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 complete payments and JMH obtained a $98,606.94 judgment against RAM in July 2012.
- In Oct 2013 RAM (as managing partner of PVIA Partnership) transferred the partnership’s customer list and agency contracts to Messersmith Ventures for $250; those contracts were later renewed in Messersmith’s name.
- JMH sued under the Nebraska Uniform Fraudulent Transfer Act (UFTA), alleging the transfer was fraudulent and asking that the transfer be avoided and that it be allowed to levy execution on the transferred assets or proceeds to satisfy JMH’s prior judgment against RAM.
- After a bench trial, the district court entered judgment for JMH for $250 (relying on Messersmith’s testimony that the assets were worth $250) and permitted execution only to that limited amount, finding JMH had not proved higher value.
- JMH appealed (arguing the court failed to explicitly find a fraudulent transfer and that the remedy should permit execution on the assets/proceeds), and Messersmith cross-appealed (arguing there was no fraudulent transfer and the $250 award was correct).
Issues
| Issue | Plaintiff's Argument (JMH) | Defendant's Argument (Messersmith) | Held |
|---|---|---|---|
| Whether the transfer from RAM to Messersmith was a fraudulent transfer under the UFTA | Transfer was made after creditor’s claim arose, for no reasonably equivalent value, and RAM was insolvent — so transfer is fraudulent under §36-706(a) | Denies a fraudulent transfer: insists either assets weren’t "assets" (encumbered by bank lien) or transfer was for reasonably equivalent value ($250) | Court (de novo): implicit finding of fraudulent transfer upheld — record shows transfer of valuable customer/agency contracts for $250 and insolvency, so §36-706(a) satisfied |
| Whether the transferred items qualified as "assets" under the UFTA or were fully encumbered by a bank lien | Assets (customer lists and agency contracts) were part of the business sold in 2011 and not wholly encumbered; therefore they are assets available to creditors | Argues bank security interest encumbered assets to at least $22,750 so they were not “assets” for UFTA purposes | Court: transferors’ evidence and business history support that assets were not fully encumbered and thus were assets for UFTA analysis |
| Whether receipt of $250 constituted "reasonably equivalent value" for the transfer | $250 is not reasonably equivalent given the assets’ prior sale value and commission history; inference supports much greater value | $250 payment reflects the asset value; JMH failed to prove greater value | Court: $250 was not reasonably equivalent value given sales history and commissions — reasonable inference of substantially greater worth |
| Appropriate remedy under the UFTA | Requested relief: avoidance and an order permitting JMH to levy execution on the transferred assets or their proceeds (or other equitable relief) | Argues if any relief, $250 monetary judgment was correct based on asset value evidence | Court: affirmed finding of fraudulent transfer but reversed $250 monetary judgment; ordered remand to enter relief under §36-708(b) permitting JMH to levy execution on the transferred assets or their proceeds to satisfy JMH’s judgment against RAM |
Key Cases Cited
- Reed v. Reed, 277 Neb. 391 (equitable nature of UFTA actions)
- Eli’s, Inc. v. Lemen, 256 Neb. 515 (appellate de novo review in equity UFTA appeals)
- Bowers v. Dougherty, 260 Neb. 74 (fraudulent conveyance is equitable action)
- Trieweiler v. Sears, 268 Neb. 952 (equity courts may devise remedies when redressing unfair conveyances)