Tosto, et al v. Zelaya, et al

Filing 387

ORDER AFFIRMING 362 Magistrate Judge's September 20, 2010, Omnibus Order and DENYING 364 Judgment Creditor's Objections to the Magistrate Judge's Omnibus Order. Signed by Judge Joan A. Lenard on 11/30/2010. (mhz)

T o s t o , et al v. Zelaya, et al

D o c . 387

UNITED STATES DISTRICT COURT S O U T H E R N DISTRICT OF FLORIDA C A S E NO. 06-21213-CIV-LENARD/GARBER P E T E R C. TOSTO, THOMAS T E L E G A D E S , et al., P l a i n t if f s , v. J O H N C. ZELAYA, et al., D e f e n d a n ts . ________________________________/ O R D E R DENYING OBJECTIONS TO MAGISTRATE JUDGE'S OMNIBUS O R D E R (D.E. 364) T H I S CAUSE is before the Court on Plaintiff/Assignee Judgment Creditor Z e laya/C a p ital International Judgment, LLC's ("Judgment Creditor")1 objections to M a g is tra te Judge Barry L. Garber's Omnibus Order ("Objections," D.E. 364), filed on O c to b e r 7, 2010. Judgment Creditor objects to the Magistrate Judge's September 20, 2010, O m n ib u s Order ("Omnibus Order," D.E. 362). The Omnibus Order dissolved numerous o u ts t a n d i n g writs of garnishment (D.E. 11, 13, 17, 93, 94) and denied as moot numerous p e n d in g motions to dissolve writs of garnishment and related motions (D.E. 71, 72, 73, 126, 1 4 1 , 146, 180, 190, 196, 242, 254, 272, 310, 311, 312, 324, 330), in light of the Court's a f f irm a tio n of the Magistrate Judge's Order permitting Defendant John C. Zelaya ("Zelaya")

Judgment Creditor's counsel, Hector Formoso-Murias, admitted during the June 1, 2010, hearing that he is both the sole owner and counsel of record for Zelaya/Capital International Judgment, LLC.

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Dockets.Justia.com

to deposit funds with the Court pursuant to Rule 67 of the Federal Rules of Civil Procedure. (S e e D.E. 321, 361.) On October 25, 2010, Zelaya filed his response to the Objections (" R e sp o n s e ," D.E. 369). Having reviewed the Omnibus Order, Objections, Response, the r e la te d pleadings, and the record, the Court finds as follows. I. B a c k gro u n d

In April 2002, the Securities and Exchange Commission ("SEC") obtained a judgment a g a in s t Plaintiffs Peter C. Tosto ("Tosto"),2 Tellerstock, Inc. ("Tellerstock"), Investor R e latio n s Inc. ("IRI"), and others in the amount of $3,757,127.66, plus $722,936.16 in p re ju d g m e n t interest, in the U.S. District Court for the Southern District of New York. See S E C v. Peter C. Lybrand, f/k/a Peter C. Tosto, et al., Case No. 00-1387 (S.D.N.Y.) ("SEC J u d g m e n t" ). In February 2004, Plaintiffs Tosto, Thomas Telegades ("Telegades"), Tellerstock, IRI, a n d Consolidated Asset Management, Inc. ("CAM") obtained a $2,678,137.11 judgment ("2 0 0 4 Judgment") against Zelaya and others in the U.S. District Court for the Southern D istric t of New York. On May 19, 2006, Plaintiffs registered the 2004 Judgment in this D is tric t. Judgment Creditor indicates that on May 16, 2009, the original Plaintiffs Tosto, T e le g a d es , Tellerstock, IRI, and CAM sold and assigned the 2004 Judgment and a previous ju d g m e n t to Judgment Creditor.3 On September 14, 2009, Judgment Creditor appeared in

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Tosto is now known as Peter C. Lybrand.

Although Judgment Creditor states the five original plaintiffs have no ownership interest in the judgments, he states: 2

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th i s action and claimed entitlement to the 2004 Judgment based on the Plaintiffs' a ss ig n m e n t.4 In an effort to collect on the 2004 Judgment, Judgment Creditor subsequently e x e c u te d numerous writs of garnishment on bank accounts owned by Zelaya or entities c o n tro lle d by him. On January 10, 2010, the SEC served Zelaya with a writ of garnishment in connection w ith its enforcement of the SEC Judgment against Tosto. The writ requires Zelaya to " w ith h o ld and retain any property in [his] possession, custody or control in which [Tosto] has a n interest at the time [the] Writ [was] served or in which [Tosto] may obtain an interest in th e future." (D.E. 297.) On May 19, 2010, the SEC also served Zelaya with an Information S u b p o e n a and Restraining Notice ("Restraining Notice") further warning Zelaya that he was

The original plaintiffs have a contingent contractual right to receive a share of the Judgment Creditor's recovery pursuant to and subject to the terms and conditions of the Agreement for Sale and Assignment of the 2004 Judgment dated May 16, 2009 (the "Agreement") between Judgment Creditor Zelaya/Capital International Judgment, LLC and the original plaintiffs/assignors. Upon receipt of the Collection Proceeds Property by the Judgment Creditor as the owner of the 2004 Judgment, any Recovery (as such herein is defined in the Agreement) after the deduction of costs and expenses shall be distributed in the following manner: Tosto is entitled to a 25% share; Telegades is entitled to a 25% share; and Zelaya/Capital International Judgment LLC retains a 50% share from which a 25% share will be paid to the law firm of Formoso-Murias, P.A. as a contingent attorney's fee and the remainder 25% is retained by the Judgment Creditor Zelaya/Capital International Judgment, LLC. (D.E. 332 at 7 n.3.) The assignment agreement also requires the consent of Tosto and other assignors before Judgment Creditor can accept less than a full settlement and provides that all rights in the 2004 Judgment revert back to Plaintiffs after a certain amount of time. (D.E. 340 at 5 n.1; D.E. 317-1 at 12-27.) The docket indicates no activity took place between the registration of judgment and Judgment Creditor's appearance on September 14, 2009. 3
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p ro h ib ited from selling, transferring, or interfering with any property in which Tosto p o ss e ss e d an interest. (Id.) The SEC's writ and Restraining Notice seek approximately $ 6 ,0 0 0 ,0 0 0 owed by Tosto and warned Zelaya he faced contempt of court should he fail to c o m p ly. On May 19, 2010, Zelaya filed a motion for leave to file interpleader or alternatively f o r leave to deposit funds in the Court's registry. (See D.E. 297.) Zelaya sought to deposit fu n d s in the amount of the 2004 Judgment, plus post-judgment interest, in the Court's re g is try in light of the SEC's claim that it had an interest in the 2004 Judgment. On May 31, 2 0 1 0 , the SEC filed a motion to intervene in this action (D.E. 317), asserting that the a ss ig n m e n t of the 2004 Judgment to Judgment Creditor may have been a fraudulent transfer in order to avoid the SEC Judgment. At a hearing on June 1, 2010, the Magistrate Judge granted Zelaya's motion and a llo w e d Zelaya to deposit the funds, including all accrued interest up to the date of deposit, w ith the Court's registry to be placed in an interest-bearing account, only to be released upon o rd e r of the Court. (See D.E. 335 at 12.) The next day, the Magistrate Judge issued his O rd e r reflecting his decision to permit Zelaya to deposit the funds with the Court. On June 7 , 2010, Zelaya deposited $2,892,250.82, representing the judgment amount of $ 2 ,6 7 8 ,1 3 7 .1 1 plus post-judgment interest accrued up until June 8, 2010, with the Court. O n June 16, 2010, Judgment Creditor filed objections to the Magistrate Judge's Order p e rm ittin g Zelaya to deposit funds with the Court. (See D.E. 332.) On September 3, 2010,

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th e Court denied Judgment Creditor's objections and affirmed the Magistrate Judge's ruling. (S e e D.E. 361.) On September 20, 2010, the Court issued its Omnibus Order dissolving the p e n d in g writs of garnishment and denying as moot the corresponding motions to dissolve the w rits of garnishment and other related motions. (See D.E. 362.) II. J u d g m e n t Creditor's Objections

J u d g m e n t Creditor objects that the Omnibus Order is contrary to Florida law and c le a r ly erroneous as it presumes Zelaya's debt has been fully satisfied as a result of his d e p o sit with the Court registry. Judgment Creditor argues the Omnibus Order "is tantamount to the Court having issued a satisfaction of judgment." (Objections at 2.) Relying upon F lo rid a Statutes §§ 55.01, 55.141, 56.29, 77.01, and 701.04, Judgment Creditor objects that s in c e he has not yet been paid or received any of the judgment proceeds, Zelaya and the other J u d g m e n t Debtors continue to be fully liable for the judgment and responsible for its s a t is f a c t io n . (Id. at 4.) Judgment Creditor further objects to the Magistrate Judge's

d e te r m i n a t i o n that its motion for default judgment against garnishee Citigroup Global M a rk e ts , Inc. (D.E. 242) was moot and that any further collection efforts were unnecessary. (Id . at 5.) Finally, Judgment Creditor objects that the garnishees should not be able to p e titio n the Court for attorney's fees and costs related to the now-dissolved writs of g arn ishm en t as no adjudication or final judgment in garnishment has been entered. (Id.) In e ss e n c e, Judgment Creditor seeks to preserve the writs of garnishment in order to secure the ju d g m e n t against Zelaya, "including all accrued post judgment interest and costs." (Id. at

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1 1 .) Z elaya responds that the Omnibus Order was neither clearly erroneous nor contrary to Florida law. Zelaya contends that Florida Statutes § 701.04 applies only to the

c a n c e lla tio n of mortgages and foreclosure liens and judgments. (Response at 6.) Zelaya f u rth e r contends that Florida Statutes § 55.141 is also irrelevant and inapplicable as it merely p erm its the satisfaction of any "judgment lien" upon satisfaction of judgment. (Id.) Rather, Z e la ya argues that Florida Statutes §§ 77.01, et seq., are the only relevant Florida statutes c ite d by Judgment Creditor. (Id. at 6-7.) Nevertheless, Zelaya argues that Judgment C re d ito r ' s ability to collect the judgment is now fully secured and there is no basis for c o n tin u in g to freeze and garnish additional assets. Zelaya contends that Judgment Creditor is attempting to reargue the issue of whether the Court should have permitted Zelaya to d e p o s it funds with the Court's registry. III. S t a n d a r d of Review

P u rs u an t to Rule 72(a) of the Federal Rules of Civil Procedure and 28 U.S.C. § 6 3 6 (b )(1 )(A ) , this Court reviews the Magistrate Judge's Omnibus Order to determine w h e th e r it is "clearly erroneous or contrary to law." See In re Commr's Subpoenas, 325 F.3d 1 2 8 7 , 1292 n.2 (11th Cir. 2003). Findings of fact "are `clearly erroneous when, although th e re is evidence to support [them], the reviewing court on the entire evidence is left with the d e f in ite and firm conviction that a mistake has been committed.'" Johnson & Johnson Vision C a re , Inc., v. 1-800 Contacts, Inc., 299 F.3d 1242, 1246 (11th Cir. 2002) (citing Univ. of

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G e o rg ia Athletic Ass'n v. Laite, 756 F.2d 1535 (11th Cir. 1985)). A review of the Magistrate Ju d g e's application of the law is de novo, as the "application of an improper legal standard . . . is never within a court's discretion." Id. (internal citation omitted). IV . D is c u s s io n

T h e Court finds the Magistrate Judge did not clearly err in dissolving the outstanding w rits of garnishment and denying as moot the related pending motions. Judgment Creditor attem p ts to re-litigate the propriety of allowing Zelaya to deposit funds with the Court's reg istry. However, that decision has already been litigated and affirmed by this Court. There is simply no need for additional funds and property to be garnished and frozen pending the M a g is tra te Judge's determination of whether the SEC should be allowed to intervene. A d d itio n a lly, Judgment Creditor does not articulate how he could be prejudiced by the d issolutio n of the writs other than the fact that he intends to seek post-judgment attorney's f e es and costs and he wishes to secure them accordingly. Nevertheless, Judgment Creditor d o e s not point to any case law or provide any basis for preserving a writ of garnishment p e rta in in g to the outstanding judgment in securing a post-judgment award of attorney's fees o r costs that is at this point speculative and premature. With regard to Judgment Creditor's a rg u m e n t that the Omnibus Order violates a multitude of Florida statutes, the Court notes that th e vast majority of the statutes cited are inapplicable, irrelevant, or have no bearing on the is s u e s at hand. Chapter 77 of the Florida Statutes sets forth the governing Florida law p ertaining to garnishment and Judgment Creditor fails to demonstrate the Magistrate Judge's d e c is io n is contrary to any of its provisions. Finally, Judgment Creditor's contention that any 7

g a rn is h e e 's motion for attorney's fees or costs is premature in light of the fact that no final ju d g m e n t in garnishment has issued can be addressed as part of any such motion. Thus, the O m n ib u s Order is neither clearly erroneous nor contrary to Florida law. Accordingly, c o n s is te n t with this Order, it is hereby ORDERED AND ADJUDGED that the Magistrate J u d g e ' s September 20, 2010, Omnibus Order (D.E. 362) is AFFIRMED and Judgment C re d ito r's Objections to the Omnibus Order (D.E. 364) are DENIED. D O N E AND ORDERED in Chambers at Miami, Florida, this 30th day of November, 2010. ____________________________________ J O A N A. LENARD U N I T E D STATES DISTRICT JUDGE

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