Ohio

Warning: The following opinion is provided for purposes of discussion only. We have not Shepardized™ this opinion, and do not know the subsequent disposition of this case nor whether the effect of the opinion has been overruled or superceded by other law.

Terry Wooten v. Robert F. Kreischer et al.,
2005 Ohio 4078 (Ohio App. 08/03/2005)

Case No. 04-CA-13

COURT OF APPEALS OF OHIO, FIFTH APPELLATE DISTRICT, PERRY COUNTY

2005 Ohio 4078;2005 Ohio App. LEXIS 3719

August 3, 2005, Date of Judgment Entry

PRIOR HISTORY: [*1] CHARACTER OF PROCEEDING: Civil Appeal From Perry County Court of Common Pleas Case 03-CV-00300. State v. Kreischer, 2004 Ohio 6854, 2004 Ohio App. LEXIS 6713 (Ohio Ct. App., Perry County, Dec. 16, 2004)

COUNSEL: For Plaintiff-Appellee: PAUL R. PANICO, Columbus, OH.

For Defendants-Appellants: RICHARD M. LEWIS, JILL H. SHRIVER, Jackson, OH.

JUDGES: Sheila Farmer, P.J., John Wise, J., Julie Edwards, J. By: Edwards, J. Farmer, P. J. and Wise, J. concur.

OPINIONBY: Julie Edwards

OPINION: Edwards, J.

Defendant-appellant Robert Kreischer appeals from the June 18, 2004, Entry of the Perry County Court of Common Pleas.

STATEMENT OF THE FACTS AND CASE

Appellant Robert Kreischer assaulted appellee Terry Wooten on May 28, 2000. Subsequently, on January 22, 2001, appellant Robert Kreischer was convicted of felonious assault and ordered to pay restitution in the amount of $ 9,163.16 to appellee. Pursuant to an Opinion filed on January 23, 2002, in State v. Kreischer, Perry App. No. 01-CA-04, 2002 Ohio 357, this Court affirmed appellant's conviction, but held that the evidence did not support a restitution award of $ 9,163.16. The matter was then remanded to the trial court for a new hearing on restitution. n1

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n1 Upon remand, the trial court ordered appellant to pay a total of $ 37,369.99 in restitution ($ 17,046.07 to appellee Wooten and $ 20,323.92 to Blue Cross/Blue Shield). Pursuant to an Opinion filed on December 16, 2004, in State v. Kreischer, Perry App. No. 03CA20, 2004 Ohio 6854, this Court remanded the matter to the trial court with directions to enter an award of restitution of $ 20,323.92 to Blue Cross/Blue Shield and $ 2,481.31 to appellee for out-of-pocket medical expenses. The Ohio Supreme Court allowed an appeal of both 2002 Ohio 357 and 2004 Ohio 6854. See State v. Kreischer, 105 Ohio St.3d 1498, 2005 Ohio 1666, 825 N.E.2d 622.

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On August 27, 2003, appellee filed a complaint against appellant and James Ponsart in the Perry County Court of Common Pleas. Appellee, in his complaint, alleged that after appellant was charged but before he was convicted of felonious assault, he transferred his interest in specific real property to James Ponsart, a friend, and that such transfer was a fraudulent conveyance. Appellee, in his complaint, sought relief pursuant to R.C. 1336.07.

Thereafter, the following evidence was adduced at the bench trial on April 21, 2004.

At trial, James Ponsart testified that, in 1995, he and appellant purchased approximately 18.4 acres of vacant land in Perry County, Ohio, from Howell Investments for the purchase price of $ 10,000.00. At the time of the purchase, the April 7, 1995, deed for the property was put in appellant's name only, although Ponsart considered himself half owner of the property. On or about April 6, 1995, Ponsart had given Mary Kreischer, appellant's wife, a $ 5,000.00 cashier's check made payable to her for his half of the property. Ponsart obtained such money after taking out a loan with Metropolitan Savings [*3] Bank of Cleveland.

Both Ponsart and appellant then started building cabins on the property. The two had an understanding that, if either one decided to sell his interest, "we would definitely...offer it to the other person, buy the other one out if one of us ever changed our minds [about selling]..." Transcript at 45.

On May 28, 2000, appellant assaulted appellee and, as a result, was charged with felonious assault in the Perry County Court of Common Pleas. Pursuant to a quitclaim deed dated September 18, 2000, appellant conveyed his interest in the subject property to Ponsart for $ 10,000.00 in cash, which he considered a fair price. Appellant testified, via a trial deposition, that he decided to sell his interest in the property at his wife's suggestion because he needed money for legal fees. While appellant hated to get rid of the property, he testified that neither his wife nor his kids wanted to go to the property any more because of the assault, so it made sense to sell the same. When asked how he arrived at the $ 10,000.00 sale price, appellant indicated that he "wanted to get out of it what I put into it, $ 5,000 for the property and $ 5,000 for the [*4] materials in the cabin." Appellant's Trial Deposition at 23. Appellant did not include labor in the purchase price since Ponsart, an experienced carpenter, had helped him build the cabin and he did not believe that it would be fair to charge Ponsart for his own labor. When asked, appellant testified that he did not become insolvent or bankrupt as a result of selling the real estate.

At the bench trial, Ponsart testified that he believed that he had received a bargain since he only paid appellant $ 10,000.00 for the property and believed the property was worth $ 34,000.00. Ponsart further testified that he placed an ad in the local paper and tried to sell 6.42 acres, which is approximately a third of the original 18.4 acres, and his original cabin to Gary McNulty for $ 20,000.00. According to Ponsart, the cabin was nearly completed and only needed carpeting.

Appellant further testified, in his trial deposition, that, after he signed the deed over to Ponsart on September 18, 2000, he returned to the subject property in June of 2003 with a reporter and a photographer from the Cleveland Plain Dealer to take pictures n2 and that he went one other time to get his [*5] belongings. Appellant also testified that he was on the property a third time in September of 2003. Appellant denied attempting to control the land after signing the deed over to Ponsart. On cross-examination, appellant testified that, as of the date of his conviction for assault on January 22, 2001, he owned a pickup truck worth approximately $ 3,000.00 that was paid for, a trailer worth $ 500.00 that was paid for, and "that's it." Appellant's Trial Deposition at 37. Appellant answered in the affirmative when asked whether the truck and trailer were the only two assets in his possession as of January 22, 2001. Appellant further testified that, at the time he signed the deed to Ponsart, he was employed and earning $ 1,000.00 a week and was current on all of his debts.

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n2 According to appellant, the Plain Dealer was "doing a story on how I was railroaded here with this felonious assault." Appellant's Trial Deposition at 43.

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Appellant further testified that he had a marital residence that was acquired [*6] in 1996. However, appellant's name was not on the title to the same since, when appellant and his wife refinanced the house early in 2000 to get a lower interest rate, the house was just put in his wife's name. While appellant, on January 22, 2001, the date of his conviction, was employed by G.Q. Contracting Company and participated in its 401(K) plan, he testified that he had not vested as of January 22, 2001, and did not know the balance in his account. Appellant testified that he believed the plan was started in 2000.

On cross-examination, appellant further testified that he believed he received a fair value when he transferred the property to Ponsart in September of 2000 and that his wife signed a deed in March of 2001 transferring an interest to Ponsart because when "Jim [Ponsart] went down there to try to transfer the property...they wouldn't let him without her signature." Appellant's Trial Deposition at 42.

At the bench trial, Mary Kreischer, appellant's wife, testified. Mary Kreischer testified that appellant received $ 10,000.00 for selling the property and that Ponsart paid for the same in one hundred and fifty dollar bills in a white envelope. [*7] She testified that she put the money in a lockbox secured to the floor of her house and used the money for lawyer's fees, bonds and general household needs. The following testimony was adduced when Mary Kreischer was asked whether she had any other assets as of September of 2000, after appellant transferred the subject property to Ponsart:

"Q. ...Did you have any other assets as of September of 2000, after the transfer of the property?

"A. Did I?

"Q. Yeah.

"A. Yes, I did. My home.

"Q. Okay. Did your husband have any other assets?

"A. He had a pickup truck and a trailer.

"Q. Okay, Do you recall the testimony at your husband's restitution hearing, where he said this guy does not deserve restitution, referring to Mr. Wooten? He then went on to say, I've spent our entire life savings and had to sale [sic] everything I own and still tens of thousands of dollars in debt because of his lies. Do you remember that?

"A. Uh-huh...

"Q. As of September of 2000 did your husband have any funds?

"A. As of September of 2000?

"Q. Uh-huh.

"A. Yes. [*8]

"Q. But didn't you just tell me you didn't know what he had? Where he keep [sic] his money?

"A. We had a joint checking account and we had the fire box.

"Q. The fire box where the 10,000 was?

"A. Uh-huh.

"Q. Do you have any receipt for this 10,000?

"A. Do I have a receipt?

"Q. Yeah.

"A. No.

"Q. Okay. There was never any 10,000, was there?

"A. There was $ 10,000. It's not every day you get handed $ 10,000, Mr. Panico." Transcript at 95-97.

On cross-examination, Mary Kreischer testified that she and appellant owned a house in September of 2000 and that they had equity in the house. She further testified that she owed a small amount of credit card debt in September of 2000 and had no other fixed debts other than the house mortgage.

Marsha Wilson, a friend of appellee's, also testified at the bench trial. Wilson testified that she met appellant, who appellee had pointed out to her on previous trips to Perry County, in June or July of 2001 when he came up to her, told her that he was the property owner and told her that she was trespassing [*9] on his land. Wilson testified that she knew that this occurred in June or July of 2001 since her friend who had helped her put the quail down there with her had died the previous year, "so this was the first year that I went by myself." Transcript at 81. Wilson showed appellant a permission slip signed by appellee giving her permission to be on Wooten's property.

Testimony also was adduced that, prior to September 18, 2000, appellee asked appellant to reimburse him for medical expenses and lost wages related to the assault.

At the conclusion of the trial, the trial court, as memorialized in an Entry filed on June 18, 2004, held as follows: "this Court finds that the intent of the transfer [to Ponsart] was to hinder, delay or defraud Wooten [appellee] out of his claim, determines said transfer to be fraudulent and hereby orders the same to be set aside."

Appellant now raises the following assignments of error on appeal:

"THE COURT ERRED IN FINDING THE TRANSFER OF KREISCHER'S INTEREST IN THE REAL ESTATE TO PONSART TO BE FRAUDULENT SO AS TO REQUIRE THAT THE TRANSFER BE SET ASIDE.

"THE TRIAL COURT ERRED IN ITS FINDINGS [*10] OF FACT RELATING TO THE 'BADGES OF FRAUD' SET FORTH IN R.C. 1336.04(B).

"THE COURT ERRED IN CONCLUDING WOOTEN WAS A CREDITOR WITHIN THE MEANING OF THE FRAUDULENT TRANSFER ACT."

I, II

Appellant, in his first two assignments of error, argues that the trial court erred in holding that appellant's transfer of the property to Ponsart was fraudulent and in ordering the same to be set aside. We agree.

Appellant's assignments of error challenge the trial court's decision as being against the manifest weight of the evidence. A judgment supported by some competent, credible evidence will not be reversed by a reviewing court as against the manifest weight of the evidence. C.E. Morris Co. v. Foley Construction Co. (1978), 54 Ohio St.2d 279, 376 N.E.2d 578. An appellate court must not substitute its judgment for that of the trial court where there exists some competent and credible evidence supporting the judgment rendered by the trial court. Myers v. Garson (1993), 66 Ohio St.3d 610, 1993 Ohio 9, 614 N.E.2d 742.

The Ohio Uniform Fraudulent Transfer Act, R.C. Chapter 1336, creates a [*11] right of action for a creditor to set aside an allegedly fraudulent transfer of assets. Revised Code 1336.04 states, in relevant part, as follows: "(A) A transfer made or an obligation incurred by a debtor is fraudulent as to a creditor, whether the claim of the creditor arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation in either of the following ways:

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

"(2) Without receiving a reasonably equivalent value in exchange for the transfer or obligation, and if either of the following applies:

"(a) The debtor 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;

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

The issue concerning fraudulent intent is to be determined based upon the facts and circumstances of [*12] each case, and "the burden of proof in an action to set aside a fraudulent conveyance must be affirmatively satisfied by the complainant." Stein v. Brown (1985), 18 Ohio St.3d 305, 308, 18 Ohio B. 352, 480 N.E.2d 1121. However, in order "to succeed on a fraudulent transfer claim, a creditor need not prove the elements of common-law fraud." Lesick v. Medgroup Mgt., Inc. (Oct. 29, 1999), Hamilton App. No. C-990097, 1999 Ohio App. LEXIS 5049, 1999 WL 979136 at 4. Because of the difficulty in obtaining direct proof of fraudulent intent, "courts have recognized certain 'badges' or indicia of fraud, circumstances which usually or frequently attend a conveyance designed to hinder, delay, or defraud a creditor, which in concert with other suspicious circumstances, are considered sufficient to prove fraudulent intent." Barbee Concrete Constr. v. Bachinski Builders, Inc. (Nov. 20, 1997), Franklin App. No. 97APE03-397, 1997 Ohio App. LEXIS 5221, 1997 WL 723195 at 3.

R.C. 1336.04(B) sets forth several of the well-established "badges" of fraud, and states as follows:

In determining actual intent under division (A)(1) of this section, consideration may be given to [*13] all relevant factors, including, but not limited to, the following:

"(1) Whether the transfer or obligation was to an insider;

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

"(3) Whether the transfer or obligation was disclosed or concealed;

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

"(5) Whether the transfer was of substantially all of the assets of the debtor;

"(6) Whether the debtor absconded;

"(7) Whether the debtor removed or concealed assets;

"( Whether 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) Whether the debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred;

"(10) Whether the transfer occurred shortly before or shortly after a substantial debt was incurred;

"(11) Whether the debtor transferred the essential assets of the business [*14] to a lienholder who transferred the assets to an insider of the debtor."

If a creditor established a sufficient number of badges of fraud with regard to a transfer, the burden of proof shifts to the defendant to show that the transfer was not fraudulent. See Cardiovascular & Thoracic Surgery of Canton, Inc. v. DiMazzio (1987), 37 Ohio App.3d 162, 166, 524 N.E.2d 915.

Appellant, in his brief, argues that the trial court erred in finding that the transfer was fraudulent since there is no evidence that appellant was insolvent at the time of the transfer nor that he became insolvent due to the transfer. We agree. R.C. 1336.02 states, in relevant part, as follows: "(A)(1) A debtor is insolvent if the sum of the debts of the debtor is greater than all of the assets of the debtor at a fair valuation.

"(2) A debtor who generally is not paying his debts as they become due is presumed to be insolvent."

A plaintiff bears burden of proof with respect to issue of insolvency under Ohio's Uniform Fraudulent Conveyance Act. See In re Gabor (Bkrtcy.N.D.Ohio 2002) 280 B.R. 149.

[*15] Upon our review of the evidence, we find that there was no evidence that appellant was insolvent at the time of the transfer of the property to Ponsart or that he became insolvent due to the transfer. Testimony was adduced at the bench trial that appellant owned a truck and trailer with a combined value of $ 3,500.00 as well as furniture, tools and other household items. Testimony also was adduced that, other than their home mortgage, appellant and his wife had little credit card or other debt. At the bench trial, appellant's wife testified that the couple had equity in their house, which they had recently refinanced. The amount of equity is unknown from the record. At the bench trial, appellant's wife testified that the couple made their house payments in 2001 as well as their car payment. n3 Both appellant and his wife testified that, as a result of selling the property to Ponsart, they never became insolvent. Testimony was also adduced that appellant earned $ 45,244.00 in 2001 and $ 54,114.00 in 2002. Based on the foregoing, we find that appellee did not meet his burden of showing that appellant was insolvent. In short, there was no evidence that, at or around the time of the transfer, [*16] the sum of appellant's debts was greater than all of his assets or that appellant was not paying his bills as they became due. n4

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n3 The car was paid off in 2003.

n4 As noted by appellant, while appellant may have been insolvent in September of 2003 when the restitution hearing was held, the issue is whether appellant was insolvent at the time of the transfer of the property to Ponsart in September of 2000 or became insolvent due to such transfer.

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We further find that, based on the foregoing, the trial court erred in holding that the transfer of the property to Ponsart was substantially a transfer of all of appellant's assets.

We further find that there was not competent and credible evidence that the transfer was made to an insider. R.C. 1336.01 states, in relevant part, as follows:

"(G) "Insider" includes all of the following:

"(1) If the debtor is an individual, any of the following:

"(a) A relative of the debtor [*17] or of a general partner of the debtor;

"(b) A partnership in which the debtor is a general partner;

"(c) A general partner in a partnership described in division (G)(1)(b) of this section;

"(d) A corporation of which the debtor is a director, officer, or person in control."

The trial court, in the case sub judice, specifically cited R.C. 1336.01(G)(1)(a) in finding that the transfer to Ponsart was to an insider. However, there is no evidence in the record that Ponsart was appellant's relative. Furthermore, at the bench trial, Ponsart testified that it was never his intention to form a partnership n5 for profit with appellant with respect to the land and, during his trial deposition, appellant testified that the two never bought the land intending to make a profit. As noted by appellant, there was no evidence to the contrary. While the trial court, in its decision, stated that at the criminal restitution hearing on September 3, 2002 appellant identified Ponsart as his "partner", upon our review of the transcript of such hearing, we find no such reference.

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n5 R.C. 1775.05(A) defines a partnership as "an association of two or more persons to carry on as co-owners a business for profit..." R.C. 1775.06(B) states that joint property, common property, or part ownership of property "does not itself establish a partnership, whether such co-owners do or do not share any profits made by the use of property."

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Based on the foregoing, we find that the trial court erred in setting aside the conveyance as fraudulent since there was not sufficient badges of fraud establishing that the transfer was fraudulent.

Appellant's first and second assignments of error are, therefore, sustained.

III

Based on the foregoing, appellant's third assignment of error is moot.

Accordingly, the judgment of the Perry County Common Pleas Court is reversed and this matter is remanded to the trial court for further proceedings.

By: Edwards, J.

Farmer, P. J. and Wise, J. concur

JUDGMENT ENTRY

For the reasons stated in our accompanying Memorandum-Opinion on file, the judgment of the Perry County Court of Common Pleas is reversed, and this matter is remanded to the trial court for further proceedings. Costs assessed to appellee.

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