Janice M. Hinrichsen, Inc. v. Messersmith Ventures
895 N.W.2d 683
| Neb. | 2017Background
- JMH sold 90% of an insurance agency’s assets to RAM in Jan 2011 for $108,870; RAM later owes JMH a money judgment of $98,606.94 (entered July 2012).
- In Oct 2013 RAM (as managing partner of PVIA Partnership) transferred customer lists and agency contracts to Messersmith Ventures for $250; Messersmith thereafter used those contracts.
- JMH sued under the Uniform Fraudulent Transfer Act (UFTA), seeking avoidance of the transfer and authority to levy execution on the transferred assets or their proceeds to satisfy JMH’s earlier judgment against RAM.
- The district court implicitly found the transfer voidable but awarded JMH only a $250 monetary judgment (the amount paid by Messersmith Ventures), and allowed execution limited to that amount.
- JMH appealed the insufficiency of relief; Messersmith cross-appealed arguing no fraudulent transfer occurred and that $250 was the correct valuation.
Issues
| Issue | Plaintiff's Argument (JMH) | Defendant's Argument (Messersmith) | Held |
|---|---|---|---|
| Whether RAM’s transfer to Messersmith was a fraudulent transfer under the UFTA | Transfer was after JMH’s claim arose, for no reasonably equivalent value, and RAM was insolvent — so transfer was fraudulent under §36‑706(a) | Denies fraudulent transfer: transferred items were either not "assets" (encumbered by bank lien) or were worth only $250, so transfer was for reasonably equivalent value | Court (de novo) upheld implicit finding of fraudulent transfer; evidence supported that transferred assets were not fully encumbered and $250 was not reasonably equivalent |
| Whether transferred items qualified as "assets" under the UFTA given bank security interest | Assets (customer list and agency contracts) were property of RAM and effectively part of the business sold earlier; not entirely encumbered by the bank lien | Argues bank lien consumed value so items were not "assets" under §36‑702(2) | Court found evidence supported that assets were not fully encumbered and thus could be reached under UFTA |
| Whether the district court’s remedy (monetary judgment of $250) was appropriate | JMH sought authority to levy execution on the transferred assets/proceeds to satisfy its prior judgment against RAM — monetary judgment for $250 is inadequate | $250 reflected the actual consideration; if any relief warranted, $250 was proper | Court reversed the $250 money judgment; held appropriate relief under UFTA is order under §36‑708(b) permitting JMH to levy execution on the transferred assets or their proceeds to satisfy its judgment against RAM |
| Whether a charging order under LLC law was an available remedy | JMH sought a charging order but focused remedy on reaching transferred assets/proceeds | Messersmith did not seek charging order relief; argued valuation and existence of fraudulent transfer defeat relief | Court held charging orders under LLC statute are inapplicable because the claim is under UFTA and the transfers were of assets (not membership interests); relief limited to UFTA remedies |
Key Cases Cited
- Reed v. Reed, 277 Neb. 391 (Neb. 2009) (UFTA actions are equitable)
- Eli’s, Inc. v. Lemen, 256 Neb. 515 (Neb. 1999) (appeal of equity action reviewed de novo with respect to factual issues)
- Bowers v. Dougherty, 260 Neb. 74 (Neb. 2000) (fraudulent conveyance claims are equitable)
- Trieweiler v. Sears, 268 Neb. 952 (Neb. 2004) (equitable courts may fashion novel remedies when equities require)
- Wells Fargo Bank, N.A. v. Barber, 85 F. Supp. 3d 1308 (M.D. Fla. 2015) (charging order under LLC statute is the usual remedy to reach a member’s distributive share)