Murphy v. Atkinson

NO. 93-084
IN THE SUPREME COURT OF THE STATE OF MONTANA
1993

G. K. MURPHY and MARGARET K. MURPHY,
Plaintiffs and Respondents,
v. : ,; : y ;;;, 3 ysg3
~,
E. A. ATKINSON, in her personal capacity,
ANN LEWIS, the personal representative of :.,., _. ..\~.:,'~,:‘- ,,:c,
the ESTATE OF JOSEPH ROSCOE LEWIS, i* her ,,~.“:~;,~'::, :'i~';l~~~,~~~-~~;,'', :-:nuRr
1
:; j ,.k /~ l,r !'.-8. ".A"il
official capacity,B . A. HUEBNER RIVERSID;"
INVESTMENT, and DEEP WATER INVESkMENT, LTD.,
Defendants and Appellants.

APPEAL FROM: District Court of the Fourteenth Judicial District,
In and for the County of Musselshell,
The Honorable Roy C. Rodeghiero, Judge presiding.

COUNSEL OF RECORD:
For Appellants:
Karl Knuchel, Attorney at Law,
Livingston, Montana
For Respondents:
Joe C. Maynard, Crowley, Haughey, Hanson,
Toole & Dietrich, Billings, Montana

Submitted on Briefs: August 5, 1993
Decided: November 23, 1993
Filed:
Justice Terry N. Trieweiler delivered the opinion of the Court.
On July 1, 1988, G. K. Murphy and Margaret K. Murphy filed an

action in the District Court for the Fourteenth Judicial District

in Musselshell County seeking to set aside certain transfers of

real property by Joseph Lewis based on fraud. Both parties moved

for summary judgment. On November 24, 1992, the District Court
granted the Murphys' motion and entered judgment in their favor.

Defendants appeal the order of the District Court.
We affirm.

The issue on appeal is whether the District Court erred when

it granted the Murphys' motion for summary judgment.

This appeal arises out of a failed real estate transaction

between the Murphys and Joseph Lewis. In 1979, the Murphys sold

ranch property to Lewis under a contract for deed. Lewis defaulted

on the payments due the Murphys, and a dispute ensued regarding the

contract's payment provisions. After Lewis initiated a number of

lawsuits and caused extensive damage to the property prior to

vacating it, the Murphys counterclaimed on November 14, 1984,

seeking actual and punitive damages. On June 27, 1988, judgment

was entered in favor of the Murphys and they were awarded damages

in the amount of $196,959.93.
In order to execute on the judgment, the Murphys immediately

filed an action in the District Court to set aside a number of

conveyances of real property by Lewis as fraudulent. Because the

facts and litigation surrounding these land transfers are pertinent

to this appeal, a brief description follows.

2
 During the pendency of the numerous lawsuits between Lewis and
the Murphys, Lewis purchased a different piece of property known as
the MN Ranch, which is the property at issue in this appeal. He
bought this property with his nephew and business partner, Robert
O'Connor. Lewis provided the funds for the purchase of the MN
Ranch, but the deed was recorded in O'Connor's name.
During the course of the next few years, Lewis and O'Connor
made approximately $350,000 worth of improvements to the MN Ranch.
In 1983, Lewis and Riverside Investment entered into a promissory
note and agreement granting Riverside a mortgage in the amount of
$492,000 against the MN Ranch. The Murphys allege that this was a
fraudulent encumbrance and name Riverside, as well as its successor
in interest, Deep Water Investment, Ltd., as defendants in this
appeal.
In 1984, a disagreement arose concerning the status of the MN
Ranch. After a series of negotiations, Lewis and O'Connor executed
a dispute settlement agreement on May 14, 1984. The agreement
provided that Lewis was to pay O'Connor a total of $75,000 in
exchange for a guitclaim deed to the MN Ranch. Upon receipt of the
deed, Lewis immediately conveyed the MN Ranch to his future wife,
E. A. Atkinson, also a defendant in this appeal, purportedly for a
consideration of $10. This transfer of title was recorded on the
same day that the agreement was signed.
Pursuant to the agreement, Lewis made the first $20,000
payment to O'Connor. However, Lewis defaulted on the remainder of

the obligation, and O'Connor brought suit to recover the $55,000

3
which was still due under the agreement. O'Connor also sought to

set aside the transfer of the MN Ranch to Atkinson as a conveyance

to defraud creditors. On March 13, 1988, the District Court

ordered Lewis to pay O'Connor $55,000 plus interest and costs, but

concluded that the transfer of the MN Ranch from Lewis to Atkinson

was not fraudulent. This conclusion was based on its finding that

O'Connor failed to produce evidence demonstrating that the

"transfer was made for the purpose, or had the effect, of rendering

the Defendant J.R. Lewis insolvent." This Court affirmed that

decision in o~cOnnOrV.LeWZh (1989), 238 Mont. 270, 776 P.2d 1228.

While O'Connor's suit was pending, Atkinson, who had since

married Lewis, transferred title to the MN Ranch to her daughter,

B. A. Huebner. This transfer was also purportedly made for a

consideration of $10. One month later, however, Huebner

transferred the property back to Atkinson, again for a $10

consideration, in light of her anticipated marriage in California,

which is a community property state.

The District Court issued its opinion and order in November
1992, granting summary judgment in favor of the Murphys and

concluding that, with regard to the Murphys, the transfers of the

MN Ranch were fraudulent. From this judgment, defendants appeal.

Did the District Court err when it granted the Murphys' motion

for summary judgment?
The District Court first noted that the defendants had not

contested any of the significant facts set forth by the plaintiffs

nor did they raise any other material issue of fact which would
4
preclude summary judgment. Therefore, the court concluded that
there were no genuine issues of material fact and, in the absence
of such a factual dispute, the issue was solely legal. Based on
its application of the law, the court concluded that the conveyance
of the MN Ranch from Lewis to Atkinson was fraudulent as a matter
of law pursuant to the Fraudulent Conveyances Act found at
55 31-2-301 through -325, MCA (1989). That statute provides as
follows:
Every conveyance made and every obligation incurred by a
persons who is or will be thereby rendered insolvent is
fraudulent as to creditors without regard to his actual
intent if the conveyance is made or the obligation is
incurred without a fair consideration.
Section 31-2-311, MCA (1989). After considering the evidence, the
court determined that the Murphys satisfied each element to
demonstrate a fraudulent conveyance. It concluded that the Murphys
were creditors pursuant to § 31-2-301(3), MCA (1989), because they
were persons "having any claim, whether matured or unmatured,
liquidated or unliguidated, absolute, fixed, or contingent" at the
time of the conveyance. Furthermore, the Murphys offered
uncontested evidence that Lewis was insolvent at the time of the
transfer, and finally, the court determined that the conveyance,
reciting a consideration of $10, had been made without fair
consideration as required under § 31-2-303, MCA (1989).
The court also set aside Atkinson's transfer of the MN Ranch
to her daughter because Huebner had not been a bona fide purchaser
of the property. The court noted that neither Riverside Investment
nor Deep Water Investment, which were allegedly sham mortgage

5
companies, appeared to defend the mortgage interests which they

held against the MN Ranch. Therefore, it ordered that all of
Lewis's conveyances of the MN Ranch be set aside and annulled.

The court further determined that the statute of limitations

for an action based on fraud had not run, and that the Murphys'

claims were not barred by resjudicata, collateral estoppel, the

collateral attack doctrine, or the "law of the case" doctrine.

On appeal, the defendants do not challenge the sufficiency of
the evidence or the court's application of the law concerning
fraudulent conveyances. Rather, they contest the court's summary
judgment order in favor of the Murphys on the bases that the "law

of the case" doctrine precluded a determination that the transfer

of the MN Ranch from Lewis to Atkinson was fraudulent and that the

Murphys' claim was barred by the statute of limitations.

Defendants contend that the Murphys are bound by the District

Court's determination, which was affirmed by this Court in O’Connor,

776 P.2d at 1233, that the May 14, 1984, conveyance of the MN Ranch

from Lewis to Atkinson was not intended to defraud creditors. In

State v. Burlingame (1980), 185 Mont. 183, 605 P.2d 176, we clarified

that the law of the case doctrine applies when this Court decides

an issue involving the same parties in the same case. Whether that

decision is right or wrong, it is binding on the parties and cannot

be relitigated in a subsequent appeal. Burlingame, 605 P.2d at 177.

In In re Marriage of Gies (1985), 218 Mont. 433, 709 P.2d 635, we

reiterated that the doctrine applies when the same parties and the

6
same case are involved. In this instance, the Murphys were not

parties to the OIConnorv.Lewis litigation, and the Murphys' cause of

action was litigated in an entirely different case. The District
Court correctly concluded that the doctrine did not apply and that

it was free to reach its own decision with respect to the Murphys'

allegations based on the evidence presented.

Defendants next contend that the applicable statute of

limitations for bringing an action based on fraud is two years

pursuant to 5 27-2-203, MCA. They assert that the transfer from
Lewis to Atkinson was recorded on May 14, 1984, and the Murphys did

not file their action to set aside the transfer until July 1988,

four years later. It is their contention that the recording of the
deed gave constructive notice of the transfer and that is when the

Murphys' cause of action accrued. The Murphys, however, contend

that the statute did not begin to run until their claim was reduced

to judgment in 1988, and that this case was instituted immediately

thereafter. Requiring them to file suit within two years of the

recording of the transfer would have required that suit be filed

before they had a right to do so.

In Finchv.&'nt (1900), 24 Mont. 268, 279, 61 P. 653, 658, this

Court addressed a similar situation. We made clear that under

circumstances such as this, where an alleged fraudulent transfer

occurs prior to the time that a judgment is obtained against the

transferor, a cause of action does not accrue, and the statutory

period does not begin to run, until the judgment is obtained.

7
Therefore, we conclude that the two-year statute of limitations did

not begin to run until June 27, 1988, and the filing of this action

on July 1, 1988, was timely.

We hold that the District Court did not err when it granted

summary judgment in favor of the Murphys. The order of the
District Court is affirmed.

J t'ice

We concur:

8
 November 23, 1993

CERTIFICATE OF SERVICE

I hereby certify that the following order was sent by United States mail, prepaid, to the following
named:

Karl Knuchel
Attorney at Law
P.O. Box 953
Livingston, MT 59047

Joe C. Maynard, Esq.
Crowley, Haughey, Hanson, Toole & Dietrich
P.O. Box 2529
Billings, MT 59103-2529

ED SMITH
CLERK OF THE SUPREME COURT
STATE OF MONTANA