Schanck v. Gayhart: Why Moving Certificates Offshore Does Not Work

The Florida First District Court of Appeal’s decision in Schanck v. Gayhart, 245 So. 3d 970 (Fla. 1st DCA 2018), held that a Florida court can order cancellation and reissuance of stock and membership certificates even when the original certificates are located in a foreign country. Alper Law served as co-counsel in the case.

The decision killed a workaround that asset protection practitioners had developed after Sargeant v. Al-Saleh (2014): issuing physical certificates for LLC or corporate interests and keeping them in a foreign jurisdiction to place them beyond a Florida court’s reach. After Schanck, that strategy no longer works. Four years later, the Florida Supreme Court in Shim v. Buechel resolved the broader question the same way Schanck had.

The Facts: A $2.5 Million Judgment and Certificates in Canada

John Schanck and Myong-He Gayhart divorced in 2015 through a Consent Final Judgment in Duval County. Gayhart waived alimony and her claims to marital assets, including Stellar Recovery, Inc., for an equalizing payment of $2.5 million. Schanck was to pay in monthly installments.

Gayhart died on July 31, 2016. Schanck stopped making payments. Her estate obtained a judgment for the unpaid balance and began collection proceedings.

The estate moved to compel Schanck to turn over stock and membership certificates in two Florida-organized entities he solely owned: Stellar Recovery, Inc. and DataSignals, LLC. Schanck argued that his new wife had taken the certificates to her home in Canada. Because the certificates were physically located outside Florida, he contended the court lacked in rem jurisdiction to order their turnover.

The estate responded with a different theory. It argued that even if the court lacked in rem jurisdiction over the Canadian-located paper, it had personal jurisdiction over Schanck himself. Under § 678.1121(5), Florida Statutes, the court could aid the estate by ordering Schanck to cancel the existing certificates and reissue new ones in Florida.

The Holding: § 678.1121(5) Authorizes Cancellation and Reissuance

The First DCA affirmed the trial court’s order in a decision by Judges B.L. Thomas, C.J. Bilbrey, and Jay, resolving three arguments Schanck raised on appeal.

Due Process

Schanck argued that the estate’s motion sought only turnover, not cancellation and reissuance, and that the court violated due process by granting relief the estate had not requested. The court rejected this. The estate’s motion had explicitly requested, as an alternative, that if the certificates could not be located, the court should order reissuance. Schanck initially claimed the certificates could not be found, then changed his testimony to reveal their supposed location in Canada. Having been on notice that reissuance was a potential remedy, he could not claim due process violation.

Statutory Authority Over Certificates Wherever Located

Section 678.1121(5) provides that a creditor whose debtor owns a certificated security is entitled to court aid “by injunction or otherwise” in reaching the security. The statute authorizes any lawful means to satisfy the claim when the property “cannot readily be reached by other legal process.”

The court held that “means allowed at law or in equity” includes ordering cancellation and reissuance of certificates, regardless of whether the originals cannot be seized because their location is unknown or because the debtor moved them outside the court’s reach. The court relied on House v. Williams, 573 So. 2d 1012 (Fla. 5th DCA 1991), where the Fifth District had reached the same conclusion and disagreed with the Fourth District’s narrower reading in Florida Boca Raton Housing Ass’n v. Malone, 325 So. 2d 22 (Fla. 4th DCA 1976).

The critical point: the order operated against Schanck personally, not against the certificates themselves. The court exercised personal jurisdiction over the debtor and ordered him to act. The certificates’ location was irrelevant.

The Debtor Can Comply Personally

Schanck argued that only the corporations and LLC themselves could reissue certificates, meaning the entities needed to be joined as parties. The court disagreed. Section 678.4051 requires the issuer to reissue certificates on request from the owner. Schanck owned 100% of both Stellar and DataSignals. He had previously represented to the court that he could provide discovery on Stellar’s behalf “as if Stellar were a party.” A sole owner who controls the entity can direct it to reissue certificates. Separate joinder was unnecessary.

The Certificated-Interest Workaround That Schanck Killed

The Schanck decision ended a specific planning strategy that practitioners had developed in the years between Sargeant (2014) and Schanck (2018).

The sequence began with Sargeant v. Al-Saleh, 137 So. 3d 432 (Fla. 4th DCA 2014), where the Fourth District held that a Florida court could not order a judgment debtor to turn over stock certificates in foreign corporations. If the certificates were physically located abroad, the court said, the creditor had to pursue them in the foreign jurisdiction.

Then Wells Fargo Bank v. Barber (M.D. Fla. 2015) held that an LLC membership interest is intangible personal property that follows the owner. Florida law applied to a Nevis LLC because the debtor was a Florida resident. But Barber involved an uncertificated interest. Practitioners noticed the opening: Sargeant protected certificated interests in foreign entities, while Barber reached uncertificated interests.

The workaround was to issue physical certificates for LLC membership interests or corporate stock and place the certificates in a foreign jurisdiction. The theory: once the interest is represented by a physical certificate, it becomes tangible personal property located wherever the paper sits. If the paper sits in Canada, the Bahamas, or Nevis, a Florida court cannot reach it under Sargeant.

The Schanck court eliminated this workaround. Section 678.1121(5) gives the court equitable authority to aid creditors in reaching certificated securities by any lawful means, including ordering the debtor to cancel and reissue. Moving the paper to Canada accomplished nothing because the court’s order targeted the debtor, not the paper.

From Schanck to Shim v. Buechel

The Schanck decision created a direct conflict with the Fourth District’s Sargeant ruling. The First DCA distinguished Sargeant on statutory grounds (§ 678.1121 versus § 56.29), but the underlying principle was incompatible: one district said a Florida court could not order debtors to act on assets located abroad, while the other said it could.

The Florida Supreme Court resolved the conflict four years later in Shim v. Buechel, No. SC21-249 (Fla. May 26, 2022). The Court unanimously held that § 56.29(6) authorizes trial courts to order debtors to act on assets located anywhere in the world, provided the court has personal jurisdiction over the debtor. The Court formally disapproved Sargeant.

The Shim decision confirmed the broader principle that Schanck had applied in the certificated-securities context: a court’s enforcement power follows the debtor, not the asset. Location of the property is irrelevant when the court has personal jurisdiction over the person who controls it.

The Firm’s Role

Alper Law served as co-counsel in Schanck v. Gayhart, representing the creditor side (the estate). The case demonstrates the firm’s appellate experience in judgment collection and post-judgment enforcement.

The firm also represented the debtor in Wells Fargo Bank v. Barber, the case that prompted the certificated-interest workaround Schanck eliminated. The two cases, argued from opposite sides of the debtor-creditor relationship, reflect the firm’s understanding of both perspectives in asset protection litigation.

What Schanck Means for Asset Protection

The Schanck decision, together with Barber and Shim, establishes that any asset a Florida judgment debtor personally controls is reachable by a Florida court. Physical certificates, uncertificated membership interests, bank accounts, negotiable instruments: none are protected by geography alone. The judgment collection case law traces this principle across the full sequence.

The only structure that moves assets beyond the court’s effective reach is one that removes the debtor’s legal control. A properly structured offshore trust accomplishes this by transferring ownership to an independent foreign trustee who is not subject to Florida jurisdiction. The court cannot order the trustee to act because the trustee is outside U.S. court authority. And an order directed at the debtor fails because the debtor no longer has the power to comply.

The charging order case law confirms that LLC interests follow the Florida-resident owner regardless of where the LLC is organized. The Schanck decision confirms that certificated securities follow the debtor regardless of where the paper is located. Together, they close every domestic workaround and leave the offshore trust as the only structure that creates genuine structural independence from the debtor.