Security Alarm Financing Enterprises, Inc. v. Parmer et al

Filing 230

MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF SECURITY ALARM FINANCING ENTERPRISES, INC. AND DEFENDANT BETTY PARMER'S EMERGENCY MOTION FOR ADJOURNMENT OF JUDICIAL SALE, SUSTAINING IN PART AND OVERRULING IN PART AS MOOT PLAINTIFF SECURITY ALARM FINANCING ENTERPRISES, INC. AND DEFENDANT BETTY PARMER'S OBJECTIONS, VACATING THE MAGISTRATE JUDGE'S ORDER DENYING THE POSTPONEMENT OF THE SALE, VACATING THE JUDICIAL SALE OF ASSETS AND DENYING AS MOOT DEFENDANT MITCH BROZIK'S MOTION TO ESCROW: It is ORDERED that the 225 Emergency Motion to the extent it seeks adjournment of the judicial sale to pursue a private sale is GRANTED; the 224 Joint Objections to the extent that SAFE should have been permitted to postpone or adjour n the judicial sale to pursue a private sale of the subject assets are SUSTAINED; the 219 Order denying the joint motion for postponement of sale is VACATED; and the 216 Motion to escrow the proceeds of the sale is DENIED AS MOOT. Further, all o ther objections filed are OVERRULED AS MOOT. The sale of assets that occurred on 10/7/14 is VACATED and the Clerk is DIRECTED to refund to Select Security the deposit paid for the assets. The judicial sale is ADJOURNED for 60 days. On or before that time, SAFE shall submit a report to this Court advising it of the status of the case. Signed by Senior Judge Frederick P. Stamp, Jr on 10/20/14. (cnd)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
SECURITY ALARM FINANCING
ENTERPRISES, INC.,
Plaintiff,
v.

Civil Action No. 1:12CV88
(STAMP)

BETTY PARMER, SECURE US, INC.,
and MITCH BROZIK,
Defendants,
and
GUARDIAN SECURITY, INC.,
and UNITED BANK, INC.,
Intervenors,
and
KOURT SECURITY PARTNERS, LLC
d/b/a SELECT SECURITY,
Interested Party.
MEMORANDUM OPINION AND ORDER
GRANTING PLAINTIFF SECURITY ALARM FINANCING ENTERPRISES, INC.
AND DEFENDANT BETTY PARMER’S EMERGENCY MOTION
FOR ADJOURNMENT OF JUDICIAL SALE,
SUSTAINING IN PART AND OVERRULING IN PART AS MOOT
PLAINTIFF SECURITY ALARM FINANCING ENTERPRISES, INC.
AND DEFENDANT BETTY PARMER’S OBJECTIONS,
VACATING THE MAGISTRATE JUDGE’S ORDER
DENYING THE POSTPONEMENT OF THE SALE,
VACATING THE JUDICIAL SALE OF ASSETS AND
DENYING AS MOOT DEFENDANT MITCH BROZIK’S MOTION TO ESCROW1

1

This memorandum opinion and order confirms in more detail the
rulings of this Court contained in a letter to counsel or record
dated October 14, 2014. ECF No. 229.

I.

Background

In this civil action filed in May 2012, the plaintiff Security
Alarm Financing Enterprises, Inc. (“SAFE”) and the defendant Betty
Parmer (“Parmer”) filed an emergency motion to adjourn or postpone
the judicial sale involving assets subject to a judgment against
defendants.

See ECF No. 204.

The case involves an alleged sham

sale of defendant Mitch Brozik’s (“Brozik”) former company, Secure
US, Inc. (“Secure US”), to his aunt, Parmer. Brozik allegedly sold
Secure

US

received.

to

Parmer

to

avoid

a

monetary

judgment

that

SAFE

On May 22, 2014, following numerous earlier motions and

hearings, this Court approved a stipulation of the parties and
entered

a

judgment

for

plaintiff

$1,132,028.42 plus interest and costs.

against

Parmer

ECF No. 164.

equaling

Then, on May

28, 2014, this Court issued an order granting the plaintiff’s
motion for issuance of a writ of fieri facias and appointed United
States Magistrate Judge James E. Seibert as the officer to seize
and sell the property of Secure US in order to satisfy the judgment
against it.

ECF No. 169.

SAFE then filed a motion seeking an order of sale of assets.
ECF

No.

172.

Following

this,

the

magistrate

judge

held

an

evidentiary hearing on July 15, 2014, where all parties involved
presented evidence and testimony regarding SAFE’s motion.

During

the hearing, witnesses testified that as time passed, the value of
the assets would decrease.

Magistrate Judge Seibert entered an

2

order granting the motion for sale of assets finding (1) that the
testimony and evidence presented was credible, aside from Brozik’s
testimony to the contrary, and (2) that the sale should proceed
because it was in the best interests of the parties.

Because of

this, the magistrate judge entered an order for the sale2 (“sale
orders”) of assets because of the continued decline in the value of
the assets resulting from this continued litigation.

Under the

sale orders, the sale was originally scheduled to occur on Tuesday,
September 9, 2014.
Following Magistrate Judge Seibert’s sale orders, Brozik filed
both an objection and supplemental objection.

Brozik objected to

the sale orders on four grounds, and this Court overruled Brozik’s
objections and affirmed the magistrate judge’s sale orders in its
memorandum opinion and order.3

See ECF No. 194.

Following that

opinion and order, Guardian Security, Inc. (“Guardian”), a bidder
for Secure US’s assets, filed a motion to intervene.

ECF No. 195.

In its motion to intervene, Guardian claimed it was denied access
to necessary information for the scheduled sale of the assets, and

2

Magistrate Judge Seibert initially entered an order of sale
(ECF No. 186).
However, the magistrate judge later entered an
“Amended Order Attaching Notice of Sale to Order Granting Motion
for Sale of Assets” that incorporated the initial order of sale
(ECF No. 187). Thus, this Court refers to both orders collectively
as “sale orders.”
3

Brozik’s objections are not relevant to this opinion. His
objections and this Court’s opinion overruling those objections can
be found at ECF No. 194.
3

requested this Court postpone the sale until a later date.

In its

order, this Court granted Guardian’s motion and postponed the sale
until September 24, 2014.

ECF No. 198.

Following that order, on September 11, 2014, SAFE filed a
motion for a protective order to limit disclosing competitive
information or to at least require a non-disclosure agreement. ECF
No. 199.

SAFE intended this motion to limit the information

Guardian would receive prior to the sale.

SAFE argued that

bidders, including Guardian, requested confidential information
that not all bidders could access, specifically customer accounts.
Thus, bidders with that information, like Guardian, could “poach”
the customers listed on the customer accounts for sale at the
auction.

Because of this, the magistrate judge entered an order

requiring Guardian to sign a non-disclosure agreement and a nonsolicitation agreement that (1) limited Guardian’s access to only
the subscriber contacts and customer accounts for bid purposes and
(2) prevented Guardian from unfairly using such information.

ECF

No. 204.
Thereafter, Guardian timely filed objections to the magistrate
judge’s order.
failed

to

ECF No. 205.

prevent

other

Guardian claimed that the order

bidders

from

accessing

confidential

information, and that overall it faced significant disadvantages in
the bidding process.

SAFE then filed a response to Guardian’s

objections, asserting that Guardian’s objections and apprehension

4

were baseless.

ECF No. 207.4

This Court entered a memorandum

opinion and order overruling Guardian’s objections and affirming
the magistrate judge’s order.

ECF No. 210.

Following that opinion, Parmer and SAFE filed a joint motion
to postpone the judicial sale to pursue the private sale of assets,
which the magistrate judge had scheduled for October 7, 2014.
No. 213.

ECF

In their joint motion, they assert that several private

parties inquired about a private sale of the assets subject to the
judicial sale. In order to continue those negotiations and resolve
the sale, SAFE and Parmer requested that the magistrate judge
postpone the sale so that they could pursue a private sale.
Brozik, Guardian, and several interested bidders filed objections
and responses, arguing that the assets would continue to decrease
in value if the judicial sale was again postponed.
215, 217, and 218.

See ECF Nos.

Further, Brozik filed a motion to place the

funds of the judicial sale in escrow, arguing that several issues
remained pending regarding his right to the assets for sale.

ECF

No. 216. On October 6, 2014, the magistrate judge denied the joint
motion to postpone the judicial sale, but placed a minimum bid of
$4.32 million on the assets in order to maximize the sale proceeds.
ECF No. 219.

Further, the magistrate judge entered an order

directing the successful bidder of the sale to deposit 10% of the

4

Defendant Parmer also filed a response.
She states she
adopts SAFE’s response in its entirety. ECF No. 208.
5

bid with the Clerk of Court at the time of sale, and then pay the
remaining balance by October 14, 2014.

ECF No. 221.

Following the judicial sale, SAFE and Parmer filed objections
to the magistrate judge’s order denying the joint motion to
postpone the sale in order that they could pursue a private sale.
ECF No. 224. In their objections, they first argue, citing at that
time case authority mandating that SAFE, as a judgment creditor,
had the right to adjourn or postpone the judicial sale.

Second,

they argue that the magistrate judge failed to adhere to the
minimum bid requirements imposed in his order setting such terms.
In furtherance of their objections, SAFE and Parmer filed an
emergency motion to stay the sale of the assets under the judicial
sale

they

claimed

was

erroneously

conducted.

ECF

No.

225.

Specifically, they seek to have all payment for the assets stayed
until their objections (ECF No. 224) are resolved. This Court then
entered an order directing all interested parties to respond to
SAFE and Parmer’s emergency motion and objections by October 14,
2014. ECF No. 226.

Two parties, Select Security5 and Guardian,

timely filed responses to SAFE and Parmer’s emergency motion and
objections.

ECF Nos. 227 and 228, respectively.6

Those parties

5

Kourt Security Partners, LLC d/b/a Select Security (“Select
Security”) was the winning bidder at the asset sale.
Select
Security placed a deposit by check in the amount of $300,000.00.
6

An additional party, intervenor United Bank, Inc. advised
this Court by telephone that it had no objections regarding SAFE
and Parmer’s motion and objections.
6

stated they supported SAFE and Parmer’s request to have the
magistrate judge’s order denying the postponement of the judicial
sale be overturned.
For the reasons set forth below, this Court will take the
following action regarding the items discussed: (1) Parmer and
SAFE’s emergency motion (ECF No. 225) to the extent it seeks
adjournment of the judicial sale to pursue a private sale is
GRANTED; (2) Parmer and SAFE’s joint objections (ECF No. 224) to
the extent that it should have been permitted the postponement or
adjournment of the judicial sale to pursue a private sale of the
subject assets are SUSTAINED while the remaining objections are
OVERRULED AS MOOT; (3) the magistrate judge’s order denying the
joint motion for postponement of judicial sale (ECF No. 219) is
VACATED; (4) the judicial sale of assets that occurred on October
7, 2014, is VACATED; and (5) defendant Brozik’s motion to escrow
the proceeds of the sale (ECF No. 216) is DENIED AS MOOT.
II.
A.

Applicable Law

Standard of Review
Pursuant to 28 U.S.C. § 636(b)(3), a magistrate judge “may be

assigned such additional duties as are not inconsistent with the
Constitution and laws of the United States.” If a decision is made
under the “additional duties” provision, then the decision is
accorded de novo review by the district court. In re United States
for an Order Pursuant to 18 U.S.C. Section 2703(D), 707 F.3d 283,

7

289 (4th Cir. 2013); Wash. Post Co. v. Hughes, 923 F.2d 324 n.2
(4th Cir. 1991).

Under a de novo standard, “the district court’s

consideration . . . must be independent and based upon the record
before the court.” LoConte v. Dugger, 847 F.2d 745, 750 (11th Cir.
1988).

This differs with the arguably more difficult standard for

overturning a magistrate judge’s order under a “clearly erroneous
standard,” which requires the reviewing court, “on the entire
evidence,” to be “left with the definite and firm conviction that
a mistake has been committed.” Saunders v. Emory Healthcare, Inc.,
No. 1:07-CV-00282, 2008 WL 513340, *3 (N.D. Ga. Feb. 22, 2008)
(“The standard for overturning a magistrate judge’s order [under
clearly erroneous] is a very difficult one to meet.”) (internal
citations omitted).
B.

Judgment Creditor’s Power Over the Adjournment of Sale
When enforcing a money judgment, the court must issue a “writ

of execution” unless it directs otherwise.
69(a)(1).

Fed. R. Civ. P.

Further, Rule 69 also provides that “the procedure and

execution . . . must accord with the procedure of the state where
the court is located.”

Accordingly, under West Virginia law, such

method of execution involves a writ of fieri facias.
§ 38-4-5 (2014).

W. Va. Code.

If granted by the court, the writ “becomes a lien

upon the personal property . . . owned by the judgment debtor.”
Barber v. Barber, 464 S.E.2d 358 (W. Va. 1995).

8

Further, pursuant

to a writ of fieri facias, the court appoints an officer to levy
the judgment against the property.

W. Va. Code § 38-5-4.

However, the judgment creditor generally has the power to
adjourn or postpone a judicial sale of assets, especially when
either the judgment debtor or other parties consent or agree to it.
Foote v. Kansas City Life Ins. Co., 92 F.2d 744 (5th Cir. 1937)
(judgment creditor could cancel judicial sale because he and debtor
arranged another method of satisfying the judgment); Wells Fargo
Home Mortgage, Inc. v. Stull, 876 A.2d 298, 302 (N.J. 2005) (“the
judgment creditor . . . controls the timing of execution”);

Wills

v. Chandler, 2 F. 273 (D. Neb. 1880) (vacating a judicial sale
where

the

judgment

creditor

and

debtor

agreed

to

another

arrangement and canceled the sale, but the judicial sale occurred
anyway); Walker v. Commonwealth, 18 Gratt. 13 (Va. 1867) (“A
plaintiff may always, with the consent of all the defendants,
abandon a levy upon the property of all or any of them, and
afterwards sue [sic] out a new execution.”); see also 30 Am. Jur.
2d Executions, Etc. § 401 (“Generally, it is the duty of the
execution officer to sell goods . . . subject to execution without
undue delay.

However, the right . . . to order a delay in making

an execution sale has been recognized on the ground that an
execution is the process of the judgment creditor and is under his
or her control.”).

9

III.
A.

Discussion

SAFE and Parmer’s Objection to the Magistrate Judge’s Order
The primary issue here is whether a judgment creditor, SAFE,

can adjourn or postpone a judicial sale when the judgment debtor,
Parmer, agrees. In their objection to the magistrate judge’s order
denying the postponement of the sale, SAFE and Parmer first argue
that SAFE, as a judgment creditor, had the right to adjourn or
postpone the judicial sale. Second, they argue that the magistrate
judge failed to adhere to the minimum bid requirements imposed in
his order setting such terms.

In his order, the magistrate judge

denied the joint motion to postpone the sale to pursue a private
sale, finding that the sale must proceed as previously advertised
pursuant to West Virginia Code § 38-4-20 and this Court’s writ of
fieri facias.

ECF No. 219.

Looking at the case law cited by the parties in the recent
emergency motion and objections and record, this Court agrees with
SAFE and Parmer’s objections to the extent that SAFE should have
been permitted to postpone or adjourn the judicial sale in order to
pursue a private sale of the subject assets.

As provided above,

the case law indicates that generally, a judgment creditor has
“plenary power over his execution, and the sheriff must do his
bidding.”

Walker, 18 Gratt. at 21.

Most significantly, as

indicated earlier, the debtor, intervenors, and other interested
parties all agree that SAFE had the right to postpone or adjourn

10

the judicial sale.

Based upon the case law and record before this

Court, SAFE had the right to adjourn or postpone the judicial sale.
Accordingly, this Court sustains SAFE and Parmer’s objections
regarding the magistrate judge’s order to the extent stated above.
All other objections are OVERRULED AS MOOT.
B.

Emergency Motion to Stay Proceedings
In furtherance of their objections to the magistrate judge’s

order, SAFE and Parmer also filed an emergency motion to stay the
sale of the assets under the judicial sale they claimed was
erroneously conducted.

ECF No. 225.

Specifically, they seek to

have all payment for the assets stayed until their objections (ECF
No. 224) are resolved.

As discussed above, this Court finds that

SAFE, as the judgment creditor, should have been granted the
opportunity to adjourn the judicial sale to pursue a private sale.
Accordingly, this Court grants SAFE and Parmer’s motion to the
extent that the Court permits an adjournment of the judicial sale
to provide the opportunity for SAFE to conduct a private sale.
IV.

Conclusion

For the reasons stated, this Court takes the following action
regarding the matters discussed herein: (1) Parmer and SAFE’s
emergency motion (ECF No. 225) to the extent it seeks adjournment
of the judicial sale to pursue a private sale is GRANTED; (2)
Parmer and SAFE’s joint objections (ECF No. 224) to the extent that
SAFE should have been permitted to postpone or adjourn the judicial

11

sale to pursue a private sale of the subject assets are SUSTAINED;
(3) the magistrate judge’s order denying the joint motion for
postponement of sale (ECF No. 219) is VACATED; and (4) Brozik’s
motion to escrow the proceeds of the sale (ECF No. 216) is DENIED
AS MOOT.

Further, all other objections filed are OVERRULED AS

MOOT.
Accordingly, the sale of assets that occurred on October 7,
2014 is VACATED.

The Clerk of Court is DIRECTED to refund to

Select Security the deposit paid for the assets by returning the
deposit check of Charles J. Kaiser, Jr. of the law firm of
Phillips, Gardill, Kaiser & Altmeyer, attorney for Kourt Security
Partners, LLC d/b/a Select Security.

Therefore, the judicial sale

in this civil action is ADJOURNED for 60 days.

On or before that

time, SAFE shall submit a report to this Court advising it of the
status of the case particularly as to the conduct of the private
sale.
IT IS SO ORDERED.
The Clerk is DIRECTED to transmit a copy of this memorandum
opinion and order to counsel of record herein.
DATED:

October 20, 2014

/s/ Frederick P. Stamp, Jr.
FREDERICK P. STAMP, JR.
UNITED STATES DISTRICT JUDGE

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