La Bella Dona Skin Care, Inc. v. Belle Femme Enters., LLC
805 S.E.2d 399
| Va. | 2017Background
- LBD obtained a judgment (over $370,000) against former employees and their business Bon Air Med Spa, LLC (BAM) for trade-secret misappropriation. BAM previously executed an $85,000 promissory note to its counsel Ayers & Stolte secured by BAM’s assets.
- After judgment, Ayers & Stolte declared the note in default, foreclosed, credit‑bid at a public auction (where the firm purchased the assets), and later transferred/sold BAM’s assets to Belle Femme Enterprises, LLC (a new company formed by family/insiders of the judgment debtors).
- LBD alleged the transfers were fraudulent conveyances designed to place BAM’s assets beyond LBD’s reach, and that Belle Femme was a mere continuation of BAM (successor liability). LBD also pleaded civil conspiracy (common law and statutory) based on the fraudulent conveyances.
- The trial court sustained demurrers to the conspiracy counts and granted summary judgment dismissing the fraudulent conveyance claim because LBD had admitted Ayers & Stolte held a senior lien. A bench trial on successor liability found LBD failed to prove successor liability by clear and convincing evidence.
- LBD appealed, arguing (1) summary judgment on the fraudulent conveyance claim was erroneous, (2) the demurrers to conspiracy counts were improper, (3) the trial court applied an incorrect clear and convincing standard to the mere‑continuation successor theory, and (4) the court wrongly rejected successor liability on the merits.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether summary judgment dismissing the Code § 55‑80 fraudulent conveyance claim was proper | LBD: facts and badges of fraud created a prima facie case; triable issues exist about intent and notice | Defs: LBD conceded Ayers & Stolte had a senior lien, so foreclosure/credit bid was lawful, not fraudulent | Reversed: summary judgment was erroneous — reasonable minds could differ; badges of fraud supported a prima facie case requiring trial |
| Whether civil conspiracy (common law and statutory) predicated on a § 55‑80 fraudulent conveyance is a viable predicate tort for damages | LBD: conspiracies caused financial/tort damages; conspiracy should be actionable based on fraudulent conveyance | Defs: § 55‑80 only voids transfers and does not by itself create in personam tort liability against co‑conspirators | Affirmed: conspiracy claims fail because § 55‑80 does not independently impose tort liability (no predicate tort to spread) |
| Proper standard of proof for successor liability under the mere‑continuation doctrine | LBD: mere‑continuation need only be proven by preponderance | Defs: trial court applied clear and convincing standard (argued appropriate given fraud allegations) | Reversed: mere‑continuation claims are proven by preponderance; clear and convincing applies only to fraud‑based successor theories |
| Whether evidence proved Belle Femme was BAM’s mere continuation (successor liability) | LBD: transfer of BAM’s valuable assets to Belle Femme for little/no consideration and common management/identity support successor liability | Defs: transaction was arm’s‑length; Ayers & Stolte’s foreclosure and sale were legitimate; insufficient proof of continuation | Remanded: court erred by applying wrong standard; sufficiency not decided — must be reevaluated under preponderance standard on remand |
Key Cases Cited
- Mount Aldie, LLC v. Land Trust of Va., 293 Va. 190 (de novo review of summary judgment)
- Fultz v. Delhaize Am., Inc., 278 Va. 84 (summary judgment and genuine dispute standard)
- Hutcheson v. Savings Bank of Richmond, 129 Va. 281 (fraudulent conveyance elements; grantee notice requirement)
- Price v. Hawkins, 247 Va. 32 (limited in personam remedy for fraudulent cash transfers under § 55‑80)
- Gelber v. Glock, 293 Va. 497 (civil conspiracy spreads liability only when underlying act imposes liability)
- Harris v. T.I., Inc., 243 Va. 63 (successor liability exceptions, including mere continuation)
- Mills v. Miller Harness Co., 229 Va. 155 (general rule against in personam judgments when voiding conveyances)