the November 8, 2013 appearance.

Berger filed a motion to reconsider denial of his objections to the Application and motion to shorten time.⁴ In his motion, Berger argued that the trial court erred in: (1) failing to require sufficient notice prior to a hearing; (2) refusing to conduct a hearing and allow Berger to present evidence; and (3) entering a charging order “based upon a purported verification that was inaccurate” and which “failed to disclose the amount of the unsatisfied judgment.” RBRE filed a response to Berger's motion to reconsider arguing that: (1) Section 347.119 does not require notice or an evidentiary hearing; (2) the trial court did not abuse its discretion in shortening notice and allowing the Application to proceed; and (3) the statutory post-judgment interest rate of 9% per annum applied to the outstanding judgment.⁵ The trial court denied the motion to reconsider on February 7, 2014. Berger appeals the trial court's grant of the Application and subsequent entry of the November 8, 2013 charging order.

Standard of Review

Our review of a court-tried case is governed by the principles set forth by the Missouri Supreme Court in Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976). This court will affirm the trial court's entry of a charging order unless there is no substantial evidence to support it, it is against the weight of the evidence, or it erroneously declares or applies the law.

Deutsch v. Wolff, 7 S.W.3d 460, 462 (Mo.App.E.D.1999) (citing Murphy v. Carron, 536 S.W.2d 30 (Mo. banc 1976) ).

Discussion

In his first point, Berger claims the trial court erred in failing to require five days' notice prior to a hearing and conduct an evidentiary hearing on RBRE's Application. In his second point, Berger asserts that the trial court erred in entering the charging order because it “fail[ed] to require RBRE to meet its burden and demonstrate entitlement to a charging order” under Section 347.119. Because the record contains insufficient evidence to support the charging order, we need not resolve the question of whether entry of a charging order requires five days' notice and a hearing.⁶

A charging order is a post-judgment remedy that allows the judgment creditor of an individual debtor-member of a limited liability company (or a partnership) to enforce a judgment by charging the individual member's distributional interest with the unsatisfied amount of a judgment. See Mo.Rev.Stat. § 347.119 ; see also Wills v. Wills, 750 S.W.2d 567, 574 (Mo.App.E.D.1988) (applying Section 358.280, which governs charging orders against individual debtor-partners). Section 347.119 provides, in pertinent part: “On application to a court of competent jurisdiction by any judgment creditor of a member, the court may charge the member's interest in the limited liability company with payment of the unsatisfied amount of the judgment with interest.” Mo.Rev.Stat. § 347.119. In other words, the charging order “requires the limited liability company to pay over to the person to which the charging order was issued any distribution that would otherwise be paid to the judgment debtor.”⁷ 51 Am.Jur.2d Limited Liability Companies § 23.

To obtain a charging order, the judgment creditor must file an “application to a court of competent jurisdiction.” Mo.Rev.Stat. § 347.119. Pursuant to Rule 55.26, “[a]n application to the court for an order shall be by motion which ... shall be in writing, shall state with particularity the grounds therefor, and shall set forth the relief or order sought.” Rule 55.26; see also Mo.Rev.Stat. § 509.280. A motion is not self-proving, and the movant has the burden of proving the allegations contained therein. Keith v. Burlington N.R. Co., 889 S.W.2d 911, 925 (Mo.App.S.D.1994). When an after-trial motion is based on facts not appearing in the record, a movant may submit proof of facts in the form of affidavits, depositions, and oral testimony. Rule 78.05...