First State Bank of Casselton v. McConnell, 11399

• Decision Date: 28 July 1987
• Docket Number: No. 11399,11399
• Citation: 410 N.W.2d 139
• Parties: The FIRST STATE BANK OF CASSELTON, Plaintiff and Appellee, v. Janet R. McCONNELL and Edward D. Nesemeier as Trustee for Edward William McConnell and any other children that may be born to Janet Nesemeier McConnell, Defendants and Appellants. Civ.
• Court: North Dakota Supreme Court

Page 139

410 N.W.2d 139

The FIRST STATE BANK OF CASSELTON, Plaintiff and Appellee, v. Janet R. McCONNELL and Edward D. Nesemeier as Trustee for

Edward William McConnell and any other children

that may be born to Janet Nesemeier

McConnell, Defendants and

Appellants.

Civ. No. 11399.

Supreme Court of North Dakota.

July 28, 1987.

Nilles, Hansen & Davies, Fargo, for plaintiff and appellee; argued by Roger A. Royse.

DeMars, Turman & Johnson, Fargo, for defendants and appellants; argued by Joseph A. Turman.

ERICKSTAD, Chief Justice.

Janet R. McConnell and Edward D. Nesemeier, as trustee for Edward William McConnell, appeal from a summary judgment granted in favor of the First State Bank of Casselton (Bank) setting aside as fraudulent a conveyance of real property from McConnell to Nesemeier. We reverse.

On March 9, 1983, McConnell defaulted on a $54,650 promissory note made to the Bank. On July 10, 1984, McConnell executed a quitclaim deed transferring her undivided one-half interest in certain Cass County real property to her father, Nesemeier, as trustee for her son, Edward, and any other children that may be born to her. It is undisputed that McConnell conveyed her interest in the property without receiving any consideration. On the same day that the conveyance was made, the Bank commenced an action against McConnell to recover on the promissory note and subsequently obtained a judgment in the total amount of $81,354.84.

The Bank did not attempt to execute on that judgment but commenced this action under the provisions of the Uniform Fraudulent Conveyance Act, Chapter 13-02, N.D.C.C., ¹ to set aside the conveyance. The Bank alleged that the conveyance by McConnell was voidable under Sec. 13-02-04, N.D.C.C., because it was not made for a fair consideration and it rendered her insolvent. The Bank subsequently moved for summary judgment. The district court granted the Bank's motion, concluding that there were no genuine issues of material fact and that the Bank was entitled to judgment as a matter of law. Judgment was entered declaring the conveyance "fraudulent and void and a nullity," and this appeal followed.

McConnell asserts that the district court erred in granting summary judgment because a genuine issue of material fact exists as to whether she was rendered insolvent by the conveyance. We agree.

Section 13-02-04, N.D.C.C., provides:

"13-02-04. Conveyances by insolvent. Every conveyance made and every obligation incurred by a person who is or thereby will be rendered insolvent is fraudulent as to creditors without regard to his actual intent if the conveyance is made or the obligation is incurred without a fair consideration."

Section 13-02-02(1), N.D.C.C., defines insolvency:

"13-02-02. Insolvency. The question of insolvency shall be determined as follows:

"1. A person is insolvent when the present fair salable value of his assets is less than the amount that will be required to pay his probable liability on his existing debts as they become absolute and matured."

Generally, whether a transferor was insolvent at the time of the transfer or was thereby rendered insolvent is a question for the trier of fact. Telefest, Inc. v. VU-TV, Inc., 591 F.Supp. 1368, 1376 (D.N.J.1984).

Under Rule 56, N.D.R.Civ.P., a movant for summary judgment has the burden of showing that there is no dispute as to either the material facts or the inferences to be drawn from undisputed facts and that he is entitled to judgment as a matter of law on the facts shown. Northwestern Equipment, Inc. v. Badinger, 403 N.W.2d 8, 9 (N.D.1987). If the movant fails to meet this initial burden, summary judgment is inappropriate even if the adverse party fails to respond by filing proof in opposition to the motion. Badinger, supra; Rice v. Chrysler Motors Corporation, 198 N.W.2d 247, 252 (N.D.1972). In considering a motion for summary judgment, the evidence must be viewed in the light most favorable to the party opposing the motion, and he must be given the benefit of all favorable inferences which can be reasonably drawn from the evidence. Production Credit Ass'n of Minot v. Klein, 385 N.W.2d 485, 487 (N.D.1986); Everett Drilling Ventures, Inc. v. Knutson Flying Service, Inc., 338 N.W.2d 662, 664 (N.D.1983).

In this case the Bank moved for summary judgment "upon all the pleadings, files, affidavits, and records on file in this action, ..." The evidence presented by the Bank essentially consisted of an affidavit of counsel and two depositions of McConnell.

The affidavit of the Bank's counsel was accompanied by a personal financial statement of McConnell "which she provided to the First State Bank of Casselton indicating that her only assets on December 9, 1982 was cash in the bank of ... ($300) and her interest in the subject real estate of ... ($300,000)." Counsel's affidavit further stated that "McConnell conveyed substantially all her property, thereby rendering her with insufficient assets to pay her obligations to the [Bank], by virtue of her Deed of July 10, 1984." McConnell responded by affidavit that the financial statement "was signed in blank and filled out with incorrect and fictitious amounts while in custody of the bank by parties unknown to her." She further "den[ied] that I have conveyed 'substantially all her property' when I created a trust on July 10, 1984 for my child ... for my indebtedness which wasn't to mature until December, 1985."

In a brief in support of its summary judgment motion, the Bank referred to McConnell's deposition testimony taken on September 3, 1986, in connection with the instant case. The Bank relied upon a part of McConnell's deposition testimony indicating that her only assets consisted of her interest in her homestead, her interest in a 1976 Toronado automobile, and her one-half interest in the land conveyed. In its brief the Bank asserted that, taking into account statutory exemptions with regard to these assets, McConnell would have non-exempt assets of "$61,800 as of the date of transfer," which was less than the $67,149 "which was due and owing to the Bank as of that date ... and was much less than the $81,000.00 judgment which was subsequently had against her."

However, in the 1986 deposition, McConnell testified that she and her husband also owned a "quarter [section of land] down south just north of Davenport ..." ² and that she had personal property consisting of furniture and cars. Moreover, the Bank also submitted McConnell's deposition testimony taken on February 14, 1985, in connection with the Bank's previous suit on the promissory note. During the 1985 deposition, McConnell further testified:

"Q. [By Mr. Garaas] You also mentioned a house in Casselton that you were acquiring from your father. Do you also have personal property that you haven't told Mr. Nilles about?

"A. Yes.

"Q. And there's an extensive amount of personal property; is that right?

"A. Yes. Just with this apartment above our garage that means two washers, two dryers, two refrigerators, two stoves, two--you know, it's double of everything.

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"Q. [By Mr. Nilles] Well, let me put it this way. You don't have assets of...