F.D.I.C. v. Bell

• Decision Date: 20 March 1997
• Docket Number: No. 96-1183,96-1183
• Citation: 106 F.3d 258
• Parties: FEDERAL DEPOSIT INSURANCE CORPORATION, Appellee, v. Melvyn BELL, Defendant, Darlene Bell, Appellant, Bell Holdings, Inc., Defendant, Bell Equities, Inc., Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 258

106 F.3d 258

FEDERAL DEPOSIT INSURANCE CORPORATION, Appellee, v. Melvyn BELL, Defendant Darlene Bell, Appellant Bell Holdings, Inc., Defendant Bell Equities, Inc., Appellant.

No. 96-1183.

United States Court of Appeals Eighth Circuit.

Submitted Nov. 18, 1996.

Decided Feb. 6, 1997.

Rehearing and Suggestion for Rehearing En Banc Denied March

20, 1997.

S. Russell Headrick, Memphis, TN, argued (Stephen P. Hale, Ted Mackall, Jr. and Mark A. Koppel, on the brief), for appellant.

Marta W. Berkley, Washington, DC, argued, for appellee.

Before RICHARD S. ARNOLD, Chief Judge, MAGILL, Circuit Judge, and LONGSTAFF, ¹ District Judge.

MAGILL, Circuit Judge.

This case is a diversity action based on the Arkansas Fraudulent Transfer Act, Ark.Code Ann. §§ 4-59-201-213, between plaintiff the Federal Deposit Insurance Corporation (FDIC) and defendants Darlene Bell and Bell Equities, Inc. ² Darlene Bell and Bell Equities appeal the district court's ³ grant of injunctive relief and partial summary judgment against them, contending that the existence of a contingent liability on an asset transferred to Darlene Bell creates a question of fact regarding the value of that asset. The FDIC contends that we do not have jurisdiction to decide this question at this time because it is a nonfinal order. We hold that we do have jurisdiction and affirm.

I.

Richardson Savings & Loan, the predecessor in interest to American Federal and, ultimately, the FDIC, made loans in 1986 and 1987 in the amounts of $11,550,000.00 and $519,819.20 to Melvyn Bell, the then-husband of Darlene Bell. Melvyn Bell defaulted on the loans in 1988 and brought suit against American Federal for breach of contract. American Federal counterclaimed for the default on the loans and, on July 31, 1991, obtained a judgment against Melvyn Bell for $11,127,467.70.

Meanwhile, on March 22, 1991, Darlene Bell filed a complaint for divorce against Melvyn Bell in Arkansas state court. The divorce was granted on April 26, 1991, and the Bells entered into a property settlement agreement. Pursuant to the agreement, Melvyn Bell retained ownership of Bell Holdings, while Darlene Bell acquired ownership of Bell Equities. ⁴ Based on the valuation schedules submitted by the Bells to the state court, the assets distributed to Melvyn Bell had a gross value of $33,663,067.00 and liabilities of $27,744,252.00, for a net value of $5,918,815.00. The assets distributed to Darlene Bell had a gross value of $31,748,935.00 and liabilities of $24,422,585.00, for a net value of $7,326,353.00. The state court questioned Darlene Bell as to the accuracy of the valuation schedules, and Bell confirmed that they were accurate:

THE COURT: With respect to the valuations on the assets, I noticed that they're fairly even in terms of value. It looks like Bell Holdings has about $34 million and you have about $32 million assets, according to these sheets. Do you feel comfortable with what has been disclosed to you about value and liability?

MRS BELL: I feel that's pretty accurate. The gentlemen that worked with us on this, their livelihood depends on their accuracy, so I would imagine that they wouldn't mislead me because then they wouldn't have a job.

Order Granting Partial Summ.J. at 4 n. 3 (Aug. 4, 1995) (quoting Tr. of H'rg at 17-18), reprinted in Appellants' Add. at 4.

One of the assets acquired by Darlene Bell and held by Bell Equities was Red Apple Enterprises, with a gross value of $5,500,000.00, liabilities of $6,122,075.00, and a negative net value of $622,075.00. See Appellants' App. at 163 (valuation schedule). A footnote indicated that this entry did "not include contingent liability of $1.85 million related to Red Apple Club notes currently owned by The Bank of Ozark." Id.

On March 5, 1992, American Federal brought the instant diversity action against Melvyn Bell, Bell Holdings, Darlene Bell, and Bell Equities. Relying on the Arkansas Fraudulent Transfer Act, ⁵ American Federal alleged that Melvyn Bell had made a fraudulent transfer to Darlene Bell in their property settlement because he did not receive the reasonably equivalent value for the transferred assets.

During the years of discovery and litigation that followed, the district court granted partial summary judgment to American Federal and held, "as a matter of law, [that] Melvyn Bell was either insolvent at the time of the transfer [of property to Darlene Bell] or was rendered insolvent by the transfer within the meaning of [the Arkansas Fraudulent Transfer Act]." Tr. of Telephone Conference of October 18, 1993, at 8, reprinted in Appellants' App. at 30. On November 3, 1993, the district court denied summary judgment to the defendants, concluding that the instant suit was not barred as a defaulted compulsory counterclaim or by res judicata, the domestic relations exception, the full faith and credit doctrine, or quasi-judicial immunity. See Order Denying Defs'. Mot. for Summ.J., reprinted in Appellee's Add. at 1. Following a settlement agreement, Melvyn Bell and Bell Holdings were dismissed as defendants on June 29, 1994. Guaranty Federal thereafter became the successor in interest to American Federal and was substituted as plaintiff in this case on August 3, 1994.

On August 4, 1995, the district court granted partial summary judgment to Guaranty Federal, holding that, based on the valuation schedules verified by Darlene Bell, Melvyn Bell had transferred at least $1,407,538.00 to Darlene Bell in excess of what he had retained. Dividing this in half, the district court held that Darlene Bell and Bell Equities were liable to Guaranty Federal for a minimum of $703,769.00. See Order Granting Partial Summ.J. at 5-6, reprinted in Appellants' Add. at 5-6. The district court also granted prejudgment interest to Guaranty Federal of 6% per annum from April 26, 1991, through November 15, 1995, in the amount of $160,693.41, postjudgment interest at 5.45% per annum until paid, and costs of $415.25, for a total judgment as of November 15, 1995, of $864,877.66. See Judgment (Nov. 20, 1995), reprinted in Appellants' Add. at 14.

On December 7, 1995, Darlene Bell and Bell Equities filed in the district court a Motion to Reconsider Judgment under Federal Rules of Civil Procedure 59(e) and 60(b), arguing that the court had erred by failing to consider the $1.85 million contingent liability described in the valuation schedules. See Defs.' Mot. to Recons.J. at 2 (Dec. 7, 1995), reprinted in Appellants' App. at 103. The district court denied this motion, stating that

[t]he Court did consider the contingent liability. In fact, the defendants drew the contingent liability issue to the Court's attention in the defendants' Brief in Support of Response of Separate Defendants Darlene Bell and Bell Equities, Inc., to Plaintiff's Motion for Summary Judgment.... Even if the Court were to reconsider the issue the Court would maintain its position in relying upon the valuation schedules. It is generally held that speculative or contingent liabilities should not be considered in determining the net marital estate. See, e.g., Hansen v. Hansen, 302 N.W.2d 801 (S.D.1981); see also Aaron v. Aaron, 281 N.W.2d 150 (Minn.1979) (finding that if potential liability is too speculative, it should not be considered in the distribution of marital property). The defendants have offered no new evidence to support the position that the contingent liability is not speculative. The defendants have not offered the notes themselves nor have they argued the terms of the notes.

Order Denying Mot. to Recons.J. at 2-3 (Dec. 21, 1995), reprinted in part in Appellants' App. at 100.

On December 19, 1995, the district court granted Guaranty Federal injunctive relief, enjoining Darlene Bell and Bell Equities from transferring or encumbering certain assets. The injunction was specifically premised on the need to protect the judgment entered in favor of Guaranty Federal and against Darlene Bell and Bell Equities. See Order Granting Permanent Inj. at 4 (Dec. 19, 1995), reprinted in Appellants' Add. at 10. On May 1, 1996, the FDIC, as successor in interest to Guaranty Federal, was substituted as plaintiff-appellee in this matter. Darlene Bell and Bell Equities now appeal the grant of injunctive relief and the grant of partial summary judgment holding them liable for at least $864,877.66.

II.

The parties agree that the district court's grant of partial summary judgment was not a final order for purposes of determining whether this Court has jurisdiction. See 28 U.S.C. § 1291; see also Fed.R.Civ.P. 56(c) ("A summary judgment, interlocutory in character, may be rendered on the issue of liability alone although there is a genuine issue as to the amount of damages."). ⁶ The FDIC contends that this Court therefore has no jurisdiction to consider either the grant of injunctive relief or the grant of partial summary judgment. We disagree.

Under 28 U.S.C. § 1292(a)(1), this Court has jurisdiction over orders of the district court "granting, continuing, modifying, refusing or dissolving injunctions, or refusing to dissolve or modify injunctions, except where a direct review may be had in the Supreme Court...." Here, the district court specifically granted an injunction prohibiting Darlene Bell and Bell Equities from disposing of property without notice to and consent from the Bank. See Order Granting Permanent Inj. at 4, reprinted in Appellants' Add. at 10.

The FDIC argues that, despite § 1292(a)(1)'s textual clarity, this Court does not have jurisdiction to hear an appeal of a grant of injunctive relief where "the injunctive order is merely incidental to the substantive relief sought and does not threaten to cause irreparable harm...." Appellee's Br. at 11. This is simply an incorrect statement of the law of this Circuit. See, e.g., Morgenstern v. Wilson, 29 F.3d 1291, 1294-95 (8th Cir.1994) ("[I]f an interlocutory order expressly grants or denies a request for injunctive relief...