Judge Kevin Emas
Judge Kevin Emas (J. Albert Diaz)

A state appellate court on Wednesday ordered an evidentiary hearing on whether a $10.5 million judgment can be pursued against a third party accused of hiding assets for the losing defendant, which invested in mortgage pools before the housing crash.

The Third District Court of Appeal in Miami ruled there are too many material issues to be sorted out without more evidence and testimony in the trial court.

The defendant is Miami-based American Residential Equities LLC led by Jeffrey Kirsch, which borrowed money to buy more than $1 billion in troubled mortgages at deeply discounted prices.

Miami-based Redwood Recovery Services LLC sued ARE and others for breaching a promissory note held by Redwood. Following a bench trial, Miami-Dade Circuit Judge John W. Thornton found in favor of Redwood and entered the $10.5 million judgment.

Redwood then filed a motion to implead Addle Hill Inc., asserting ARE transferred all of its assets, employees and rights to the California-based company. Redwood argued the court has jurisdiction over Addle Hill because it maintained its records in Miami-Dade County.

Redwood maintained “Addle Hill was a mere instrumentality of ARE, improperly formed to conceal and shield ARE’s assets from creditors,” Judge Kevin Emas wrote for the unanimous panel. Judges Linda Ann Wells and Edwin Scales III concurred.

Addle Hill moved to dismiss the amended impleader complaint, saying it was “unrelated” to ARE, was insolvent and had no Florida offices.

Thornton granted Addle Hill’s motion to dismiss after a hearing last year.

The Third DCA panel said Thornton must hold an evidentiary hearing because the pleadings conflicted with one another.

“The record on appeal does not establish the basis for the trial court’s dismissal of Redwood’s impleader complaint or its basis for denying rehearing,” Emas wrote.

The appellate panel said the evidentiary hearing should be “limited” to reconciling disputed facts to decide the jurisdictional issue.