In re Mirabile

HOLSTEIN, Judge,

concurring in part and dissenting in part.

I reluctantly concur in the dismissal of the information against attorney Mirabile. However, I respectfully dissent as to dismissal of the information regarding attorney Moroney.

The majority opinion correctly notes that the Master’s findings are merely advisory, but it is also true that such findings are helpful to this Court. In re Griffey, 873 S.W.2d 600, 601 (Mo. banc 1994). Typically, the one before whom a witness testifies is in a far better position to determine the credibility of the witness and the weight to be given to the testimony than a tribunal reviewing only the cold record. Davis v. Research Medical Center, 903 S.W.2d 557, 568 (Mo.App.1995). In the era when factual findings in a judge-tried case were, as here, reviewed de novo, Judge Lamm summed up this principle artfully:

Truth does not always stalk boldly forth naked, but modest withal, in a printed abstract in a court of last resort. She oft hides in nooks and crannies visible only to the mind’s eye of the judge who tries the case. To him appears the furtive glance, the blush of conscious shame, the hesitation, the sincere or flippant or sneering tone, the heat, the calmness, the yawn, the sigh, the candor or lack of it...

*942Creamer v. Bivert, 214 Mo. 473, 113 S.W. 1118, 1120 (1908). In the present case, the Master specifically found that respondents’ testimony was not credible, that respondents were aware of their clients’ intent to file for separation only to avoid the collection of child support, and that respondents actively participated in carrying out that evil intention. There is a great danger in being too quick to reject the determination of witness credibility found by a Master who both heard and saw the witnesses testify in person. For that and the following reasons, I would find facts consistent with those of the Master at least with regard to Mr. Moroney.

The majority opinion correctly points out (and it should come as no surprise) that respondents and their clients testified that the Leahys truly desired a legal separation and respondents truly believed their clients so desired. Witnesses accused of intentional wrongdoing rarely affirm the accusations on the witness stand. Dickinson v. Ronwin, 935 S.W.2d 358, 364 (Mo.App.1996) (“[Fraudulent intent is rarely proven by direct evidence.”).

Although a charge of professional misconduct does not create a rebuttable presumption of professional misconduct, Missouri courts have been willing to look to “badges of fraud” when fraudulent intent underlying a transaction is being proven. Vaughn v. Christian, 472 S.W.2d 337, 338 (Mo.1971); Mercantile Bank of Trenton v. Ryder, 898 S.W.2d 647, 647 (Mo.App.1995) (Undisputed admissions to “badges of fraud” entitled judgment creditor to prevail in its suit to set aside fraudulent transfer as a matter of law). These “badges” include (1) a conveyance to a spouse, (2) inadequate consideration, (3) transactions different from the usual method of transacting business, (4) transfers in anticipation of suit or execution, (5) retention of possession by the debtor, (6) the transfer of all or nearly all of debtor’s property, (7) insolvency caused by the transfer; and (8) failure to produce rebutting evidence when circumstances surrounding the transfer are suspicious. Allison v. Mildred, 307 S.W.2d 447, 453 (Mo.1957); Nance v. Nance, 880 S.W.2d 341, 346 (Mo.App.1994). A concurrence of several badges of fraud in one transaction allows an inference of fraudulent intent and has been held to create a presumption thereof. See Mark Twain Kansas City Bank v. Riccardi, 865 S.W.2d 425, 427 (Mo.App.1993); Citizens Nat. Bank of Maryville v. Cook, 857 S.W.2d 502, 505 (Mo.App.1993). Far from being arcane, the badges of fraud are rooted in everyday experience and provide a practical aid to the factfinder in the search for the truth regarding whether fraud has occurred.

Joseph Leahy’s transfer of all his control of Jovial, Inc., and all of the couple’s joint accounts to Joyce as well as his agreement to pay Joyce and their children one hundred percent of his monthly income is a textbook example of nearly all the badges of fraud. It is a conveyance to a spouse. It certainly differed from the usual method of dividing marital property and resolving marital disputes. The stipulation amounted to a transfer of all or nearly all of Leahy’s assets. Had Leahy’s scheme been effective, no assets would have been available for the Jackson County child support judgment. The Master was “incredulous that Joseph Leahy would fight a bitterly contested dissolution action over a period of months with his ex-wife over an increase in child support, yet in less than one day would agree to pay to his current wife the full amount of his claimed $7,000.00 monthly income for support and maintenance, assign to her control over all assets solely in his name, and transfer to her all interest in all joint checking, savings and financial accounts.”

Additionally, the Ray County transaction was clearly made in anticipation of an order from the Jackson County Circuit Court. Joseph’s deceptive enterprise in the Ray County Circuit Court began only after the Jackson County judge indicated his intention to impute over sixteen thousand dollars of monthly income to Joseph. This transaction in anticipation of the resolution of the Jackson County case is a more obvious badge of fraud than anticipated by Nance or Riccardi.

Joesph Leahy’s stipulations in Ray County divested him not only of all his income and existing financial accounts, but also of Jovial, Inc., his principal income-producing asset. Moreover, after giving away virtually every*943thing, Joseph could be considered insolvent. See, e.g., section 276.401(17); Adams v. Richardson, 337 S.W.2d 911, 916 (Mo.1960) (defining “Insolvency”). Indeed, this appeared to the Master to be Joseph’s purpose in consenting to the Ray County order. That the fraudulent transaction giving rise to this proceeding took the form of a judgment rather than a deed or sale is of no legal consequence. A collusive judgment is a form of fraudulent conveyance if intended to defraud creditors and may be vacated. Shepard v. Shepard, 353 Mo. 1057, 186 S.W.2d 472, 476 (1945).

Given the many badges of fraud that accompanied the Leahys’ Ray County stipulation, I find as a matter of fact that the Leahys had a fraudulent purpose in initiating that proceeding and entering into the stipulation. My conclusion might be different if the obvious fraudulent circumstances were rebutted by persuasive evidence from a disinterested or neutral source indicating a genuine intent to separate. Examples of evidence by a neutral or disinterested source might include documentary evidence that, at some point, Joseph and Joyce lived separately. Perhaps third parties with nothing at stake in the proceeding might have testified to marital problems they perceived to have existed between the Leahys at any time before June 16,1992. At any rate, the testimony of the four alleged co-conspirators, however consistent with each other and adamant, is wholly unpersuasive.

The evidence suggesting that respondents knew of their clients’ fraudulent intent and assisted them, by bringing a baseless separation proceeding, in carrying out their scheme is also necessarily circumstantial.

The strongest evidence against Moroney arises out of the timing of significant events in the two lawsuits. After learning of the Jackson County judge’s intent to impute significant income to Joseph and remarking that his client would be better off were he to divorce and renounce his corporate holdings, respondent Moroney spoke first to Joyce, not his client. That evening, Moroney met at length with Joseph and Mirabile. Moroney had suggested Joyce retain Mirabile, having immediately decided to separate from her husband given this recent financial adversity. The very next day, Moroney was present at the filing of Joyce’s fraudulent petition and he filed the stipulation and joint motion. It is difficult to believe an attorney could ever be satisfied that his client truly had decided in good faith to seek a legal separation and to give away virtually all of his assets in less than a day. The circumstance becomes even more unbelievable when the recent turn in the Jackson County litigation is considered.

Although attorneys may generally represent their friends, the close relationship between Moroney, Joseph, Mirabile, and Joyce is another element that makes the possibility of bad faith more likely. Additionally, details of respondents’ testimony before the circuit bar committee and Advisory Committee differed from their testimony before the Master. “[T]he putting together of trivial circumstances may furnish persuasive evidence of fraud.” Garrison v. United States Fidelity & Guaranty Co., 506 S.W.2d 87, 89 (Mo.App.1974) (quoting Judge Lamm in Hadley v. Standard Oil Co., 194 Mo. 124, 91 S.W. 1062, 1071 (1906)). I find respondent Moro-ney knowingly participated in bringing a baseless lawsuit before the Ray County Circuit Court, which contained false statements of fact about the marriage of Joseph and Joyce Leahy. Further, I find that the purpose of that lawsuit was principally to help Joseph avoid his obligation to support his daughter by a previous marriage despite his ability to do so. Thus, Moroney’s conduct violates Rules 4-3.1, 4-3.3 and 4-8.4 and subjects him to appropriate punishment up to and including disbarment. See In re Caranchini, 956 S.W.2d 910 (Mo. banc 1997); In re Storment, 873 S.W.2d 227 (Mo. banc 1994).

The majority appears to place great significance on the statements made by the Ray County judge that he knew of the Jackson County lawsuit. I do not agree with the significance of that evidence for two reasons. First, the extent of the judge’s knowledge is unclear. Indeed, that judge eventually saw fit to rescind his order in the matter on his own motion. Second, the opinion of the Ray County judge does not change the effect his order would have had upon Joseph’s ex-wife *944and daughter in their efforts to collect child support.

Had the separate maintenance case not been dismissed and had the matter come here as a fraudulent conveyance case, any reasonable person would immediately recognize the Leahys’ scheme for what it surely was, a fraudulent use of the court process to avoid child support. A lawyer with full knowledge of the circumstances Moroney had at hand should at least be held to the same standard as a reasonable person in recognizing that fraud was afoot. Without other contradictory information, a lawyer might, but is not duty bound, to believe the statements of a client. But the lawyer-client relationship does not suspend the lawyer’s need to exercise common sense in evaluating the' client’s intent to commit a fraud, particularly where the lawyer’s assistance is the means of effectuating that intent. In the past, lawyers with marginal ethics might advise a client on how to avoid the claims of creditors through fraudulent conveyances. Here the lawyer, Moroney, went well beyond giving advice. He actually assisted in advancing the client’s transparently fraudulent plan. This Court should not place its imprimatur on a lawyer’s contrived ignorance or countenance such reckless conduct by a member of the bar.

With respect to respondent Mirabile, the evidence that he knew the Leahys’ ulterior motive in filing the Ray County matter is not as strong or clear as that implicating Moro-ney. Unlike Moroney, Mirabile was essentially brought into this situation by a colleague, not by an emotional, vindictive client. The extent of Mirabile’s knowledge of Joseph’s underlying legal controversy in Jackson County is unclear. Mirabile was, therefore, more likely an unwitting participant in the Leahys’ scheme. While his lack of diligence in inquiring into the details of his client’s circumstances is troubling, it is not usually a cause for substantial discipline.

For these reasons, I reluctantly concur in the majority’s finding with respect to respondent Mirábile. I dissent from that portion of the opinion finding that Moroney should not be disciplined. At minimum, Moroney should be suspended from the practice of law indefinitely.