Janice M. Hinrichsen, Inc. v. Messersmith Ventures
296 Neb. 712
Neb.2017Background
- JMH sold 90% of an insurance agency business to RAM in 2011 for ~$108,870; RAM later failed to complete payments and JMH obtained a $98,606.94 judgment against RAM in 2012.
- In October 2013, RAM (as managing partner of PVIA Partnership) transferred customer lists and agency contracts to Messersmith Ventures for $250; Messersmith then renewed primary agency contracts in its name.
- JMH sued under the Nebraska Uniform Fraudulent Transfer Act (UFTA), alleging RAM’s transfer to Messersmith was fraudulent and seeking relief to satisfy JMH’s preexisting judgment against RAM (including levy/execution on transferred assets or proceeds).
- The district court implicitly found a fraudulent transfer but awarded JMH a monetary judgment of $250 (the price paid), and permitted execution only to that extent; JMH appealed and Messersmith cross-appealed.
- On de novo review the Nebraska Supreme Court affirmed that a fraudulent transfer occurred (assets likely far exceeded $250 and were not fully encumbered by bank lien) but held the $250 money judgment was not appropriate relief under the UFTA.
- The Court reversed the $250 judgment and remanded with directions that, pursuant to § 36-708(b) of the UFTA, the trial court should permit JMH to levy execution on the assets transferred or their proceeds to satisfy JMH’s judgment against RAM.
Issues
| Issue | Plaintiff's Argument (JMH) | Defendant's Argument (Messersmith) | Held |
|---|---|---|---|
| Was there a fraudulent transfer under the UFTA? | Transfer was after creditor’s claim arose, for no reasonably equivalent value, and RAM was insolvent — § 36-706(a). | Denies fraudulent transfer: contends transferred items were not "assets" (encumbered by bank lien) or, if assets, were worth only $250 so value was reasonably equivalent. | Court: Implicit finding of fraudulent transfer affirmed. Record supports that transferred customer lists/contracts were not fully encumbered and $250 was not reasonably equivalent. |
| Were the transferred items "assets" under the UFTA (not excluded by lien)? | N/A (asserts they were assets). | Bank security interest encumbered assets sufficiently to remove them from UFTA "asset" definition. | Court: Evidence showed assets were not fully encumbered; they remained assets for UFTA purposes. |
| Was $250 a reasonably equivalent value, barring avoidance under § 36-706(a)? | N/A (argues transfer was fraudulent). | $250 reflected fair value paid; JMH failed to prove higher value. | Court: $250 was not reasonably equivalent given prior sale price and commissions; JMH need not prove exact valuation to show inadequacy of consideration. |
| What relief is appropriate under the UFTA? | Seek avoidance and authorization to levy execution on transferred assets/proceeds or a charging order. | If any relief, payor argues monetary judgment of $250 was correct per trial court. | Court: Monetary judgment of $250 was inappropriate. Remedy under § 36-708(b) is proper — permit JMH to levy execution on transferred assets or their proceeds to satisfy its judgment against RAM. Charging order inapplicable to these transferred assets. |
Key Cases Cited
- Reed v. Reed, 277 Neb. 391 (equitable nature of UFTA actions)
- Eli’s, Inc. v. Lemen, 256 Neb. 515 (appeal of UFTA determinations is equitable)
- Bowers v. Dougherty, 260 Neb. 74 (fraudulent conveyance is an action in equity)
- Trieweiler v. Sears, 268 Neb. 952 (equitable remedies when no direct precedent exists)
- O’Connor v. Kearny Junction, 295 Neb. 981 (equitable relief principles)
- Wells Fargo Bank, N.A. v. Barber, 85 F. Supp. 3d 1308 (charging-order remedies explained)