Janice M. Hinrichsen, Inc. v. Messersmith Ventures
296 Neb. 712
| Neb. | 2017Background
- JMH sold 90% of its insurance agency assets to RAM in Jan 2011 for $108,870; RAM later defaulted and JMH obtained a $98,606.94 judgment against RAM in July 2012.
- In Oct 2013, RAM (as managing partner of PVIA Partnership) transferred customer lists and agency contracts to Messersmith Ventures for $250; Messersmith later operated the agency and collected commissions.
- JMH sued under the Nebraska Uniform Fraudulent Transfer Act (UFTA), alleging the transfer was fraudulent and asking the court to avoid the transfer and permit levy/execution or a charging order to satisfy JMH’s existing judgment against RAM.
- The district court implicitly found a fraudulent transfer but awarded JMH a monetary judgment of $250 (reflecting the purchase price) and permitted execution only to that amount, finding JMH had not proved a higher value.
- JMH appealed the form of relief; Messersmith cross-appealed arguing no fraudulent transfer occurred and that, if any relief were proper, $250 was correct.
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 is fraudulent under §36‑706(a) | Denied a fraudulent transfer: assets were either not “assets” (encumbered by bank lien) or, if transferred, Messersmith paid reasonably equivalent value ($250) | Court (de novo) affirmed implicit finding of fraudulent transfer — record supports that $250 was not reasonably equivalent and assets were not fully encumbered |
| Whether customer lists and agency contracts counted as "assets" under the UFTA given bank security interest | These intangibles were part of the business RAM bought and had substantial value; not fully encumbered by bank lien | Argued assets were encumbered by bank lien and thus excluded from “asset” definition | Court found evidence showed assets retained value and were not entirely encumbered; they qualify as assets for UFTA relief |
| Proper form of relief under the UFTA: monetary judgment for value of asset vs. execution on asset/proceeds | JMH sought authority to levy execution on transferred assets or proceeds (to satisfy its existing $98,606.94 judgment) rather than a fixed $250 judgment | Supported district court’s $250 award (reflecting the price paid) if any monetary relief were given | Court reversed $250 money judgment as inappropriate; remanded to order relief under §36‑708(b): allow JMH to levy execution on the transferred assets or their proceeds to satisfy JMH’s judgment against RAM |
| Applicability of charging order remedies (LLC charging order) | JMH requested a charging order but principally sought UFTA remedies targeting the transferred assets/proceeds | Messersmith implicitly relied on LLC protections; argued that distributions/interest valuation showed only $250 value | Charging order statute for LLC membership interests not applicable because UFTA relief targets transferred assets (no membership interest transfer here); court limited remedy to UFTA §36‑708(b) execution on assets/proceeds |
Key Cases Cited
- Reed v. Reed, 277 Neb. 391 (Neb. 2009) (UFTA actions are equitable; appellate de novo review in equity cases)
- Eli’s, Inc. v. Lemen, 256 Neb. 515 (Neb. 1999) (appeal of UFTA determinations is equitable in nature)
- Bowers v. Dougherty, 260 Neb. 74 (Neb. 2000) (fraudulent conveyance claims are equitable)
- Trieweiler v. Sears, 268 Neb. 952 (Neb. 2004) (equity courts may fashion remedies to redress fraudulent transfers)