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 partnership customer list and agency contracts to Messersmith Ventures for $250; Messersmith then renewed agency contracts in its name.
- JMH sued under the Nebraska Uniform Fraudulent Transfer Act (UFTA), alleging the transfer was fraudulent and sought avoidance and authority to levy execution on the transferred assets or proceeds to satisfy its judgment against RAM.
- The district court implicitly found a fraudulent transfer but awarded JMH a monetary judgment of $250 (the purchase price) and allowed execution only up to that amount; JMH moved for new trial and was denied.
- On appeal the Nebraska Supreme Court reviewed the equity action de novo, concluded the record supports a finding of fraudulent transfer, but reversed the $250 money judgment as inappropriate relief and remanded for an order under § 36-708(b) permitting JMH to levy execution on the transferred assets or their proceeds to satisfy its judgment against RAM.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1) Whether RAM's transfer to Messersmith was a fraudulent transfer under the UFTA | JMH: Transfer occurred after creditor claim arose, received no reasonably equivalent value, and RAM was insolvent — so transfer is fraudulent. | Messersmith: No fraudulent transfer; alternatively assets transferred were worth only $250 so value was reasonably equivalent. | Court: Implicit finding of fraudulent transfer upheld; record supports that $250 was not reasonably equivalent to the assets transferred. |
| 2) Whether transferred items (customer lists/agency contracts) were "assets" not excluded by a bank lien | JMH: These were debtor assets (book of business, contracts) and not fully encumbered by the bank's lien. | Messersmith: Assets were encumbered by bank security interest (at least $22,750), so not "assets" under UFTA. | Court: Evidence supports that transferred assets were not fully encumbered and thus qualify as assets for UFTA purposes. |
| 3) Whether JMH proved the value of transferred assets | JMH: Need not prove specific dollar value; circumstantial evidence (prior sale price, commissions) shows value far exceeds $250. | Messersmith: District court correctly found value was $250, the amount paid. | Court: JMH was not required to prove exact value; inferences from prior sale and commissions show $250 was not reasonably equivalent. |
| 4) Proper remedy under the UFTA: money judgment vs. execution/avoidance | JMH: Seeks avoidance and authority to levy execution on Messersmith's assets/proceeds (or charging order). | Messersmith: If any relief, $250 monetary judgment was proper given trial court’s valuation. | Court: Monetary judgment of $250 was inappropriate; proper relief is under § 36-708(b): permit JMH to levy execution on the transferred assets or their proceeds to satisfy its judgment against RAM. |
Key Cases Cited
- Reed v. Reed, 277 Neb. 391 (discusses UFTA actions as equitable)
- Eli’s, Inc. v. Lemen, 256 Neb. 515 (equitable-review standard on UFTA appeals)
- Bowers v. Dougherty, 260 Neb. 74 (fraudulent conveyance is an action in equity)
- Trieweiler v. Sears, 268 Neb. 952 (equitable remedies may be fashioned where appropriate)
- Wells Fargo Bank, N.A. v. Barber, 85 F. Supp. 3d 1308 (charging order explained as lien on LLC member distributions)