United States District Court, Eastern District of Missouri
DAVID J. BENING, et al., Plaintiffs,
ARTHUR G. MUEGLER, JR., et al., Defendants, FREDA BROCKMAN, DONALD NANGLE, JEANNE NANGLE, and W. DAVID BLACKWELL, Garnishees.
MEMORANDUM AND ORDER
CIIARLES A. SHAW UNITED STATES DISTRICT JUDGE
This closed case is before the Court on the First Amended Motion for Creditor’s Bill and Equitable Garnishment filed by plaintiffs David J. Bening; Bernice Harre, Shirley Ann Hardin, and Sharon Mewes, as successors of plaintiff Alfred W. Harre, deceased; and Bernice Harre (collectively “plaintiffs”). Plaintiffs seek an Order from the Court, among other things, imposing a $233, 700.00 judgment lien on several properties recently bought by garnishee Jeanne Nangle, a debtor of deceased judgment debtor defendant Arthur Muegler, Jr. The motion is opposed by garnishees Donald and Jeanne Nangle (“Nangle garnishees”) and garnishee the City of Fenton (the “City”). For the following reasons, the motion will be granted to the extent it seeks a finding that garnishee Jeanne Nangle violated the preliminary order in aid of execution and of creditor’s bill and equitable garnishment, and denied in all other respects. Plaintiffs will be ordered to file a motion for contempt and for sanctions.
This case dates back to 1990, and the current motion concerns a preliminary order in aid of execution and of creditor’s bill and equitable garnishment, which was issued on February 23, 1999. The history of this proceeding is complex and spans two decades and several courts. At bottom it is a collection case in which plaintiffs seek from garnishees Donald and Jeanne Nangle the contingency fee the Nangles owed to defendant Arthur G. Muegler, Jr. arising out of his successful representation of them in a Missouri state court lawsuit captioned Nangle v. Brockman. On September 21, 1990, plaintiffs David J. Bening and Alfred W. Harre (now deceased) sued defendant Arthur G. Muegler, Jr. (now deceased) for fraud, among other things. On January 23, 1996, a jury awarded plaintiffs Bening and Harre separate judgments against defendant Muegler, each in the sum of $260, 000.00. These judgments remained unsatisfied for several years. Plaintiffs represent, without offering any calculation, that as of March 7, 2014, the principal and interest remaining due on the judgments is approximately $421, 161.00. (Pls.’ Mot. at ¶ 3).
Plaintiffs’ attempts to collect on the judgments were thwarted by various fraudulent transfers of defendant Muegler and garnishee Donald Nangle. See Prelim. Order in Aid of Execution and Creditors Bill and Equitable Garnishment (“preliminary order in aid of execution”), Doc. 313. On February 23, 1999, the Court found that defendant Muegler had conveyed various properties and entered into various sham transactions in an intentional effort to frustrate plaintiffs’ efforts to collect their judgments. Id. On that same date, the Court issued the preliminary order in aid of execution. The order stated that defendant Muegler was the attorney of record representing Donald Nangle in a suit Mr. Nangle had brought in state court against Freda Brockman, Nangle v. Brockman. Mr. Nangle had received a judgment in that case of $117, 598.08, and the Court found that defendant Muegler was to receive a contingency fee from the proceeds of this judgment. The Court found that plaintiffs Bening and Harre were entitled to “levy, attach and seize” all of defendant Muegler’s rights to the judgment in the Nangle v. Brockman lawsuit. See Doc. 313. These proceeds had been purportedly assigned to Nangle’s wife, Jeanne Nangle, “in a transparent and disingenuous attempt to circumvent plaintiffs’ [Bening and Harre’s] collection of the judgment.” Id. at 3. The preliminary order in aid of execution stated at paragraph two:
Except as set forth herein, Defendant Muegler and Garnishees [Donald and Jeanne Nangle] are temporarily and preliminarily enjoined and prohibited from obtaining or receiving any money, property, funds or any other value from Garnishee Brockman or from any other party in satisfaction of the aforesaid judgment entered in Nangle v. Brockman lawsuit[.]
Id. at ¶ 2. These findings of the Court were upheld by the Eighth Circuit on appeal. See Kell v. First Colony Life Ins. Co., 168 F.3d 494 (8th Cir. 1998) (unpublished per curiam) (“The District Court did not clearly err in finding that the [attorney compensation] agreement was an attempt to obscure the attorneys’ [Muegler and Nangle’s] actual fee-splitting arrangement.”).
As it happened, garnishees Donald and Jeanne Nangle had attempted to seize certain real property owned by their judgment debtor Freda Brockman, which was to be sold at an impending public auction. The proceeds of this auction were to be given to the Nangles in execution of Mr. Nangle’s judgment against Ms. Brockman. Because of the fraudulent transactions between Muegler and the Nangles, plaintiffs Bening and Harre had moved this Court for an injunction to prohibit the Nangles and Mr. Muegler from receiving any proceeds from the sale. See Doc. 312. In its preliminary order in aid of execution, the Court granted plaintiffs’ motion and enjoined and prohibited Ms. Brockman from paying any money to the Nangles or to Muegler in satisfaction of the judgment in Nangle v. Brockman. Instead, any and all proceeds of the sale of the real property were to be paid into the Registry of this Court, presumably to be turned over to plaintiffs Harre and Bening.
Donald Nangle’s Bankruptcy
To understand some of the later property issues, the Court must follow the Nangle v. Brockman judgment through Donald Nangle’s bankruptcy proceeding. On February 17, 2000, Donald Nangle filed a Petition under Chapter 7 of the Bankruptcy Code. On February 17, 2001, the then-bankruptcy trustee, Kathy A. Surratt-States (now U.S. Bankruptcy Judge Surratt-States) filed a complaint against Donald Nangle and his wife, Jeanne Nangle. The trustee’s complaint sought avoidance of two fraudulent transfers: (1) Donald Nangle’s transfer to Jeanne of his interest in their home; and (2) Donald Nangle’s assignment of the $107, 445.00 judgment obtained against Freda Brockman. Apparently Mr. Nangle had attempted to keep the judgment against Ms. Brockman alive by having it assigned to his wife, Jeanne, pre-bankruptcy.
To settle this complaint brought by the trustee, the trustee and Jeanne Nangle agreed to transfer the Freda Brockman judgment to the trustee. The settlement agreement outlined the division of any proceeds from the sale of the judgment or any collections on the judgment received by the trustee. See Nangle v. Surratt-States, 288 B.R. 213, 215 (B.A.P. 8th Cir. 2003). On September 12, 2002, as part of the settlement, Jeanne Nangle assigned the Brockman judgment to trustee Surratt-States. The settlement agreement provided Jeanne Nangle the right to request that the bankruptcy court appoint special “collection counsel” for the trustee to pursue collection of the judgment at any time after one year from the date of the execution of the settlement agreement. See id. at 218.
Donald Nangle appealed the bankruptcy court’s order setting aside the two fraudulent transfers. On January 6, 2003, Chief Judge Kressel of the United States Bankruptcy Appellate Panel of the Eighth Circuit issued an opinion. The opinion reaffirmed the earlier decision of this Court regarding the assignment of the Brockman judgment from Donald Nangle to his wife, Jeanne, stating that the Nangles could not gain possession of funds arising out of an execution sale of the Freda Brockman property. Id. at 218. In the same opinion, Judge Kressel approved the settlement agreement originated by the bankruptcy trustee in which Jeanne Nangle had a right to request the bankruptcy court to appoint a special “collection counsel” for the trustee to pursue collection of the Brockman judgment “at any time after one year from the date of execution of the settlement agreement.” Id. at 219.
On January 13, 2009, Leslie A Davis, successor trustee to Kathy A. Surratt-States, assigned the Brockman judgment back to Jeanne Nangle. Beginning February 2010, Jeanne Nangle filed a number of executions and levies through the Sheriff’s Office against properties owned by Ms. Brockman. On April 1, 2010, Ms. Brockman filed a petition to ...