Clarke v. Latimer

• Decision Date: 26 June 2018
• Docket Number: Docket No. 45012
• Citation: 437 P.3d 1,165 Idaho 1
• Court: Idaho Supreme Court
• Parties: Michael CLARKE and Sue Clarke, Individually and as husband and wife, Plaintiffs-Appellants, v. Holly LATIMER, Defendant-Respondent.

165 Idaho 1
437 P.3d 1

Michael CLARKE and Sue Clarke, Individually and as husband and wife, Plaintiffs-Appellants,
v.
Holly LATIMER, Defendant-Respondent.

Docket No. 45012

Supreme Court of Idaho, Boise, May 2018 Term.

Filed: June 26, 2018

Eric R. Clark, Clark & Associates, Boise, for appellants.

Holly Latimer, Ewa Beach, Hawaii, respondent pro se.

BRODY, Justice.

165 Idaho 3

This appeal arises from Michael and Sue Clarke's attempted recovery of earlier financial losses sustained due to the fraudulent investment practices of Zach Latimer. After obtaining a judgment against Latimer, the Clarkes filed a separate action against his wife, Holly Latimer, alleging that the Latimers engaged in transfers of funds that violated the Uniform Fraudulent Transfer Act,

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I.C. §§ 55-910 to 55-921. The district court found in favor of the Clarkes' claim after a bench trial but ruled that there was no prevailing party and denied the Clarkes' request for attorney's fees and costs. The court also ordered the Clarkes to file a partial satisfaction of judgment in their separate action against Zach and denied their post-trial motion for prejudgment interest. The Clarkes now challenge each of these determinations, and seek additional fees and costs for their appeal.

I. FACTUAL AND PROCEDURAL BACKGROUND

In 2012, the Clarkes obtained a judgment against Zach Latimer for $7,405,256.44 in a lawsuit stemming from Latimer's loss of the Clarkes' retirement savings in a fraudulent investment scheme. The Clarkes recorded the judgment in Utah in an effort to garnish wages from Latimer's employer. Thereafter, Latimer's wages were continuously garnished other than during a period in 2014 when garnishment was stayed while Latimer's bankruptcy proceedings were pending. Garnishment continued after Latimer's attempt to discharge his debt to the Clarkes through the bankruptcy action was denied.

At some point, Latimer formed two companies—ZV Latimer Investments, Inc., and VVL, LLC—for which he opened Wells Fargo bank accounts. As the sole shareholder, officer, director, manager, and member, Latimer exercised exclusive control over each company. There is no evidence that either entity actually engaged in any legitimate business. Latimer did however have his employer directly deposit his wages into the companies' bank accounts after 25% was garnished. Through all of this, Latimer would periodically transfer various funds from the companies' bank accounts to his wife's personal bank account. The transfers arose from Holly Latimer's requests for money for household and family purposes on an as-needed basis. The district court found that Holly remained in a state of "deliberate ignorance" regarding the precise nature of the transfers. The court also found that notwithstanding some extravagant spending of the money on her part, the transferred funds were used for legitimate household and family purposes.

In December 2015, the Clarkes filed their complaint against Holly seeking a judgment in the total amount of the transfers plus prejudgment interest, attorney's fees, and costs. On March 17, 2017, following a bench trial, the district court ruled in favor of the Clarkes. In a written Findings of Fact and Conclusions of Law, the court awarded a judgment of $252,868.41, which was the specific amount sought by the Clarkes at trial. The court did not award fees or costs after concluding that there was no prevailing party in the action. The court also ordered the Clarkes to file a partial satisfaction of judgment in their separate case against Zach for the amount of the new judgment against Holly.

Thereafter the Clarkes filed a motion for prejudgment interest pursuant to Idaho Code sections 55-916 and 28-22-104, seeking $81,619.32. The motion was denied from the bench. On April 27, 2017, the Clarkes filed a partial satisfaction of judgment in their case against Zach, as well as their objection to the district court's order. At that time, the Clarkes also appealed.

II. STANDARD OF REVIEW

Determinations as to prevailing party, prejudgment interest, and attorney's fees and costs are committed to the sound discretion of the trial court and will not be altered absent an abuse of that discretion. Jorgensen v. Coppedge , 148 Idaho 536, 538, 224 P.3d 1125, 1127 (2010) ; Dillon v. Montgomery , 138 Idaho 614, 617, 67 P.3d 93, 96 (2003) ; Bingham v. Montane Res. Assocs. , 133 Idaho 420, 427, 987 P.2d 1035, 1042 (1999). To determine if a trial court abused its discretion, this Court considers whether the trial court perceived the issue as one of discretion, acted within the outer boundaries of that discretion, acted consistently with the applicable legal standards, and reached its decision by an exercise of reason. Jorgensen , 148 Idaho at 538, 224 P.3d at 1127.

III. ANALYSIS

The district court found that the transfers between Zach and Holly Latimer were voidable

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under the Uniform Fraudulent Transfer Act, I.C. §§ 55-910 to 55-921 (2012). In 2015, the Act was amended, which included its renaming to the Uniform Voidable Transactions Act and some minor modifications to the substantive statutes. I.C. §§ 55-910 to 55-922 (2017). Because a majority of the relevant transfers occurred prior to the amendment, the earlier version of the Act is used here.

In particular, section 55-913 of the Act provides:

(1) A transfer made or obligation incurred by a debtor is fraudulent as to a creditor, whether the creditor's claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation:

(a) With actual intent to hinder, delay, or defraud any creditor of the debtor....

I.C. § 55-913(1)(a).

If a creditor establishes that a fraudulent transfer was made, the Act provides remedies including avoidance, attachment, injunction, receivership, and other relief. I.C. § 55-916(1). To the extent the transfer is voidable, the creditor is able to recover a money judgment for the lesser of the value of the asset transferred and the amount necessary to satisfy the creditor's claim. I.C. § 55-917(2). The judgment can be entered against the first transferee of the asset or the person for whose benefit the transfer was made. I.C. § 55-917(2)(a). Here, the Clarkes, as creditors of Zach Latimer, pursued a judgment against the first transferee, Holly Latimer, in the amount of the value of the transferred funds. To apply section 55-913, the district court considered whether a preponderance of the evidence established (1) Zach was indebted to the Clarkes, (2) the Clarkes' claim arose before or after the allegedly fraudulent transfers were made, (3) Zach made the transfers with the actual intent to hinder, delay, or defraud, and (4) the total amount Holly received from Zach.

The first two issues were not disputed. Before addressing the remaining two, the court found that Zach's post-garnishment wages lost their exempt status under Idaho Code section 11-207(1) when they were deposited into the companies' bank accounts. Because the companies (and thus their bank accounts) were under the exclusive ownership and control of Zach, the court found that the funds still remained his "assets" under the Act, i.e., "property of a debtor" not including that which "is generally exempt under nonbankruptcy law," I.C. § 55-910(2)(b). The court then found that multiple statutory factors under section 55-913(2) established that Zach transferred the assets with an actual intent to hinder, delay, or defraud the Clarkes. Given this, the court explained that the necessary elements of section 55-913(1)(a) were satisfied and the transfers were voidable to the Clarkes. From there, the court addressed the total amount of the voidable transfers and largely deferred to the undisputed amount claimed by the Clarkes. The court concluded that the Clarkes had proven their claim and were therefore entitled to recovery in the form of a judgment against Holly in that amount. The determinations that followed that decision are the subjects of this appeal.

A. The Clarkes should have been found to be the prevailing party below.

Reaching its conclusion of the Clarkes' entitlement to recovery, the district court explained that there was no prevailing party because the case was "largely inconsequential" as the judgment against Holly sought effectively the "same money" as the judgment against Zach. In its written decision, the court explained that

to the extent that the Clarkes obtain a judgment against Holly Latimer voiding the lawful transfers and awarding a money judgment against her, then the new judgment against her would effectively

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