By Michael P. Sampson (part 7 of 8)
In Rem Jurisdiction Over Property Located in County Where Florida Divorce Is Pending
If property at issue in a divorce case is within the court’s jurisdictional boundaries, it doesn’t matter if the owners or those claiming an interest in the property reside outside Florida. The court has in rem jurisdiction over the property at issue.
Jurisdiction in rem, founded on property within the court’s territorial bounds, can substitute for personal jurisdiction. See Stephens, Scott, Florida’s Third Species of Jurisdiction, Vol. 82, No. 3, Florida Bar Journal 10 (March 2008); Publix Super Markets, Inc. v. Cheesbro Roofing, Inc., 502 So. 2d 484 (Fla. 5th DCA 1987) (an action asking the court to act directly on property or title to the property is an in rem action, which must be brought in the county where the land lies). See also State, Dep’t of Nat. Res. v. Antioch Univ., 533 So. 2d 869 (Fla. 1st DCA 1988); Seven Hills, Inc. v. Bentley, 848 So. 2d 345 (Fla. 1st DCA 2003).
In Rem Jurisdiction Over Property in Florida Divorce
An example of in rem jurisdiction over property in a divorce is an action to partition real property or personal property a spouse and another owner, such as a foreign trust or corporation, co-own. Under these circumstances, in rem jurisdiction over the property lies in the circuit court of the county in which the property is physically located.
“[A] partition judgment is unquestionably in rem,” Sammons v. Sammons, 479 So. 2d 223 (Fla. 3d DCA 1985). In divorce, both the dissolution of marriage and division of property rights may be conducted through in rem jurisdiction. Davis v. Dieujuste, 496 So. 2d 806 (Fla. 1986); Montano v. Montano, 520 So. 2d 52 (Fla. 3d DCA 1988).
Under section 64.031, Florida Statutes, a spouse owning an interest in real property or personal property may file a partition action against the cotenants, coparceners, or others interested in the lands to be divided.
For example, in Martinez v. Martinez, 219 So. 3d 259 (Fla. 5th DCA 2017), a wife’s petition for dissolution of marriage included a partition count against her stepson and corporations her husband created during the marriage. She alleged her husband had been commingling the parties’ marital assets with assets owned by the stepson and corporate respondents. She sought partition of the marital assets, recognition and equitable distribution of her interest in the corporations. Further, she asked the court to claw back and equitably distribute assets transferred to the corporations and stepson.
The Fifth DCA held the trial court erred by granting the stepson’s motion for summary judgment on his stepmom’s claims against him.
Joinder of Nonparty Co-Owners of Property in Florida Divorce Is Necessary to Adjudicate Their Interests
A divorce judge can’t adjudicate property interests of co-owners unless joined as parties. In Bailey v. Bailey, 310 So. 3d 103 (Fla. 4th DCA 2021) a mother-in-Law claimed interest in real property, to be distributed in a divorce. The wife sought partition of the property. After joining mother-in-law as an indispensable party, the wife dropped her partition claim. But the mother-in-law claimed she owned the property with the divorcing couple as joint tenants with rights of survivorship. She moved to intervene, but the trial court denied her motion. The divorce judge could adjudicate only the husband’s and wife’s respective one-third interest in the property, but that adjudication would likely impact the right of survivorship in the property held as joint tenants. Therefore, the 4th DCA held, the mother-in-law’s joinder was required.
See also Salituri v. Salituri, 184 So. 3d 1250 (Fla. 4th DCA 2016), in which the same court reversed a judgment purporting to distribute property in a divorce absent joinder of the husband’s dad, who co-owned the property. In a dissolution of marriage action, in Matajek v. Skowronska, 927 So. 2d 981 (Fla. 5th DCA 2006), the trial judge erred in adjudicating the full value of and assigning to the wife real property titled to a partnership co-owned between Husband’s limited liability company and a partner not a party.
Corporate Property: No Power to Transfer Property Without Joining Entity
A Florida trial court has no power or authority to transfer property of a corporation without joining the entity. See Ehman v. Ehman, 156 So. 3d 7 (Fla. 2d DCA 2014); Mathes v. Mathes, 91 So. 3d 207 (Fla. 2d DCA 2012). See also Sandstrom v. Sandstrom, 617 So. 2d 327 (Fla 4th DCA 1993) (the court lacked jurisdiction to order a transfer of a corporation’s assets because it was not made a party) and Ashourian v. Ashourian, 483 So. 2d 486, 486 (Fla. 1st DCA 1986).
In Nichols v. Nichols, 578 So. 2d 851 (Fla 2d DCA 1991), an order distributing corporate property in a dissolution of marriage proceeding was reversed because the corporation was not made a party. Likewise, in Keller v. Keller, 521 So. 2d 273 (Fla. 5th DCA 1988), the court had no authority to award wife a Mercedes owned by husband’s corporation because the corporation was not joined). See also Buchanan v. Buchanan, 225 So. 3d 1002 (Fla. 1st DCA 2017) (court had no power to order a company not joined as a party to continue paying spouse’s salary).
Property Business Entities and Trusts Own Isn’t the Same as Spouses’ Ownership in the Entities
Assets nonparty LLCs, corporations, partnerships, or trusts own ordinarily aren’t divisible in equitable distribution. See, e.g., Minsky v. Minsky, 779 So. 2d 375 (Fla. 2d DCA 2000) (reversing divorce judgment effectively dissolving a nonparty trust by characterizing trust funds it held as marital assets); Lassett v. Lassett, 768 So. 3d 472 (Fla. 2d DCA 2000) (divorce court had no jurisdiction to adjudicate or distribute assets or property rights of a nonparty partnership).
That’s what the court found in Nelson v. Nelson, 206 So. 3d 818 (Fla. 2d DCA 2016). The Nelsons transferred their California home during their marriage to an irrevocable trust. The ex-husband established the trust for the benefit of his ex-wife and her descendants. The home wasn’t a marital asset subject to equitable distribution. The home lost its character as a marital asset once the couple transferred it into the irrevocable trust. To reach the assets of an irrevocable trust, all contingent beneficiaries were indispensable parties who would have to be joined.
Property that the Spouses’ Limited Liability Company Owns
Appellate courts have expanded the rule barring transfer of non-party corporate assets to also bar transfer of assets owned by non-party limited liability companies. So it was in Ehman v. Ehman, 156 So. 3d 7 (Fla. 2d DCA 2014), where the court held the trial judge erred by awarding to a wife property her husband’s LLC owned. And, in Bro v. Bro, 262 So. 3d 218 (Fla. 2d DCA 2018), the 2d DCA held the trial judge improperly ordered commercial property of a nonparty LLC sold and proceeds distributed between the parties.
Jurisdiction Over Personal Property: Stock in Family Business
Courts may consider stock in a family-owned business a marital asset subject to equitable distribution. Esposito v. Esposito, 651 So. 2d 1248 (Fla. 2d DCA 1995). Still, the court can’t order the transfer of corporate property or assets without joinder of the entity. See Austin v. Austin, 120 So. 3d 669 (Fla. 1st DCA 2013) (without joining a corporation, the court may value and distribute corporate stock determined to be a marital asset and may preclude a spouse’s disposal of assets over which the spouse exercises exclusive control).
Without In Rem Jurisdiction, Orders Affecting Stock Certificates Located Outside the Jurisdiction May Be Invalid
In Sargeant v. Al-Saleh, 137 So. 3d 432 (Fla. 4th DCA 2014), the court reversed a judgment compelling the turnover of stock certificates located in foreign countries. The trial court lacked in rem jurisdiction over foreign property, including certificates. The court’s in personam jurisdiction over debtors conferred no power on the court to enter orders affecting the certificates. The case outlines how a creditor may reach a debtor’s security interests and invoke the court’s power, by injunction or otherwise, to reach certificated securities or to satisfy the creditor’s claim by means allowed at law or in equity. The Court may order certificates to be cancelled and reissued. But the entities (a corporation and LLC) didn’t need to be parties to the proceedings.
See also House v. Williams, 573 So. 2d 1012 (Fla. 5th DCA 1991) (When one debtor refused to respond to discovery, and the other said she didn’t know where stock certificate was, the court could order a corporation the debtors closely held and controlled to reissue a stock certificate).
Personal Jurisdiction Over Parties Gives the Court Power to Compel Them To Take Acts Regarding Property Outside the Court’s Jurisdiction
While court has no in rem jurisdiction over property located outside its jurisdiction, its in personam jurisdiction over parties properly before it empowers it to order them to take actions with respect to the property. See, e.g., General Electric Capital Corp. v. Advance Petroleum, Inc., 660 So. 2d 1139 (Fla. 3d DCA 1995) (creditor who supplied fuel for a jet airplane had a perfected lien on the jet, which the trial court ordered the debtor to return to Florida).
Simply Asking for the Next Step in the Partition Process Isn’t Asking for Affirmative Relief that Subjects a Nonresident Spouse to Personal Jurisdiction
In an in rem action like partition, the court doesn’t need personal jurisdiction over the landowner to decide the parties’ property interests. Miccosukee Tribe of Indians of Fla. v. Dep’t of Env’t Prot., 78 So. 3d 31 (Fla. 2d DCA 2017).
Moreover, as an ex-wife learned, her out-of-state ex-husband’s asking the Florida judge to take a step to move her partition claim along – he asked for appointment of a special magistrate to conduct the sale of marital property – didn’t then subject him to personal jurisdiction in Florida. Fradera v. Fradera, Case No. 5D22-53 (Fla. 5th DCA Nov. 4, 2022).
Seeking Affirmative Relief May Subject Nonresident to Personal Jurisdiction
A nonresident who seeks affirmative relief may be subject to personal jurisdiction by consent or waived a challenge to personal jurisdiction. Sowden v. Brea, 47 So. 3d 341 (Fla. 5th DCA 2010); Ge v. Swearingen & Assocs., Inc., 328 So. 3d 58 (Fla. 5th DCA 2021); Babcock v. Whatmore, 707 So. 2d 702 (Fla. 1998); Empire Beauty Salon v. Com. Loan Sols. IV, LLC, 159 So. 3d 136 (Fla. 5th DCA 2014).
But, what is affirmative relief? Affirmative relief is relief a party seeks by raising a counterclaim or crossclaim the party could’ve maintained independently of the petitioner’s action. See also Inglis v. Casselberry, 137 So. 3d 389 Fla. 2d DCA 2013); Mason v. Hunton, 816 So. 2d 234 (Fla. 5th DCA 2002).
Remember Mr. Fradera? His motion for appointment of a special magistrate in his wife’s partition case depended entirely on her partition petition – he couldn’t make that request without it. So, rather than a request for “affirmative relief,” he simply sought the next procedural step for the trial court in the partition action under section 64.061(4), Florida Statutes. In other words, he asked the court to move the in rem proceeding forward and finalize the partition. That didn’t cause him to submit to personal jurisdiction.
Even With No Jurisdiction Over Property, Trial Courts May Exercise In Personam Jurisdiction to Compel Acts
If the court doesn’t directly affect title to real or personal property while it remains in a foreign jurisdiction, a court with personal jurisdiction over a party may order the party to take acts (or refrain from acting) regarding the property located in a foreign jurisdiction. See French v. Hay, 89 U.S. (22 Wall.) 250 (1874); Fall v. Eastin, 215 U.S. 1 (1909).
See also Schanck v. Gayhart, 245 So. 3d 970 (Fla. 1st DCA 2018); Ciungu v. Bulea, 162 So. 3d 290 (Fla. 1st DCA 2015); Hirchert v. Hirchert Fam. Tr., 988 So. 2d 63 (Fla. 5th DCA 2008) (“The court’s decree does not operate directly upon the property or affect its title, but is made effectual through coercion of the defendant.”) (quoting Groza-Vance v. Vance,834 N. E. 2d 15 (Ohio Ct. App. 2005)); Corbett v. Nutt, 77 U.S. (10 Wall.) 464 (1870) (A court may decree a conveyance of land in another jurisdiction, and even in a foreign country, and enforce the execution of the decree by process against the defendant over whom the court has personal jurisdiction).
In Belsky v. Belsky, 324 So. 2d 111 (Fla. 3d DCA 1975), a Florida court properly entered an in personam order directing an ex-husband to extend a Massachusetts trust. The court didn’t interfere with the trustees or assets of the trust.
Court Has No Authority Directly to Affect Title to Real or Personal Property Located in a Foreign Jurisdiction
The above authority to compel a party to take acts regarding property not located in the court’s jurisdiction has limits. Specifically, the court has no inherent power to annul a deed or establish title for property outside its jurisdiction, but may indirectly to so by compelling or coercing the defendant to act on such property. Shim v. Buechel, 339 So. 3d 315 (Fla. 2022); Carpenter v. Strange, 141 U.S. 87 (1891); Hart v. Sansom, 110 U.S. 151 (1884).
See also Sammons v. Sammons, 479 So. 2d 223 (Fla. 3d DCA 1985) (Colorado divorce decree wasn’t entitled to full faith and credit because it directly affected title to Florida real property); Belsky v. Belsky, 324 So. 2d 111 (Fla. 3d DCA 1975), (Florida court properly entered an in personam order directing an ex-husband to extend a Massachusetts trust, the trustees or assets of the trust with which the Florida court did not interfere).
These distinctions appeared in Dusesoi v. Dusesoi, 498 So. 2d 1348 (Fla. 2d DCA 1986). A purported award in a Texas divorce decree to a husband of Collier County, Florida real estate was not entitled to full faith and credit by the Florida court. But the Texas court, exercising in personam jurisdiction over a wife, directed her to sign a warranty deed to the Florida property in a form attached to the final judgment. That provision was entitled to full faith and credit.
Shim v. Buechel: 2022 Florida Supreme Court Case: Compelling a Party to Take Acts Regarding Foreign Property
These principles played out in 2022. The Supreme Court of Florida reaffirmed a trial court’s authority to compel a party over whom it has personal jurisdiction to take acts regarding foreign property. Shim v. Buechel, 339 So. 3d 315 (Fla. 2022).
Judgment creditors sold a medical device company to the buyers. They later recovered a money judgment against them. But when the creditors tried to collect, they learned the judgment debtor had sold stock in a limited partnership for $4 million, held in a safe at home in South Korea in a negotiable instrument drawn on funds in a Korean bank.
The creditors moved to compel Shim to turn the money over to them. They argued the court had personal jurisdiction to force him to act regarding the foreign funds. Citing Burns v. State, Dep’t of Legal Affairs, 147 So. 3d 95 (Fla. 5th DCA 2014), the trial judge reasoned Florida courts have no in rem or quasi in rem jurisdiction over foreign property.
The 5th DCA reversed. See Buechel v. Shim, 340 So. 3d 507 (Fla. 5th DCA 2021). Resolving conflict the 5th DCA certified with Sargeant v. Al-Saleh, 137 So. 3d 432 (Fla. 4th DCA 2014), the Florida Supreme Court held the proceedings supplementary statute, section 56.29(6) unambiguously authorizes a trial court to order a debtor over whom it has in personam jurisdiction to act on assets located outside the court’s territorial jurisdiction and doesn’t limit its reach to its territorial boundaries.
Questions About Corporations and Trust in Florida Divorce?
For questions about personal jurisdiction over foreign corporations and trusts and opportunities in Florida Collaborative Divorce to resolve issues globally, contact Michael P. Sampson.
Related Blog Posts:
- Corporation or Trust Challenges to Service of Process and Jurisdiction
- Challenge to Personal Jurisdiction: Service of Process
- Family Law Pleadings: Allege Personal Jurisdiction
- Personal Jurisdiction – Long-Arm Statute or Alter Ego?
- Long-Arm Jurisdiction: Specific or General?
- Alter Ego Basis for Jurisdiction in Florida Family Law Action
- Affidavits to Support Challenges to Jurisdiction in Florida Divorce