Stafford v. McCarthy

• Citation: 825 S.W.2d 650
• Decision Date: 09 March 1992
• Docket Number: No. 17249,17249
• Parties: Jess STAFFORD, Plaintiff-Respondent, v. Donald L. McCARTHY, Defendant, and Pat McCarthy, Defendant-Appellant.
• Court: Court of Appeal of Missouri (US)

Page 650

825 S.W.2d 650

Jess STAFFORD, Plaintiff-Respondent, v. Donald L. McCARTHY, Defendant, and Pat McCarthy, Defendant-Appellant.

No. 17249.

Missouri Court of Appeals,

Southern District,

Division One.

March 9, 1992.

Richard L. Schnake, Neale, Newman, Bradshaw & Freeman, Springfield, Ralph W. Gilchrist, Bolivar, for defendant-appellant.

Kerry D. Douglas, Verna Lee Haun, Douglas, Lynch, Munton & Haun, P.C., Bolivar, for plaintiff-respondent.

CROW, Judge.

This case (number CV789-35CC in the trial court) involves an allegedly fraudulent transfer by Donald L. McCarthy ("Don") to his wife, Patsy Jean McCarthy ("Pat"), of his interest in a partnership. The trial court awarded Jess Stafford ("Plaintiff") a money judgment against Pat. She appeals, presenting three assignments of error.

The issues we must resolve are easier addressed after a recital of the extensive and intricate facts. In narrating them, we honor the rule that on review, an appellate court accepts as true the evidence and inferences from it favorable to the trial court's judgment and disregards contrary evidence. T.B.G. v. C.A.G., 772 S.W.2d 653, 654 (Mo. banc 1989). Any fact issue on which no finding was made is considered to have been found in accordance with the judgment. Id. at 654. Credibility of the witnesses and the weight to be given their testimony was a matter for the trial court, which was free to believe none, part, or all of the testimony of any witness. Herbert v. Harl, 757 S.W.2d 585, 587 (Mo. banc 1988).

On December 16, 1985, in case number CV785-127CC styled "Jess Stafford, d/b/a Stafford Insurance Company, Plaintiff, vs. Donald L. McCarthy et al., Defendants," the Circuit Court of Polk County rendered judgment for Plaintiff and against Don for $8,005.03, together with interest "at 9% from December 13, 1984," and an $800.50 attorney fee plus interest from date of judgment "at 9% per annum."

On January 24, 1986, Don signed a "Lease Agreement" with Venture Drilling, Inc. ("Venture"), a corporation owned by his brother, Wayne. By the agreement, Don leased from Venture two pieces of equipment: (1) a drilling rig and a 1972 International truck on which the rig was mounted, and (2) a "tool truck." The agreement required Don to pay Venture: (a) an initial sum of $41,203 by cancelling a promissory note owed by Venture to Don, and (b) thirty-six monthly installments of $938. The agreement provided that title to the equipment remained with Venture. Although not spelled out in the agreement, it was the understanding of the parties that when all lease payments had been made, both pieces of equipment would belong to Don.

Don took possession of the equipment and used it in his well drilling business, McCarthy Drilling Company.

On August 8, 1986, Don married Pat. According to Don, when they married she "put" about $10,000 into McCarthy Drilling. The funds were used for "operating expense." Don recounted that after the marriage, he and Pat operated McCarthy Drilling as "a husband and wife operation."

Shortly after the marriage, Venture requested Pat to sign the Lease Agreement. She did, and her name was added as a lessee. With this addition, the agreement showed the lessee as: "Donald L. McCarthy & Patsy J. McCarthy, Husband & Wife." Pat testified she understood this made her "jointly liable" with Don for the lease payments.

According to Pat, from and after August 28, 1986, all lease payments were made from a "husband and wife" bank account "jointly owned" by her and Don.

Don testified that after Pat's name was added to the lease, the understanding was that when all lease payments had been made both pieces of equipment would become his and Pat's "as husband and wife."

The 1987 United States income tax return filed by Don and Pat showed a deduction for depreciation on a drill rig with a "basis for depreciation" of $33,797.

On January 15, 1988, the Circuit Court of Polk County held a hearing in CV785-127CC on Plaintiff's "Application for Order Charging Interest of Debtor Partner with Payment of Unsatisfied Amount of Judgment." The application was made per § 358.280, RSMo 1986, which reads, in pertinent part:

1. On due application to a competent court by any judgment creditor of a partner, the court ... may charge the interest of the debtor partner with payment of the unsatisfied amount of such judgment debt....

....

At the conclusion of the hearing, the court found a partnership then existed between Don and Pat known as McCarthy Drilling Company and that Don's interest "is subject to a charging order."

On January 20, 1988, five days after the hearing, Don and Pat signed an "Agreement to Dissolve Partnership" providing, in pertinent part:

Whereas, the parties commenced a business known as MCCARTHY DRILLING in June of 1986, and whereas, the parties were married August 8, 1986 and there after [sic] sought to continue said business, and whereas, the parties derive [sic] to mutually agree to dissolve any interest in such business, which could be designated as a partnership interest, and whereas, [Pat] contributed TEN THOUSAND ... DOLLARS to commence said business, and has never been repaid said amount as originally agreed between the parties.

Now therefore, it is mutually agreed between the parties, that any and all partnership interests between the parties be and are hereby dissolved.

It is further agreed that any and all partnership assets due [sic] of a value of less than TEN THOUSAND DOLLARS, and that [Don] assigns assets over, and transfers to [Pat], all his rights, title, and whereas in and to said partnership, and partnership assets to [Pat] in satisfaction of his obligation on the indebtedness owed by such partnership to [Pat].

It is further understood, and agreed between the parties that the business shall be conducted in record with its operation as a husband and wife sole proprietorship as shown by the lease of a DRILLING RIG, TOOL TRUCK, TOOLS AND EQUIPMENT, and in accordance with a tenents [sic] by the entirety business bank account.

That ... in satisfaction of the partnership obligation to [Pat] of said TEN THOUSAND ($10,000.00) no partnership assets of interest remains to be accounted for in dissolution.

....

On February 23, 1988, the Circuit Court of Polk County entered an order in CV785-127CC based on its findings at the January 15, 1988, hearing. The order provided, in pertinent part:

On January 15, 1988 ... Donald McCarthy and Pat McCarthy appear in person and by Attorney.... Plaintiff appears by Attorney....

WHEREUPON, evidence is adduced by both parties. After seeing and hearing the same ... the Court finds as follows:

....

2. That Donald McCarthy and Pat McCarthy are partners in a partnership known as McCarthy Drilling Company.

3. That Plaintiff has received a judgment against Defendant Donald L. McCarthy in the amount of Eight Thousand Five and 03/100 Dollars ... principal; interest at nine percent ... per annum from December 13, 1984; and attorneys fee of Eight Hundred and 50/100 Dollars.... The judgment remains unsatisfied.

4. That the interest of Donald McCarthy in the partnership of McCarthy Well Drilling is subject to a charging order as provided by law.

WHEREFORE, IT IS ORDERED, ADJUDGED AND DECREED ... that Donald McCarthy and Pat McCarthy are partners in a partnership known as McCarthy Drilling Company.

IT IS FURTHER ORDERED, ADJUDGED AND DECREED ... that the

interest of Donald McCarthy in such partnership is hereby charged with Plaintiff's judgment under ... Section 358.280 RSMo.

The record demonstrates no appeal was taken from the above order.

Don and Pat continued to operate McCarthy Drilling as before, with Don "managing the day-to-day operations."

On September 12, 1988, the Circuit Court of Polk County entered an order in CV785-127CC directing issuance of an execution against Don's interest in the "partnership of McCarthy Well Drilling." An execution issued per that order bears a sheriff's return dated November 16, 1988, reciting a "failure to find anything to levy upon."

The 1988 United States income tax return filed by Don and Pat showed a deduction for depreciation on a drill rig with a "cost" of $33,797.

On March 8, 1989, Plaintiff commenced the instant action (number CV789-35CC) in the Circuit Court of Polk County. His petition averred, in pertinent part, that by the agreement of January 20, 1988, Don purported to convey his interest in the partnership, McCarthy Drilling Company, to Pat, but Don continued to own and control his interest. The petition further pled:

12. [Don's] interest ... was conveyed to ... Pat ... for the purpose of hindering, delaying, defrauding and defeating Plaintiff in the collection of the judgment [in CV785-127CC].

13. ....

14. [Don] owns no other property except property owned in tenancy by the entirety.

15. Unless the property aforesaid can be reached and applied to the payment of Plaintiff's judgment, the judgment will remain unpaid.

16. Plaintiff has no adequate remedy at law.

WHEREFORE, Plaintiff ... prays for a decree that [Don's] conveyance of his partnership interest to his wife ... Pat ... be adjudged fraudulent and void as against Plaintiff; that the partnership interest be adjudged to be the property of [Don]; that the partnership interest be ordered ... sold for the satisfaction of Plaintiff's judgment, and that Defendants ... in the meantime be enjoined and restrained from disposing of said property, or paying out any of the proceeds thereof....

Don and Pat submitted a financial statement dated May 22, 1989, to a Bolivar bank. A list of assets in the statement included a drill rig valued at $75,000 and a tool truck valued at $15,000.

According to Don and Pat, the final payment to Venture on the Lease Agreement was made in either June or July, 1989. Venture thereupon transferred "title" to both pieces of equipment to Don and Pat "as husband and wife."

On January 8, 1990, the trial court set the instant case for trial June 25,...