Kruse v. Repp
| Decision Date | 20 March 2020 |
| Docket Number | Case No. 4:19-cv-00106-SMR-SBJ |
| Citation | 611 F.Supp.3d 666 |
| Parties | Christina L. KRUSE; The Guardianship and Conservatorship of Christina Kruse, by and through Verda Kruse, as sole surviving guardian and conservator of Christina Kruse; and Harley J. Hudson, Plaintiffs, v. David M. REPP; Dickinson, Mackaman, Tyler & Hagen, P.C.; Zachary I. Guinn; Bradley J. Van Vark; and First State Bank of Lynnville, Iowa, Defendants. |
| Court | U.S. District Court — Southern District of Iowa |
Justin K. Swaim, Swaim Law Firm, PLLC, West Des Moines, IA, Jeffrey E. Grell, Pro Hac Vice, Grell Feist PLC, Minneapolis, MN, for Plaintiffs.
Robert L. Johnson, Andrew M. Stanley, Jeffrey Robert Kappelman, Finley Law Firm, Des Moines, IA, for Defendants David M. Repp, Dickinson, Mackaman, Tyler & Hagen, P.C.
Lucas B. Draisey, Matthew E. Laughlin, Sarah K. Franklin, Davis Brown Law Firm, Des Moines, IA, for Defendants Zachary I. Guinn, Bradley J. Van Vark, First State Bank of Lynnville, Iowa.
ORDER ON DEFENDANTS' MOTIONS TO DISMISS
After obtaining a $2.5 million personal injury judgment and successfully setting aside a series of financial transactions found to have been intentionally designed to fraudulently shield assets from satisfying their judgment lien, Plaintiffs filed this lawsuit against the attorneys and bankers who, they allege, worked hand-in-hand with the tortfeasor to frustrate their collection efforts. [ECF No. 18-2]. Defendants move to dismiss the petition in its entirety. [ECF Nos. 4; 11]. The parties requested oral argument, but the Court finds a hearing is unnecessary. See LR 7(c). Accepting as true the facts alleged in the First Amended Petition ("Petition"), and drawing all reasonable inferences in Plaintiffs' favor, the Court GRANTS in part and DENIES in part Defendants' Motions to Dismiss.
TABLE OF CONTENTS
III. ANALYSIS...688
IV. CONCLUSION...725
I. BACKGROUND
Plaintiffs' Petition documents a saga of injury and admission, judgment and avoidance after Plaintiff Christina L. Kruse ("Kruse") was horrifically injured in a car accident caused by Steven Weller ("Weller"), a local farmer and crop insurance agent.1 A bench trial found Weller liable and determined Plaintiffs were owed approximately $2.5 million in compensatory damages for past and future medical costs, loss of function, pain and suffering, and loss of consortium. Rather than compensating Kruse for her injury, Weller undertook a series of financial transactions that have since been found to have been made with the specific intent to shield his assets from Plaintiffs' judgment and adjudicated fraudulent.
The crux of Plaintiffs' allegations in this case centers on the role of Defendants' services as legal and banking professionals in Weller's attempt to avoid his obligation to compensate Kruse for her injuries or otherwise obstruct Plaintiffs' efforts to collect on their judgment lien. Much of the factual basis for the lawsuit is established historical fact and a matter of public record through prior litigation. See generally [ECF No. 18-2 ¶¶ 10–12, 15–17, 19–22].2
The drama plays out over the course of three acts, which the Court reproduces below.
The scene opens with trauma and a confession. On January 28, 2012, Steven Weller ran a stop sign in rural Davis County, Iowa, striking Kruse broadside in an catastrophic automobile accident. [ECF No. 18-2 ¶¶ 19, 23]. Weller witnessed the extensive damage to the vehicles, the incapacitation of Kruse and her passengers, and the lifesaving efforts by emergency responders in the wake of the accident; when law enforcement responded to the scene, he immediately acknowledged that he was entirely at fault. Id. ¶¶ 19(b), 24–25. Weller formally admitted his culpability through admissions made in the course of the lawsuit that followed. Id. ¶ 28. He also stipulated to the amount of Kruse's necessary medical expenses and agreed they were caused by the collision. Id. ¶ 29. Weller entered into settlement negotiations with Kruse, but efforts to come to a resolution were unfruitful. See generally id. ¶¶ 40–44.
After a three-day bench trial in April 2015, the Iowa district court found in favor of Kruse and awarded $2,557,100 in damages; judgment was entered on May 1, 2015. Id. ¶¶ 15, 19(l)–(m), 20–21. Weller owns farm and commercial real estate in Mahaska County, Iowa. See id. ¶¶ 32, 53; see generally id. at 140–45 (2002 mortgage), 161–70 (2007 mortgage). Kruse filed her judgment in the office of the Clerk of the Iowa District Court for Mahaska County on May 8, 2015, which became a lien against Weller's real estate on that date. Id. ¶¶ 21, 22; see also Iowa Code § 624.24 ().
The second act transitions from remorse to resistance. The facts alleged by the Petition make plain that, from the time immediately following the car accident, Weller desired to reduce his obligation to compensate Kruse for the injuries he caused by hiding or otherwise shielding his assets and sought out professional assistance in doing so. He redoubled these efforts in the months following the personal injury trial which, according to the Petition, continue to the present day.
Shortly after the collision, Weller spoke with his children about his financial concerns stemming from the car accident. Id. ¶ 27. Weller's experience as an insurance agent led him to believe he would face a major lawsuit resulting from his negligence and gave him a prescient warning that he faced a judgment that could put his family farm and other valuable assets at risk. See id. ¶¶ 26–27. Weller's fears were confirmed when he was informed by his insurance company that he would need to retain his own legal counsel to represent him in the personal injury lawsuit because his exposure exceeded his policy limits. Id. ¶ 30.
Accordingly, Weller retained a local "estate planning" attorney shortly after the accident who advised him to transfer his farms and other real estate into a revocable trust and to make cash gifts to family members, which he agreed to do. Id. ¶¶ 31, 32, 25. On March 23, 2012, Weller transferred all of his real estate by quit claim deed into the newly-formed Steven J. Weller Revocable Trust (the "Trust"), of which he was the sole trustor, trustee, and primary beneficiary. Id. ¶¶ 11, 32–33. Weller then made numerous $13,000 cash "gifts" to a number of individuals totaling $104,000, including to his son, daughter, brother, nephew, niece, girlfriend, girlfriend's daughter, and girlfriend's granddaughter, in addition to making significant contributions to his children's college savings funds. Id. ¶ 35. In preparing for pre-trial settlement negotiations in the personal injury action, Weller presented personal financial documents to Kruse that "grossly undervalued Weller's farm property and homestead," forming the basis for settlement offers well below the judgment eventually rendered. See id. ¶¶ 40–44.3 Weller was later advised that these gifts were unlawful fraudulent transfers, and that he should reverse the transactions. See id. ¶¶ 39, 41.
Against this backdrop, the Petition alleges, Weller turned to the Attorney Defendants. See id. ¶ 47. When it became apparent that Kruse would not accept a settlement Weller was willing to offer (one that allowed Weller to keep his farms) and the Trust could not protect his assets as he had been told, Weller sought out additional professional advice. Id. ¶¶ 34, 44–46.
Defendant David M. Repp is an attorney at the Des Moines law firm Dickinson, Mackaman, Tyler & Hagen, P.C. (the "Dickinson Law Firm") (collectively, the "Attorney Defendants"). Id. ¶¶ 3–4. Weller testified in his judgment debtor examination that he sought out Repp because of the threat Kruse's personal injury lawsuit posed to his assets. Id. ¶¶ 47, 82. He was explicit in the reason for retaining Repp: "I went to him because of [Kruse's personal injury] lawsuit." Id. ¶ 47 at 14 (alteration in original). And according to the allegations contained in the Petition, the purpose behind seeking Repp's representation was no secret to his new attorney: Weller told Repp that he had been in an auto accident; that the plaintiff (Kruse) claimed millions of dollars in damages; and that his insurance coverage would likely be exhausted by the claims against him. Id. ¶¶ 47–48. Weller also testified that he told Repp of his previous attempts to shield himself from judgment by transferring ...
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