Bueneman v. Zykan

• Decision Date: 10 July 2001
• Citation: Bueneman v. Zykan, 52 S.W.3d 49 (Mo. App. 2001)
• Parties: (Mo.App. E.D. 2001) Thomas and Donna Bueneman, Appellant/Cross-Respondent v. James and Diane Zykan, et al., Respondent/Cross-Appellant. ED78615 0
• Court: Missouri Court of Appeals

52 S.W.3d 49 (Mo.App. E.D. 2001)

Thomas and Donna Bueneman, Appellant/Cross-Respondent v. James and Diane Zykan, et al., Respondent/Cross-Appellant.

ED78615

Missouri Court of Appeals Eastern District

07/10/2001

Appeal From: Circuit Court of Franklin County, Hon. John Brackmann

Counsel for Appellant: Earl Robert Schultz III

Counsel for Respondent: Gael Davis Wood and Isidore Ireland Lamke

Opinion Summary: Thomas Bueneman and Donna Benes Bueneman appeal the court's entry of summary judgment in favor of Ray Frankenberg and Elizabeth Frankenberg. James Zykan and Diane Zykan cross-appeal the court's entry of a default judgment against them and in favor of the Buenemans.

Division Four holds: (1) The court incorrectly entered summary judgment in favor of the Frankenbergs. Because there were genuine issues of material fact as to whether the Frankenbergs paid fair market value for the Zykans' lake house, the Frankenbergs were not entitled to judgment as a matter of law on the Buenemans' fraudulent conveyance action.

(2) The court erred in entering a default judgment against the Zykans because it lacked personal jurisdiction over them.

(3) Service of process by publication establishes in rem jurisdiction but not personal jurisdiction for purposes of a default judgment against a party personally for money damages.

(4) The Zykans were not required to ask the court to set aside the default judgment prior to their appeal because the court lacked personal jurisdiction over them and any personal judgment against the Zykans was void ab initio and could be set aside under Missouri Rule of Civil Procedure 74.06(b)(4).

(5) A special limited entry of appearance to contest the court's exercise of personal jurisdiction over the Zykans did not establish personal jurisdiction over them.

Mooney, P.J. and Simon, J., concur.

Sherri B. Sullivan, Judge

Thomas Bueneman (Thomas) and Donna Benes Bueneman (Donna) (collectively Appellants) appeal from the summary judgment entered by the trial court in favor of Ray Frankenberg (Ray) and Elizabeth Frankenberg (Elizabeth) (collectively the Frankenbergs). James Zykan (James) and Diane Zykan (Diane) (collectively the Zykans) cross-appeal from the default judgment entered by the trial court against the Zykans and in favor of Appellants.

We reverse and remand.

Facts and Proceedings Below

Appellants are farmers who live outside Wright City. In 1992, the State of Missouri began investigating environmental violations by James and his companies¹ involving landfills and improper disposal of waste. The State brought suit against James and his companies in 1994. Appellants were cross-claimants in the suit, alleging environmental violations against their own property. On November 17, 1997, Appellants obtained a judgment against James in the amount of $642,782.03. Appellants have not received payment of any part of the judgment from James or his companies.

The Frankenbergs are the parents of Diane, James's wife. In September 1994, the Frankenbergs purchased a lake lot and house at the Lake of the Ozarks, as well as a pontoon boat, wave runner and trailer (sometimes referred to as "the property," "the lake property" or "the lake house"), from the Zykans .

On September 4, 1998, Appellants filed suit against the Zykans and the Frankenbergs for transferring the lake property to defraud creditors.² Appellants effected service against the Zykans by publication in the Washington Missourian pursuant to Rule 54.12(c),³ because attempted personal service in Missouri and service by registered mail in Belize, where the Zykans had moved, were unsuccessful. On March 28, 2000, the trial court entered a default judgment against the Zykans personally for a total of $779,244.99. On April 13, 2000, counsel for the Zykans filed a special limited entry of appearance and motion to set aside the default judgment on the basis that the trial court did not have personal jurisdiction over the Zykans. No answer or other pleadings were filed by the Zykans. On July 12, 2000, the trial court set aside the default judgment based on lack of personal jurisdiction, but found that the Zykans' entry, motion and challenge to the default judgment conferred personal jurisdiction over them and ordered them to respond within thirty days. The Zykans failed to file a response and the trial court entered a second default judgment against them on September 14, 2000.

On September 20, 1999, the trial court entered summary judgment in favor of the Frankenbergs. Appellants appeal from the summary judgment. The Zykans cross-appeal from the default judgment.

Point on Appeal

In their point on appeal, Appellants maintain the trial court erred in granting summary judgment in favor of the Frankenbergs because there are disputed issues of material fact concerning the amount the Frankenbergs paid for the lake house that the Zykans transferred to them.

Standard of Review

When considering appeals from summary judgments, the Court will review the record in the light most favorable to the party against whom judgment was entered. ITT Commercial Fin. Corp. v. Mid-Am. Marine, 854 S.W.2d 371, 376 (Mo.banc 1993). Appellate review is essentially de novo. Id. The criteria on appeal for testing the propriety of summary judgment are no different from those which should be employed by the trial court to determine the propriety of sustaining the motion initially. Id. Summary judgment is appropriate where there are no genuine issues of material fact. Rice v. Hodapp, 919 S.W.2d 240, 243 (Mo.banc 1996). Genuine implies that the issue, or dispute, must be a real and substantial one--one consisting not merely of conjecture, theory and possibilities. ITT Commercial Fin. Corp., 854 S.W.2d at 378. Mere speculation and conjecture are not enough to create a genuine issue of fact. O'Brien v. Mansfield, 941 S.W.2d 582, 585 (Mo. App. W.D. 1997).

Discussion

Appellants first argue that we should reverse the entry of summary judgment because Appellants had substantial evidence supporting every element of their claim.

The key elements of a fraudulent conveyance are the conveyance of goods or titles with an intent to hinder, delay or defraud creditors. Community Fed. Sav. and Loan Ass'n v. Boyer, 710 S.W.2d 332, 334 (Mo. App. E.D. 1986).⁴ The burden of proof is on the creditor, and fraud is never presumed when the transaction may be fairly reconciled with honesty. Nance v. Nance, 880 S.W.2d 341, 346 (Mo. App. E.D. 1986). A party seeking to have a transaction declared void as fraudulent must prove his case by clear and convincing evidence. Behr v. Bird Way, Inc., 923 S.W.2d 470, 473 (Mo. App. S.D. 1996). However, fraudulent intent is difficult to establish by direct proof, and consequently, it must be demonstrated by the surrounding circumstances. Nance, 880 S.W.2d at 346.

The courts have recognized several "badges of fraud" which include: (1) a conveyance to a spouse or near relative; (2) inadequacy of 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 the debtor's property; (7) insolvency caused by the transfer; and (8) failure to produce rebutting evidence when circumstances surrounding the transfer are suspicious. Id. While none of the badges of fraud existing alone establishes fraud, a concurrence of several of them raises a presumption of fraud. Id.

Appellants contend that the badges of fraud shown in the instant case are as follows:

1. A conveyance of property to a near relative. The Frankenbergs are the parents of Diane and the in-laws of James.

2. The consideration paid was inadequate. The Frankenbergs claim the fair market value of the lake house is approximately $143,000.00,⁵ but the Frankenbergs paid either one dollar or sixty thousand dollars.

3. The transaction was carried out in a very odd and unnatural manner. The Frankenbergs and Diane testified that there was no written contract for the lake house transaction. Diane also testified there was no note or documents setting forth the amount due for the lake house. The Zykans testified they did not obtain title insurance for the lake house. The Frankenbergs testified they paid with multiple checks totaling less than $10,000.00 each.

4. The transfer was done several months after the initiation of litigation against James and his companies.

Appellants conclude that because they have substantial and admissible evidence of essentially all of the badges of fraud for the lake house transaction, we should reverse the trial court's entry of summary judgment for the Frankenbergs. Appellants also argue that we should reverse the judgment because the sole basis for the Frankenbergs' Motion for Summary Judgment was that they paid $143,000.00 for the property, which was sufficient consideration, but there exist disputed issues of fact as to the actual purchase price.

The giving and the receipt of sufficient consideration is a foundational inquiry when a conveyance is sought to be set aside as fraudulent as against creditors. Mark Twain Kansas City Bank v. Riccardi, 865 S.W.2d 425, 427 (Mo. App. W.D. 1993). The presence of sufficient consideration for a conveyance would in most cases defeat an attempt to set it aside as fraudulent as against creditors. Id. The absence of sufficient consideration, on the other hand, makes the court more hospitable to other circumstantial evidence of the grantor's fraudulent intent. Id.

In their motion for summary judgment, the Frankenbergs contend that they purchased the lake property from the Zykans without any intent to hinder, delay or defraud Appellants. They presented evidence in the form of affidavits and deposition testimony that they paid $143,000.00 for the lake house, as well as fifteen cancelled checks payable to the Zykans totaling $143,000.00. The trial court granted their motion for summary...