UBS FINANCIAL SERVICES, INC. v. ALBERT V. LACAVA, JR., ET AL.
No. 106461
Court of Appeals of Ohio, EIGHTH APPELLATE DISTRICT, COUNTY OF CUYAHOGA
August 2, 2018
2018-Ohio-3055
BEFORE: Boyle, P.J., Celebrezze, J., and Jones, J.
JUDGMENT: AFFIRMED
Civil Appeal from the Cuyahoga County Court of Common Pleas Case No. CV-16-868794
RELEASED AND JOURNALIZED: August 2, 2018
Carol Dillon Horvath
P.O. Box 42044
Brookpark, Ohio 44142
ATTORNEYS FOR APPELLEE
For UBS Financial Services, Inc.
Joseph S. Simms
Koehler Fitzgerald, L.L.C.
1301 East Ninth Street
3330 Erieview Tower
Cleveland, Ohio 44114
Robert D. Barr
Christine M. Cooper
Koehler Fitzgerald, L.L.C.
1111 Superior Avenue, East, Suite 2500
Cleveland, Ohio 44114
For Assurance Investment Management, L.L.C.
Joseph J. Triscaro
Triscaro & Associates, Ltd.
6325 Cochran Road, Suite 8
Solon, Ohio 44139
For Huntington National Bank
Huntington National Bank, pro se
Attn: Legal Department EA2W34
7 Easton Oval
Columbus, Ohio 43219
For JP Morgan Chase Bank, N.A.
JP Morgan Chase Bank, N.A., pro se
Court Orders & Levies Department
P.O. Box 183164
Columbus, Ohio 43218
Northwest Bank, pro se
Attn: Product Support Services
100 Liberty Street
Warren, Pennsylvania 16365
MARY J. BOYLE, P.J.:
{¶1} Defendant-appellant, Mary Ellen Lacava, appeals the trial court‘s order granting summary judgment to the plaintiff-appellee, UBS Financial Services, Inc. She raises nine assignments of error for our review:
- Trial court erred by ignoring Appellant_Transferee‘s and Appellant_Debtor Mr. Lacava submitted evidence satisfying the necessary two elements listed in
R.C. 1336.08(A) for a transfer to not be fraudulent underR.C. 1336.04 by a Transferee, irrespective of the outcome to the claims against the debtor. - Trial court erred by ignoring Appellant_Transferee‘s and Appellant_Debtor Mr. Lacava submitted evidence satisfying the necessary element listed in
R.C. 1336.08(E)(1) for a transfer to not be fraudulent under1336.05 by a Transferee, irrespective of the outcome to the claims against the debtor. - Trial court erred by ignoring Appellant_Transferee‘s and Appellant_Debtor Mr. Lacava submitted evidence satisfying the necessary element listed in
R.C. 1336.08(E)(2) for a transfer to not be fraudulent under sectionR.C. 1336.05 by a Transferee, irrespective of the outcome to the claims against the debtor. Trial court erred by ignoring Appellant_Transferee‘s submitted evidence satisfying the necessary element listed in R.C. 1336.08(C)(1) for her statutory law protected right to retain any interest in the asset transferred, irrespective of the outcome to the claims against the debtor.- Trial court erred by ignoring Appellant_Transferee‘s and Appellant_Debtor Mr. Lacava submitted evidence satisfying the necessary element listed in
R.C. 1336.08(C)(2) for her statutory law protected right to retain any interest in the asset transferred, irrespective of the outcome to the claims against the debtor. - Trial court erred in not following the statutory language of
R.C. 1336.01(A)(3) , (G), (K) in regards to Appellant_Transferee Mrs. Lacava, irrespective of the outcome to the claims against the debtor. - Trial court erred in not applying the sections in
R.C. 1336.08 detailed in Error #1, and either, #2 or #3, which nullifiesR.C. 1336.08(B)(1)(a) in respect to Appellant_Transferee Mrs. Lacava, irrespective of the outcome to the claims against the debtor. - The trial court erred in violating the law under the Consumer Credit Protection Act (CCPA) not allowing any income to the Transferee, Mrs. Lacava, and hence, the Lacava family.
- Trial court erred in not following the statutory exemptions of
R.C. 2329.66(A)(3) for Appellant_Transferee Mrs. Lacava and dependent 60 year old brother with mental health issues and unable to work.
{¶2} Finding no merit to her assignments of error, we affirm.
I. Procedural History and Factual Background
{¶3} Mrs. Lacava‘s husband, Albert Lacava, previously worked for UBS. During his employment, specifically on or around August 27, 2004, Mr. Lacava received two loans from UBS, secured through promissory notes. On July 17, 2008, UBS terminated Mr. Lacava‘s employment. As of his termination date, Mr. Lacava had not yet satisfied the full amount of the promissory notes.
{¶4} On December 26, 2009, Mr. Lacava filed a Statement of Claim with the Financial Industry Regulatory Authority (FINRA) against UBS and certain UBS employees, asserting claims for breach of contract, breach of covenant of good faith and fair dealing, failure
{¶5} Prior to the arbitration proceedings, on August 22, 2008, Mr. Lacava formed his own investment-management company, Assurance Investment Management, L.L.C. (AIM). According to the original operating agreement for AIM, AIM‘s principal place of business was his residential address.1 Mr. Lacava was the sole member of AIM, had full management rights, and was entitled to all of the company‘s profits.
{¶6} On January 21, 2010, however, before the FINRA panel announced its decision in favor of UBS, Mr. Lacava amended the operating agreement for AIM, changing it to a multimember limited liability company. Under the new operating agreement, Mr. Lacava‘s wife, Mary Ellen Lacava, not only became a member of AIM but also obtained 94.8 percent ownership interest. According to the amended operating agreement, Mrs. Lacava made a capital contribution of $140,000 to AIM. Further, the operating agreement established Mr. Lacava as the president and treasurer of AIM and Mrs. Lacava as the secretary.
{¶7} After the FINRA panel released its decision, UBS requested confirmation of the award from the Cuyahoga County Court of Common Pleas on April 1, 2010. On June 17, 2010, the common pleas court entered default judgment against Mr. Lacava, who failed to respond or contest UBS‘s request.
{¶9} As a result, UBS filed a complaint in January 2012 against Mr. and Mrs. Lacava alleging that Mr. Lacava fraudulently transferred his ownership interest to his wife in an effort to defraud UBS. In June 2015, however, UBS voluntarily dismissed its complaint without prejudice.
{¶10} On September 9, 2016, UBS filed a second complaint against Mr. Lacava, Mrs. Lacava, and AIM. In its complaint, UBS set forth one count for a request for charging order under
{¶11} All of the parties filed motions for summary judgment. The trial court granted UBS‘s motion for summary judgment, denied Mr. and Mrs. Lacava‘s motions for summary judgment, and granted AIM‘s motion for summary judgment on the issue of statute of limitations, but ordered AIM to freeze any assets and accounts immediately[, which would] only be released to satisfy th[e] judgment. Additionally, in its order, the trial court stated:
The court grants the following relief in favor of UBS and against Mr. Lacava and Mrs. Lacava, and against AIM so far as it holds assets which are recoverable to satisfy this judgment and the prior judgment obtained by UBS:
1. The charging order against the member interests of Mr. Lacava and Mrs. Lacava in AIM is granted;
2. The transfer of money to AIM in the amount of $140,000.00 is voided and the money is to be held for purposes of satisfying this judgment;
3. UBS is awarded attachment of all transferred assets in AIM, pursuant to
R.C. 1336.07(A)(2) ;4. AIM, Mr. Lacava, Mrs. Lacava, and any and all parties acting in concert with any of these parties are enjoined from any disposition of any assets of AIM, Mr. Lacava, or Mrs. Lacava;
5. Compensatory damages are granted in the amount of $196,963.89;
6. Interest at the legal rate is applied to the compensatory damages from January 21, 2010, the date of the fraudulent transfer[.]
The court also awarded $98,481.95 for punitive damages against Mr. Lacava and $50,155 and $480.33 for attorney fees and expenses against all of the defendants. The trial court assessed court costs to the Lacavas and AIM as well.
{¶12} It is from this judgment that Mrs. Lacava now appeals.2
II. Law and Analysis
{¶13} In her assignments of error, Mrs. Lacava contests the trial court‘s order granting summary judgment to UBS as well as the remedies the trial court awarded to UBS. Specifically, her first seven assignments of error argue that the trial court erred when it failed to apply
{¶14} An appellate court reviews a trial court‘s decision to grant summary judgment de novo. Grafton v. Ohio Edison Co., 77 Ohio St.3d 102, 105, 671 N.E.2d 241 (1996). De novo review means that this court independently examine[s] the evidence to determine if as a matter
{¶15} Under
{¶16} The burden of showing that no genuine issue exists as to any material fact falls upon the moving party. Once the moving party has met his burden, it is the non-moving party‘s obligation to present evidence on any issue for which that party bears the burden of production at trial. Robinson v. J.C. Penney Co., 8th Dist. Cuyahoga Nos. 62389 and 63062, 1993 Ohio App. LEXIS 2633, 14 (May 20, 1993), citing Harless and Wing v. Anchor Media, Ltd. of Texas, 59 Ohio St.3d 108, 570 N.E.2d 1095 (1991). The moving party is entitled to summary judgment if the nonmoving party fails to establish the existence of an element essential to that party‘s case and on which that party will bear the burden of proof at trial. Brandon/Wiant Co. v. Teamor, 125 Ohio App.3d 442, 446, 708 N.E.2d 1024 (8th Dist.1998), citing Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).
{¶17} Ohio‘s Uniform Fraudulent Transfer Act (UFTA), set forth in
that measure or degree of proof which will produce in the mind of the trier of facts a firm belief or conviction as to the allegations sought to be established. It is intermediate, being more than a mere preponderance, but not to the extent of such certainty as is required beyond a reasonable doubt as in criminal cases. It does not mean clear and unequivocal.
Cross v. Ledford, 161 Ohio St. 469, 477, 120 N.E.2d 118 (1954).
{¶18} If a transfer is fraudulent, then a creditor has the right to sue the original transferee and any subsequent transferee for the value of the transferred property. Yoo at ¶ 12, citing
(A) A transfer made or an obligation incurred by a debtor is fraudulent as to a creditor, whether the claim of the creditor arose before, or within a reasonable time not to exceed four years after, the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation in either of the following ways:
(1) With actual intent to hinder, delay, or defraud any creditor of the debtor;
(2) Without receiving a reasonably equivalent value in exchange for the transfer or obligation, and if either of the following applies:
(a) The debtor was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction;
(b) The debtor intended to incur, or believed or reasonably should have believed that the debtor would incur, debts beyond the debtor‘s ability to pay as they became due.
{¶19} Put simply, to set forth a claim under
{¶20} Because proof of actual intent is often impossible to acquire, creditors may establish a debtor‘s intent to defraud, hinder, or delay through badges of fraud, which are set forth in
(1) Whether the transfer or obligation was to an insider;
(2) Whether the debtor retained possession or control of the property transferred after the transfer;
(3) Whether the transfer or obligation was disclosed or concealed;
(4) Whether before the transfer was made or the obligation was incurred, the debtor had been sued or threatened with suit;
(5) Whether the transfer was of substantially all of the assets of the debtor;
(6) Whether the debtor absconded;
(7) Whether the debtor removed or concealed assets;
(8) Whether the value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred;
(9) Whether the debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred;
(10) Whether the transfer occurred shortly before or shortly after a substantial debt was incurred;
(11) Whether the debtor transferred the essential assets of the business to a lienholder who transferred the assets to an insider of the debtor.
{¶21} While the existence of one or more badges does not establish a per se fraudulent transfer, a creditor need not demonstrate the presence of all badges in order to carry its burden. Seed Consultants, Inc. v. Schlichter, 12th Dist. Fayette No. CA2011-02-002, 2012-Ohio-2256, ¶ 13, citing Baker & Sons Equip. Co. v. GSO Equip. Leasing, Inc., 87 Ohio App.3d 644, 622 N.E.2d 1113 (10th Dist.1993).
{¶22} Even if a creditor cannot set forth a viable fraudulent-transfer claim requiring a showing of actual intent, that creditor may still succeed on a claim for constructive fraud, which focuses on the effect of the transaction(s), and may exist even where the debtor has no actual intent to commit fraud. Blood v. Nofzinger, 162 Ohio App.3d 545, 2005-Ohio-3859, 834 N.E.2d 358, ¶ 52 (6th Dist.). In contrast to claims involving an actual intent to commit fraud in an asset transfer,
(a) The debtor was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction or (b) The debtor intended to incur, or believed or reasonably should have believed that the debtor would incur, debts beyond the debtor‘s ability to pay as they became due.
R.C. 1336.04(A)(2) .
{¶24} Mrs. Lacava‘s assignments of error do not contest the trial court‘s grant of summary judgment based on its findings as to the badges of fraud or its finding of constructive fraud. As a result, we will not review the record to determine whether a genuine issue of material fact exists concerning the existence of those badges or of constructive fraud. Instead, we will move on to analyze Mrs. Lacava‘s arguments concerning
{¶25} If the party alleging fraud is able to demonstrate a sufficient number of badges, an inference of actual fraud arises and the burden then shifts to the defendant to prove that the transfer was not fraudulent. Saez Assocs. at ¶ 13. Once the burden shifts, the debtor may rebut the presumption of fraud if, pursuant to
{¶26} In her first and seventh assignments of error, Mrs. Lacava argues that summary judgment was improper because there is a genuine issue of material fact as to whether the transfer was made in good faith and whether she paid reasonably equivalent value for the ownership interest in AIM under
{¶27} The determination of a lack of good faith does not rely solely on actual intent but can involve an inquiry into the party‘s motive and purpose. * * * [T]he court can consider evidence of what is reasonable [] and can evaluate any objective facts that contradict the suggestion of a subjectively honest purpose. E. Sav. Bank v. Bucci, 7th Dist. Mahoning No. 08 MA 28, 2008-Ohio-6363, ¶ 85, citing Castle Properties v. Lowe‘s Home Ctrs., Inc., 7th Dist. Mahoning No. 98CA185, 2000 Ohio App. LEXIS 1229 (Mar. 20, 2000).
{¶28} As the Ohio Supreme Court noted,
Good faith in law * * * is not to be measured always by a man‘s own standard of right, but by that which it has adopted and prescribed as a standard for the observance of all men in their dealings with each other. When one conveys all his property to another with the intention of hindering and delaying his creditors, or a part of them, in pursuing their legal remedies against him and his property, his conduct in law is deemed fraudulent however honestly he may have intended to deal with all his creditors, in the future. * * * The good faith of a party under such circumstances must be determined by the legal effect of what he deliberately does.
First Natl. Bank v. F.C. Trebein Co., 59 Ohio St. 316, 325, 52 N.E. 834 (1898).
{¶29} There is no genuine issue of material fact as to whether Mrs. Lacava accepted the transfer of ownership interest in AIM in good faith. Mrs. Lacava accepted 94.8 percent of the
{¶30} We also find that there is no genuine issue of material fact as to whether the parties exchanged reasonably equivalent value for the transfer of ownership interest in AIM. To satisfy
{¶31} Here, Mr. Lacava transferred 94.8 percent of his ownership interest in AIM to Mrs. Lacava for no consideration. While Mrs. Lacava argues that her capital contribution qualifies as reasonably equivalent value, that value went to AIM, not Mr. Lacava. Mrs. Lacava‘s argument that AIM allegedly benefitted from becoming a woman-owned company also does not prevent summary judgment on this issue because, once again, that benefit went to AIM, not Mr. Lacava, the debtor, and second, as UBS points out, Mrs. Lacava failed to offer any evidence that AIM actually benefitted from the change in ownership. As a result, we find that there is no genuine issue of material fact as to the applicability of
{¶32} In her second and third assignments of error, Mrs. Lacava argues that the trial court‘s grant of summary judgment was improper because it ignored her evidence showing that her transfer was not fraudulent under
{¶33} Mrs. Lacava did not raise this argument in the trial court below and she cannot do so for the first time on appeal. See State ex rel. Zollner v. Indus. Comm. of Ohio, 66 Ohio St.3d 276, 278, 611 N.E.2d 830 (1993) (A party who fails to raise an argument in the court below waives his or her right to raise it here.).
{¶34} Accordingly, we overrule Mrs. Lacava‘s second and third assignments of error. We also overrule Mrs. Lacava‘s seventh assignment of error, which depends on the viability of her first, second, and third assignments of error.
{¶35} In her fourth and fifth assignments of error, Mrs. Lacava argues that the trial court‘s order granting summary judgment was improper because it did not apply the elements
{¶36} Again, Mrs. Lacava did not raise this argument in the trial court below, and she cannot do so for the first time on appeal. See Zollner at 278 (A party who fails to raise an argument in the court below waives his or her right to raise it here.). Accordingly, we overrule Mrs. Lacava‘s fourth and fifth assignments of error.
{¶37} In her sixth assignment of error, Mrs. Lacava argues that the trial court failed to follow the statutory language of
{¶38} The pertinent subsections of
{¶39} There are no genuine issues of material fact as to whether Mrs. Lacava is an affiliate, an insider, and a relative of Mr. Lacava. In fact, she admits to being an insider and relative in her appellate brief.
{¶41} In her eighth and ninth assignments of error, Mrs. Lacava argues that the trial court violated the Consumer Credit Protection Act (CCPA) by not applying the statutory exemptions found in
{¶42} The CCPA, set forth in
{¶43} Here, the trial court‘s order granting relief to UBS stated:
The court grants the following relief in favor of UBS and against Mr. Lacava and Mrs. Lacava, and against AIM so far as it holds assets which are recoverable to satisfy this judgment and the prior judgment obtained by UBS:
1. The charging order against the member interests of Mr. Lacava and Mrs. Lacava in AIM is granted;
2. The transfer of money to AIM in the amount of $140,000.00 is voided and the money is to be held for purposes of satisfying this judgment;
3. UBS is awarded attachment of all transferred assets in AIM, pursuant to
R.C. 1336.07(A)(2) ;4. AIM, Mr. Lacava, Mrs. Lacava, and any and all parties acting in concert with any of these parties are enjoined from any disposition of any assets of AIM, Mr. Lacava, or Mrs. Lacava;
5. Compensatory damages are granted in the amount of $196,963.89;
6. Interest at the legal rate is applied to the compensatory damages from January 21, 2010, the date of the fraudulent transfer[.]
{¶44} After review, it is clear that the trial court did not violate the CCPA because it did not order a garnishment against Mrs. Lacava.
{¶45} Unlike the CCPA,
{¶46} Mrs. Lacava‘s argument regarding
{¶47} Judgment affirmed.
It is ordered that appellee recover from appellant the costs herein taxed.
The court finds there were reasonable grounds for this appeal.
A certified copy of this entry shall constitute the mandate pursuant to
MARY J. BOYLE, PRESIDING JUDGE
FRANK D. CELEBREZZE, JR., J., and LARRY A. JONES, SR., J., CONCUR