William J. Benzick, et al., Respondents,

This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2018).

STATE OF MINNESOTA
IN COURT OF APPEALS
A18-0956

William J. Benzick, et al.,
Respondents,

vs.

Palm Properties LLC,
defendant,

Michael N. Palm,
Appellant.

Filed March 25, 2019
Affirmed in part, reversed in part, and remanded
Cochran, Judge

Hennepin County District Court
File No. 27-CV-09-22816

James C. Brand, Marie E. Williams, Fredrikson & Byron, P.A., Mi nneapolis, Minnesota
(for respondents)

Michael N. Palm, Sr., Wayzata, Minnesota (pro se appellant)

Considered and decided by Hooten , Presiding Judge; Reyes, Judg e; and Cochran,
Judge.
U N P U B L I S H E D O P I N I O N
COCHRAN, Judge
Appellant Michael N. Palm challenges an order entered by the d istrict court that
(1) requires two limited liability companies (LLCs) that he who lly owns to make all

2
payments owed to him directly to respondent-judgment-creditors William J. Benzick and
Perry Rynders (the creditors), a nd (2) requires the LLCs to mak e monthly financial
disclosures to the creditors. The order was entered to effectu ate a charging order against
Palm’s interest in the LLCs. We affirm in part, reverse in part, and remand.
FACTS
On August 26, 2010, the creditors obtained a judgment in the am ount of
$264,821.91 against Palm Properties LLC, and appellant Michael N . P a l m , j o i n t l y a n d
severally. The judgment was docketed on October 4, 2010. The judgment was related to
two loans that Palm Properties re ceived from the creditors, whi ch Palm personally
guaranteed. Palm Properties defaulted on the loans, causing the creditors to bring a district
court action against both Palm and Palm Properties.
The creditors made efforts to collect from Palm but were unsuccessful in collecting
the full judgment. On February 6 , 2018, in an effort to collec t the unsatisfied portion of
the judgment, the creditors brou ght a motion seeking a charging o r d e r u n d e r M i n n .
Stat. § 322C.0503, subd. 1 (2018),1 against Palm’s transferrable interest in two LLCs that
he wholly owns, GREC, LLC and GSR Real Estate Services, LLC.2
The creditors also asked the dis trict court to make additional orders under Minn.
Stat. § 322C.0503, subd. 2 (2018), which gives the court the au thority to make orders
necessary to effectuate a charging order. The creditors asked the court to order that all

1 A charging order is a lien on a judgment debtor’s interest in a n L L C . M i n n .
Stat. § 322C.0503, subd. 1. It requires the LLC to pay any dis tribution that would
otherwise be paid to the judgment debtor to the judgment creditor instead. Id.
2 GREC and GSR are not parties to this case.

3
payments due from GREC or GSR to Palm, not solely distributions , be paid directly to
t h e m . T h e y a l s o a s k e d t h e c o u r t t o o r d e r G R E C a n d G S R t o d i s c lose financial
information—specifically, complete financial s t a t e m e n t s , a b a l ance sheet, income
statements, cash-flow statements, bank-account statements, and statements of all payments
made to or for the benefit of Michael Palm—by the tenth day of every month until the
judgment is satisfied. They argued that these additional order s were necessary because
Palm was the sole owner of both GREC and GSR and could characterize distributions from
the LLCs as other forms of payment to avoid making payments directly to the creditors.
Palm objected to the creditors’ request that the court order al l payments made by
GREC and GSR be paid to the creditors. He argued that Minn. St at. § 322C.0503 (2018)
limits the payments that a judgm ent creditor may receive under a charging order to
distributions only and that there are other available means of garnishing his wages from
the LLCs. Palm also argued that the financial disclosures that the creditors sought were
too burdensome and that he could not comply with the timeline that the creditors suggested.
On April 18, 2018, the district court granted the creditors’ mo tion for a charging
order. The court also ordered GREC and GSR to make “any payments currently owed to,
or that become payable in the future to, Michael N. Palm directly to” the creditors until the
judgment is satisfied. Finally, the district court ordered GRE C and GSR to make the
financial disclosures requested by the creditors by the tenth d ay of each month until the
judgment is satisfied.
This appeal by Palm follows.

4
D E C I S I O N
This appeal involves the district court’s application of Minn. Stat. § 322C.0503 to
effectuate a charging order against Palm’s interest in GREC and GSR. Palm does not
dispute that his interests in GREC and GSR are properly subject to a charging order under
Minn. Stat. § 322C.0503, subd. 1 . Instead, he argues that the district court exceeded its
authority under Minn. Stat. § 322C.0503, subd. 2, by (1) orderi ng that all payments, not
just distributions, owed to Palm be paid directly to the creditors and (2) ordering the LLCs
to make monthly financial disclosures to the creditors.
The statutory language at issue, Minn. Stat. § 322C.0503, subd. 2(2), provides that
the district court may “make all other orders necessary to give effect to the charging order.”
Because the statute gives the district court broad discretion in making orders necessary to
effectuate a charging order, we review the contested orders for an abuse of discretion. See
Personalized Mktg. Serv., Inc. v. Stotler & Co., 447 N.W.2d 447, 450 (Minn. App. 1989)
(“Where a trial court has made a ruling which calls for an exer cise of discretion, the clear
abuse of discretion standard of review applies, and the rulings should not be disturbed
unless a clear abuse is shown.”), review denied (Minn. Jan. 12, 1990). A district court
abuses its discretion when its decision is based on an erroneou s view of the law or its
decision is inconsistent with the facts in the record. In re Stisser Grantor Trust , 818
N.W.2d 495, 508 (Minn. 2012).

5
1. The district court abused its discretion by ordering that all payments made by
GREC or GSR to Palm, not just distributions, be paid directly to the creditors.

Minnesota law allows a judgment creditor to apply for a chargin g order against a
j u d g m e n t d e b t o r ’ s t r a n s f e r a b l e i n t e r e s t i n a n L L C f o r t h e u n s a tisfied amount of the
judgment. Minn. Stat. § 322C.0503, subd. 1. “A charging order constitutes a lien on a
judgment debtor’s transferable interest and requires the limite d liability company to pay
over to the person to which the charging order was issued any distribution that would
otherwise be paid to the judgment debtor.” Id. (emphasis added).
B y i t s t e r m s , M i n n . S t a t . § 3 2 2 C .0503, subd. 1, provides that a charging order
requires payment of “any distribution.” Id. A “distribution” is a transfer of money or
property from an LLC to another person on account of a transfer able interest in the LLC.
Minn. Stat. § 322C.0102, subd. 7 (2018). A “transferrable interest” in an LLC is the right
to receive distributions from the LLC in accordance with the operating agreement. Minn.
Stat. § 322C.0102, subd. 28 (2018).
The charging order statute, Minn. Stat. § 322C.0503, is substantively identical to a
similar provision of the Revised Uniform Limited Liability Company Act (Nat’l Conf. of
Comm’rs on Unif. State Laws 2006) (RULLCA). Compare Minn. Stat. § 322C.0503 with
RULLCA § 503.3 The comment to section 503 of the RULLCA provides guidance as to
the scope of a charging order under the act. The comment expresses that payments that are

3 The Minnesota Revised Uniform Limited Liability Company Act (M RULLCA), Minn.
Stat. §§ 322C.0101-.1205 (2018), is an adaptation of the RULLCA.

6
not distributions are not subject to a charging order and are instead subject to other creditor
remedies that may apply. RULLCA § 503 cmt.
Here, the district court’s order requires GREC and GSR to make “any payments
currently owed to, or that become payable in the future to, Mic hael N. Palm directly to”
the creditors. The phrase “any payments” goes beyond “distributions” and is broad enough
to encompass other types of payments, including salary payments , compensation for
services, or other forms of payment that are not distributions. The order’s requirement that
“any payments” owed to Palm be paid to the creditors is inconsi stent with the charging
order language set forth in Minn . Stat. § 322C.0503, subd. 1, b ecause the order is not
limited to “distributions.”
The creditors argue that the district court acted within its di scretion because Minn.
Stat. § 322C.0503, subd. 2, authorizes the district court to “make all other orders necessary
to give effect to the charging order” to “the extent necessary to effectuate the collection of
distributions pursuant to a cha rging order in effect under subd ivision 1.” The creditors
maintain that, under the circumstances presented to the district court, it was reasonable and
necessary to order any payments, not just distributions, be paid to the creditors to effectuate
the charging order. The credito rs assert that, without this pr ovision, Palm would be able
to “mask” distributions as other forms of payments that are not subject to a charging order
because Palm alone owns and contro ls both LLCs. T hey contend that the district court’s
order “avoided the need for subs equent litigation over [a]ppell ant’s characterization of
payments.”

7
To support their argument that the order crafted by the distric t court was not an
abuse of its discretion, the creditors cite PB Real Estate, Inc. v. DEM II Props. , 719 A.2d
73 (Conn. App. Ct. 1998). 4 I n PB Real Estate , the Connecticut trial court granted a
charging order in creditor PB Real Estate’s favor against two individual debtor defendants’
interests in an LLC that the debtors wholly owned. 719 A.2d at 74. The district court’s
order directed the LLC to pay PB Real Estate “present and futur e shares of any and all
distributions, credits, drawings, or payments due to the defendant[s] . . . until the judgment
is satisfied in full.” Id. PB Real Estate later applied for a “turnover order,” allegin g that
the LLC made payments to the deb tor defendants in violation of the charging order. Id.
The LLC and the individual defendants claimed that the payments were compensation for
legal services that the debtors provided, akin to wages, and were not subject to a charging
order. Id. at 74-75. After an evidentiary hearing, the trial court foun d that the payments
were, in fact, distributions that were subject to the charging order and that the payments to
the defendants were made in viol ation of the charging order. Id. at 75. The Connecticut
Appellate Court affirmed the trial court’s turnover order, hold ing that the evidence
supported the trial court’s finding that the payments were dist ributions and that
Connecticut’s limited liability statutes did not preclude a fin ding that the payments were
distributions subject to a charging order merely because they w ere not disbursed under
certain procedures within the LLC. Id. at 75-76.

4 PB Real Estate is a Connecticut decision that is not binding precedent on this court. See
Mahowald v. Minn. Gas Co., 344 N.W.2d 856, 861 (Minn. 1984) (indicating that foreign
caselaw is not binding precedent).

8
While PB Real Estate illustrates the creditors’ leg itimate concern that Palm may
have the ability to mask payments to circumvent the charging order, the facts in this case
differ from those in PB Real Estate. In PB Real Estate, the Connecticut Appellate Court
addressed the trial court’s characterization of specific payments that were allegedly made
in violation of an existing charging order. The Connecticut Appellate Court did not address
whether payments other than distributions could also be subject to a charging order.5
Here, unlike in PB Real Estate , there was no existing charging order that was
allegedly violated. Instead, in this case, the district court issued a charging order and, at
the same time, also required that all payments owed now or in the future from the LLCs to
Palm must be paid directly to the creditors until the judgment is satisfied. But, the creditors
are only entitled to distributions under Minn. Stat. § 322C.0503. And, the district court did
not find that all payments due to Palm would be distributions or that requiring the LLCs to
make all payments directly to th e creditors was otherwise “nece ssary” to effectuate the
collection of distributions.

5 It is also noteworthy that the Connecticut Appellate Court remarked on the broadness of
the trial court’s original charging order in PB Real Estate:

The trial court observed that the phrase, “distributions, credits,
drawings, or payments due” in the charging order may be
broader than the definition of a member’s limited liability
company interest in General Statutes § 34-101(10), “a
member’s share of the profits and losses of the limited liability
company and a member’s right to receive distributions of the
limited liability company’s assets. . . .” The court restricted the
scope of the turnover order to payments found to have been
“distributions.”

PB Real Estate, 719 A.2d at 74 n.3.

9
The facts in the record only esta blish that it is possible that Palm could attempt to
circumvent the chargi ng order by abusing his position as owner of the LLCs and
mischaracterizing distributions as other forms of payment. This possibility by itself is not
sufficient to conclude that the LLCs will not comply with the charging order and pay over
any distributions that would otherwise be paid to Palm. To the extent that the LLCs fail to
comply with the charging order in the future, the creditors can bring a subsequent action as
did the creditor in the PB Real Estate case.
Because the district court’s orde r regarding the payments to be made by the LLCs
is inconsistent with Minn. Stat. § 322C.0503, and was not neces sary to effectuate the
charging order, the district court abused its discretion by requiring GREC and GSR to make
all payments, not just distributions, due to Palm directly to t he creditors. We reverse this
provision of the district court’s order and remand to the distr ict court to modify the order
in a manner consistent with this opinion.
2. The district court did not abuse its discretion by ordering GREC and GSR to
provide monthly financial disclosures to the creditors.

Palm also challenges the district court’s decision to order GREC and GSR to provide
monthly financial statements to the creditors. The district co urt ordered GREC and GSR
to disclose “(1) complete financial statements, including a bal ance sheet, an income
statement, and a cash flow statement for the previous month; (2) bank statements reflecting
all account activity for the previous month; and (3) a statement of all payments made to or
for the benefit of Michael N. Pa lm” to the creditors by the ten th day of each month until
the judgment is satisfied.

10
Citing Minn. Stat. § 322C.0502, Palm argues that a charging order does not entitle
the creditors to access financial information. Minn. Stat. § 3 22C.0502, subd. 1(3)(ii)
provides that the transfer of a transferable interest does not entitle the transferee to have
access to records or other information concerning the company’s activities. A charging
order, however, constitutes a lien on the transferrable interest—it does not transfer the
interest to the creditor. Minn. Stat. § 322C. 0503, subd. 1. B ecause there has been no
transfer of Palm’s transferrable interest, Minn. Stat. § 322C.0502 does not apply.
Instead, Minn. Stat. § 322C.0503, subd. 2, is the applicable statutory provision. As
discussed above, subdivision 2 provides that the district court may make orders necessary
to effectuate a charging order. The record supports the distri ct court’s determination that
the financial disclosures are necessary to effectuate the charging order. The creditors made
other unsuccessful efforts to collect the judgment from Palm prior to seeking this charging
order. Given that the LLCs subjec t to the charging order are w holly owned by Palm and
the creditors experienced problems collecting from Palm in the past, it was reasonable for
the district court to conclude t hat an order requiring the LLCs to provide financial
information was necessary to monitor compliance and effectuate collection of distributions
under the charging order. The requirement that the LLCs provid e financial information
addresses the creditors concern that Palm could mask payments w ithout overreach into
payments that the creditors are not entitled to under Minn. Stat. § 302C.0503, subd. 1, and
is narrowly tailored to monitor compliance with the charging or der and effectuate the
collection of distributions. B ecause the facts in the record s upport the district court’s
conclusion that an order requiring the LLCs to provide financia l information to the

11
creditors is necessary to effectuate the charging order, the di strict court did not abuse its
discretion when it ordered financial disclosures by the LLCs.
In sum, the district court did not abuse its discretion when it required the LCCs to
make monthly financial disclosures to the creditors until the j udgment is satisfied, but it
did abuse its discretion when it required that all payments made by the LLCs to Palm, not
just distributions, be paid directly to the creditors.
Affirmed in part, reversed in part, and remanded.