Fischer v. Brancato

• Decision Date: 24 August 2004
• Docket Number: No. ED 83408.,ED 83408.
• Citation: 147 S.W.3d 794
• Parties: Ronald J. FISCHER, Appellant, v. Donald H. BRANCATO, et al., Respondents.
• Court: Missouri Court of Appeals

147 S.W.3d 794

Ronald J. FISCHER, Appellant, v. Donald H. BRANCATO, et al., Respondents.

No. ED 83408.

Missouri Court of Appeals, Eastern District, Division Four.

August 24, 2004.

Motion for Rehearing and/or Transfer to Supreme Court Denied October 6, 2004.

Application for Transfer Denied November 23, 2004.

David M. Heimos, Clayton, MO, for appellant.

Thomas A. Connelly, St. Louis, MO, for respondent.

BOOKER T. SHAW, Presiding Judge.

Appellant Ronald J. Fischer ("Creditor") appeals from the trial court's judgment in favor of Respondents Donald H. Brancato ("Debtor"), Georgia D. Brancato ("Wife"), Donald H. Brancato, Inc. ("DHBI") and North County Orthopedics, Inc. ("NCOI") on his petition for civil conspiracy to engage in a fraudulent conveyance and civil conspiracy to tortiously interfere with his judgment lien. Creditor argues the trial court erred in holding Creditor failed to prove a fraudulent transfer by Debtor under the Missouri Uniform Fraudulent Transfer Act, Section 428.005, et seq., RSMo 2000¹ ("MUFTA"). We agree.

On February 2, 1996, Creditor obtained a judgment in the amount of $165,525.64 against Debtor in the City of St. Louis Circuit Court for damages related to a previous partnership agreement. Debtor has not paid any money to Creditor toward this judgment. In March 1999, Creditor filed a petition for relief under MUFTA in the Circuit Court of St. Louis County alleging that Debtor fraudulently transferred certain real and personal property into various trusts and that Debtor received payments totaling $24,000 from DHBI. Creditor specifically named the following parties as defendants in that lawsuit: Debtor, Wife, Brancato Properties, L.P., Brancato Family Trust, Brancato Family Trust Properties, Inc., DHBI, NCOI, Donald H. Brancato Pension Plan & Trust and Donald H. Brancato, Inc. Profit Sharing Plan & Trust. Debtor and the other defendants filed a motion for summary judgment that the trial court granted on August 9, 1999. The trial court, however, also specifically stated "[i]t is the judgment and order of the court that facts exist which preclude summary judgment as a matter of law on plaintiff's claim in regard to fees for the professional services of [Debtor]." On July 26, 2000, Creditor dismissed this lawsuit without prejudice.

Creditor subsequently filed the present lawsuit on June 4, 2001, alleging a civil conspiracy to engage in a fraudulent conveyance and civil conspiracy to tortiously interfere with his judgment lien. Creditor specifically alleged in his petition as follows:

9. That with an intent to hinder, delay and defraud [Creditor], of the obligations owed him under said [j]udgment by [Debtor], [Debtor], [Wife], [DHBI], a Missouri corporation, and [NCOI], a Missouri corporation, have participated, and continue to participate, by a meeting of the minds, in a civil conspiracy, the purpose of which is to fraudulently convey to [d]efendants, Wife, [DHBI], a Missouri corporation, and [NCOI], a Missouri corporation, [Debtor's] assets, including his personal services and income, for which [Debtor] has received and continues to receive inadequate consideration, thereby making [Debtor] "judgment proof" and preventing [Creditor] from collecting on the obligations owed him under said [j]udgment by [Debtor].

10. That all of the aforesaid [d]efendants have and continue to knowingly participate in the civil conspiracy involving the aforesaid fraudulent conveyance scheme and have benefited from it.

This case was tried before a judge in equity on November 6, 7, and 8, 2002. In its Findings of Fact, Conclusions of Law and Judgment, the trial court specifically found:

26. Since shortly after entry of [j]udgment against him on February 2, 1996, [Debtor] has not received any income or other remuneration, the intent and effect of which is to make him "judgment proof" and to prevent [Creditor] from collecting on the [j]udgment.

27. From the evidence presented it is clear that the [d]efendants have gone to great lengths to divert [Debtor's] earnings from his medical practice through related corporate entities and finally to [Wife]. The diversion of this income has had the effect of preventing [Creditor] from executing on his judgment of February 2, 1996 against [Debtor].

Despite these factual findings in favor of Creditor, the trial court stated in its judgment that it "must reluctantly agree and find[ ] that there is no proof of a transfer made directly by [Debtor] ... and that this failure defeats liability under [M]UFTA." In its judgment, the trial court additionally sustained Debtor's objection that Creditor failed to properly plead that he was seeking to pierce the corporate veil of DHBI and NCOI. Debtor claimed "unfair surprise" and "[h]aving sustained that objection at trial, the [c]ourt must now conclude that [Creditor] cannot be granted the remedy of `piercing the corporate veil.'" The trial court also held that "[m]aking [DHBI] or [NCOI] the `alter egos' of [Debtor] was not sufficiently demonstrated by the facts adduced at trial, and the [c]ourt must reject this theory, which was not pleaded or tried by consent."² Creditor subsequently filed a motion for reconsideration and to amend the judgment, which the trial court overruled. This appeal follows.

On appeal, we will affirm the trial court's judgment unless there is no substantial evidence to support it, it is against the weight of the evidence or it erroneously declares or applies the law. Behr v. Bird Way, Inc., 923 S.W.2d 470, 471 (Mo.App. S.D.1996).

In his only point on appeal, Creditor argues the trial court erred in holding that Creditor failed to prove a fraudulent transfer by Debtor and that this failure defeated liability under MUFTA. Creditor argues that the trial court failed to recognize that DHBI and NCOI are under the complete dominion and control of Debtor and that these corporations were used by Debtor to fraudulently convey to Wife all of the income he received from his professional services as an orthopedic surgeon. Creditor contends that the trial court, sitting as a court of equity, has the power to impose against all of the defendants his judgment against Debtor. We reverse the trial court's judgment and remand for further proceedings consistent with this opinion.

Creditor's two-count petition against Debtor, Wife, DHBI and NCOI alleges all of these defendants conspired to engage in a fraudulent conveyance and to tortiously interfere with his judgment lien. A civil conspiracy is an agreement or understanding between two or more persons to do an unlawful act, or to use unlawful means to do an act which is lawful. Trimble v. Pracna, 51 S.W.3d 481, 500 (Mo.App. S.D.2001). It is not a cause of action in and of itself, but rather, it acts to hold the conspirators jointly and severally liable for the underlying act. Id. at 501. Here, Creditor alleged the underlying wrongful act is the defendants'"intent to hinder, delay and defraud [Creditor] of the obligations owed him under [the February 2, 1996] [j]udgment," by fraudulently conveying Debtor's assets, including his personal services and income such that Debtor is "judgment proof."

Section 428.024.1 of MUFTA 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:

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

(2) Without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor:

(a) Was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction; or

(b) Intended to incur, or believed or reasonably should have believed that he would incur, debts beyond his ability to pay as they became due.

Actual intent may be determined by considering, among other factors, whether:

(1) The transfer or obligation was to an insider;

(2) The debtor retained possession or control of the property transferred after the transfer;

(3) The transfer or obligation was disclosed or concealed;

(4) Before the transfer was made or obligation was incurred, the debtor had been sued or threatened with suit;

(5) The transfer was of substantially all the debtor's assets;

(6) The debtor absconded;

(7) The debtor removed or concealed assets;

(8) The value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred;

(9) The debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred;

(10) The transfer occurred shortly before or shortly after a substantial debt was incurred; and

(11) The debtor transferred the essential assets of the business to a lienor who transferred the assets to an insider of the debtor.

Section 428.024.2.

In addition, Section 428.009(7) of MUFTA defines "insider" as "[a] relative of the debtor or of a general partner of the debtor; or ... [a] corporation of which the debtor is a director, officer or person in control." A "transfer" is also defined under MUFTA as "every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an asset or an interest in an asset, and includes payment of money, release,...