M ORE L AW
LEXAPEDIA
Salus Populi Suprema Lex Esto

Information
About MoreLaw
Contact MoreLaw

Please E-mail suggested additions, comments and/or corrections to Kent@MoreLaw.Com.

Date: 01-11-2018

Case Style:

Robert Law v. Ronald Zemp

Oregon Supreme Court Building - Eugene, Oregon

Case Number: S064415

Judge: Walters

Court: Supreme Court of Oregon

Plaintiff's Attorney: Bruce Orr

Defendant's Attorney: Natalie Scott

Description: This review proceeding arises out of a post-judgment
order charging a judgment debtor’s interests in four limited
partnerships and a limited liability company to satisfy the
judgment creditor’s judgment against him. The charging
order was issued over the limited partnerships’ and limited
liability company’s objections that ancillary provisions
included in the charging order, which required them to
refrain from certain kinds of transactions and provide extensive
financial information to the judgment creditor, were not
authorized under the controlling statutes. On appeal, the
Court of Appeals held that some, but not all, of the ancillary
provisions were authorized. Law v. Zemp, 276 Or App
652, 368 P3d 821, adh’d to on recons, 279 Or App 808, 381
P3d 1099 (2016). We hold that a trial court has either general
or specific statutory authority to include, in a charging
order, ancillary provisions that it finds necessary to allow
a judgment creditor access to a debtor-partner’s distributional
interest in a company, as long as those provisions do
not unduly interfere with the company’s management. We
further hold that, in this case, the record does not establish
that that standard was met and, therefore, that the trial
court erred in imposing the challenged ancillary provisions.
We reverse the decision of the Court of Appeals and vacate
the circuit court order, and remand to the circuit court for
further proceedings.
I. HISTORICAL FACTS
In 2012, plaintiff obtained a money judgment against
defendant Ronald Zemp. After his initial attempts to collect
the judgment were unsuccessful, plaintiff moved the
trial court under ORS 70.295 and ORS 63.259 for an order
directing Zemp to show cause why an order charging his
interest in certain named companies to satisfy the judgment
should not be entered.1 The named companies were
1 ORS 70.295 provides, in part:
“On application to a court of competent jurisdiction by any judgment
creditor of a partner [of a limited partnership], the court may charge the
partnership interest of the partner with payment of the unsatisfied amount
of the judgment with interest. To the extent so charged, the judgment creditor
has only the rights of an assignee of the partnership interest.”
Cite as 362 Or 302 (2018) 305
four limited partnerships (LPs), The Ron Zemp Family
Limited Partnership 1, 2, 3 and 4, and a limited liability
company (LLC), Forever Young Oregon, LLC. In support of
the motion, plaintiff submitted copies of public business registry
records which identified Zemp as the general partner
of each of the LPs and as the manager of the LLC. Plaintiff
also submitted a proposed charging order which required
the companies to pay all “distributions, credits, drawings or
payments” they otherwise would have paid to Zemp to plaintiff
until plaintiff’s judgment against Zemp was satisfied in
full. The proposed charging order also included the following
ancillary provisions:
“3. Until said judgments are satisfied in full, * * * the
companies shall make no loans to any partner or anyone
else.
“4. Until said judgments are satisfied in full, * * * the
companies shall make no capital acquisitions without
either Court approval or the approval of [plaintiff].
“5. Until said judgments are satisfied in full, * * * neither
the companies nor its members shall undertake, enter
into, or consummate any sale, encumbrance, hypothecation,
or modification of any partnership interest without
either Court approval or the approval of [plaintiff].
“6. * * * [T]he companies * * * shall supply to [plaintiff]
full, complete, and accurate copies of the applicable membership
or partnership agreements, including any and all
amendments or modifications thereto; true, complete and
accurate copies of any and all Federal and State income
tax or informational income tax returns filed within the
past two years; balance sheets and profit and loss statements
for the past two years; and balance sheets and profit
and loss statements for the most recent present periods
for which same has been computed. Further, upon ten (10)
days notice * * *, all books and records shall be produced for
inspection, copying examination in the office of [plaintiff].
In a similar vein, ORS 63.259 provides, in part:
“On application to a court of competent jurisdiction by any judgment
creditor of a member [of a limited liability company], the court may charge
the membership interest of the member with payment of the unsatisfied
amount of the judgment with interest. To the extent so charged, the judgment
creditor has only the rights of an assignee of the membership interest.”
306 Law v. Zemp
“7. Until said judgments are satisfied in full, * * * all
future statements reflecting cash position, balance sheet
position, and profit and loss, the companies shall supply
to [plaintiff] within thirty (30) days of the close of their
respect accounting periods for which said data is or may be
generated.2”
The trial court issued the requested show cause order, setting
a hearing date on the proposed charging order some
three weeks out. The order was served on Zemp through
each of the companies’ registered agent.
Although Zemp himself did not appear in the ensuing
proceeding, the companies filed objections and attended
the hearing. The companies initially sought to establish,
through a declaration by Zemp’s business advisor, that
Zemp had no personal ownership interest in any of the companies.
Plaintiff moved to strike the declaration on a variety
of grounds and also argued, on the merits, that the declaration
did not disprove Zemp’s status vis-à-vis the companies.
The trial court granted plaintiff’s motion to strike and
moved on to the companies’ second objection to the charging
order—that, insofar as plaintiff’s proposed charging order
included ancillary provisions that would affect the companies’
operations, it went beyond what the charging order
statutes authorized. In response to that objection, plaintiff
had argued that the provisions would help insure that Zemp
did not use his control of the companies to keep his interests
in them out of plaintiff’s reach, without plaintiff having any
way to know what had been done.3 The companies insisted,
however, that the provisions would invade the rights of the
companies’ other partners and members, and that, at the
very least, they should not be allowed without the posting
of a bond and a protective order. Thereafter, the hearing
evolved into a more practical editorial session, with the trial
court removing one provision (paragraph 4) in the proposed
2 The proposed order contained another ancillary provision, identified as
paragraph 8, which allowed plaintiff to seek modification of the charging order to
provide for the appointment of a receiver. We have omitted that provision because
it is not at issue in this review.
3 Plaintiff previously had suggested to the court that Zemp controlled the
companies and was operating them as “classic asset protection program[s]”
rather than as businesses.
Cite as 362 Or 302 (2018) 307
order, adjusting certain due dates set in the proposed order,
and instructing the parties to devise a protective order for
the financial disclosure requirements. The court approved
and issued the charging order as edited.
The companies later filed a motion for reconsideration,
arguing that, insofar as the provisions that remained
affected the rights of partners in the companies who had
not been made parties to the proceedings, inclusion of those
provisions, particularly on such short notice, amounted
to a violation of due process. But plaintiff responded, and
the trial court agreed, that the companies could have and
should have raised those objections in the original hearing,
and that they presented no basis for reconsideration.
Accordingly, the motion for reconsideration was denied.
II. THE COURT OF APPEALS DECISION
The companies decided to appeal and moved for a
stay of the charging order as issued. Unable to persuade the
trial court or the Court of Appeals to grant such a stay, they
finally reached a partial settlement with plaintiff, under
which plaintiff agreed to a stay of the objectionable ancillary
provisions that remained in the order (paragraphs 3, 5, 6,
and 7) in return for certain concessions, including the company’s
waiver of any right to challenge the basic provisions
of the charging order (and, thus, to argue that Zemp was not
a member or partner in the companies). The resulting stipulated
order specified, however, that the companies “may
argue on appeal that the trial court was without authority
to include paragraphs 3, 5, 6, and 7 in the Charging Order
[i.e., the ancillary provisions barring certain transactions
and requiring financial disclosures] because such paragraphs
exceed what is allowable under the Oregon [Limited
Liability Company] Act, Oregon’s limited partnership statutes,
or any other applicable law.”
The companies then made that argument on appeal,
and the Court of Appeals was persuaded in part. In a nutshell,
the Court of Appeals held, with regard to the charging
order as it applied to the LPs, that (1) the court’s authority is
controlled by a provision of the limited partnership statute,
ORS 70.295, which impliedly incorporates a provision in
308 Law v. Zemp
the general partnership statutes, ORS 67.205, under which
courts issuing charging orders are authorized to “make all
other orders, directions, accounts and inquiries the judgment
debtor might have made or that the circumstances of
the case might require”; (2) because the ancillary provisions
in the charging order requiring disclosure of financial information
(paragraphs 6 and 7) were ones that the judgment
debtor might have made as a general partner in the limited
partnership, the court was authorized to include those provisions
in the charging order against the LPs; (3) because
the ancillary provisions restricting the limited partnerships
from making loans and transferring partnership interests
(paragraphs 3 and 5) were not ones that the judgment debtor
might have made, and because the trial court had not made
any clear determination that those provisions were required
under the circumstances to ensure compliance with the
charging order, the trial court lacked “discretion” to issue
them; (4) on remand, if plaintiff demonstrated to the trial
court’s satisfaction that the latter provisions were ones that
“might [be] require[d]” to ensure that the LPs comply with
the charging order, the trial court could reimpose those provisions.
276 Or App at 666-69.
With regard to the charging order as it applied to the
LLC, the court held that, because that trial court’s authority
was controlled by a provision of the Oregon Limited Liability
Company Act, ORS 63.259, that does not itself contain any
wording authorizing the issuance of ancillary orders to
enforce a charging order against a limited liability company,
and does not incorporate by implication any provision that
grants such authority, the trial court lacked authority to
issue any of the ancillary orders that it did against the LLC.
Id. at 670-71. Finally, the Court of Appeals declined to consider
the companies’ arguments invoking due process and
the Oregon Rules of Civil Procedure, holding that the trial
court had acted within its discretion in declining to consider
those arguments when the companies raised them for the
first time in a motion for reconsideration. Id. at 664-65.
The Court of Appeals subsequently allowed the parties’
separate petitions for reconsideration to clarify a point
regarding the standard of review it had applied. Law, 279
Or App at 809. Although, in its original opinion, the court
Cite as 362 Or 302 (2018) 309
had referred to the trial court’s imposition of some of the
ancillary requirements as “beyond the court’s discretion,” it
explained that, in fact, its holding was that the court had
“legally erred by imposing the provisions in a manner that
did not comport with the statute.” Id. That holding, the
court explained, was predicated on a conclusion that the
trial court had imposed those provisions without first making
the required prerequisite determination that the provisions
were ones that either the judgment debtor might have
made or that the circumstances of the case “may require.”
Id. at 809-10. After the opinion on reconsideration issued,
both parties filed petitions for review, which we allowed.
III. THE PARTIES’ ARGUMENTS TO THIS COURT
Before this court, the companies appear to be satisfied
with the Court of Appeals’ evaluation of the ancillary
provisions as they apply to the LLC. However, the companies
challenge the Court of Appeals’ evaluation of the ancillary
provisions in the charging order as they apply to the LPs.
They contend that, contrary to the Court of Appeals’ analysis,
ORS 70.295 does not authorize a trial court to include
ancillary provisions in a charging order against a limited
partnership in any circumstance.4
Before this court, plaintiff argues that the Court of
Appeals erred in its analysis of the ancillary provisions in the
charging order as applied to both the LLC and the LPs. As
to both types of entities, plaintiff criticizes the court’s exclusive
focus on whether the ancillary orders were authorized
by the relevant charging order statutes, and argues that the
court should have also considered whether the orders were
authorized by other sources of law, including the inherent
authority of courts to enforce their own orders. As to the
LPs, plaintiff asserts that the court erred in remanding to
the trial court to allow it to determine whether the ancillary
restrictions on the operations of those entities were required
to ensure compliance with the charging order. Plaintiff
4 The companies also press for review of the due process argument that the
Court of Appeals declined to consider, insisting that it either was sufficiently
preserved or is reviewable as error apparent on the fact of the record. Given our
conclusion that none of the challenged ancillary provisions were authorized on
this record, there is no need to consider that argument.
310 Law v. Zemp
contends that the remand was inappropriate because it
arose in connection with an issue that the companies never
raised and that, in any event, was based on an incorrect
assumption—that the kind of ancillary orders at issue may
only be included if the trial court first makes a specific finding,
on the record, that the provisions are necessary under
the circumstances.
Many of the issues that are before us in this case
turn on the meaning of two charging order statutes, ORS
70.295 and 63.259, which pertain, respectively, to limited
partnerships and limited liability companies. For reasons
that will become apparent, those statutes must be considered
in the context of the general history and purposes of the
charging order remedy, including the history of the uniform
acts from which one of the statutes is derived. Before turning
to the particular issues of statutory construction that
the parties have raised, we set out that contextual material.
IV. THE STATUTORY BACKDROP
A charging order is a creature of statute that was
originally developed in the context of partnership law. Prior
to the adoption of the charging order mechanism, commonlaw
courts generally allowed a judgment creditor whose
debtor was a partner in a business to enforce the judgment
against the assets of the entire partnership. J. Gordon Gose,
The Charging Order under the Uniform Partnership Act, 28
Wash L Rev 1, 1-2 (1953). The practice constituted an obvious
invasion of the rights and interests of nondebtor partners
and resulted in disruption of the partnership business
and, often, a forced dissolution of the partnership. Id. at 2.
Efforts to reform that problematic common-law approach
culminated in the idea of a new statutory remedy for a judgment
creditor seeking to collect from the judgment debtor’s
interest in a partnership—a judicial order charging the
judgment debtor’s distributional interest in the partnership
with payment of the judgment, without disturbing the partnership’s
property or management.
A. The Uniform Partnership Act
The charging order remedy first appeared in the
United States as a provision of the Uniform Partnership Act
(UPA), adopted by the National Conference of Commissioners
Cite as 362 Or 302 (2018) 311
on Uniform State Laws (NCCUSL) in 1914. The provision in
that original version of the UPA begins by instructing that
a partner’s individual right in partnership property is not
subject to attachment or execution—thus precluding the seizure
of partnership property to satisfy a judgment against
a single partner. UPA § 25(c) (1914). It then allows for an
order charging a debtor-partner’s “interest” in a partnership
itself with payment of the judgment debt, where the
partner’s “interest” is defined as the partner’s share of the
partnership’s profits and surplus. Id. at §§ 28(1), 26. Finally,
it provides that a court issuing a charging order also is
authorized to (1) appoint a receiver of the profits due to the
debtor-partner from the partnership and (2) “make all other
orders, directions, accounts and inquiries which the debtor
partner might have made or which the circumstances of the
case may require.” Id. at § 28(1).5
The charging order provision of the UPA is notably
short on detail with respect to the procedures that were
intended. But, although admittedly sparse, the cases and
commentary in the years after the UPA’s adoption suggest
a general consensus that the provision gives courts broad
authority to do what was necessary to obtain payment of
the debt from the debtor-partner’s share of the partnership
profits without interfering with the rights of nondebtor
partners. For example, shortly after the UPA’s adoption, its
principal architect, William Draper Lewis, described the
intended operation of its charging order provisions:
“ ‘[W]hen a judgment is secured against a partner by
his separate creditor, all that a creditor will have to do is
to apply to the court which gave him the judgment * * * to
issue an order on the other partners to pay him the profits
which would otherwise be paid to his debtor, or to make any
further order which will result in his securing the payment
of his judgment without unduly interfering with the rights
of the remaining partners in partnership property.’ ”
Gose, 28 Wash L Rev at 11 (quoting statement made by
William Draper Lewis one year after the UPA was adopted).
5 Another subsection of the same provision implies that courts are authorized
to direct a sale of the debtor-partner’s interest in the partnership. UPA
§ 28(2).
312 Law v. Zemp
And some forty years later, another prominent commentator,
surveying the UPA’s charging order provision and the
few decisions by American courts that relied on it, concluded
that the provision contemplated a “highly flexible and elastic
procedure” under which the debtor-partner’s share of the
profits would be either diverted to the creditor or sold for the
creditor’s benefit, with the court being authorized to appoint
a receiver and/or issue a broad range of orders as aids to
either of those methods of collecting the debt. Gose, 28 Wash
L Rev at 10.
B. The Uniform Limited Partnership Act
In 1916, two years after it adopted the UPA, the
NCCUSL adopted the Uniform Limited Partnership Act
(1916) (“ULPA”).6 The original ULPA contains its own
provision for charging orders, but it provides only for a
charging order against a limited partner’s interest in the
limited partnership,7 and is silent with respect to charging
orders against a general partner’s interest. However, the
UPA charging order provision arguably becomes applicable
in such circumstances: Section 6(b) of the UPA provides
that, assuming that limited partnerships are provided for
by statute, the UPA “shall apply to limited partnerships
except insofar as the statutes relating to such partnerships
are inconsistent [t]herewith.” And section 9 of the ULPA
provides that a general partner in a limited partnership
“shall have all the rights and powers and be subject to all
6 Limited partnerships are a product of statute. In Oregon and other jurisdictions
that have enacted some version of the ULPA, a limited partnership is a
partnership consisting of one or more general partners, who manage the partnership
business and are personally liable for the debts of the partnership, and
one or more limited partners, who are not involved in management and have no
liability beyond their capital contributions to the partnership. ORS 70.005(13),
(14), (15); RULPA § 101(7); I Oregon State Bar, Advising Oregon Businesses § 4.1
(2001). At the time of the adoption of the ULPA in 1916, the limited partnership
was the primary way to obtain limited liability outside of the corporate business
structure. Larry E. Ribstein, Limited Partnerships Revisited, 67 U Cin L Rev 953,
953 (1999).
7 The provision in the ULPA for charging the interests of a limited partner
is similar to the UPA charging order provision. It contemplates an order
charging the limited partner’s share of the limited partnership’s profits and
surplus, and authorizes the court to appoint a receiver and “make all other
orders, directions and inquiries which the circumstances of the case may
require.” ULPA § 22(1).
Cite as 362 Or 302 (2018) 313
the restrictions and liabilities of a partner in a partnership
without limited partners.”8
C. Enactment of the UPA and Revised UPA in Oregon
The Oregon legislature enacted the original UPA
into Oregon law in 1939. Or Laws 1939, ch 550, §§ 1-43. In
1997, the Oregon legislature repealed the original UPA and
replaced it with NCCUSL’s then most current revision of the
UPA, the Revised Uniform Partnership Act (1994) (“Revised
Uniform Partnership Act” or “RUPA”), with some minor
revisions that are not relevant here. Or Laws 1997, ch 775,
§§ 1-103. See generally I Oregon State Bar, Advising Oregon
Businesses § 67 (2001) (recounting history).9 That version of
the uniform act remains in effect in Oregon and is codified
at ORS chapter 67.10
The resulting statute, the Oregon Uniform Partnership
Act, includes a charging order provision that is similar,
but not identical, to the provision in the original UPA (1914).
It provides:
“(1) On application by a judgment creditor of a partner
or of a partner’s transferee, a court having jurisdiction may
charge the transferable interest of the judgment debtor to
satisfy the judgment. The court may appoint a receiver of
the share of the distributions due or to become due to the
judgment debtor in respect of the partnership and make all
other orders, directions, accounts and inquiries the judgment
debtor might have made or that the circumstances of
the case may require.
“(2) A charging order constitutes a lien on the judgment
debtor’s transferable interest in the partnership. The
80 Notably, the ULPA charging order provision contains a paragraph, § 22(3),
that expressly provides that “[t]he remedies conferred by paragraph (1) shall not
be deemed exclusive of others which may exist.”
9 0 Thompson v. Coughlin, 329 Or 630, 637 n 7, 997 P2d 191 (2000) cites RUPA
(1996) as the source of the 1997 Oregon enactment.
10 NCCUSL issued a later (1997) revision, the Uniform Partnership Act
(1997) (also known as “RUPA”), which is now recognized as the standard revision
of the UPA. The 1997 revision contained significant modifications to the Act’s
charging order provision, § 504, accompanied by extensive commentary, which
the companies have quoted in their brief to this court. Oregon did not enact that
1997 version of the provision (or the 1997 version of RUPA in general), so the cited
commentary is not relevant to the meaning of the provision that it did enact.
314 Law v. Zemp
court may order a foreclosure of the interest subject to the
charging order at any time. * * *
“* * * * *
“(5) This section provides the exclusive remedy by
which a judgment creditor of a partner or partner’s transferee
may satisfy a judgment out of the judgment debtor’s
transferable interest in the partnership.”
ORS 67.205 (RUPA § 504). The revised provision retains the
original provision’s notion of charging a judgment debtor’s
interest in a partnership to satisfy a judgment, but notably
identifies the interest that can be charged as the partner’s
“transferable interest,” a term that is defined elsewhere as
being limited to the “partner’s share of the profits and losses
of the partnership and the partner’s right to receive distributions.”
ORS 67.195 (RUPA § 502).11 The revised charging
order provision, ORS 67.205 (RUPA § 504), also retains the
original provision’s authorization to “make all other orders,
directions, accounts and inquiries the judgment debtor
might have made or that the circumstances of the case may
require.”
D. Enactment of ULPA and Revised ULPA in Oregon
The Oregon legislature enacted the original ULPA
in 1976. In 1985, the legislature replaced the original ULPA
with NCCUSL’s then-current revision of the uniform act,12
the Uniform Limited Partnership Act (1976), codifying the
act at ORS chapter 70. Or Laws 1985, ch 67, §§ 1-63. In 1987,
it amended ORS chapter 70 to incorporate changes to the
1976 uniform act approved by NCCUSL in 1985 (Uniform
Limited Partnership Act (1976) with 1985 Amendments)
11 The NCCUSL commentary to RUPA § 502 emphasizes that those economic
rights are the only rights of a partner that are transferable: (“A partner has other
interests in the partnership that may not be transferred, such as the right to
participate in the management of the business.”). That sentiment is also evident
in RUPA § 503(3) (ORS 67.200(c)), which provides that a transfer of a partner’s
transferable interest in the partnership “[d]oes not, as against the other partners
or the partnership, entitle the transferee * * * to participate in the management
or conduct of the partnership business, to require access to information
concerning partnership transactions, or to inspect or copy the partnership books
or records.”
12 NCCUSL issued a later revision, the Revised Uniform Limited Partnership
Act (2001) (Re-RULPA), which has not been enacted in Oregon.
Cite as 362 Or 302 (2018) 315
(RULPA). Or Laws 1987, ch 543, §§ 1-33. See generally,
I Oregon State Bar, Advising Oregon Businesses § 4(2)
(2001) (recounting history). The resulting limited partnership
statute, the Oregon Uniform Limited Partnership Act,
ORS chapter 70, contains a charging order provision that is
similar to the provision in the original ULPA. It provides, in
part, at ORS 70.295 (RULPA § 703):
“On application to a court of competent jurisdiction by
any judgment creditor of a partner, the court may charge
the partnership interest of the partner with payment of
the unsatisfied amount of the judgment with interest. To
the extent so charged, the judgment creditor has only the
rights of an assignee of the partnership interest.”
A related provision spells out the referenced “rights of an
assignee of a partnership interest”:
“* * * An assignment of a partnership interest does not
dissolve a limited partnership or entitle the assignee to
become or to exercise any rights of a partner. An assignment
entitles the assignee to receive only the distribution
to which the assignor would be entitled.”
ORS 70.290 (RULPA § 702). The newer charging order provision
notably does not retain the wording in the original
ULPA (and Oregon’s earlier statute) authorizing courts to
appoint a receiver and “make all other orders, directions and
inquiries which the circumstances of the case may require.”
ULPA § 22(1). Neither does the revised act (ORS chapter 70)
retain the original act’s statement that “the remedies conferred
by * * * this section shall not be considered exclusive
of others that may exist.” ULPA § 22(3).
Another significant revision to the original ULPA
(and to Oregon’s earlier statute) appears in a new section
setting up an express linkage to the UPA. RULPA § 1105
provides: “In any case not provided for in this Act, the provisions
of the Uniform Partnership Act govern.” In codifying
that provision of the RULPA, the Oregon legislature substituted
more general references to ORS chapters, allowing
the provision to retain its relevance if and when the referenced
“Act[s]” were to change (as occurred in 1997 when the
Oregon legislature replaced the UPA with the RUPA): “In
any case governing limited partnerships that is not provided
316 Law v. Zemp
for in this chapter, the provisions of ORS chapter 67 govern.”
ORS 70.615.
Relatedly, RUPA (1994) (ORS chapter 67) omits its
predecessor’s express statement regarding its application to
limited partnerships, discussed above, 362 Or at 312 (setting
out and discussing UPA § 6(b)). However, as explained
in the revised uniform act’s prefatory note regarding the
removal of the provision, the omission does not reflect an
intention to delink the RUPA from the RULPA, but rather
an understanding that the provision was unnecessary in
light of RULPA § 1105 (ORS 70.615).
“No substantive change in result is intended, however.
Section 1105 of RULPA already provides that the UPA
governs in any case not provided for in RULPA, and thus
the express linkage in RUPA is unnecessary. Structurally,
this is more appropriately left to RULPA to determine that
applicability of RUPA to limited partnerships.”
E. Oregon Uniform Limited Liability Company Act
Although NCCUSL adopted a Uniform Limited
Liability Company Act in 1994, Oregon did not enact that
uniform act. It already had enacted its own Oregon Limited
Liability Company Act (OLLCA) the preceding year. The
Oregon Bar Association task force that drafted the OLLCA
drew wording for the Act from other Oregon statutes,
including the Oregon Uniform Limited Partnership Act
(ORS chapter 70, RULPA (1976, with 1985 amendments).
Exhibit, Summary and Commentary [on] Limited Liability
Act, Senate Judiciary Committee, SB 285, Feb 22, 1993.
The OLLCA (ORS chapter 63) includes a charging
provision, ORS 63.259, which provides:
“On application to a court of competent jurisdiction by
any judgment creditor of a member, the court may charge
the membership interest of the member with payment of
the unsatisfied amount of the judgment with interest. To
the extent so charged, the judgment creditor has only the
rights of an assignee of the membership interest.”
The “rights of an assignee of the membership interest,”
as used in that statute, are described in ORS 63.249(3),
which provides that, unless the assignee actually becomes
Cite as 362 Or 302 (2018) 317
a member of the limited liability company, with the consent
of the other members:
“the assignee shall have the assignor’s right to receive and
retain, to the extent assigned, the distributions, as and
when made, and allocations of profits and losses to which
the assignor would be entitled, but shall not exercise any
other rights of a member, including without limitation the
right to vote or otherwise participate in the management
and affairs of the limited liability company.”
ORS 63.259, the charging provision for limited liability
companies is remarkably similar in concept and
wording to ORS 70.295, the charging provision for limited
partnerships. ORS 63.259 differs from ORS 70.295 only in
its reference to “members” and “membership” rather than
“partners” and “partnership.” However, ORS 63.259 does
not contain authorization, such as that found in the Oregon
RUPA, to “make all other orders, directions, accounts and
inquiries the judgment debtor might have made or that the
circumstances of the case may require.” ORS 67.205. Nor
does it contain a provision like that found in the Oregon
RULPA linking the two partnership acts. See ORS 70.615
(providing that ORS chapter 67—the Oregon RUPA—
governs in any case involving a limited partnership “not
provided for” in ORS chapter 70).
V. ANALYSIS
A. A Court’s Authority to Issue Ancillary Orders Directed to
Limited Partnerships
Having set out the necessary statutory background,
we turn to the companies’ first argument—that, contrary to
the Court of Appeals’ analysis, the applicable limited partnership
statute does not authorize a trial court to include
ancillary provisions in a charging order against limited
partnerships like the ones at issue here. The companies’ initial
position, in that regard, is that the relevant charging
order statute, ORS 70.295, does not allow for ancillary provisions
at all. Although ORS 70.295 expressly authorizes
courts to issue a charging order against a partner’s interest
in a limited partnership, it contains no express authorization,
such as that included in ORS 67.205, for appointing a
receiver or making “other orders.”
318 Law v. Zemp
The Court of Appeals considered and rejected that
argument, explaining that the authority to issue other ancillary
orders was incorporated in the provision in Oregon’s
RULPA because of the link provided to Oregon’s RUPA.
ORS 67.205, the charging order provision in Oregon’s
RUPA, grants authority to appoint a receiver and make “all
other orders” as required. The court determined that that
authority extends to charging orders issued against limited
partnerships through the operation of ORS 70.615 (RULPA
§ 1105), which provides that the provisions of the partnership
statute, ORS chapter 67, govern “in any case governing
limited partnerships * * * not provided for in this chapter.”
Zemp, 276 Or App at 666-69. The Court of Appeals was
persuaded by the reasoning of other courts that had considered
the effect of that linkage provision in the charging
order context and had concluded that, insofar as methods
for enforcing a charging order are “not provided for” in
RULPA’s charging order provision, the charging order provision
in the UPA (or RUPA), which does provide methods of
enforcement, becomes applicable in the limited partnership
context. Id. at 667-68 (discussing Baybank v. Catamount
Const. Inc., 141 NH 780, 693 A2d 1163 (1997), and citing
Madison Hills Limited Partnership II v. Madison Hills, Inc.,
35 Conn App 81, 644 A2d 363 (1994), and other cases).
But the companies argue that it is wrong to use
ORS 70.615 to import into the charging order provision of
Oregon’s RULPA authority from the charging order provision
of Oregon’s RUPA. ORS 70.615 provides that the provisions
of the partnership statute govern “in any case governing
limited partnerships * * * not provided for in this
chapter.” The companies contend that the “all other orders”
wording in the original ULPA charging order provision
was purposely omitted from the RULPA charging provision.
Consequently, they argue, Oregon’s RULPA charging
order statute, ORS 70.295, represents a complete statement
of what its drafters intended to provide with respect to the
authority of courts to charge a judgment debtor’s interest in
a limited partnership. In those circumstances, the companies
argue, it cannot reasonably be said that the issue of the
court’s authority to make ancillary orders is one that ORS
chapter 70 has “not provided for.”
Cite as 362 Or 302 (2018) 319
The success of the companies’ argument depends
on whether we can discern from the omission of the “other
orders” provision in Oregon’s RULPA a specific determination
to withdraw such authority. The companies contend
that we can discern that affirmative intent from the fact
that, after enacting Oregon’s RULPA and ORS 70.295, the
legislature enacted Oregon’s RUPA and ORS 67.205, which
retained the express “other orders” authority contained in
its predecessor. The companies’ theory, it seems, is that,
even if a specific purpose to withdraw “other orders” authority
cannot be drawn from the simple fact that express “other
orders” wording has been omitted from the provision in
Oregon’s RULPA, the subsequent inclusion of that wording
in the revisions to the partnership charging order statute
without a concomitant amendment to the limited partnership
charging order statute shows that the legislature specifically
intended that courts not have “other orders” authority
in the limited partnership context. But the logic of that
theory depends on an assumption that is unsupported and
illogical—that, when the legislature enacted the Oregon
RUPA and its charging order provision (ORS 67.205), it also
must have been considering and interpreting the Oregon
RULPA and its charging order provision (ORS 70.295), a
statute that at that point was eight years old. The companies’
argument does not persuade us that, when it enacted
ORS 70.295 in 1987, the legislature had a specific intent
to preclude courts from issuing “other orders” in aid of a
charging order.
Certain commentary to the RULPA also shows that
the legislature did not intend to preclude courts from including
other orders in charging orders directed at limited partnerships.
When, in 1985, NCCUSL promulgated RULPA,
it included commentary after each section, explaining any
changes from the original ULPA. The commentary that followed
section 703 (Oregon’s ORS 70.295) provides:
“Section 703 is derived from Section 22 of the 1916 [UPA]
but has not carried over some provisions that were thought
to be superfluous. For example, references in Section 22(1)
to specific remedies have been omitted, as has a prohibition
in Section 22(2) against discharge of the lien with partnership
property. Ordinary rules governing the remedies
320 Law v. Zemp
available to a creditor and the fiduciary obligations of general
partners will determine those matters.”13
That commentary does not support the specific legislative
intent that the companies contend for—an intent to strip
courts of their prior authority to appoint receivers and issue
other orders in aid of a charging order. Instead, it suggests
that the provision’s drafters understood that, in most jurisdictions,
courts would have some similar authority to issue
other orders from other sources, and thought that courts
should look to those “ordinary rules governing the remedies
available to a creditor,” to appoint receivers and issue other
orders rather than the ULPA. In Oregon, those “ordinary
rules” include Oregon’s RUPA and its charging order provision,
ORS 67.205.14
As the Court of Appeals observed in its opinion,
most courts seeking to apply RULPA § 703 as enacted in
their jurisdiction have concluded that, because that statute
does not provide for any enforcement mechanism, the
enforcement mechanism provided in the charging order provision
in the UPA and/or the RUPA (i.e., the express grant
of authority to appoint receivers and make “all other orders
that the circumstances require”) is imported, by operation
of RULPA § 1105, into RULPA § 703. See Zemp, 279 Or App
at 668 (discussing Baybank, 141 NH 780 (finding that drafters
of RULPA charging provision intended that reference be
made to the UPA provision for means of enforcing the creditor’s
rights in the charged partnership interest); and citing
Madison Hills, 35 Conn App at 88 (holding that RULPA
charging order provision imports enforcement mechanisms
in UPA provision), Lauer Const. Inc. v. Schrift, 123 Md App
112, 716 A2d 1096 (1998) (same), and other cases). See also
Crocker Nat’l Bank v. Perroton, 208 Cal App 3d 1, 255 Cal
Rptr 794 (1989) (importing UPA’s enforcement provision into
analysis of RULPA charging order without discussion). The
13 This court often has looked to similar commentary by the drafters of a
uniform act to determine what the Oregon legislature intended when it enacted
some provision of the uniform act. See, e.g., Couch Investments, LLC v. Peverieri,
359 Or 125, 131, 371 P3d 1202 (2016) (looking to commentary to uniform act to
determine legislative intent); Datt v. Hill, 347 Or 672, 682, 227 P3d 714 (2010)
(same); State ex rel Torres v. Mason, 315 Or 386, 389, 848 P2d 592 (1993) (same).
14 Accord, Madison Hills, 35 Conn App at 87-88.
Cite as 362 Or 302 (2018) 321
Court of Appeals was persuaded by those cases that ORS
70.295 should likewise be read to incorporate the “other
orders” authority provided in the charging order provision
of Oregon’s RUPA, ORS 67.205. We agree.
Before we turn to the companies’ contention that
the statutory “other orders” authority would not extend to
the ancillary orders at issue in this case, we consider an
additional issue that the companies have raised. They
observe that, even in the absence of express exclusivity
wording in RULPA § 703 and the charging order provisions
in other uniform statutes, most courts that have considered
the question have concluded that statutorily-provided
charging order remedies are “exclusive.” See, e.g., 91st Street
Joint Venture v. Goldstein, 114 Md App 561, 569, 691 A2d
272 (1997) (noting general agreement that charging order
is judgment creditor’s exclusive method of reaching a partner’s
interest in a partnership and that the creditor may no
longer execute directly on partnership property, and citing
cases to that effect); In re Smith, 17 BR 541, 547 (Bkrtcy,
MD Ga 1982) (listing cases that hold that charging order
is exclusive remedy for creditor of a limited partner). The
companies conclude from those cases that everything but
the bare charging order remedy provided in ORS 70.295 is
excluded, including the “remedies” that other orders issued
in aid of the charging order might entail.
Even if the companies are generally correct that
the charging order remedy provided in ORS chapter 70 and
other uniform acts was intended to be “exclusive,” their
notion of what is excluded is too broad. When the cited cases
discuss exclusivity, the alternatives they identify as being
excluded are traditional creditors’ remedies like attachment,
garnishment and levy—not ancillary orders that are
designed only to assist or enforce the charging order remedy.
See, e.g., Smith, 17 BR at 547 (“the charge order is a
substitute for execution, attachment, levy and sale, or garnishment,”
and, thus, the exclusive remedy for a judgment
creditor against the debtor-partner’s interest in the limited
partnership); Baum v. Baum, 51 Cal 2d 610, 335 P2d 481
(1959) (statutory remedy of charging order replaces levies
of execution as remedy for reaching partnership interests).
See also Jay D. Adkisson, Charging Orders: The Peculiar
322 Law v. Zemp
Mechanism, 61 S Dak L Rev 440, 466-67 (2016) (explaining,
with respect to express “exclusive remedy” wording in
charging order provision in the RULLCA, that “remedy” is a
term of art referring to devices for enforcing judgments that
are enumerated under the remedy statutes of the state, and
would not preclude other legal strategies). Thus, even if the
charging order remedy provided in ORS 70.295 is in some
respect exclusive, that exclusivity would not affect a court’s
authority under “ordinary rules”, including ORS 67.205, to
issue ancillary orders that are not themselves traditional
creditor’s remedies.
Having disposed of that issue, we return to the
companies’ contention that the “other orders” authority set
out in ORS 67.205 and incorporated into ORS 70.295 would
not, in any event, extend to the kind of ancillary orders that
are at issue here. In that regard, the companies argue that,
when that “other orders” wording is considered in the context
in which it appears, the surrounding provisions of ORS
chapter 67, the relevant case law, and the well-understood
purpose of the charging order remedy in general, it becomes
evident that the drafters intended to strictly limit courts to
“other orders” that do not interfere with the conduct of the
partnership business. Orders like those at issue that purport
to prohibit certain transactions by the partnership or
grant outsiders access to partnership information would fall
outside of those strict limitations, the companies conclude.15
15 The companies also argue that the existence of other statutory avenues for
the kind of relief that these ancillary orders provide is further proof that such
ancillary orders are not authorized by ORS 67.205(1). They point to ORCP 79,
providing for temporary restraining orders and preliminary injunctions, ORCP
80 B, providing for appointment of a receiver to preserve, dispose of, or otherwise
manage property that is subject to a judgment, ORCP 83, providing for
provisional process, and ORS 18.268, providing for examination of a judgment
debtor about property that may be applied against the judgment. The companies
further point out that all of those statutory remedies expressly provide specific
procedural safeguards for the parties who may become subject to them (bond
requirements and protective order provisions), while ORS 67.205(1) does not. The
companies conclude that the absence of any express mention of those procedural
safeguards in ORS 67.205(1) shows that the legislature did not contemplate that
ORS 67.205(1) would be used to obtain this kind of relief—because creditors
could thereby bypass the intended safeguards.
Our answer to that argument is twofold. First, most of the cited rules are
directed at prejudgment orders and would not apply in the charging order context.
And second, the most reasonable takeaway from the existence of parallel
statutory avenues of relief, with expressly-provided procedural safeguards, would
Cite as 362 Or 302 (2018) 323
Our consideration of that argument begins with an
examination of the relevant wording in its statutory context.
After setting out the charging order remedy, Oregon’s
partnership charging order statute, ORS 67.205(1), provides
that a court issuing a charging order may also appoint a
receiver and “make all other orders, directions, accounts
and inquiries the judgment debtor might have made or that
the circumstances of the case may require.” The words by
themselves can be read as authorizing a very broad range of
orders, including ones that clothe the court (and, indirectly,
the judgment creditor) with the rights of the debtor-partner
and ones that otherwise touch on the partnership’s management,
if the “circumstances of the case [so] require.”
But those words must be read in the broader context
in which they appear—a provision that is directed first
and foremost at furnishing judgment creditors with a mechanism
for satisfying their judgments out of the partnership
interests of their debtors. Notably, ORS 67.205(1) identifies
the interest that may be charged to satisfy the judgment as
“the transferable interest of the judgment debtor.” (Emphasis
added.) The statute elsewhere defines the emphasized term
in a way that underscores the limited nature of the charging
remedy: ORS 67.195 provides that “[t]he only transferable
interest of a partner in the partnership is the partner’s
share of the profits and losses of the partnership and the
partner’s right to receive distributions.” (Emphasis added.)
Another related statute, ORS 67.200(1)(c), although not
directly applicable in the context of charging orders, adds to
the understanding that the transferable rights of a partner
that may be charged to satisfy a judgment are strictly limited.
16 It provides that the actual transfer of a “transferable
interest” to another person
“[d]oes not, as against the other partners or the partnership,
entitle the transferee, during the continuance of the
partnership, to participate in the management or conduct
not be that ORS 67.205(1) excludes orders that grant relief of that sort, but rather
that what appear to be procedural safeguards of general applicability should be
included in any orders granting such relief.
16 ORS 67.200 speaks to an actual transfer of a partner’s transferable interest,
rather than an order charging a partner’s transferable interest to satisfy a
judgment.
324 Law v. Zemp
of the partnership business, to require access to information
concerning partnership transactions, or to inspect or
copy the partnership books or records.”
Taken together, ORS 67.195 and ORS 67.200(1)(c)
point to a general legislative understanding that outsiders
(creditors and assignees) should be excluded from participating
in the conduct of partnership business and accessing
partnership information even if, through a charging
order or outright transfer of a partnership interest, they can
obtain an interest in the partnership’s profits and distributions.
The same legislative understanding is reflected in the
limited partnership charging order statutes, insofar as they
provide that a judgment creditor charging his or her debtor’s
interest with payment of the debt “has only the rights of
an assignee of the partnership interest,” ORS 70.295, i.e.,
the right “to receive the distributions to which the assignor
would be entitled,” but not to “exercise any rights of a partner,”
ORS 70.290. As the companies observe, that notion
of protecting the management of the partnership business
from outside interference by creditors and assignees has
long been understood as a bedrock principle underpinning
the UPA and the RUPA. See, e.g., William Draper Lewis,
Uniform Partnership Act, 24 Yale LJ 43, 633-34 (1915)
(delineating three different partnership rights—to partnership
property, to profits and surplus, and to participate
in management—and noting that only interest in profits
and surplus is assignable); Francis M. Burdick, The Law of
Partnership 5.2, 270-71 (3rd ed 1917) (UPA allows partner’s
creditors and assignees to obtain partner’s financial interest
in the partnership but “deny * * * the right to interfere
in management or administration of the partnership * * *
or to require any accounts or to inspect books”). See also I
Alan Bromberg and Larry Ribstein, Bromberg and Ribstein
on Partnership § 3.05(c)(4) (2007-1 Supp) (the fact that a
partner may transfer purely financial rights in the partnership
but not the right to participate in management reflects
the principle that, in the close-knit arrangement that typifies
the partnership form, partners should be able to choose
their associates).
ORS 67.205(1)’s grant of authority to “make all
other orders, directions, accounts and inquiries the judgment
Cite as 362 Or 302 (2018) 325
debtor might have made or that the circumstances of the
case may require” must be read in the context of the noted
provisions and the broader principle that they convey. It
seems highly unlikely that, while so clearly excluding management
rights from the partnership interests that are subject
to a charging order, the drafters of RUPA § 504 and the
legislature that enacted it as ORS 67.205(1) would intend to
authorize a court to issue ancillary orders that effectively
override that exclusion. Of course, one could argue that, as
long as it is the court, and not the judgment creditor, that
is interfering with management of the partnership business
or “making orders, directions, accounts and inquiries the
judgment debtor might have made,” there is no actual conflict
with the principle we have been discussing. But, given
that the court’s ancillary orders are made on behalf of the
judgment creditor’s charging efforts and generally at the
judgment creditor’s request, the issue cannot be that simple.
Although we have searched the charging order
cases decided under the uniform acts (UPA, RUPA, ULPA,
and RULPA) for confirmation of our thinking about the
“all other orders” provision, we have not discovered any
that are directly on point.17 But the desire to exclude judgment
creditors and assignees from management rights in a
17 The companies have recommended to our attention Wells Fargo Bank v.
Continuous Control Solutions, Inc., 821 NW 2d 777 (Iowa Ct App 2012), which
involved an ancillary order issued in connection with a judgment creditor’s
charging order against an LLC, which required the LLC to provide twice yearly
cash flow statements to the judgment creditor, “in order to insure compliance
with th[e] charging order.” As authority for including the ancillary provision,
the trial court cited the charging order provision in Iowa’s version of the Revised
Uniform Limited Liability Company Act (RULLCA), which provides, in a variation
on the wording in ORS 67.205, that a court issuing a charging order may
also (a) “appoint a receiver of the distributions subject to the charging order
with the power to make all inquiries the judgment debtor might have made” and
(b) “make all other orders necessary to give effect to the charging order.” Iowa
Code § 489.503. On appeal, the Iowa Court of Appeals held that the latter “all
other orders” provision “authorize[d] ancillary orders that affect only economic
rights, not governance rights,” and that, insofar as an order granting the judgment
creditor access to the company’s financial information affected the latter
(governance) rights, it was not authorized. The court also was persuaded by the
fact that a related provision of Iowa’s RULLCA expressly provides that a transferee
of a member’s interest in an LLC is not entitled to access to the LLC’s
business and financial information: It opined that “if a transferee of a member’s
economic interest is not entitled to access to the LLC’s records, the holder of a
lien upon the member’s economic interest [which is what a judgment creditor gets
from a charging order] should be similarly denied access.” 821 NW 2d at 780.
326 Law v. Zemp
partnership is a strong and constant theme in the cases,
see, e.g., Green v. Bellerive Condominiums Ltd. Partnership,
135 Md App 563, 763 A2d 252, 260-62 (2000), cert den, 534
US 824 (2001); Wells Fargo Bank v. Continuous Control
Solutions, Inc., 821 NW 2d 777 (Iowa Ct App 2012); Madison
Hills, 35 Conn App at 85-86, and, in that respect, the cases
support our analysis.
Thus, it appears to us that the authority to issue
orders “that the judgment debtor might have made” is
qualified by the phrase “that the circumstances of the case
may require.” When we consider the statute’s text, context
and the case law interpreting it and identical provisions
in NCCUSL’s uniform acts, we conclude that such orders
must be ones that allow a judgment creditor to reach a general
partner’s financial interest in the partnership without
unduly interfering with the partnership management.18
In other words, an “other order” may be required by the
circumstances of the case when, without such an order or
action, the underlying charging order would not be able to
effectuate the statutory objective of allowing the judgment
creditor to access a general partner’s distributional interest
in the company or of protecting the partnership’s management
from interference, or of drawing some balance between
those purposes, if they cannot both be effectuated fully.
“Other orders” are authorized under ORS 67.205 and ORS
70.295 only to the extent that they are “required” in that
sense.19
Wells Fargo Bank has no clear application here. The RULLCA charging
order provision, under which it was decided, grants authority to issue ancillary
orders in significantly different terms than those employed in ORS 67.205(1)—
notably, it separately and specifically authorizes an appointed receiver to make
any inquiries the judgment debtor might have made. And, in fact, although the
court in Wells Fargo Bank held that the court had no authority to include an ancillary
order requiring the LLC to provide financial information to the judgment
creditor, it suggested that a court-appointed receiver might have had authority to
ask for that information.
18 In this case, because Zemp was a general partner, the court imposed orders
that it determined a general partner could make. The orders that a limited partner
could make may be more circumscribed.
19 What that standard means, as a practical matter, is that, if a court has
reason to believe that the charging order by itself cannot effectively convey to
the judgment creditor the debtor-partner’s right to distributions and profits—as
might happen, for example, if the limited partnership exists only to shelter assets
from creditors and has no business that will generate distributions or profits in
Cite as 362 Or 302 (2018) 327
B. A Court’s Authority to Issue Ancillary Orders Directed to
Limited Liability Companies
Charging orders directed to limited liability companies
are governed by ORS 63.259. As noted, that statute
contains no wording that expressly authorizes courts to
issue ancillary orders in connection with charging orders,
and, unlike charging orders directed at limited partnerships,
it provides no basis for thinking that the legislature
intended that its terms be supplemented by the terms in
some other statute (such as ORS 67.205) that expressly provides
such authority. Accordingly, the only question with
respect to charging orders directed at limited liability companies
under ORS 63.259 is whether courts have authority
to issue ancillary orders in aid of a charging order under
some other source of law.20
Plaintiff has identified a number of possible sources
of law as relevant. Plaintiff first asserts that courts have
broad inherent authority to enforce their own orders and
judgments, and that the orders at issue fall within the scope
of that inherent authority. We accept the former proposition,
but are less certain about the latter. It is true that courts
have broad inherent powers, sometimes also recognized by
statute, to do those things that are necessary to perform
their judicial function, Ortwein v. Schwab, 262 Or 375, 385,
498 P2d 757 (1972), aff’d, 410 US 656 (1973), and that those
powers include the power to compel obedience to a court’s
own orders and judgments. State ex rel Oregon State Bar v.
Lenske, 243 Or 477, 492-93, 407 P2d 250, cert den, 384 US
the ordinary sense of the words, or has been structured in or operated in such a
way as to allow money to be transferred to the debtor-partner or his or her agents
through a mechanism other than formal distribution or profit sharing—the court
may issue ancillary orders that will ensure that the charge on the judgment creditor’s
share is not evaded. And while the court would be expected to craft its
orders, if possible, to avoid interference in the partnership’s management, there
may be circumstances in which it is not possible to effectuate the goal of charging
the judgment creditor’s share of distributions and profits without some degree of
interference in the business. As long as the order effectuates a reasonable balance
between the two objectives, it would be authorized.
20 To the extent that the companies suggest that the charging order remedy
provided in ORS 63.259 is an “exclusive” remedy that precludes courts from issuing
ancillary orders in aid of the charging order under other sources of law, we
reject that suggestion for the same reason that we rejected it as applied to ORS
70.295.
328 Law v. Zemp
943 (1966); ORS 1.010(4).21 It is even true that, to the extent
that courts’ inherent powers are essential to the courts’
work, those powers cannot be eliminated (or excluded) by
legislative fiat. See Lenske, 243 Or at 492-93 (legislature
cannot eliminate court’s authority to impose sanctions for
contempt). But the general power to compel obedience to a
court’s own existing orders (for example, through sanctions),
which is the inherent power of courts that plaintiff seems
to reference, is different from the power that the orders at
issue here would seem to require—the power to take prospective
steps to ensure the effectiveness of a lawful order.
None of the cases cited by plaintiff speak to that kind of
inherent authority.
But, whether or not courts have inherent authority
of that kind, they appear to have been granted something
akin to it by one of the statutes that plaintiff has
cited. ORS 1.160 provides that, “[w]hen jurisdiction is, by
the Constitution or by statute, conferred on a court * * *, all
the means to carry it into effect are also given.” Although
ORS 1.160 primarily has been understood as authorizing
courts to devise procedures to carry out a statutory charge
when none have been provided by the relevant statute, it at
times has been given a more substantive slant—of authorizing
courts to take whatever steps are necessary to effectively
carry out their statutory obligations. See, e.g., Grayson v.
Grayson, 222 Or 507, 352 P2d 738 (1960) (although neither
divorce statutes nor receivership statutes provided divorce
courts with authority to appoint a receiver, divorce courts
had authority to do so under ORS 1.160, to make effective
the express authority conferred on such courts by statute
to enjoin husband and wife from encumbering or disposing
of any property during pendency of proceeding); Kelley
v. Kelley, 183 Or 169, 191 P2d 656 (1948) (although court
lacked general authority to decide validity of a divorce in
a foreign jurisdiction, such authority existed under ORS
1.160 to the extent that it was necessary to effectuate its
statutorily-conferred authority to grant legal separations
and divorces). However, to the extent that the power granted
21 ORS 1.010(4) provides that every court of justice has power “to compel
obedience to its judgments, orders and process, and to the orders of a judge out of
court, in an action, suit or proceeding pending therein.”
Cite as 362 Or 302 (2018) 329
to courts by ORS 1.160 is “the power to make effective jurisdiction
expressly conferred,” Esselstyn v. Casteel, 205 Or 344,
354, 286 P2d 665 (1955), it necessarily is defined by the statutory
or constitutional provision that confers “jurisdiction.”
In other words, a court’s authority under ORS 1.160 is the
authority to take whatever additional steps are necessary to
carry out the task that the legislature assigned to the court
in the underlying statute or constitutional provision.
ORS 63.259 directs a court, on application of a judgment
creditor of a member of a limited liability company, to
charge “the membership interest of the member” with payment
of the judgment, and specifies that, “[t]o the extent
so charged, the judgment creditor has only the rights of an
assignee of the membership interest.” The referenced “rights
of an assignee of [a] membership interest” are described in
ORS 63.249(3). Under that provision, unless the assignee of
the membership interest becomes a member of the limited
liability company (which generally requires the consent of
the majority of the members):
“the assignee shall have the assignor’s right to receive and
retain, to the extent assigned, the distributions, as and
when made, and allocations of profits and losses to which
the assignor would be entitled, but shall not exercise any
other rights of a member, including without limitation the
right to vote or otherwise participate in the management and
affairs of the limited liability company.”
Considered in the context of ORS 63.249(3), ORS 63.259
directs courts to issue charging orders that accomplish two
objectives—giving the judgment creditor of a member of
a limited liability company access to the debtor-member’s
interest in the limited liability company’s profits and distributions
to satisfy his or her judgment, but, at the same
time, excluding the judgment creditor from other rights
of the member, including management rights. Those two
objectives—and the further objective of striking a balance
between them to the extent they are opposed—are at the
heart of the charging order remedy, and are found in virtually
every charging order statute, whether for general partnerships,
limited partnerships or limited liability companies.
As several students of the charging order remedy have
explained, the evident concern with preventing the transfer
330 Law v. Zemp
of management authority in all these statutes reflects the
peculiar interests at play in the small, unincorporated
business entities for which the charging order remedy was
designed. In those entities—partnerships, limited partnerships,
limited liability companies and a few others—a small
number of owners invest in a business venture and agree to
rely on each other, rather than on third parties (usually professionals),
to manage the business’s operations. For such
entities, allowing a stranger to intrude into the business’s
operations and management is particularly problematic,
undermining both the entity’s foundational agreement and
the principle that members of such organizations should
be able to pick their own partners. See Chad J. Pomeroy,
Think Twice: Charging Orders and Creditor Property Rights,
102 Ky LJ 705, 715-17 (2013); Adkinson, 61 S Dak L Rev at
449-50. The charging order mechanism, as provided in ORS
63.259 and in other similar statutes, seeks to balance that
“pick your partner” principle against the judgment creditor’s
interest in reaching the debtor’s assets by directing
courts to charge the debtor-member’s share of distributions
and profits to satisfy the creditor’s judgment while excluding
the judgment creditor from participating in management.
Pomeroy, 102 Ky LJ at 716.
Thus, as applied to ORS 63.259, the general authority
of courts under ORS 1.160 to employ “all the means” necessary
to carry their statutory jurisdiction into effect is circumscribed
by the obligations imposed on the court by that
statute to convey the debtor-member’s right to the company’s
distributions and profits to the judgment creditor, to refrain
from conveying the debtor-member’s rights in the company’s
management, and, presumably, if those two obligations cannot
both be perfectly served, to find some balance between them.
An ancillary order is authorized by ORS 1.160, in this context,
if it is needed to effectuate those objectives. Notably, that is
the same standard that would apply under the “other orders”
wording of ORS 67.205, as incorporated into ORS 70.295.
C. The Standard’s Application to the Ancillary Orders at
Issue
Thus far, we have considered the authority of courts
to issue ancillary orders in aid of a charging order to enforce
Cite as 362 Or 302 (2018) 331
a judgment against a general partner in a limited partnership
or a member of a limited liability company entirely in
the abstract. With respect to limited partnerships, we have
concluded that the authority to issue “other orders” set out in
ORS 67.205 is incorporated into ORS 70.295. With respect
to limited liability companies, we have concluded that the
authority to issue ancillary orders derives from ORS 1.160.
For both types of entities, the court’s authority to issue other
orders in aid of a charging order are subject to the same
standard—whether the order is necessary to effectuate the
court’s obligation to allow the judgment creditor access the
debtor’s distributional interest to satisfy his or her judgment,
without unduly interfering with the entity’s management.
Our conclusions about the scope of a court’s authority
to make other orders in aid of a charging order issued under
ORS 70.295 and ORS 63.259 have obvious implications for
orders like those that are at issue, which preclude a limited
partnership or limited liability company from engaging in
certain kinds of transactions22 or require a limited partnership
or a limited liability company to provide details about
their business and finances to the judgment creditor. But
they do not provide a direct and immediate answer about
the particular orders that are before us. On the one hand,
we can imagine circumstances in which a carefully cabined
order requiring a partnership or limited liability company
to provide financial information or refrain from particular
transactions would be truly necessary to make the charge
against the debtor-partner’s or debtor-member’s distributional
interest in the entity effective—so much so that any
effect on the entity’s management would be seen as incidental.
On the other hand, in less compelling circumstances, an
order of that sort—particularly if it is more broadly worded
and appears to make the partnership accountable to the
22 The provisions in the charging order that precluded the LPs and LLC from
engaging in certain transactions are particularly significant because they purport
to control all transactions of a certain type by the entire LP or LLC. While
plaintiff correctly observes that charging orders often include ancillary orders
that “command that the debtor-member not take any loans, salary, fees, etc., or
any other actions that would get money out of the LLC through the backdoor,”
Adkisson, 61 S Dak L Rev at 452, those typical orders are different in that they
are directed solely at the debtor-member or debtor-partner and transactions that
might amount to distributions to the debtor-member or debtor-partner.
332 Law v. Zemp
creditor, rather than the court—might be viewed as primarily
working to transfer fundamental management rights of a
debtor partner to the creditor, and properly disapproved on
that ground. In the end, the trial court will have to carefully
consider the judgment creditor’s particular request and all
of the surrounding circumstances to determine which side
of the line the contemplated order falls on—and, thus,
whether it is authorized either under the standard that we
have announced.
With those conclusions in mind, we turn to the
charging order in this case, which included ancillary provisions
requiring both the LPs and the LLC to refrain from
making any sort of loan to anyone, to refrain from selling,
encumbering or otherwise modifying any partnership interest
without permission from plaintiff or the court, to provide
plaintiff with extensive information about the companies’
structure and past finances, and to provide periodic updates
regarding their internal finances until plaintiff’s judgment
should be satisfied in full. All of those provisions would seem
to touch on matters of company management and therefore
could only be properly included in the charging order if they
were found to be necessary to the charging order’s effectiveness
under the standard that we have discussed. Although
we cannot say with certainty that the trial court did not
consider the requested orders and the surrounding circumstances
in the light of that standard, we can say that there
was no evidence before the court that would have supported
a determination that the orders were authorized under the
standard. A broad range of evidence might have been relevant
to that determination, including information about the
structure of the companies and the interests of and relationships
between Zemp partners and members, information
about any past efforts to collect the judgment from Zemp,
evidence supporting plaintiff’s assertion that Zemp was
using the companies as a device for protecting his assets
from creditors and not for any recognizable business or commercial
purpose, and information showing that Zemp had
failed to respond fully and truthfully to a debtor’s examination
under ORS 18.265. The only actual evidence before the
court when it made its decision was evidence that Zemp was
a general partner of the four limited partnerships and the
Cite as 362 Or 302 (2018) 333
manager of the limited liability company. The court could
not determine, on the basis of that evidence alone, that the
ancillary orders were so crucial to the effectiveness of the
remedy that the court sought to provide (i.e., access to the
debtor-partner’s or debtor-member’s distributional interest
in the partnership or limited liability company) and their
effect on the companies’ management was so that incidental
that, on balance, the orders were justified. It follows that
none of the challenged ancillary orders were authorized.
The trial court erred in refusing to strike them from the
charging order, as the companies had requested. The Court
of Appeals erred to the extent that it held that two of the
four challenged provisions in fact were authorized.23
D. Other Issues
Plaintiff raises an additional objection to the Court
of Appeals’ decision that we think merits discussion only to
confront a potential argument that the present opinion is
susceptible to the same objection. As recounted above, the
Court of Appeals initially held that, while trial courts have
general authority under the limited partnership statute to
impose orders like those that were (and are) at issue, the
trial court here “had acted outside its discretion in imposing
the restriction on loans, and the restriction on partners’
ability to encumber or transfer their partnership interests.”
Zemp, 276 Or App at 666. The court added that its conclusion
that those restrictions were outside the scope of the court’s
discretion “does not preclude the trial court from reimposing
those restrictions against the limited partnerships on
remand if [plaintiff] demonstrates that such restrictions
‘may be required’ to ensure that the limited partnerships
comply with the charging order.” Id. at 666 n 5. In its opinion
on reconsideration, the court clarified that, although
it had used the word “discretion” in its holding, its actual
23 Given that we have concluded that none of the challenged ancillary provisions
were authorized, at least on this record, there is no need to consider
the companies’ alternative argument that the challenged orders violated the
Oregon Rules of Civil Procedure and the Due Process Clause of the Fourteenth
Amendment to the United States Constitution (the Court of Appeals declined to
consider that argument, concluding that it was unpreserved, but the companies
take issue with that conclusion). If plaintiff should seek inclusion of the same or
similar ancillary provisions on remand or in a new charging order, the companies
may raise the issue at that time.
334 Law v. Zemp
conclusion was that the trial court had “legally erred by
imposing the provision in a manner that did not comport
with the statute,” because the record did not demonstrate
that the trial court had made a predicate determination
that the provisions were required under the circumstances
of the case. Zemp, 279 Or App at 809.
Plaintiff argues that the Court of Appeals’ “abuse of
discretion” holding and its subsequent “legal error” explanation
did not correspond to any claim of error that the companies
had raised in their appeal—and that, consequently,
the Court of Appeals should not have granted the requested
relief. Plaintiff asserts that the companies’ only argument
on appeal was that a charging order, as provided in either
ORS 70.295 or ORS 63.259, is the judgment creditor’s
exclusive remedy against the member/partner’s interest in
the partnership or LLC, and that ancillary orders are not
allowed under either of those statutes. Plaintiff adds that,
because the companies never assigned error to the trial
court’s exercise of discretion to issue orders of this sort, or to
its failure to make a predicate determination on the record
that the provisions were required under the circumstances,
the Court of Appeals should not have used those errors as a
basis for granting relief.
Plaintiff’s ultimate point—that appellate courts are
limited to considering the errors that are assigned by the
appellant—is a valid one. ORAP 5.45(1). However, in our
view, the issue whether the trial court correctly refused
to strike the challenged ancillary provisions is sufficiently
preserved. As noted, the companies assigned error to the
trial court’s refusal to strike paragraphs 3, 5, 6, and 7 from
the charging order. They argued that the relevant charging
order statutes, ORS 70.295 and ORS 63.259, do not provide
for ancillary orders to aid in the charging order’s enforcement,
and that, insofar as the statutes set out the judgment
creditor’s exclusive remedy against the judgment debtor’s
interest in a partnership or limited liability company, no
ancillary orders are allowed. In response to that argument,
plaintiff contended that other sources of law permit the
ancillary orders. It therefore was incumbent on this court
to determine the extent of the authority granted by those
specific statutes that the companies cited or other sources of
Cite as 362 Or 302 (2018) 335
law. Although the companies did not raise any issue in this
court or in the Court of Appeals about the propriety of the
orders under the standard that we set out in this opinion,
our rejection of the orders for failure to meet the standard
relates back in a clear line to the statutory analysis that the
companies offered as a basis for their assignments of error.
Our decision that the orders should have been stricken is
responsive to the companies’ broad assignments of error,
and the analysis that led to that decision involved consideration
of matters that were inherent in the companies’
original analysis and argument. Moreover, regardless of
the proceedings in the Court of Appeals, plaintiff had a fair
opportunity in this court to marshal its arguments as to the
meaning and effect of the statutes.
Our decision that the trial court should have
stricken the ancillary orders at issue does not necessarily
mark the end of the road for plaintiff. On remand, plaintiff
should be given the opportunity to offer evidence that meets
the standard that we have announced for including such
ancillary orders in a charging order. Alternatively, plaintiff
may propose a new charging order with different ancillary
requirements, and supporting evidence, that may more easily
meet our standard.

Outcome: The decision of the Court of Appeals is reversed.
The order of the circuit court is reversed, and the case is
remanded to the circuit court for further proceedings.

Plaintiff's Experts:

Defendant's Experts:

Comments:



 
 
Home | Add Attorney | Add Expert | Add Court Reporter | Sign In
Find-A-Lawyer By City | Find-A-Lawyer By State and City | Articles | Recent Lawyer Listings
Verdict Corrections | Link Errors | Advertising | Editor | Privacy Statement
© 1996-2018 MoreLaw, Inc. - All rights reserved.