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St. Louis Bank v. Kohn

Court of Appeals of Missouri, Eastern District, Second Division

May 2, 2017

MICHAEL E. KOHN, et al., Appellants.

         Appeal from the Circuit Court of St. Louis County Honorable Michael T. Jameson

          ROY L. RICHTER, Judge

         Michael E. Kohn and Catherine K. Kohn (collectively, "the Kohns") appeal from the trial court's judgment granting a charging order and receiver requested by Gaol Holdings, LLC ("Gaol"), which was assigned an interest in an $80, 877.07 judgment taken by default against the Kohns by St. Louis Bank in 2009. We reverse and remand.

         I. Background

         On June 24, 2009, St. Louis Bank took a default judgment for $80, 877.07 against the Kohns, jointly and severally, which became a final judgment on July 24, 2009 (hereinafter, "Judgment"). The Judgment was silent as to post-judgment interest. St. Louis Bank assigned its interest in the Judgment to Gaol Holdings, LLC ("Respondent") on February 18, 2015. Respondent filed the assignment of Judgment with the Circuit Court of St. Louis County on March 18, 2015. In an effort to collect on the Judgment, Respondent filed its "Verified Motion for Charging Order as to Defendants, [the Kohns]" (hereinafter "Motion for Charging Order") on June 30, 2015.[1] The Motion for Charging Order was verified by counsel for Respondent, Leonard Komen ("Respondent's Counsel"), and was based upon, among other things, a calculation of interest at 9 percent, calculated on a monthly basis to $44, 421.73, and a statement of probable interest of the Kohns in a number of entities, gleaned from either "pretrial discovery in this case, or discovery in other cases in which Michael Kohn or Catherine Kohn is a litigant, or by means of review of documents pertaining to the respective limited liability partnerships which discloses the Defendants' interest." Respondent's Counsel did not express a basis on which he had personal knowledge of any interest of the Kohns in any of the entities sought to be charged.[2] Respondent's Counsel further stated only in his Motion for Charging Order that he has personal knowledge of the facts set forth and is the custodian of records for Respondent and the records of the plaintiff in the action in connection with the Judgment in this case. Personally maintaining the records of the company for the purposes of collection of the Judgment in this matter, Respondent's Counsel stated in the Motion for Charging Order that no payments had been received subsequent to June 24, 2009. Although Respondent's Counsel calculated interest based upon the principal amount of the judgment multiplied by 9 percent per year, and pro-rated therefrom to equal $44, 421.73, Respondent's Counsel did not indicate his personal knowledge of an agreed upon interest rate or any other evidence as to how the rate of 9 percent was determined.

         The Motion for Charging Order stated that it was brought pursuant to Section 358.280 RSMo. 2000[3] (a provision of Missouri's Uniform Partnership Act) and Section 347.119, RSMo. (a provision of Missouri's Limited Liability Company Act). One of the entities listed as the Kohns' probable interest, Jilila, however, is a Missouri limited partnership and governed by Chapter 359, RSMo., the Missouri Limited Partnership Act.

         On July 24, 2015, the trial court granted Respondent's Motion for Charging Order.[4] The trial court's Charging Order stated that Respondent's motion was granted in part pursuant to Section 358.280 as follows:

1. The Court finds that Judgment was entered in this case June 24, 2009[, ] in favor of [Respondent] and against [the Kohns], in the total amount of $80, 877.07, that no payments have been made on that Judgment, that the total due as of July 8, 2015, with accrued interest is $124, 849.82, that execution was issued on that judgment and returned unsatisfied, that the Judgment was duly assigned to [Respondent], and that [Respondent], as substitute Plaintiff, is entitled to a Charging Order as to the interest of Defendants, [the Kohns], jointly or severally, in certain liability companies, limited partnerships, and limited liability partnerships.
2. It is ORDERED, ADJUDGED AND DECREED that the interests of [the Kohns], jointly and severally, in the following listed limited liability companies are charged with payment of the unsatisfied amount of the judgment with interest, being $124, 849.82 and each of the following listed entities is directed to pay to [Respondent], for the [Kohns], jointly or severally, all present and future distributions, credits, draws, or payments arising from the membership interest of [the Kohns], jointly or severally, in these entities until the Judgment is satisfied in full, the listed limited liability companies, limited partnerships and limited liability partnerships against which this Order is directed being:
Brentmoor 1, LP
Funny Bone Holdings, LP
The Kohn Partnership, LLP
Jilila III, LP
Brentmoor Capital Partners, L.P.
Applied Innovative Monetary Solutions, L.L.C.
Brentmoor Capital Group, LLC

         The trial court continued for a hearing Respondent's motion for the appointment of a receiver until August 7, 2015.

         On July 13, 2015, the Kohns' counsel entered his appearance for Jilila for the limited purpose of quashing a deposition subpoena duces tecum directed to Douglass and Sabrina Holtzman (hereinafter collectively referred to as the "Holtzmans"). After entering on a matter unrelated to Respondent's Motion for Charging Order, counsel for Jilila received, via the court's electronic filing system, the signed Charging Order entered on July 24, 2016. Jilila had no notice prior to this that its interests were subject to any action by the trial court, or that there was a request pending to have a receiver appointed over any interest in Jilila.

         On August 5, 2015, the court denied Jilila's Motion to Quash the deposition subpoena directed to the Holtzmans. On August 7, 2015, the court held its hearing on Respondent's request for the appointment of a receiver. Both Jilila and Funny Bone Holdings, LLC, a Missouri limited liability company duly formed and in good standing with the Missouri Secretary of State (hereinafter "Funny Bone") appeared through counsel and argued against the appointment of a receiver under the Charging Order, asserting that the Judgment debtors had no interest in the entities charged and that the appointment of a receiver was not warranted. Respondent's Counsel, however, argued that the matter of the interests of the debtors in the charged entities was established by virtue of the entry of the Charging Order on July 24, 2015, and that the entities to be charged were estopped from re-litigating those issues. Respondent further argued that a receiver was appropriate under Section 358.280, RSMo., and restated that this statute was the basis for the appointment. Respondent's Counsel also admitted that the Charging Order was obtained without notice and claimed that similar to a garnishment, no notice was required.

         At the hearing, the trial court granted Respondent's Counsel seven days to draft and file its proposed order, due August 14, 2015, and granted counsel for Jilila and Funny Bone seven days after Respondent's submission in which to file their response. Prior to the deadline for filing Respondent's proposed order, Respondent's Counsel contacted counsel for Jilila and requested until Monday, August 17, 2017, in which to file their proposed order. Jilila consented and, in return, Jilila could file its proposed order seven days later, on August 24, 2015. On August 24, 2015, prior to the submission of Jilila's proposed order, the trial court granted Respondent's application for the appointment of a receiver pursuant to the July 24, 2015 Charging Order, but did not denominate that Order a "judgment" pursuant to Rule 75.01(a). The Kohns timely filed their Notice of Appeal, which was dismissed by this Court pursuant to Rule 75.01(a), and the matter was returned to the trial court for denomination of the Order as a judgment.

         On March 30, 2016, the trial court re-issued the Order Appointing Receiver, denominating it an Order and Judgment Appointing Receiver, in compliance with the ...

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