Janice M. Hinrichsen, Inc. v. Messersmith Ventures
296 Neb. 712
Neb.2017Background
- JMH sold 90% of its insurance-agency assets to RAM in 2011 for ~$108,870; RAM later defaulted 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 thereafter operated the agency.
- JMH sued under the Nebraska Uniform Fraudulent Transfer Act (UFTA), alleging the transfer was fraudulent and asking that the transferred assets be made available to satisfy JMH’s earlier judgment against RAM (including levy of execution or a charging order).
- 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 moved for a new trial and appealed; Messersmith cross-appealed.
- On de novo review, the Nebraska Supreme Court held the record supported a finding of fraudulent transfer (transfer for $250 was not reasonably equivalent to the assets given RAM’s prior purchase price and commissions received), but reversed the $250 money judgment as improper relief.
- The Supreme Court directed that, under UFTA §36-708(b), the appropriate remedy is to permit JMH to levy execution on the assets transferred or their proceeds to satisfy JMH’s existing judgment against RAM, rather than be limited to the $250 award.
Issues
| Issue | JMH’s Argument | Messersmith’s Argument | Held |
|---|---|---|---|
| Whether the transfer from RAM to Messersmith was a fraudulent transfer under the UFTA | Transfer was fraudulent under §36-706(a): judgment preexisted transfer, RAM received no reasonably equivalent value, and RAM was insolvent | Denied fraudulent transfer; alternatively, assets were encumbered by bank lien or worth only $250 so value was reasonably equivalent | Court (de novo) held record supports finding of fraudulent transfer — $250 was not reasonably equivalent and assets not fully encumbered |
| Whether the district court’s implicit finding sufficed where no explicit finding was entered | Implicit finding plus money judgment shows court found a fraudulent transfer; de novo review appropriate | Court’s narrative insufficient to establish value; contended JMH failed to prove more than $250 value | Court accepted implicit finding but reviewed de novo and affirmed fraudulent-transfer determination |
| Appropriate remedy under the UFTA | Requested avoidance and that JMH be allowed to levy execution on transferred assets or proceeds (or a charging order) to satisfy prior judgment | Argued no relief warranted if no fraudulent transfer; if relief due, $250 judgment was correct because that was the proved value | Court held monetary judgment for $250 was inappropriate; directed relief under §36-708(b): JMH may levy execution on the transferred assets or their proceeds to satisfy its judgment against RAM |
| Applicability of charging order as remedy | Sought charging order against transferee’s assets/interest to reach value | Transferee argued only $250 required; charging order not at issue for transferee assets | Court held charging order (LLC statute) inapplicable here because UFTA remedies target the transferred assets (not membership interests); charging order not the proper UFTA remedy |
Key Cases Cited
- Reed v. Reed, 277 Neb. 391 (discussing equitable nature of UFTA actions and appellate de novo review)
- Eli’s, Inc. v. Lemen, 256 Neb. 515 (equitable nature of UFTA appeals and de novo review rules)
- Bowers v. Dougherty, 260 Neb. 74 (fraudulent conveyance is an action in equity)
- Trieweiler v. Sears, 268 Neb. 952 (equitable remedies and courts may craft relief to fit the situation)
- Wells Fargo Bank, N.A. v. Barber, 85 F. Supp. 3d 1308 (explaining charging orders as remedy under LLC statutes)