Allen v. Meinig

Citation109 Or.App. 341,819 P.2d 744
PartiesSamuel E. ALLEN, individually and dba Monarch Motor Hotel, Appellant, v. Edward MEINIG, Michael Meinig, Meinig Brothers, Inc., and Tri-Star Western, Inc., Respondents, and Meinig Oil Company, Respondent. A8903-01517; CA A65441.
Decision Date30 October 1991
CourtCourt of Appeals of Oregon

Gary M. Georgeff, Portland, argued the cause for appellant. With him on the briefs was O'Donnell, Ramis, Crew & Corrigan, Portland.

Kurt L. Maul, Portland, argued the cause for respondents Edward Meinig, Michael Meinig, Meinig Bros., Inc. and Tri-Star Western, Inc. With him on the brief was Hampson, Bayless, Murphy & Stiner, Portland.

No appearance, for Meinig Oil Co.


JOSEPH, Chief Judge.

Plaintiff is a judgment creditor of Meinig Brothers, Inc. (the corporation), and brings this action on a creditor's bill and for other relief. While the action that would result in plaintiff's obtaining the judgment was pending, defendants Michael and Ed Meinig, who are brothers, decided to stop doing business through the corporation and to form defendant Tri-Star Western, Inc. (Tri-Star). Tri-Star then began engaging in essentially the same heating, ventilating and air conditioning business that the corporation had performed; it also used the same business location, phone number, equipment and inventory as had the corporation. The only shareholders of Tri-Star were the Meinig brothers. Much of the business property used by the two entities was leased from defendant MEC Leasing (MEC), a partnership that also consists of the two brothers.

During the course of "restructuring" their business activities, the brothers caused the corporation to convey approximately $6,800 worth of inventory to its attorneys as a credit against its unpaid bill. The attorneys in turn transferred the inventory to Tri-Star, in exchange for a promissory note. In addition, Michael and Ed, as the corporation's directors, passed a resolution that had the effect of forgiving a debt of approximately $60,500 that MEC owed the corporation. In exchange, the brothers agreed that they would pay debts that slightly exceeded that amount, in the aggregate, that the corporation owed the brothers' father and aunt. For all practical purposes, the corporation was left without any significant assets and is defunct.

Although plaintiff divided his complaint into several separately stated claims, what he really advances are a number of alternative theories for reaching the transferred assets and obtaining payment of his judgment. He argues, first, that Tri-Star is responsible for the corporation's debts, because it is simply a "continuation" of the corporation, and that Tri-Star is also accountable for the $6,800 in inventory, because it was fraudulently transferred within the meaning of ORS 95.200 et seq. Plaintiff also contends that the Meinig brothers personally and MEC are accountable for the amount owed him, because the forgiveness of their debt to the corporation was also a fraudulent transfer and because the brothers "were alter egos of [the corporation] and are personally liable for its debts."

Defendants respond that all of the activities were undertaken for legitimate business reasons. The fact that the lawyers, the father and the aunt were paid and plaintiff was not, according to defendants, was simply an exercise of their right to prefer some creditors over others, which is permissible in the absence of fraud. The case was tried to the court, which found for defendants. Plaintiff appeals, and we reverse.

Plaintiff first contends that some of his claims sounded in law and that he was entitled to a jury trial on them. We disagree. The essential relief that plaintiff seeks is to set transfers aside and to make assets available to satisfy his claim. That is an equitable remedy. See ORS 95.260; Nelson v. Hansen, 278 Or. 571, 565 P.2d 727 (1977). The fact that plaintiff also sought money damages and placed legal labels on claims that, in substance, were redundant of the equitable claims, does not change the real nature of the proceeding. Any monetary remedy to which he may be entitled simply follows from or is ancillary to the underlying equitable remedy. See Wincer v. Ind. Paper Stock Co., 48 Or.App. 859, 618 P.2d 15 (1980). It follows, of course, that we try the facts de novo on appeal. We make findings that are very different from those of the trial court.

Plaintiff relies, for his claim against Tri-Star, on Erickson v. Grande Ronde Lbr. Co., 162 Or. 556, 568, 92 P.2d 170, 94 P.2d 139 (1939). There, the court noted that a successor corporation is not usually liable for its predecessor's debts, but is liable in circumstances "where the purchasing corporation is merely a continuation of the selling corporation" or "where the transaction is entered into fraudulently in order to escape liability for such debts." Defendants argue that Tri-Star does not come within either exception. They maintain that there are significant differences between the businesses and the organization of the corporation and Tri-Star. Therefore, Tri-Star was not a mere continuation of the corporation. We need not decide that facet of the argument, because it is enough under the Erickson rationale if Tri-Star was formed for the purpose of defrauding creditors and to escape liability.

Defendants argue that Tri-Star was not formed to escape the corporation's potential liability to plaintiff. Rather, they say:

"[The corporation] had a number of other problems, including a lawsuit filed [by] a former employee and a large debt to an electrical supplier. However, the major factor in the decision to cease operating business concerned problems with a key employee, Rick Davison."

They go on to explain that Davison was a problem while employed by the corporation and that, when he resigned, the corporation had "no employees who possessed the requisite electrical supervisor's license." They also maintain that they thought that they would win the underlying action against plaintiff.

Those explanations are wholly unconvincing. The resignation of a key employee would more naturally lead to the hiring of a replacement than the dissolution of a corporation and the creation of a new one that engages in substantially the same kind of business.

Still less imposing are defendants' protestations that the corporation was disassembled and Tri-Star created because of the potential or actual debts owed the former employee and the supplier rather than the obligation owed plaintiff. Even if it were necessary for defendants to have had the specific intent to defraud only plaintiff in order for them to come within the Erickson exception, their testimony that they were attempting to escape liability to two other creditors hardly helps them. An obvious inference follows that their intention extended to plaintiff. Moreover, it is not plausible that defendants would take an action that, if successful, would relieve them from all debts that they chose not to pay but that they were motivated to do so only to avoid some of those debts.

We find from our review of the evidence, including defendants' own, that Tri-Star was formed to defraud creditors of the corporation and to avoid its debts to plaintiff and...

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8 cases
  • D'Abbracci v. Shaw-Bastian
    • United States
    • Oregon Supreme Court
    • 10 Agosto 2005
    ...692, 693 n. 1, 820 P.2d 904 (1991) (where monetary relief is ancillary to equitable relief, review is de novo); Allen v. Meinig, 109 Or.App. 341, 344, 819 P.2d 744 (1991), rev. den., 313 Or. 209, 830 P.2d 595 (1992) (same). Accordingly, we find anew the facts necessary to our We begin with ......
  • Morris v. Nance
    • United States
    • Oregon Court of Appeals
    • 28 Diciembre 1994
    ...conclude that the burden-shifting test in Hughey v. Lind and Nelson v. Hansen is not compatible with the UFTA. In Allen v. Meinig, 109 Or.App. 341, 346, 819 P.2d 744 (1991), rev. den. 313 Or. 209, 830 P.2d 595 (1992), we followed the lead of the parties and applied the test stated in Nelson......
  • Marriage of Zabel, In re
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    • Wisconsin Court of Appeals
    • 9 Abril 1997
    ...and seeking rescission of the transfer. See Keville v. McKeever, 42 Mass.App.Ct. 140, 675 N.E.2d 417, 424 (1997); Allen v. Meinig, 109 Or.App. 341, 819 P.2d 744, 745 (1991); Hudson v. Maher, 55 Mich.App. 90, 222 N.W.2d 47, 49 (1974); Lane v. Lane, 211 S.C. 536, 34 S.E.2d 754, 756 ...
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    • 8 Enero 2003 other testimony or evidence and finally that human experience demonstrates it is logically incredible.' " Allen v. Meinig, 109 Or.App. 341, 347-48, 819 P.2d 744 (1991), rev. den., 313 Or. 209, 830 P.2d 595 (1992) (quoting Lewis and Clark College v. Bureau of Labor, 43 Or.App. 245, 256, 6......
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