Bowers v. Dougherty, S-99-261.
| Decision Date | 28 July 2000 |
| Docket Number | No. S-99-261.,S-99-261. |
| Citation | 260 Neb. 74,615 N.W.2d 449 |
| Parties | Bill R. BOWERS and Ilene Sue Bowers, appellants, v. Duane C. DOUGHERTY, defendant and third-party plaintiff, appellee, Timothy K. Kelso and Harris, Feldman, Stumpf Law Offices, third-party defendants, appellees. |
| Court | Nebraska Supreme Court |
David L. Herzog, of Herzog & Herzog, P.C., and Kathy Pate Knickrehm, Omaha, for appellants.
Milton A. Katskee, of Katskee, Henatsch & Suing, Omaha, for appellee Duane C. Dougherty.
Bill R. Bowers and Ilene Sue Bowers brought a claim for legal malpractice against attorney Duane C. Dougherty. The court entered judgment in favor of Dougherty, finding that any negligence on Dougherty's part did not proximately cause damage to the Bowerses. The Bowerses appealed, and we moved the case to our docket pursuant to our authority to regulate the caseloads of this court and the Nebraska Court of Appeals. Neb.Rev. Stat. § 24-1106(3) (Reissue 1995).
The nexus of this case involves litigation over transfers of property and assets from Henry and Eleanor Greenberg to their daughter, Ilene. For many years prior to the transfers, the Greenbergs operated Philips Stores, Inc., a chain of retail stores in and around Omaha, Nebraska. On June 30, 1976, Norwest Bank Nebraska, N.A. (Norwest), loaned Philips Realty Co. $975,000 to assist with financing the construction of a new Philips store in Council Bluffs, Iowa. Under the terms of the loan, full repayment would be completed no later than June 1, 1991. The loan was secured by certain real estate owned by Philips Realty.
As a part of this agreement, the Greenbergs both signed a mortgage loan guaranty agreement, which obligated each of them individually and personally on the $975,000 note. Henry, as president of Philips Stores, also signed a mortgage loan guaranty agreement obligating Philips Stores on the $975,000 note. Philips Realty's holdings were later transferred into "MMP Trust." Henry held a two-thirds interest in MMP Trust, and Philips Stores held the other one-third interest.
The profits of Philips Stores began to decline. The last year the business showed any profit was 1980, when a substantial debt owed by Philips Stores was written off. In 1984, Philips Stores posted a $348,000 loss. Also in 1984, Norwest required a personal loan guaranty, signed by Henry alone, for a separate debt owed by Philips Stores. Philips Stores' debt to Norwest was in the form of a $750,000 revolving demand note secured by accounts receivable. In 1985, Philips Stores posted a $352,000 loss. In the spring of 1985, Henry met with Michael McQuillan, the loan officer at Norwest responsible for Philips Stores' revolving demand note from 1984 to 1986. At that meeting, according to McQuillan's notes, Henry was told that if Philips Stores posted another year of losses, it would be necessary to liquidate all of the company's assets to pay off the demand note because the loan had become too leveraged; that is, the bank did not believe that Philips Stores would have sufficient accounts receivable to secure the demand note if the company's losses continued.
Philips Stores continued to lose money, and in September 1986, Henry again met with McQuillan and discussed the liquidation of the business. According to McQuillan, at that meeting, Henry presented a plan to liquidate the business, with the Philips store in Council Bluffs closing in January 1987, and the remainder of Philips Stores' retail operations closing by July 1987. Henry asserted later that he was only considering closing one of the Philips stores in September 1986.
On January 5, 1987, the Greenbergs transferred three of their real estate assets to their daughter, Ilene. The attorney who handled these transfers was Eleanor's younger brother, Sheldon Harris, who had served as the Greenbergs' attorney for over 30 years. Henry met with Harris previously in November 1986, after the meeting with Norwest, to prepare these transfers to Ilene as part of the Greenbergs'"estate planning." At that time, Eleanor was suffering from terminal cancer and, according to Henry, was concerned for Ilene's needs and wanted Ilene to have something in her name.
On January 5, 1987, Henry conveyed to Ilene all of his interest in the "108th and Q Street Farm Partnership," an undeveloped area of commercial real estate. On the same day, the Greenbergs together conveyed to Ilene all of their interest in the Yorkshire Manor apartments, an apartment complex in Fremont, Nebraska, and their respective one-half interests in their residence, a condominium located in Omaha, Nebraska, with a life estate reserved in the condominium for the Greenbergs. Ilene gave no consideration for any of the transfers.
The Council Bluffs Philips store closed in January 1987, and by July 1987, all Philips Stores' retail operations ceased. As of July, Philips Realty was in default on the $975,000 promissory note, and Philips Stores had an unpaid balance of approximately $75,000 on the revolving demand note.
In July 1987, Henry gave Philips Stores' computer to Ilene. She took it home to continue collecting outstanding credit card debts in an effort to help pay off the remaining balance on the revolving demand note. On July 29, Eleanor transferred $68,869 in cash to Ilene, and on August 15, Henry transferred his 1986 Chevrolet Corsica to Ilene. Eleanor died on August 3.
The three real estate transfers, cash, car, and computer were all listed on the Greenbergs' 1987 tax return as gifts to Ilene. The value listed for each of these items was as follows:
Philips Stores' revolving demand note with Norwest was eventually paid in full by liquidation of the Philips Stores' inventory and by the collection of receivables. However, the remaining balance on the defaulted $975,000 promissory note was not paid. In December 1987, Norwest brought suit in Iowa against Philips Realty, Philips Stores, Henry, the trustees of the MMP Trust, and First National Bank of Council Bluffs (First National Bank), seeking to foreclose on the Council Bluffs property securing the promissory note and seeking a judgment in the amount of $844,459.96. This represented $796,030.32 still owed on the promissory note; $48,154.64 in unpaid interest beginning on July 1, 1987; and title search fees of $275.
Norwest received a judgment in the district court for Pottawattamie County, Iowa, for the full amount against Henry, Philips Stores, and Philips Realty. The real estate securing the promissory note was then sold, leaving approximately $561,197 outstanding from the judgment. Norwest registered this judgment in Nebraska on December 9, 1988.
In order to collect the remaining $561,197 from the unsatisfied judgment, Norwest brought suit in 1989 in the district court for Douglas County, Nebraska, against the Bowerses to have the 1987 transfers to Ilene set aside as fraudulent. Norwest instituted one suit against only Ilene and a second suit against both the Bowerses. The two cases were ultimately consolidated.
Harris, recognizing that he would be called as a witness in the case, sought other counsel to represent the Bowerses. Harris recommended Jerome Ortman, who became counsel of record to defend the Bowerses against Norwest's suit. Dougherty also represented the Bowerses in this matter and was "second chair" to Ortman during the trial.
Prior to trial, the Bowerses submitted a motion in limine, seeking to preclude evidence regarding the valuation of several of Henry's assets, which Norwest intended to introduce at trial. The Bowerses essentially argued that because these valuations were done after January 5, 1987, they were irrelevant to the issue of Henry's solvency on that date. The court overruled the Bowerses' motion.
The evidence at trial focused primarily on the issue of whether the Greenbergs were insolvent on January 5, 1987, or whether the January transfers to Ilene rendered the Greenbergs insolvent for purposes of Neb.Rev.Stat. § 36-604 (Reissue 1988) (repealed, see 1989 Neb. Laws, L.B. 423). Both Harris and Henry testified that based on their valuations of the Greenbergs' assets done in November 1986, the Greenbergs were not insolvent in January 1987, nor did the transfers to Ilene render them insolvent. Further, Henry and Harris testified that the purpose of the January transfers was estate planning, motivated by Eleanor's poor health and her concerns for Ilene's future, and was not an attempt to delay, hinder, or defraud Norwest.
Henry's and Harris' valuations of the Greenbergs' assets in the fall of 1986 were refuted by Norwest's experts. For example, Harris and Henry valued the stock of Philips Stores at $734,000 in November 1986, but on the Greenbergs' 1986 tax returns, the stock was valued at zero. Janet Labenz, a certified public accountant and one of the expert witnesses for Norwest, testified that Philips Stores' stock was worthless as of January 5, 1987.
Labenz also testified regarding the estate planning aspects of the transfers to Ilene. Labenz testified that the transfers resulted in $659,000 worth of taxable gain to Ilene. However, if the property had simply been transferred by Henry completely to Eleanor and then devised to Ilene upon Eleanor's death, under the tax laws in effect at the time, the taxable gain would have been only $45,000. Labenz also noted that the transfers would have resulted in significant tax liabilities for the...
To continue reading
Request your trial
-
Citizens for Eq. Educ. v. Lyons-Decatur Sc.
...1981) (providing that petitions by voters and school boards are subject to same requirements for contents). 20. See Bowers v. Dougherty, 260 Neb. 74, 615 N.W.2d 449 (2000). 21. Rohde v. City of Ogallala, 273 Neb. 689, 731 N.W.2d 898 22. See City of Elkhorn v. City of Omaha, 272 Neb. 867, 72......
-
New Tek Mfg., Inc. v. Beehner
...must show that he or she would have been successful in the underlying action but for the attorney's negligence. Bowers v. Dougherty, 260 Neb. 74, 615 N.W.2d 449 (2000). We conclude that contrary to the defendant's suggestion, this case is not one "arising under" the patent law within the me......
-
Skinner v. OGALLALA PUBLIC SCH. DIST. NO. 1
...this error but did not argue this in its brief. Errors assigned but not argued will not be addressed on appeal. Bowers v. Dougherty, 260 Neb. 74, 615 N.W.2d 449 (2000). 5. Excessive Because we conclude that the trial court was not clearly wrong in finding Skinner to be an invitee, we theref......
-
Bellino v. Mcgrath North Mullin & Kratz, Pc
...favorable judgment or settlement. Viner v. Sweet, 30 Cal.4th 1232, 70 P.3d 1046, 135 Cal.Rptr.2d 629 (2003). See Bowers v. Dougherty, 260 Neb. 74, 615 N.W.2d 449 (2000). The jury found that Bellino had sustained damages in the amount of $1.6 million as a proximate result of McGrath North's ......
-
Conning the IADC Newsletters.
..."but for" the malpractice, the damage would not have occurred. See Crookham v. Riley, 584 N.W.2d 258 (Iowa 1998); Bowers v. Dougherty, 615 N.W.2d 449 (Neb. A recent trend in some courts, however, is to use a less stringent test and require only that the plaintiff prove that the defendant's ......