Schempp v. Lucre Management Group, LLC, 02CA0731.

• Decision Date: 03 July 2003
• Docket Number: No. 02CA0731.,02CA0731.
• Parties: Hans-Martin SCHEMPP, Plaintiff-Appellant, v. LUCRE MANAGEMENT GROUP, LLC and Richard L. Rollings, Defendants-Appellees.
• Court: Colorado Court of Appeals

75 P.3d 1157

Hans-Martin SCHEMPP, Plaintiff-Appellant, v. LUCRE MANAGEMENT GROUP, LLC and Richard L. Rollings, Defendants-Appellees.

No. 02CA0731.

Colorado Court of Appeals, Div. IV.

July 3, 2003.

Kennedy & Kennedy, P.C., Cynthia T. Kennedy, Lafayette, Colorado, for Plaintiff Appellant.

Samson, Pipis & Marsh, LLC, Richard A. Marsh, Longmont, Colorado, for Defendants Appellees.

Opinion by Judge NIETO.

In this action under the Colorado Uniform Fraudulent Transfer Act (CUFTA), § 38-8-101, et seq., C.R.S.2002, plaintiff, Hans-Martin Schempp, appeals the judgment entered in favor of defendants, Lucre Management Group, LLC and Richard L. Rollings. We affirm.

Plaintiff held a judgment against Helmut Schaal, who is not a party to this action. Plaintiff registered the judgment in Adams County District Court as a foreign judgment. Plaintiff then commenced this action after Schaal sold ten office condominium units to defendants in 1996. Plaintiff asserted that Schaal did not receive a reasonable equivalent value in exchange for the property and that the property was transferred to Lucre with actual intent to hinder, delay, or defraud Schaal's creditors.

A trial to the court was held, and the court dismissed plaintiff's claims on defendants' motion at the conclusion of plaintiff's case. Plaintiff appealed, and a division of this court reversed the dismissal order and remanded the case to the trial court for further proceedings. See Schempp v. Lucre Mgmt. Group, LLC, 18 P.3d 762 (Colo.App. 2000)(Schempp I)

.

After a second trial, in which the parties presented additional testimony and evidence, the court found that Lucre paid reasonably equivalent value for the units and therefore plaintiff was not entitled to recover pursuant to §§ 38-8-105(1)(b) or 38-8-106(1), C.R.S. 2002. The court further found that plaintiff was not entitled to recover under § 38-8-105(1)(a), C.R.S.2002, because he failed to prove that Rollings or Schaal made the transfer with the actual intent to hinder, delay, or defraud creditors. The court discharged the receivership concerning the units and ordered that they be returned to Lucre. This appeal followed.

I.

As a preliminary matter, we address defendants' contention that this appeal is now moot because plaintiff, through a company that he owns, purchased the units at a foreclosure sale in 2001. Defendants allege facts outside the record to show mootness, and the record has not been supplemented to support these factual allegations. Further, they do not cite any legal authority in addressing this issue. Therefore, we conclude that the issue has not been adequately briefed, and we do not consider it. See Westrac, Inc. v. Walker Field, 812 P.2d 714 (Colo.App.1991)

(counsel must inform the court as to the specific errors relied upon, supporting facts in the record, and legal authority supporting claims).

II.

Plaintiff contends that the trial court clearly erred in its factual findings concerning the factors in § 38-8-105(2), C.R.S.2002, and in its ultimate conclusion that neither Schaal nor Rollings transferred the units with the intent to hinder, delay, or defraud creditors. We disagree.

Section 38-8-105(1)(a) provides that a transfer is fraudulent as to a creditor if the debtor made the transfer with actual intent to hinder, delay, or defraud any creditor. Section 38-8-105(2) provides a number of factors that may be considered in determining actual intent under § 38-8-105(1)(a). These factors, or "badges of fraud," are used because the intent to hinder, delay, or defraud creditors is seldom susceptible of direct proof. "While a single badge of fraud may only create suspicion of fraud, several badges of fraud considered together may infer intent to defraud." Schempp I, supra, 18 P.3d at 764.

"[F]or purposes of CUFTA, the intent of the transferee can be imputed to the debtor when the transferee is in a position to dominate or control the disposition of the debtor's property." Schempp I, supra, 18 P.3d at 765.

Whether a debtor intended to hinder, delay, or defraud creditors is a question of fact. Thus, we determine whether there is evidentiary support for the trial court's findings. The credibility of witnesses and the sufficiency, probative effect, and weight of the evidence are committed to the sound discretion of the trial court. On review, we must view the record in the light most favorable to the judgment. Silverberg v. Colantuno, 991 P.2d 280 (Colo.App.1998). The trial court's factual findings must be accepted unless they are so clearly erroneous as to find no support in the record. Tiger v. Anderson, 976 P.2d 308 (Colo.App.1998).

The trial court considered each of the factors in § 38-8-105(2), and plaintiff challenges the findings on all factors except those relating to § 38-8-105(2)(a), where the court found that the transfer to Lucre and Rollings was to an insider; § 38-8-105(2)(f), where the court found that Schaal had absconded; and § 38-8-105(2)(k), which the court found to be inapplicable. We address each challenged finding in turn.

A. Section 38-8-105(2)(b)

The trial court found that Schaal did not maintain possession or control of the units following the transfer. Plaintiff contends that this finding is erroneous because Rollings, who is Schaal's agent, retained possession, and Rollings's possession of the units should be imputed to Schaal. We are not persuaded.

Initially, we reject plaintiff's assertion that the division in Schempp I mandated that the trial court collapse the debtor and his agent when determining whether to impute the transferee's intent to the debtor. The division in Schempp I held only that the intent of the transferee may be imputed to the debtor, not that the transferee's intent is interchangeable or synonymous with the debtor's intent.

Plaintiff does not allege that defendants' retention of the property allowed Schaal to retain any degree of possession or control over the units, nor does he explain how defendants' retention of the property indicates the fraudulent intent of Schaal. Thus, we conclude that the trial court did not err in finding that this factor was not established.

B. Section 38-8-105(2)(c)

The trial court found that the transfer was not concealed. Plaintiff contends that the trial court erred because there was evidence that Rollings concealed the nature of the transaction from Schaal. We disagree.

This factor, by its plain language, addresses whether the transaction was concealed generally. See In re Thomason, 202 B.R. 768 (Bankr.D.Colo.1996)

(transfer was concealed where assignment was never recorded in the public records or revealed to trustee and creditors of defendant); see also Walton v. First Nat'l Bank, 13 Colo. 265, 277, 22 P. 440, 444 (1889)("an agreement between the party giving and the party receiving... an instrument that it shall be kept from the public, or that it shall not be entered of record for an unreasonable or indefinite time, is one of the strongest badges of fraud").

While plaintiff cites to evidence that Rollings sought to conceal the nature of the transaction, plaintiff does not contest the court's findings that the transfer here was not concealed generally, that the purchase agreement discloses that Rollings was the manager of Lucre, and that the transaction was recorded. Thus, we conclude that the trial court properly found that concealment was not established.

C. Section 38-8-105(2)(d)

The trial court found that while Schaal had been sued prior to the transfer in question, there was evidence that he had substantial assets that reduce the significance of these lawsuits. Plaintiff contends that the court erred in considering mitigating circumstances rather than simply concluding that the factor favored plaintiff.

However, the list of factors in § 38-8-105(2) is not exclusive, and a court should evaluate all the relevant circumstances in considering the factors. "Thus the court may appropriately take into account all indicia negativing as well as those suggesting fraud...." Section 38-8-105 cmt. 6. Therefore, we perceive no error by the trial court in considering this evidence.

D. Section 38-8-105(2)(e)

The court found that the transfer did not dispose of substantially all of Schaal's assets because Schaal held significant assets following the transfer. Plaintiff argues that the only evidence before the trial court to support this finding was Rollings's testimony concerning Schaal's assets and that it was improper for the court to rely on this testimony because it was not based on actual knowledge of Schaal's ownership interests. However, Rollings testified that he was an accountant for Schaal and had knowledge of Schaal's assets. He further testified that in 1995, Schaal was a director and substantial shareholder of certain entities, and that after the transfer at issue here, those entities sold real property for a total of $2,740,000. He further testified that in 1995 the property had no mortgage debt.

Therefore, there is evidence to support the trial court's finding that the transfer did not include substantially all of Schaal's assets.

E. Section 38-8-105(2)(g)

The court found that the evidence did not show that Schaal removed or concealed assets. Plaintiff argues that the transfer of the units to Lucre constitutes removal of Schaal's assets from his creditors. Plaintiff's argument assumes that the transfer to Lucre was fraudulent. It would be improper for the court to assume that the transfer was fraudulent and then use that assumption in weighing one of the factors used to determine whether the transfer was fraudulent.

Further, as the trial court found, the transfer was not concealed and was recorded. Plaintiff does not explain how the sale constituted concealment of assets by Schaal. To the extent that plaintiff argues that the court erred in finding otherwise, we reject his argument.

F. Section 38-8-105(2)(h)

The trial court found that plaintiff failed to prove that the $94,000...