1.Blosam Contractors, Inc. v. Lucyx
(535 So. 352 (Fla. 1st Dist.App 1988)
In Blosam, the lienholder is granted priority before charging order holder. In this case, Blosam obtained a final judgment against debtor and executed a financing statement that covered her interest in a limited partnership (or LLC).
Then Lucyx obtained a final judgment against debtor and filed an application for a charging order, which the lower court granted because the first to get a charging order had priority for the judgment.
The Appeals Court reversed the lower court, holding that a protected security interest (held by Blosam) was superior to the rights of a subsequent lien creditor (i.e. Lucyx).
2. Cadle Co. v. Ginsberg
(2002 WL 725500) CV 9500768115
(Conn. Sup. Ct 2002)
In Cadle, the creditor sought a charging order against the defendant’s interest in a LLC, which the defendant opposed because the defendant contended that the LLC must be made a party to the case. The court held:
a. It is not necessary for the LLC to be made a party to the action because the “charging order merely gives the judgment creditor the rights of an assignee” of the LLC’s membership interest, but it does not give the assignee the right to manage the LLC.
b. The assignee’s right to the LLC membership interest does not equate to the right to manage or participate in the LLC.
3. Koh v. Inno Pacific Holdings, Ltd.
(54 P.3d 1270 (Wash. App. Div. 1, 2002).
In Koh, a creditor was awarded a monetary judgment in California and sought a charging order against the debtor’s 50% interest in a LLC formed under Washington law. The LLC’s principal place of business was in Malaysia.
The Washington trial court initially quashed a charging order, claiming that the court lacked jurisdiction over the debtor’s LLC membership interest in the LLC because the interest as personal property was located outside Washington. The trial court defined the LLC member’s interest as personal property and determined that personal property for purposes of levy and attachment is normally adjudicated where it is physically located or where the owner resides.
The Appellate Court reversed, holding that when a LLC organizes under the laws of a state, the entity’s interest is located within that state. Therefore, as long as there is a valid foreign judgment (i.e. California’s), the creditor can register that judgment (in Washington) and obtain a charging order against the debtor’s LLC member interest in Washington.
4. Krauth v. First Continental
(“First Come, First Served”)
(351 So. 2d 1106 (Fla. 4th Dist.App 1977)
In Krauth, the court held that when there are multiple, unsecured judgment creditors against a single debtor, the first creditor that applies for a charging order against the debtor’s partnership (or LLC’s) interest to a court of proper jurisdiction has priority for the full satisfaction of his judgment. It does not matter when the judgment was entered. Under Krauth, enforcement of charging orders are performed one at a time, with priority given to the order filed first.