Eli's, Inc. v. Lemen

Decision Date26 March 1999
Docket NumberNo. S-97-1255,S-97-1255
Citation256 Neb. 515,591 N.W.2d 543
PartiesELI'S, INC., a Nebraska corporation, appellee and cross-appellant, v. George E. LEMEN, Jr., appellant and cross-appellee, and Western Printing Company, a Nebraska corporation, et al., appellees.
CourtNebraska Supreme Court

Syllabus by the Court

1. Conveyances: Fraud: Equity: Appeal and Error. An appeal of a district court's determination that transfers of assets were in violation of the Uniform Fraudulent Transfer Act is equitable in nature.

2. Equity: Appeal and Error. In an appeal of an equity action, an appellate court tries factual questions de novo on the record, reaching a conclusion independent of the findings of the trial court, provided, however, that where credible evidence is in conflict on a material issue of fact, the appellate court considers and may give weight to the fact that the trial judge heard and observed the witnesses and accepted one version of the facts rather than another.

3. Judgments: Jurisdiction: Appeal and Error. The determination of a jurisdictional issue which does not involve a factual dispute is a matter of law which requires an appellate court to reach its own conclusions independent from the trial court.

4. Actions: Parties. Neb.Rev.Stat. § 25-301 (Reissue 1995) provides that every action must be prosecuted in the name of the real party in interest, except as otherwise provided in Neb.Rev.Stat. § 25-304 (Reissue 1995).

5. Assignments. The assignee of a thing in action may maintain an action thereon in the assignee's own name and behalf, without the name of the assignor.

6. Actions: Parties: Standing. To determine whether a party is a real party in interest, the focus of the inquiry is whether that party has standing to sue due to some real interest in the cause of action, or a legal or equitable right, title, or interest in the subject matter of the controversy. The purpose of the inquiry is to determine whether the party has a legally protectable interest or right in the controversy that would benefit by the relief to be granted.

7. Assignments: Parties. The assignee of a chose in action is the proper and only party who can maintain the suit thereon.

8. Actions: Parties: Standing. The question of whether a party who commences an action has standing and is therefore the real party in interest is jurisdictional.

9. Conveyances: Fraud: Assignments. The benefit of a fraudulent conveyance statute may be claimed by one who stands in the place of, and has succeeded to the rights of, the creditor, such as, for example, an assignee of the debt which was owed by the transferor. Suit may be maintained by the assignee even though the assignee purchased the judgment against the transferor subsequently to the execution of the conveyance which is sought to be set aside.

10. Actions: Conveyances: Parties. An action does not abate by the transfer of any interest therein during its pendency, if the cause of action survives or continues. In case of transfer of interest other than by death or disability of a party, the action may be continued in the name of the original party; or the court may allow the person to whom the transfer is made to be substituted in the action.

11. Actions: Parties. The transfer of interest after the action is commenced does not prevent the action from being continued to final termination in the name of the original plaintiff.

12. Fraud: Intent: Proof: Words and Phrases. Badges of fraud are said to be facts which throw suspicion on a transaction, and which call for an explanation. More simply stated, they are signs or marks of fraud. They do not of themselves or per se constitute fraud, but they are facts having a tendency to show the existence of fraud, although their value as evidence is relative not absolute. They are not usually conclusive proof; they are open to explanation. They may be almost conclusive or they may furnish merely a reasonable inference of fraud, according to the weight to which they may be entitled from their intrinsic character and the special circumstances attending the case. Often a single one of them may establish and stamp a transaction as fraudulent. When, however, several are found in the same transaction, strong, clear evidence will be required to repel the conclusion of fraudulent intent.

13. Conveyances: Fraud. The generally recognized badges of fraud are the lack of consideration for the conveyance, the transfer of the debtor's entire estate, the relationship between the transferor and the transferee, the pendency or threat of litigation, secrecy or hurried transaction, insolvency or indebtedness of the transferor, departure from the usual method of business, the retention by the debtor of possession of the property, and the reservation of benefit to the transferor.

14. Debtors and Creditors: Conveyances: Fraud: Proof. In an action seeking to set aside a fraudulent transfer, the burden of proof is on a creditor to prove, by clear and convincing evidence, that fraud existed in a questioned transaction. Clear and convincing evidence is that amount of evidence which produces in the trier of fact a firm belief or conviction about the existence of a fact to be proved.

15. Assignments: Words and Phrases. As a general rule, an assignment is a transfer vesting in the assignee all of the Waldine H. Olson and Amy Sherman LaFollette, of Nolan, Roach, Olson, Fieber & Lautenbaugh, Omaha, for appellant.

assignor's rights in property which is the subject of the assignment.

D.C. Bradford, of Bradford, Coenen & Welsh, Omaha, for appellee Eli's, Inc.



This action involves alleged fraudulent transfers of assets of Western Printing Company (Western) to George E. Lemen, Jr. (Lemen), its principal shareholder and operating officer, and other members of Lemen's family. The action was filed by Eli's, Inc. (Eli's), as the assignee of four of Western's creditors. Following a bench trial, the district court for Douglas County entered judgment in favor of Eli's in the amount of $356,652.96 plus prejudgment interest. Lemen appealed, and Eli's cross-appealed on the ground that the district court erred in not awarding certain additional sums claimed by Eli's. We transferred the appeal to our docket pursuant to our authority to regulate the caseloads of the appellate courts and now affirm the judgment of the district court.


Western was a closely held corporation engaged in the printing business in Omaha. Prior to transfers that occurred in 1993 which are the subject of this action, all of its stock was owned by Lemen and his three children. Western Enterprises II (Western Enterprises) was a partnership, composed of the same Lemen family members, which owned the real estate upon which Western conducted its business. Lemen held a 60-percent interest in the partnership.

Prior to the transfers at issue, Lemen conducted Western's operations and business affairs with the assistance of his son William Todd Lemen. Western experienced annual operating losses beginning in 1989, requiring Lemen to make periodic loans to Western in order to continue its operations. Western was delinquent on its $8,000 monthly rental payments to Western Enterprises for the months of February, March, and April 1993, and Lemen personally paid the mortgage payments of Western Enterprises during these months. Western's accounts payable, as shown by audited reports, increased from approximately $128,872 on June 30, 1991, to $230,611 on June 30, 1992. The record also shows that for several months prior to April 1993, Western did not pay its creditors on a timely basis and its monthly operating losses had increased to approximately $25,000 per month.

When William Lemen informed Lemen in 1992 that he did not wish to purchase the business or continue its operation on a long-term basis, Lemen sought an outside purchaser. By November 1992, Lemen had signed a "Summary of Understanding and Intent" (summary) with Robert Gittins, whereby Gittins agreed to purchase the stock of Western for a total of $456,000. The summary stated that Lemen would receive $100,000 cash from Gittins and that Western would pay Lemen a secured installment note of $171,000. Western was also to convey to Lemen approximately $100,000, representing the cash value of life insurance policies held by Western, and 4,639 shares of Nebraska National Bank stock that was owned by Western, having an approximate value of $85,000. The summary provided for the payment of 72 monthly payments of $2,400 to Lemen as consideration for a covenant not to compete and stated that a cash advance of $22,262 made by Lemen to Western would be repaid on December 1. The summary further provided that preferred stock owned by Lemen family members would be redeemed by Western at a par value of $12,000. Finally, the summary provided that any rent in arrears as of December 1, 1992, would be paid to Lemen on that date.

In a separate transaction in December 1992, Lemen caused Western to transfer the 4,639 shares of Nebraska National Bank stock to himself in return for a promissory note in the amount of $85,000. This bank stock and the cash value of the life insurance Field Paper Company supplied printing paper to Western. In the fall of 1992, Michael Freeland, the president of Field Paper, had several discussions with Lemen regarding Western's delinquency on its account with Field Paper. As a result of these discussions, Lemen provided Freeland with the audited report of Western's financial condition as of June 30, 1992. Freeland testified that he noticed that the $100,000 life insurance asset and the Nebraska National Bank stock were listed on this report. On behalf of Field Paper, Freeland entered into a workout agreement with Western on March 9, 1993, relying in part upon the existence of these assets which he believed to be unencumbered. On that date, the...

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