Key Points

  • The Sixth District Court of Appeal held that John Paul Brown and Peter Wood waived any right to claim they had not transferred 135 Little Brownie Properties shares to judgment creditor Banc of America Leasing & Capital, which assigned them to the company.
  • The waiver rested on the debtors' notices confirming they had voluntarily delivered the shares and their failure to object to a notice, a motion, a hearing and a court order approving the transfer, along with years of silence.
  • As a result, rival judgment purchaser ROP Holding Group cannot execute on the 135 shares, but it may execute on Brown's remaining 70 shares.
  • Wood owns no shares and is not entitled to management fees the trial court found were disguised dividends; the trial court must recalculate Brown's fees on remand.
  • The court affirmed the trial court's other findings and said the unique facts likely limit the holding to these parties.

A Florida appeals court ruled on Nov. 6 that two men who handed their shares in a family real estate company to a creditor, then stayed silent while a court approved the shares' transfer, gave up any right to claim they still owned that stock.

The unanimous decision of the Sixth District Court of Appeal, written by Chief Judge Traver, partly reversed an Orange County trial court. It went in favor of Little Brownie Properties Inc., the company, and against ROP Holding Group Inc., which bought a judgment of more than $1 million against the two men and wanted to collect it by seizing 135 of the disputed shares.

The ruling cuts the stake of John Paul Brown, one of the debtors, from the 132.5 shares the trial court found he owned to 70. It leaves his business partner, Peter Wood, with no shares and no claim to unpaid management fees that the trial court had treated as "disguised dividends." The panel cautioned that the case "involves a unique set of facts, likely restricting its holding to the parties involved in this appeal."

The dispute arose in proceedings supplementary, a court process that lets a creditor holding a judgment locate a debtor's assets and have them applied to the debt. Both Little Brownie Properties and ROP had bought judgments against Brown and Wood, and the trial court heard their consolidated claims at a multi-day evidentiary hearing.

According to the opinion, Brown's father started the company more than 40 years ago, and its main asset is a property worth over $20 million. Brown received 70 shares in 1978, and Wood, a close family friend, received 10 in 1996. A shareholders' agreement gave the company a 60-day option to buy any shares a holder might involuntarily transfer to someone else.

Banc of America Leasing & Capital LLC (BALC), a judgment creditor, obtained a consent judgment of more than $500,000 against the two men in 2009. In 2014, a court ordered Wood to turn over his 10 shares to BALC, and he complied. He never sought their return, the panel wrote.

After BALC began garnishment proceedings against the estate in 2018, Wood, acting as co-personal representative of Brown's father's estate, distributed 62.5 shares to himself and 62.5 to Brown. To avoid garnishment proceedings against the estate, the two delivered those certificates to BALC as well. Brown explained that BALC was just "holding" the 135 shares while the two men tried to negotiate their return.

BALC told the company that an involuntary transfer had occurred and demanded that the company either buy the shares or reissue them in BALC's name. Brown and Wood then sent the company their own notices, which questioned whether the involuntary-transfer provision applied but confirmed they had "voluntarily delivered" the shares to BALC.

In January 2019, BALC sold the 135 shares and assigned its judgment to the company for $435,000. BALC filed a notice giving Brown and Wood 10 days to object, BALC and the company jointly moved for court approval, and a hearing was noticed. Brown and Wood received notice at each step, according to the opinion, and neither objected, intervened, sought rehearing or appealed the February 2019 order approving the transfer. The company then canceled the shares.

ROP bought its judgment in December 2019, joined the proceedings and sought to apply the 135 shares to its debt. The company argued that Brown and Wood had waived any claim that they had not transferred the shares to BALC. The trial court rejected that defense in its amended final order. "In its amended final order, it rejected the defense without explanation. Based on the evidentiary record, this was error," Chief Judge Traver wrote.

Florida law defines waiver as "the voluntary and intentional relinquishment of a known right or conduct which implies the voluntary and intentional relinquishment of a known right," the panel noted, quoting a 2005 Florida Supreme Court decision. A waiver implied from conduct "must make out a clear case," and courts weigh how long a party failed to assert its right. The panel contrasted a Fifth District case that found no waiver where a party went only a few weeks without objecting to construction of a garage. "By contrast, Brown's and Wood's silence lasted years," the court wrote.

The panel held that the waiver rested on more than silence. "While these notices were equivocal, Brown's and Wood's subsequent conduct did nothing but affirm their stated suspicion that an involuntary transfer had, in fact, occurred," Chief Judge Traver wrote. Through the notice, motion, hearing and approval order, the opinion said, the two "sat silent," and the company "then canceled the certificates, again without even a whisper from Brown and Wood."

The court also pointed to timing. "As it related to his shares, Wood's silence lasted nearly a decade," the opinion said, and the two men "only spoke up after they had arranged a separate deal to sell their shares to satisfy ROP's judgment against them."

Because of the waiver, the panel held, ROP "cannot collect on its judgment by executing on this property," though it may still execute on Brown's remaining 70 shares. The court affirmed the trial court's other findings as supported by competent, substantial evidence, including that neither man legally transferred his shares to BALC, that the management fees were disguised dividends and that Brown did not involuntarily transfer his remaining 70 shares to the company. Judges Wozniak and White joined the opinion.

Lawyers for Little Brownie Properties included Christopher V. Carlyle of The Carlyle Appellate Law Firm. ROP's lawyers included Matthew D. Baylor of Ellison | Lazenby.

The case returns to the Orange County trial court, which must recalculate what the company owes Brown in management fees under the appeals court's decision. The opinion is not final until the time to file a motion for rehearing expires and any timely motion is resolved.