No. 92-615
IN THE SUPREME COURT OF THE STATE OF MONTANA
1993
SAM E. McDONALD,
Plaintiff and Respondent,
3
:
,
.
8
&
JACK ANDERSON (deceased),
HELEN Y. ANDERSON,
Defendant and Appellant.
APPEAL FROM: District Court of the Thirteenth Judicial District,
In and for the County of Yellowstone,
The Honorable G. Todd Baugh, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
John J. Cavan, Cavan, Smith & Cavan,
Billings, Montana
For Respondent:
W. Scott Green, Attorney at Law,
Billings, Montana
Submitted on Briefs: April 15, 1993
Decided: October 29, 1993
Filed:
Justice Terry N. Trieweiler delivered the opinion of the Court.
Defendant Helen Anderson appeals from a decision of the
District Court for the Thirteenth Judicial District, in Yellowstone
County, which granced summary judgment to plaintiff Sam McDonald.
The District Court concluded that defendant Jack Anderson
fraudulently conveyed property to his spouse, Helen. The court
issued an order to set aside the fraudulently transferred property
and allow Sam McDonald to enforce a prior judgment. We affirm.
The sole issue on appeal is whether the District Court erred
when it granted summary judgment to McDonald.
In June 1978, Jack and Helen Anderson purchased a residence in
Billings by contract for deed. In November 1984, Jack Anderson
(Anderson), Sam McDonald, and a third party formed a partnership
named Airport Metra Inn Partnership. The purpose of the
partnership was to own and operate a motel and restaurant complex
known as the Airport Metra Inn. Each partner owned 33 and 1/3
percent of the partnership. The partnership purchased the Airport
Metra Inn on contract for deed from John Q. Hammond, and pursuant
to the contract, the partners were obligated to make balloon
payments to Hammond.
On September 10, 1986, Anderson conveyed all of his personal
property and his contract interest in his residence to his spouse,
Helen. The value of the transferred property was $100,000; of that
amount, $25,000 represented the value of his personal property.
Anderson did not receive any consideration from his spouse in
exchange for the property that he conveyed to her. Anderson did
not transfer his partnership interest to Helen.
In the months preceding September 1986, the partners were
involved in discussions and negotiations for the sale of the
Airport Metra Inn. At the time of Anderson's property conveyance,
the partnership owed substantial back taxes which had been assessed
to the Airport Metra Inn, and balloon payments on the Hammond
contract were imminent.
On December 15, 1986, approximately three months after
Andersonis property conveyance to his wife, t n partnership sold
ie
the Airport Metra Inn to Terrence Liu for $1,525,000. On
December 31, 1986, the partnership borrowed $580,000 from the First
Security Bank of Livingston to pay the back taxes on the Airport
Metra Inn and to make the balloon payments on the Hammond contract.
The parties do not dispute that the back taxes and balloon payments
had to be paid before the Liu contract could be performed.
All three partners signed the Livingston Bank note which
stated that they were jointly and severally liable on the note as
partners and individual guarantors. Because the payments on the
Liu contract were insufficient to service the underlying debt
obligation of the partnership to the Livingston Bank, McDonald paid
the deficiency with his own funds.
Anderson did not make his share of the payments on the bank
note and McDonald paid Anderson's share. In May 1988, McDonald
filed a lawsuit against Anderson for contribution of his obligation
under the $580,000 note. McDonald subsequently filed a motion for
3
summary judgment. On August 8, 1989, the District Court granted
summary judgment in favor of McDonald and ordered Anderson to pay
contribution to McDonald for those bank loan installments which
were made by McDonald.
On December 15, 1989, Jack and Helen Anderson executed a
Declaration of Homestead on their residence.
On January lo, 1990, the District Court entered a judgment in
McDonald's favor for $15,081.81 at a rate of 10 percent per annum.
In April 1990, pursuant to a writ of execution, $513.82 was
collected from Anderson's bank account pursuant to the judgment.
On August 14, 1990, Anderson appeared at a judgment debtor
examination before the Honorable Pedro Hernandez, a Justice of the
Peace. At the hearing, McDonald's attorney questioned Anderson
about his financial situation to ascertain whether he had any
assets from which McDonald could collect his judgment. Anderson
testified that he transferred his assets to his wife on
September 10, 1986. He explained that this transfer included all
of his interest in his house, car, clothes, insurance policies, and
other personal property. Anderson testified that every month he
received a social security retirement check and an army retirement
check and that he gifted this income to his spouse. He explained
that his spouse used the gifted checks to pay for his health
insurance, life insurance, and day-to-day living needs; and that
his wife paid for these expenses as a gift to him.
On September 25, 1990, McDonald filed this action. He alleged
that Anderson conveyed his property to his spouse on September 10,
1986, to avoid liabilities that he owed to his creditors. McDonald
requested the court to set aside the property transfer in order to
allow him to enforce his January 10, 1990, judgment. Both parties
filed motions for summary judgment in which they contended that
there were no issues of material fact.
Anderson died on December 2, 1990, and Helen was substituted
as a defendant. In April 1331, Helen sold the Anderson residence.
On June 10, 1991, Helen and McDonald entered into a substitution of
security agreement. They placed in escrow a contract for the sale
of And~TSOn1Shome from which McDonald's judgment could be
collected.
On September 23, 1992, the District Court granted summary
judgment in favor of McDonald and ordered Anderson's property
transfer to his spouse to be set aside as a fraudulent conveyance.
The court relied on the Uniform Fraudulent Conveyance Act (UFCA),
which was the law in effect at the time of Anderson's property
transfer. The court determined that p § 31-2-311, -313, -314, and
-315, MCA, of the UFCA were applicable and that the elements of
each statute were satisfied. The court concluded that 5 31-2-313,
MCA, which pertains to a conveyance made by a person about to incur
debts, was the most applicable statute based on several findings.
The court found that Anderson was a partner and the hotel
manager of the Airport Metra Inn at the time of the property
transfer in September 1986; and therefore, he was aware of the
partnership's financial status, its valuation, its outstanding
contract obligations (with Hammond and Liu), its current
liabilities (back taxes and balloon payments), and its potential
liabilities (the bank loan with the Livingston Bank in December
1986). For the court, the timing of the property transfer, and the
fact that Anderson had knowledge about the partnership's
liabilities, cast doubt on a transfer already suspect because it
was a conveyance to a spouse, made without consideration.
Horeover, it involved property over which Anderson gave up no
control, possession, or beneficial use. The court concluded that
Anderson fraudulently transferred his property for the purpose of
avoiding present and future creditors. From that decision,
Anderson appeals.
The purpose of summary judgment is to encourage judicial
economy through the elimination of any unnecessary trial. However,
summary judgment is never to be a substitute for trial if there is
an issue of material fact. Reaves v. Reinbold (i980), 189 Mont. 234,
288, 615 P.2d 896, 898. Summary judgment is proper only when no
genuine issues of material fact exist and the moving party is
entitled to judgment as a matter of law. Rule 56(c), M.R.Civ.P.
The party seeking summary judgment has the burden of
demonstrating a complete absence of any genuine factual issues.
D~Agos~itro Swansorz (1990), 240 Mont. 435, 442, 784 P.2d 919, 924;
b.
IJX. (1981), 195 Mont. 409, 411, 637 P.2d 509, 511.
Ccreck v. illhertsorz~s,
The burden then shifts to the nonmoving party who must show the
existence of a genuine issue in order to prevail. OfiBasy V . Frt
is
Ittlentule Bcmk of Missoulu (1990), 241 Mont. 44, 46, 785 P.2d 190, 191.
To meet this burden, the nonmoving party must offer substantial
evidence, not mere speculation and conclusory statements. FirstSec.
Bank oJ'Bozemun v. Jones (1990), 243 Mont. 301, 303, 794 P.2d 679, 681.
All reasonable inferences that may be drawn from the offered proof
must be resolved in favor of the party opposing summary judgment.
Pq~rzeRedly urzd Hou.si/~g,Itzc. v. First Sec~kriry
Bank of Livirgston ( 1992) , 256 Mont .
The Uniform Fraudulent Conveyance Act (UFCA) was the
substantive law in effect in 1986, the time when Anderson
transferred his assets. The Montana Legislature repealed the UFCA
in 1991 and enacted the Uniform Fraudulent Transfer Act (UFTA).
However, because the UFTA does not expressly state that it is
retroactive, we will apply the UFCA, which was the law in effect at
the time of the conveyance at issue. ToweAntique Ford Foundation v. I.R.S.
(D. Mont. 1992) 791 F. Supp. 1450, 1457-58.
We conclude that, at least with regard to § 31-2-315, MCA
(1985), the District Court correctly concluded that plaintiff was
entitled to judgment as a matter of law. That section of the UFCA
provides that:
certain transfers presumed fraudulent. Every transfer of
personal property, other than a thing in action, and
every lien thereon, other than a mortgage, when allowed
by law, made by a person having at the time the
possession or control of the property, not accompanied by
an immediate delivery and followed by an actual and
continued change of possession of the things transferred
is conclusively presumed to be fraudulent and therefore
void against:
(1) those who are his creditors while he remains in
possession;
(2) the successors in interest of such creditors;
(3) any persons on whom his estate devolves in
trust for the benefit of others than himself; and
(4) purchasers or encumbrancers in good faith
suDsequent to the transfer. [Emphasis added].
According to § 31-2-315, MCA (1985), and the undisputed facts,
at least some of Anderson's personal property was conveyed
fraudulently.
section 31-2-301(3), MCA, provides that a "creditorM is "a
person having any claim, whether matured or unmatured, liquidated
or unliquidated, absolute, fixed, or contingent." McDonald
obtained a judgment against Anderson on January 10, 1990, for
$15,081.81. At the time of the judgment debtor hearing in August
1990, only $513.82 had been collected from Anderson's bank account
pursuant to McDonald's judgment. Therefore, McDonald was a
creditor of Anderson's at the time of the judgment debtor hearing.
At the hearing, Anderson testified that he transferred all of
his personal property to Helen, including his clothes, insurance
policies, and income checks. However, the evidence is clear that
despite the transfer, Anderson continued to retain possession or
control of such property. Anderson testified that the clothes he
wore at the judgment debtor hearing were owned by his wife. Yet
despite her ownership of the clothes, he continued to wear them.
Anderson testified that his health insurance and life
insurance policies covered him, but that his wife owned them. He
testified that he gifted his monthly income checks to his wife, and
that she spent this income on his health insurance, life insurance,
and day-to-day living expenses. It is clear that although Anderson
transferred his insurance policies and money to Helen, he still
held control and possession of these items of personal property.
His wife used && income checks to pay for his living expenses and
to make payments for him on insurance policies.
The record reveals that after McDonald obtained a judgment
against Anderson, Anderson remained in possession of the personal
property he claimed he transferred.
Based on the facts and the clear meaning of § 31-2-315, MCA,
we conclude that t n District Court did not err when it datermineci,
ie
as a matter of law, that Anderson's transfer of his personal
property to his wife was fraudulent regarding creditors, including
McDonald. Therefore, the District Court did not err when it
declared the transfer of these items of personal property invalid.
Prior to the District Court's judgment, the parties stipulated
that certain property owned by Helen Anderson could be set aside to
satisfy any judgment obtained by McDonald. Therefore, we need not
consider with greater particularity the items of personalty
retained by Anderson, nor the value of the individual items.
The judgment of the District Court is affirmed.
we concur:
October 29, 1993
CERTIFICATE OF SERVICE
I hereby certify that the following order was sent by United States mail, prepaid, to the following
named:
John J. Cavan, Esq.
CAVAN, SMITH, GRUBBS, & CAVAN
P.O. Box 1297
Billings, MT 59103
W. Scott Green, Esq.
W. SCOTT GREEN, P.C.
301 North 27th St.
Billings, MT 59101
ED SMITH
CLERK OF THE SUPREME COURT
STATE O E M Q N ~ A N A
i
By: /,,fi;, ,"I
!, , '
j
D ~ P WJ