Druyvestein v. Gean

Cite as 2014 Ark. App. 559

ARKANSAS COURT OF APPEALS
DIVISION II
No. CV-14-270

TERRY DRUYVESTEIN Opinion Delivered October 22, 2014
APPELLANT
APPEAL FROM THE SEBASTIAN
V. COUNTY CIRCUIT COURT, FORT
SMITH DISTRICT
[NO. CV-2012-34]
ROY GEAN, JR.
APPELLEE HONORABLE JAMES O. COX,
JUDGE

REVERSED AND REMANDED

RITA W. GRUBER, Judge

Appellant Terry Druyvestein appeals from an order of the Sebastian County Circuit

Court granting summary judgment to appellee Roy Gean, Jr. Appellant filed a complaint

against appellee alleging fraudulent transfer and also requesting the court to impose a

constructive trust on certain funds held by appellee that were acquired from Lois

Druyvestein. We hold that there were genuine issues of material fact to be decided on both

claims; accordingly, we reverse the circuit court’s order and remand for further proceedings.

This case arose out of a dispute over the ownership of a bond account after the death

of appellant’s uncle, H.J. “Humpy” Druyvestein. Humpy died on February 24, 2007,

survived by his wife Lois Druyvestein. It was unclear at Humpy’s death whether he intended

to leave the bond account at Summit Brokerage to either Lois or appellant. Appellant filed

a complaint against Lois in October 2007 seeking a constructive trust over the bond account,
 Cite as 2014 Ark. App. 559

which the circuit court dismissed. In an opinion dated June 16, 2010, this court reversed that

dismissal, and the circuit court subsequently entered judgment in favor of appellant for an

amount in excess of $200,000. Druyvestein v. Summit Brokerage Servs., Inc., 2010 Ark. App.

500, 375 S.W.3d 777. Lois’s daughter, Linda Van Divner, appeared in lieu of her mother in

that case and also answered postjudgment interrogatories, through which appellant learned

that the funds from the bond account in the amount of $208,830.72 had been liquidated.

According to a letter from Ms. Van Divner attached to appellant’s complaint in this case,

Lois’s lawyer in the previous case, appellee, received a check for the entire proceeds of the

account made out to Lois. He drove to Kansas to have Lois endorse the check; he placed the

proceeds in his own account; then he wrote a check to Ms. Van Divner for $105,625.72 and

kept the remaining $103,205, presumably for his fee. When Ms. Van Divner asked appellee

for a statement for services rendered to explain the amount, appellee never provided one.

On January 11, 2012, appellant filed a complaint against Ms. Van Divner and appellee

for the creation of a constructive trust and for relief pursuant to the Arkansas Fraudulent

Transfer Act, found in Ark. Code Ann. § 4-59-201 et seq. He filed an amended complaint

on February 9, 2012.1 Appellant alleged that Ms. Van Divner and appellee took control of

the entire funds to which he was entitled and requested the court to create a constructive

trust over the funds. He alleged that Ms. Van Divner concealed the location of the funds for

more than a year and defrauded the court by failing to reveal in requested interrogatories the

location of the funds. Appellant also alleged that Ms. Van Divner and appellee transferred the

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Lois passed away sometime before appellant filed his amended complaint.

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funds to themselves without the knowledge or consent of Lois, the court, or any guardian

acting on behalf of Lois.

In addition, appellant requested relief under the Arkansas Fraudulent Transfer Act,

claiming that Lois’s estate was insolvent, that this fact was known or should have been

known to Ms. Van Divner and appellee, that Ms. Van Divner and appellee were aware of

appellant’s claim to the funds at the time they transferred them to themselves, and that Lois

did not have sufficient funds to satisfy the judgment to appellant upon her death. He claimed

that the transfers to Ms. Van Divner and appellee left Lois’s estate unable to pay appellant,

her creditor. He alleged that, pursuant to Ark. Code Ann. § 4-59-207, the transfers to Ms.

Van Divner and appellee were not made for value received and thus were fraudulent under

the statute. Finally, he alleged that appellee’s fee was six times the fee that his counsel charged

for similar work on the same matter and was not based on value. He concluded by requesting

the court to void the transactions.

I. Summary Judgment

On July 20, 2012, appellee filed a motion for summary judgment, alleging that

appellant had no standing to question the payment of an attorney’s fee from Lois to him. He

asserted that he had no direct relationship to appellant and that they lacked privity of

contract. He alleged that it was undisputed that appellee “provided legal services for Lois

Druyvestein based upon a agreement between Ms. Druyvestein and Mr. Gean and the

attorney fee was voluntarily paid by Lois Druyvestein.” Although there were no attachments

to the motion, appellee did file a brief in support, which contained the following legal

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arguments: (1) appellant assumed the risk of Lois transferring the money by failing to file a

supersedeas bond in the earlier case; (2) appellant could not recover under a valid contractual

theory and was not a third-party beneficiary to appellee’s fee contract; (3) appellant could not

recover under a valid tort-based theory; (4) appellant had no standing under the Declaratory

Judgment Act to require appellee to pay his attorney’s fee collected from a non-party to the

case; (5) appellant could not collect under a fiduciary-duty theory because appellee owed

appellant no fiduciary duty; and (6) appellant could not establish a constructive trust because

there was no fraud or confidential relationship. Appellant filed no response to appellee’s

motion.

On May 29, 2013, the circuit court granted appellee’s motion for summary judgment,

stating that it had considered the motion, “attachments[,] and Brief.” The court found that

appellee “performed legal services for Lois Druyvestein and that Mr. Gean was paid for such

services based upon an agreement between him and Ms. Druyvestein. Said agreement

reflected the understanding of Ms. Druyvestein and Mr. Gean as to the value of the services

rendered.” The court then concluded that by failing to file a supersedeas bond in the earlier

case, appellant bore the risk that Lois would no longer have the money to pay him if he

obtained a favorable judgment on appeal. The court then found that appellant had no “direct

relationship” with appellee and thus no viable theory of law to recoup the money paid by

Lois to appellee. The court’s order then essentially parroted appellee’s brief, rejecting

recovery based on a contractual theory, a tort theory, and declaratory-judgment law. Finally,

the court found that there must be clear, cogent, and convincing evidence of fraud or a

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confidential relationship to establish a constructive trust and that there was no fraud or

confidential relationship between appellant and appellee in this case. The court’s order did

not mention the Arkansas Fraudulent Transfer Act.

Appellant filed a petition to set aside the order granting summary judgment, attaching

billing records provided by appellee to Ms. Van Divner for services he had rendered to Lois.

Ms. Van Divner provided this statement and testified regarding the statement in a deposition

that was also attached to appellant’s motion to set aside the order. Appellant’s petition

restated his fraudulent-transfer and constructive-trust allegations, specifically referring to

appellee’s billings. There were many days on which appellee billed over 24 hours; on one

day he billed over 60 hours. Sample entries included a five-hour call to a brokerage company

to review disbursement arrangements and one day that included 3 three-hour calls with Ms.

Van Divner (which she disputed in her deposition), eight hours to review the Reporter’s

Index pertaining to Depositions, eight hours to review a file, and eight hours to review

exhibits. Without further detailing the statement, we note that no entry, including entries

to review a letter or make a phone call, took less than two hours.

II. Final Order

On January 23, 2014, the court entered a final order, finding that appellant was a

creditor of Lois as a result of funds held by Summit Brokerage, which were “improperly paid

over to [Lois] when they should have been paid to [appellant]” and recognizing that the

court had entered a judgment in favor of appellant in the previous case. The court then

found that Lois had transferred the funds to Ms. Van Divner and appellee and noted that it

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had previously entered an order of summary judgment in favor of appellee. The court denied

appellant’s motion to reconsider. The court then found that Lois had made the transfer to

Ms. Van Divner “without receiving reasonably equivalent value in exchange for the transfer

and [Lois] believed or reasonably should have believed that she was incurring debts beyond

her ability to pay as they became due.” The court found that appellant was damaged by the

transfer “in the amount of at least $60,000,” ordered Ms. Van Divner to pay that amount to

the court, and granted appellant a judgment for that amount. Appellant filed a notice of

appeal designating the court’s final order and order granting appellee’s motion for summary

judgment. Neither appellant nor Ms. Van Divner appealed from the $60,000 judgment

against her.

A circuit court may grant summary judgment only when it is clear that there are no

genuine issues of material fact to be litigated and that the party is entitled to judgment as a

matter of law. Mitchell v. Lincoln, 366 Ark. 592, 596, 237 S.W.3d 455, 458 (2006). The

burden of sustaining a motion for summary judgment is always the responsibility of the

moving party. New Maumelle Harbor v. Rochelle, 338 Ark. 43, 45–46, 991 S.W.2d 552, 553

(1999). Once the moving party has established prima facie entitlement to summary judgment

by affidavits, depositions, or other supporting documents, the opposing party must meet

proof with proof and demonstrate the existence of a material issue of fact. Id. at 46, 991

S.W.2d at 553. When the proof supporting a motion for summary judgment is insufficient,

there is no duty on the part of the opposing party to meet proof with proof. Inge v. Walker,

70 Ark. App. 114, 120, 15 S.W.3d 348, 352 (2000). Summary judgment is not granted simply

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because the opposing party fails to respond to the motion. Id. at 119, 15 S.W.3d at 352. On

appellate review, we determine if summary judgment was appropriate based on whether the

evidentiary items presented by the moving party in support of its motion leave a material fact

unanswered. Kachigian v. Marion Cnty. Abstract Co., 2011 Ark. App. 704, at 6. This court

views the evidence in a light most favorable to the party against whom the motion was filed,

resolving all doubts and inferences against the moving party. Id.

III. Point on Appeal

The issue on appeal is whether summary judgment was appropriate in this case. We

hold that it was not, and we reverse and remand for further proceedings.

Appellant’s complaint requested relief under two theories: constructive trust and

fraudulent transfer. Thus, we note first that appellee’s arguments and the circuit court’s

findings regarding contractual third-party beneficiaries, tort law, and the declaratory-

judgment act are irrelevant to this case. We turn to appellant’s claim under the Arkansas

Fraudulent Transfer Act. Under the Act,

a transfer made or obligation incurred by a debtor is fraudulent as to a creditor whose
claim arose before the transfer was made or the obligation was incurred if the debtor
made the transfer or incurred the obligation without receiving a reasonably equivalent
value in exchange for the transfer or obligation and the debtor was insolvent at that
time or the debtor became insolvent as a result of the transfer or obligation.

Ark. Code Ann. § 4-59-205(a) (Repl. 2011).

A transfer is fraudulent as to a creditor regardless of whether the creditor’s claim arose

before or after the transfer if the debtor made the transfer “without receiving a reasonably

equivalent value in exchange” for the transfer and the debtor either intended to incur, or

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“believed or reasonably should have believed” that she would incur, debts beyond her ability

to pay as they became due. Ark. Code Ann. § 4-59-204(a) (Repl. 2011). A creditor may

obtain avoidance of the transfer under the Act. Ark. Code Ann. § 4-59-207 (Repl. 2011).

A transfer is not voidable under the Act against a person who took in good faith and for a

reasonably equivalent value. Ark. Code Ann. § 4-59-208(a) (Repl. 2011).

Appellant alleged in his complaint that Lois’s estate was insolvent, that this fact was

known or should have been known to Ms. Van Divner and appellee, that Ms. Van Divner

and appellee were aware of appellant’s claim to the funds at the time they transferred Lois’s

funds to themselves, and that Lois did not have sufficient funds to satisfy the judgment to

appellant upon her death.2 He claimed that the transfers to Ms. Van Divner and appellee left

Lois’s estate unable to pay appellant, her creditor. He alleged that the transfers to Ms. Van

Divner and appellee were not made for value received and thus were fraudulent under the

statute. He specifically alleged that appellee’s fee was six times the fee his counsel charged for

similar work on the same matter and was not based on value.

Appellee’s motion for summary judgment mentioned the Fraudulent Transfer Act

only by stating that appellant’s complaint asserted it. Appellee gave no explanation why it did

not apply. He stated only that he and appellant had no “direct relationship” and lacked

“privity of contract,” and that appellant lacked “standing.” He then alleged in his motion that

2
We note that the circuit court found in its final order that Lois made the transfer to
Ms. Van Divner without receiving reasonably equivalent value in exchange for the transfer
and that, at the time, she believed or reasonably should have believed that she was incurring
debts beyond her ability to pay as they became due.

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it was undisputed that he provided legal services for Lois “based upon an agreement”

between Lois and him and that “the attorney fee was voluntarily paid” by her. He did not

attach this alleged agreement to his motion or an affidavit detailing facts about the agreement.

Indeed, he attached no documents at all to his motion—only a nine-page brief that did not

contain any arguments about the fraudulent-transfer allegations. It did not even mention the

Act; rather, appellee explained why appellant could not proceed under four theories that

were not alleged—contract, tort, declaratory-judgment, and fiduciary duty.

In granting appellee’s motion for summary judgment, the court stated that it had

considered the motion, attachments (of which there were none), and brief and had found

good cause. The court then found that appellee “performed legal services for Lois

Druyvestein and that Mr. Gean was paid for such services based upon an agreement between

him and Ms. Druyvestein. Said agreement reflected the understanding of Ms. Druyvestein

and Mr. Gean as to the value of the services rendered.” We are not certain how the circuit

court made this finding, as the agreement was not attached to the motion nor was there an

affidavit describing the details of this agreement. Although there are summary-judgment cases

in which there are no factual issues, only legal issues, this is not one of those. When there are

factual issues, in deciding a motion for summary judgment, a trial court may consider

“pleadings, depositions, answers to interrogatories and admissions on file, together with

affidavits, if any.” Pyle v. Robertson, 313 Ark. 692, 695, 858 S.W.2d 662, 663 (1993) (quoting

Ark. R. Civ. P. 56(c)). A trial judge may not base his or her decision whether to grant

summary judgment on factual allegations made in the briefs. Id.

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It is undisputed that appellant was a creditor of Lois. It is also undisputed that Lois

transferred money from the Summit Brokerage bond account to appellee. Further, the circuit

court found in its final order that, at the time Lois made the transfer to Ms. Van

Divner—which was the same time the transfer was made to appellee—Lois believed or

reasonably should have believed that she was incurring debts beyond her ability to pay as they

became due. We hold that there are genuine issues of material fact regarding whether Lois

received a “reasonably equivalent value” from appellee for the transfer. Because there are no

documents or other evidence to review, we cannot determine what other factual issues may

arise.

Appellant’s complaint also requested the court to impose a constructive trust over the

funds held by appellee. The circuit court granted appellee’s summary judgment motion,

finding that, because there was no fraud or confidential relationship between appellee and

appellant, there could be no constructive trust. Again, no evidence has been provided to the

court, only allegations. Thus, there are genuine issues of material fact before the circuit court,

and summary judgment was inappropriate. Moreover, the doctrine of constructive trust is

not as narrow as the circuit court’s order suggests. A constructive trust is an implied trust that

arises by operation of law when equity demands: “It is imposed where a person holding title

to property is subject to an equitable duty to convey it to another on the ground that he

would be unjustly enriched if he were permitted to retain it.” Druyvestein, 2010 Ark. App.

500, at 7, 375 S.W.3d at 781(holding the doctrine applied in a case of mistake).

Accordingly, we reverse and remand this case for further proceedings.

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WALMSLEY and HARRISON, JJ., agree.

Brett D. Watson, Attorney at Law, PLLC, by: Brett D. Watson, for appellant.

Gean, Gean & Gean, by: Roy Gean, III, for appellee.

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