Lariat Cos. v. Wigley, A17-0210
| Decision Date | 14 September 2020 |
| Docket Number | A17-0210 |
| Parties | Lariat Companies, Inc., Respondent, v. Barbara Wigley, Appellant, Michael Wigley, Defendant. |
| Court | Minnesota Court of Appeals |
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2018).
Affirmed; motion denied
Hennepin County District Court
George E. Warner, Jr., Warner Law, LLC, Minneapolis, Minnesota (for respondent)
Mychal A. Bruggeman, Tiede Grabarski PLLC, White Bear Lake, Minnesota (for appellant)
Considered and decided by Larkin, Presiding Judge; Jesson, Judge; and Bratvold, Judge.
UNPUBLISHED OPINION
On appeal from a judgment in favor of respondent-creditor following a court trial on its claims under the Minnesota Uniform Fraudulent Transfer Act (MUFTA), appellant-wife-transferee argues that the district court abused its discretion by denying her motion (1) for amended findings related to the district court's determination that the challenged transfers were both constructively fraudulent and made with actual intent to hinder, delay, or defraud respondent and (2) to vacate or reduce the judgment under Minn. R. Civ. P. 60.02. Appellant also filed a motion to supplement the record on appeal. We affirm the district court's judgment and deny the motion to supplement the record.
This appeal arises from allegedly fraudulent transfers of assets from Michael Wigley (husband) to his wife, appellant Barbara Wigley (wife).1 Husband is the majority owner of Baja Sol Cantina EP, LLC (Baja Sol), an entity operating a restaurant business in Eden Prairie. On October 8, 2008, Baja Sol entered into a commercial lease with respondent Lariat Companies, Inc. (Lariat). The lease term was for ten years, and husband, as Baja Sol's president, executed it on Baja Sol's behalf. Husband signed a personal guarantee for all of Baja Sol's obligations under the lease.
In June 2010, Baja Sol defaulted on the lease and was evicted from the premises. Lariat subsequently sued husband and Baja Sol for breach of contract, and soughtjudgment, jointly and severally, for unpaid rent and attorney fees and costs. The district court granted Lariat's motion for summary judgment, awarding Lariat $2,224,237 in damages, pre-and-post-judgment interest, and reasonable attorney fees. This court affirmed the district court's judgment in Lariat Companies, Inc. v. Baja Sol Cantina EP, LLC, No. A12-2202 (Minn. App. Aug. 19, 2013).
In the meantime, Home Federal Savings Bank (Home Federal) sued husband in December 2010, related to a Baja Sol equipment lease. Husband subsequently entered into assignment and assumption agreements on March 1, 2011, in which he transferred to wife his interests in Spell Capital Partners Fund II, LP, and Spell Capital Funds III, LP (collectively Spell Capital Funds II and III) to wife. Around the same time, husband removed his name from a joint U.S. Bank account he held with wife.
Husband had negative equity in real property located on Tonkawa Road in Orono, which was encumbered by a mortgage in favor of Bremer Bank N.A. (Bremer Bank). To resolve that debt, husband provided a warranty deed to the Tonkawa Road property to Bremer on March 11, 2011, "as a deed in lieu of foreclosure."
On September 23, 2011, Indianhead Foodservice Distributer Inc. (Indianhead) sued husband to recover $116,452.20, plus late fees, collection costs, and attorney fees, related to foodservice products provided to Baja Sol. Two months later, on November 21, husband was forced into involuntary bankruptcy by his creditors, including Lariat. The next day, Lariat, Bremer Bank, and Home Federal commenced this action against wife, allegingcertain fraudulent transfers in violation of MUFTA, Minn. Stat. §§ 513.41-.51 (2010).2 The complaint alleged that husband had fraudulently transferred funds to wife in an effort to conceal and preserve assets.
Husband's bankruptcy was dismissed on March 7, 2012, after he negotiated settlement with many of his creditors that had forced the involuntary bankruptcy proceeding. Shortly thereafter, in May 2012, Bremer Bank and Home Federal settled their fraudulent-transfer claims against wife. Lariat later amended its complaint to specifically allege that husband fraudulently transferred to wife his ownership interests in the following assets to avoid paying the judgment for Lariat: (1) Great Plains Supply of Sidney Inc.; (2) Spell Capital Funds II and III; (3) Fine Wine Appreciation Funds I and II; (4) a coin collection; and (5) checking and savings accounts.3
Husband and wife testified at trial, as well as expert witnesses for Lariat and the Wigleys. The testimony centered on the alleged transfers of the following assets: (1) Spell Capital Funds II and III; (2) U.S. Bank account; (3) coin collection; (4) wine collection; (5) Wine Funds; and (6) life insurance policies. Evidence was presented that at the time of the transfers, wife's interest in Spell Capital Fund II was $412,258, and her interest in Spell Capital Fund III was $358,533, for a total of $770,791.
Husband claimed that the purpose of transferring Spell Capital Funds II and III was to restore value to wife's estate due to a decline in real estate values. Husband also acknowledged that in 2011, he removed his name from a joint U.S. Bank account he held with wife. Husband further testified that although he did not pay the claims sought by Home Federal, Lariat, and Indianhead because he "disagreed with them" and "didn't believe that they were [his] obligations," wife later used the assets she received in the transfers to pay off debts to Bremer Bank and Home Federal. Evidence was presented that the total amount paid to Home Federal and Bremer Bank to settle their claims was $675,000.
Lariat's expert witness opined that husband became insolvent after he transferred Spell Capital Funds II and III and that, after the transfers, husband's liabilities exceeded his assets by $178,934. Wife's expert witness disagreed with Lariat's expert and claimed that Lariat's expert significantly overstated three of husband's liabilities and understated two of his assets. Specifically, wife's expert opined that husband's liabilities related to the Home Federal claim, Bremer Bank's mortgage on the Tonkawa Road property, and a debt to Wells Fargo related to GPS Hot Springs Partners LLP, were overstated. Wife's expert also opined that Lariat's expert understated husband's interest in two assets: (1) GPS Sidney Equity Interest, and (2) GPS Loan Receivable. Wife's expert testified that, based upon a proper calculation of husband's assets and liabilities, husband was solvent at the time of the transfers.
Following the trial, the district court determined that Lariat failed to establish its fraudulent-transfer claims with respect to (1) the coin and wine collection; (2) the WineFunds; and (3) the life insurance policies. But the district court determined that husband transferred his interests in Spell Capital Funds II and III and the U.S. Bank account to wife, "with actual intent to hinder, delay, or defraud Lariat; without receipt of reasonably equivalent value in exchange for the transfers; and at a time when . . . [husband] was insolvent or became insolvent as a result of the transfers." Thus, the district court concluded that Lariat established a presumption of fraudulent transfer as to Spell Capital Funds II and III, and the U.S. Bank account.
The district court further concluded that the Wigleys failed to rebut the presumption by clear and convincing evidence. In doing so, the district court found the Wigleys' testimony that the transfers were made for estate planning purposes incredible. The district court determined the value of Spell Capital Funds II and III to be $770,791 and the value of the U.S. Bank account to be $24,307, for a total of $795,098. The district court, therefore, entered judgment in favor of Lariat and against the Wigleys "jointly and severally, with statutory interest, costs, and disbursement."
The Wigleys moved for amended findings and to vacate the judgment. But their motion was stayed in February 2014, when husband filed for chapter 11 bankruptcy. After the bankruptcy court confirmed husband's plan of reorganization, wife renewed the motion for amended findings and moved to vacate the judgment.
In December 2016, wife's motion for amended findings and to vacate the judgment was granted in part and denied in part. The district court determined that it had erroneously determined the amount of the U.S. Bank account balance at the time of the transfer and therefore amended the findings to reflect a balance of $10,492.06. But after determiningthat it had properly applied the badges of fraud and the presumption that transfers between spouses are fraudulent, the district court rejected wife's challenge to the finding that husband was insolvent at the time of the transfers. In addition, the district court determined that it had properly weighed the equities with respect to the judgment against wife. Lastly, the district court concluded that husband's bankruptcy discharge did not merit vacating the judgment against wife.
Wife filed for chapter 11 bankruptcy, and she later appealed the denial of her motion for amended findings and to vacate the judgment. This court stayed wife's appeal in light of her pending bankruptcy proceeding.
On June 20, 2018, the stay of appeal was dissolved. After briefing was complete, wife filed a motion to supplement the record with a supplemental addendum. Lariat opposed the motion.
On November 9, 2018, a bankruptcy appellate panel determined that Lariat's claim against wife must be disallowed. In re Wigley, 593 B.R. 327, 331 (B.A.P. 8th Cir. 2018). This court subsequently granted wife's motion to stay the appeal again, concluding that "[a]lthough it is not clear that any final bankruptcy decision regarding Lariat's claim would be self-implementing or have a direct impact on the state court judgment that is the...
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