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 failed to pay and JMH obtained a $98,606.94 judgment against RAM (July 2012).
- In Oct 2013 RAM (as managing partner of PVIA Partnership) transferred the customer list and primary agency contracts to Messersmith Ventures for $250; those contracts were thereafter renewed in Messersmith’s name.
- JMH sued under the Nebraska Uniform Fraudulent Transfer Act (UFTA), alleging the transfer was fraudulent (actual intent and/or constructively fraudulent under §36-706), and sought avoidance and authority to levy execution on the transferred assets/proceeds to satisfy its judgment against RAM.
- District court found JMH failed to prove asset value and entered judgment for JMH of $250 (relying on transferee’s evidence) and permitted execution limited to $250; JMH’s motion for new trial was denied.
- On appeal the Nebraska Supreme Court reviewed de novo, concluded the record supported an implicit finding of a fraudulent transfer (assets had substantial value tied to the 2011 sale and subsequent commissions), and held the $250 monetary judgment was not appropriate relief under the UFTA.
- The Supreme Court affirmed the finding of a fraudulent transfer, reversed the $250 money judgment, and remanded with directions that the trial court should, pursuant to §36-708(b), allow JMH to levy execution on the assets transferred or their proceeds to satisfy JMH’s judgment against RAM.
Issues
| Issue | JMH’s Argument | Messersmith Ventures’ Argument | Held |
|---|---|---|---|
| Whether RAM’s transfer to Messersmith was a fraudulent transfer under UFTA §36-706(a) | Transfer was after JMH’s creditor claim; RAM received no reasonably equivalent value and was insolvent, so transfer was constructively fraudulent | No fraudulent transfer: either the transferred items were not “assets” (encumbered by bank lien) or the $250 was reasonably equivalent value | Court: implicit finding of fraudulent transfer upheld (de novo review supports finding transferee received inadequate consideration and assets were not fully encumbered) |
| Whether customer lists and agency contracts were “assets” under UFTA §36-702(2) when subject to bank security interest | JMH: assets retained substantial value despite bank lien; evidence supports they were worth far more than $250 | Messersmith: bank lien encumbered assets at least to their full value, so not ‘‘assets’’ for UFTA or were worth only $250 | Court: assets were not entirely encumbered and were assets for UFTA purposes; lien did not negate fraudulent-transfer finding |
| Whether $250 judgment was proper relief under UFTA §36-708/§36-709 | JMH: monetary judgment for $250 is insufficient; seeks order authorizing levy/execution on transferred assets/proceeds (or charging order) | Messersmith: if any relief, $250 reflects actual value paid and is correct | Court: $250 money judgment inappropriate; UFTA relief should permit creditor to levy execution on transferred assets/proceeds under §36-708(b) to satisfy original judgment |
| Whether charging order under LLC law was available remedy | JMH: requested charging order as alternative remedy | Messersmith: (implicit) charging order not raised as primary remedy here; transferee argues remedies limited | Court: charging order statute for LLC interests not applicable because transfer involved specific assets (not membership interests); UFTA remedies govern |
Key Cases Cited
- Reed v. Reed, 277 Neb. 391 (equitable nature of UFTA actions)
- Eli’s, Inc. v. Lemen, 256 Neb. 515 (appellate standards in equity appeals)
- Bowers v. Dougherty, 260 Neb. 74 (fraudulent conveyance as action in equity)
- Trieweiler v. Sears, 268 Neb. 952 (equitable remedies and ability of courts to fashion relief)
- Wells Fargo Bank, N.A. v. Barber, 85 F. Supp. 3d 1308 (charging-order discussion under LLC statute)
- O’Connor v. Kearny Junction, 295 Neb. 981 (equitable principles and remedies)