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Branch Banking and Trust Company v. Hamilton Greens, LLC

2014 WL 1603759
Only the Westlaw citation is currently available.
United States District Court,
S.D. Florida.
BRANCH BANKING AND TRUST COMPANY, Plaintiff,
v.
HAMILTON GREENS, LLC, Devcon Livingston Greens, LLC, BLG Enterprises, LLC, Richard Bellinger, Individually, Chad Labonte, individually, and Roland Labonte, individually, Defendants.
No. 11–80S07–CIV. | Signed Feb. 26, 2014.

Attorneys and Law Firms
William Glenn Jensen, Shayne Ashley Thomas, Roetzel & Andress LPA, Orlando, FL, for Plaintiff.
Lance Wayne Shinder, Lance W. Shinder, P.A., Boca Raton, FL, Steven Anthony Mayans, Fitzgerald Mayans & Cook, P.A., West Palm Beach, FL, for Defendants.

Opinion

REPORT AND RECOMMENDATION ON PLAINTIFF’S MOTION FOR ORDER TO SHOW CAUSE AS TO WHY DEFENDANT RICHARD BELLINGER SHOULD NOT BE HELD IN CONTEMPT OF COURT [DE 216].
WILLIAM MATTHEWMAN, United States Magistrate Judge.
*1 THIS CAUSE is before the Court upon Plaintiff, Branch Banking and Trust Company’s (“Plaintiff”) Motion for Order to Show Cause as to Why Defendant Richard Bellinger Should Not Be Held in Contempt of Court. [DE 216]. This matter was referred to the undersigned by United States District Judge Kenneth A. Marra for a report and recommendation. [DE 223]. The undersigned held an evidentiary hearing on January 23, 2014, and the matter is now ripe for review.1 For the reasons that follow, this Court RECOMMENDS that the Motion [DE 216] be DENIED in its entirety and that the District Court find that Bellinger should not be held in contempt of court.

FACTUAL BACKGROUND
On September 5th, 2006, Colonial Bank–Plaintiff’s predecessor-in-interest-issued a loan to Hamilton Greens, LLC for $3,375,000. Bellinger, as well as two other individuals-Chad and Roland LaBonte (“LaBontes”)-were personal guarantors on the Hamilton Greens loan. Then, on February 5th, 2011, Hamilton Greens defaulted on the loan originally issued by Colonial Bank. On May 5th, 2011, BB & T filed a Complaint against Hamilton Greens, Bellinger, the LaBontes, and two other entities. The Complaint included, inter alia, a claim against Bellinger for breach of contract, whereby Plaintiff sought to enforce the guaranty Bellinger executed in connection with the Hamilton Greens loan [Compl. ¶¶ 65–71]. On November 30th, 2011, Bellinger created a Cook Islands Trust (“Trust”), funded with approximately $1.7 million in assets. On July 1st, 2011, Plaintiff moved for partial summary judgment against Bellinger [DE 25]. However, due to an extension of the discovery cutoff, Plaintiff’s motion for partial summary judgment against Bellinger was denied without prejudice [DE 54]. Plaintiff later filed an Amended Motion for Final Summary Judgment on January 3rd, 2013 [DE 196], which the Court granted [DE 209]. Thereafter, the Court entered a Final Judgment against Bellinger for $4,923,797.57, plus post-judgment interest [DE 211]. Bellinger has failed to satisfy any portion of the Final Judgment, prompting Plaintiff to file the instant Motion [DE 216].

In support of its Motion, Plaintiff points out how “[p]rior to the entry of the Final Judgment, but several months after [Plaintiff] filed [its] lawsuit, Bellinger created an offshore Cook Islands Trust.” [DE 216, p. 2]. Plaintiff alleges that “Bellinger created the Cook Islands Trust in order to shield his assets from the Final Judgment that was ultimately entered against him by this Court.” [DE 216, p. 2]. Plaintiff further asserts that Bellinger cannot argue that it is impossible for him to comply with the Final Judgment because, by creating the Trust, any inability to comply is self-created.

In opposition, Bellinger argues that Plaintiff’s Motion is overreaching and seeks to have him held in contempt because he lacks the financial ability to pay the monetary judgment entered against him [DE 221, p. 2]. Bellinger further argues that this is not a disgorgement action seeking the refund of illegally-obtained funds, but rather a garden variety civil action on a personal guaranty following a failed commercial loan [DE 221, p. 2]. Bellinger argues that the Trust was lawfully created before any final judgment was entered against him. He also argues that Plaintiff has not pursued a fraudulent conveyance action and improperly seeks to have him held in contempt because he cannot pay a civil judgment [DE 221, p. 2]. Additionally, Bellinger argues that, because he lacks the authority to have assets released from the Trust, he cannot be held in contempt because he does not have the ability to comply with the Final Judgment [DE 221, p. 2]. Bellinger filed a second affidavit in support of his position [DE 221–1].

THE EVIDENTIARY HEARING
*2 At the outset of the January 23rd, 2014 evidentiary hearing, counsel for Plaintiff and counsel for Bellinger explained that the primary issue remaining in dispute was whether Bellinger had the ability to comply with the Final Judgment. During the course of the January 23rd, 2014 evidentiary hearing, the Court heard argument from counsel as well as testimony from Bellinger. Bellinger testified, in pertinent part, that, when he created the Trust, he did not do so with an intent to evade any judgment from Plaintiff. Bellinger further explained that he transferred approximately $1.7 million in assets to the Trust in order to protect his future financial security. He testified that he does not have the financial ability to pay the Final Judgment and cannot exercise control over the Trust. Bellinger stated that he did attempt to get the Trust to release funds in order to partially satisfy the Final Judgment, but the trustee refused. Specifically, on July 23rd, 2013, after the Final Judgment was issued, Bellinger sent a letter to the trustee asking that funds be released to Plaintiff in order to satisfy the amount owed. However, this request was denied. The letter from Bellinger to the trustee as well as the reply letter from the trustee to Bellinger denying his request to release funds from the Trust was admitted into evidence as Plaintiff’s Exhibit 7. Bellinger further testified that, from March 2012 to May 2013, he received a $7,485 distribution from the Trust each month, and that he used these funds to cover “overhead costs of [his] support.”2 Bellinger testified that he cannot compel payment of the Final Judgment from the Trust, that he cannot replace the trustee, and that he cannot revoke the Trust. No other witnesses testified at the hearing, although both Plaintiff and Bellinger introduced exhibits, which this Court has carefully reviewed. At the conclusion of the January 23rd, 2014 evidentiary hearing, the Court reserved ruling and asked the parties to submit supplemental memoranda on or before February 10th, 2014. The parties complied [DEs 238, 239].

ANALYSIS
“It is well settled that courts have the inherent power to enforce compliance with their orders through civil contempt.” United States v. Grant, No. 00–08986–CIV, 2008 WL 2894826, *1 (S.D.Fla. May 27, 2008). “A party seeking civil contempt ‘bears the initial burden of proving by clear and convincing evidence that the alleged contemnor has violated an outstanding court order.’ ” Id . (quoting Commodity Futures Trading Comm’n v. Wellington Precious Metals, Inc., 950 F.2d 1525, 1529 (11th Cir.1992)). “After a showing of a violation has been made, the burden ‘shifts to the alleged contemnor, who may defend his failure on the grounds that he was unable to comply.’ ” Id. (quoting Commodity Futures Trading Comm’n, 950 F.2d at 1529). In order to show an inability to comply, “the alleged contemnor ‘must go beyond a mere assertion of inability,’ and establish that he has made ‘in good faith all reasonable efforts’ to meet the terms of the court order he is seeking to avoid.” Commodity Futures Trading Comm’n, 950 F.2d at 1529 (internal citations omitted).

*3 In Grant, the United States sought to collect “millions of dollars” in federal taxes owed by the Grants. Grant, 2008 WL 2894826 at *1. The court entered a final judgment against the Grants for more than $36 million. Id. Following the entry of the final judgment, the United States sought to repatriate funds contained in two offshore trusts in order to satisfy the judgment. Id. The court granted the motion for repatriation, and “ordered Mrs. Grant to appoint a trustee in the United States for the two offshore trusts or, in the alternative, to repatriate the assets held in these trusts.” Id. Due to Mrs. Grant’s failure to comply with the repatriation order, the United States moved for an order to show cause why she should not be held in contempt. Id. The court denied the United States’ motion, finding that she adequately demonstrated that she could not comply with the repatriation order. Id. In support of this holding, the court observed:
Mrs. Grant has made significant efforts to repatriate the funds to the United States, either directly to her or to a U.S. trustee, to no avail. For example, on January 17, 2006–less than a month after the repatriation order was issued, she sent a letter to the Jersey trustee, enclosing the repatriation order and seeking information about the procedure to repatriate funds. The government correctly notes that this letter was not an actual petition to repatriate funs. But the Jersey trustee’s lawyers made clear that any such petition would be futile.
Id. Mrs. Grant also contacted the trustee of the second trust in an attempt to repatriate the trust assets, but to no avail. Id . Additionally, Mrs. Grant contacted several financial institutions and asked them to act as transferee trustees, but these attempts were also unsuccessful. Id. at 2.

Here, during the January 23rd, 2014 hearing, Bellinger testified that he cannot compel the trustee to release funds from the Trust in order to satisfy the Final Judgment, that he cannot replace the trustee, and that he cannot revoke the Trust. Bellinger did send a letter to the trustee asking that the funds be released in an attempt to satisfy the Final Judgment, but this request was denied. In this regard, Bellinger appears to be acting in good faith to have the trustee attempt to satisfy the Final Judgment but his efforts have been unsuccessful. Bellinger testified that he has no assets to satisfy the Final Judgment; he also testified that he did not create the Trust to evade the Final Judgment. After observing his demeanor and listening to his testimony, the Court finds Bellinger to be a credible witness, and the Court concludes that he has adequately shown an inability to comply with the Final Judgment.

Plaintiff argues that Bellinger’s inability to comply with the Final Judgment should not be a defense because the impossibility of compliance is self-created; Plaintiff maintains that, by creating the Trust, Bellinger caused his own inability to satisfy the Final Judgment. In support of this argument, Plaintiff relies primarily on S.E.C. v. Solow, 682 F.Supp.2d 1312 (S.D.Fla.2010), In re Lawrence, 279 F.3d 1294, 1300 (11th Cir.2002), and S.E.C. v. Yun, 208 F.Supp.2d 1279 (M.D.Fla.2002). However, these cases are factually distinguishable from the instant case. Although both Solow and Yun state that inability to comply with an order is not a defense if the alleged contemnor created the inability,3 these cases involved disgorgement orders4 arising from fraudulent conduct. Solow, 682 F.Supp.2d at 1317; Yun, 208 F.Supp.2d at 1284. Because federal courts have “broad equitable powers to reach assets otherwise protected by state law to satisfy a disgorgement” Solow, 682 F.Supp.2d at 1325, it would appear as though federal courts have more power to enforce compliance with a disgorgement order than they do with a standard money judgment. This distinguishes Solow and Yun from the instant case. The instant case is not a disgorgement case based upon fraudulent conduct of Bellinger.

*4 In re Lawrence is also distinguishable. Lawrence involved a turn-over order directing the debtor to relinquish assets from an offshore trust. In re Lawrence, 279 F.3d at 1297. The court found that the debtor had sufficient control over the trust to enable him to comply with the turnover order. Id. at 1299. Although the court also observed that, “[e]ven if we were to find that Lawrence had set forth sufficient evidence of impossibility, we must agree with the trial court that Lawrence’s claimed defense is invalid because the asserted impossibility was self-created,” the court was not solely addressing the creation of the offshore trust itself, but also certain aspects of the trust which allowed the debtor to exercise control over certain trust mechanisms. In particular, in affirming the trial court’s order, the Eleventh Circuit observed that, “at the time [the debtor] became an excluded person under the Trust he retained the ability to appoint a new Trustee who would have the power to revoke the excluded person status at any time.” Id. at 1300. In the instant case, neither Plaintiff nor Bellinger presented any evidence to suggest that Bellinger had any ability to wield such control over the Trust. The Court finds, based upon the evidence presented, that Bellinger does not possess such ability to wield control over the Trust.

Plaintiff appears to argue that Bellinger’s creating of the Trust amounts to a fraudulent conveyance, designed to avoid having to pay a monetary judgment. However, Plaintiff does not explicitly allege a fraudulent conveyance, and does not seek to have the Trust set aside on this basis. Instead, Plaintiff appears to conflate these two concepts (fraudulent conveyance and civil contempt) by making a fraudulent conveyance argument within the analytical framework of civil contempt. Plaintiff attempts to argue that Bellinger’s inability to comply with the Final Judgment is his own doing, but such an argument fails based upon the lack of evidence presented to the Court to support this argument.

Civil contempt is a drastic remedy. Civil contempt orders are coercive in nature. It is often said that the decisive characteristic of civil contempt is that it leaves the contemnor to “carry the key of his prison in his own pocket.” Maggio v. Zeitz, 333 U.S. 56, 68, 68 S.Ct. 401, 92 L.Ed. 476 (1948). “To jail one for a contempt for omitting an act he is powerless to perform would reverse the principle and make the proceeding purely punitive, to describe it charitably.” Id. at 72. Contempt orders will not be issued if the court finds no willful disobedience but only an inability to comply. S.E.C. v. Ormont Drug & Chemical Co., Inc., 739 F.2d 654, 657 (D.C.Cir.1984).

The Court finds that Plaintiff has not presented sufficient evidence to establish that Bellinger should be held in contempt of court for failing to pay the civil judgment entered against him in this breach of contract case. Further, Bellinger has established that he is unable to pay the final judgment. There is no evidence of willful disobedience on the part of Bellinger, and the Court finds no such willful disobedience. There is insufficient evidence to establish that Bellinger created the trust to shelter his funds from the Final Judgment or from the prospect of an adverse final judgment. The Court cannot find that Bellinger’s inability to satisfy the Final Judgment was self-created under these facts. Further, if the Court were to find Bellinger in civil contempt under the facts presented, the civil contempt order would not be coercive, but would rather be punitive in nature, since Bellinger clearly does not have the ability to pay the Final Judgment and therefore does not “carry the key of his prison in his own pocket.” Maggio, 333 U.S. at 68. When considering the pleadings, affidavits, exhibits, and testimony, there is an insufficient basis to find Bellinger in contempt of court.5

CONCLUSION
*5 In light of the foregoing, this Court RECOMMENDS that the District Court DENY Plaintiff’s Motion [DE 216] and find that Defendant, Richard Bellinger, should not be held in contempt of court.

NOTICE OF RIGHT TO OBJECT
A party shall file written objections, if any, to this Report and Recommendation with United States District Judge Kenneth A. Marra within fourteen (14) days of being served with a copy of this Report and Recommendation. See 28 U.S.C. § 636(b)(1)(C).

Footnotes

1
Upon questioning from the Court, the parties stated that they were prepared to proceed with a show cause hearing on January 23rd, 2014, and did not require any additional time to prepare for the hearing. Accordingly, the Court did proceed with a show cause hearing on said date.

2
Bellinger stated that he has not received any disbursements from the Trust since May of 2013, and that instead the monthly disbursements from the Trust are paid to his girlfriend.

3
Solow, 682 F.Supp.2d at 1325; See Yun, 208 F.Supp.2d at 1285.

4
“Disgorgement is an equitable remedy designed to deprive a wrongdoer of his unjust enrichment and to deter others from violating the securities laws.” Solow, 682 F.Supp.2d at 1325.

5
In its post-hearing supplemental memorandum, Plaintiff also appears to argue that the Court should order Bellinger to show cause why he should not be held in contempt because he has “received over $200,000 in trust distributions, yet has failed to make any payments whatsoever towards the outstanding debt.” [DE 239, p. 7]. The Court does not find that this argument is timely, as Plaintiff did not raise it in its Motion, and only raised it for the first time in its supplemental post-hearing memorandum. Furthermore, the Court does not find that Plaintiff presented sufficient evidence to support a finding of civil contempt on this basis.
End of Document
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