FT - Mied, Inc. v. Summit Healthcare, Inc. (7/18/2003)

[Riser Adkisson LLP]

Mied Inc. et al. v. Summit Healthcare, Inc.,
849 So. 2d 397 (Fla.App. 07/18/2003)

28 Fla. L. Weekly D 1443

MIED, INC., J.E. CARTER, JR., ANNE S. CARTER, JOE E. COWART and EDITH COWART,
Appellants, v. SUMMIT HEALTHCARE INC., Appellee.

CASE NO. 4D02-3042

COURT OF APPEAL OF FLORIDA, FOURTH DISTRICT

849 So. 2d 397; 28 Fla. L. Weekly D 1443

June 18, 2003, Opinion Filed

PRIOR HISTORY: [*1] Appeal from the Circuit Court for the Seventeenth Judicial Circuit, Broward
County; Mel Grossman, Judge; L.T. Case No. 99-9809 (03).

DISPOSITION: Affirmed.

COUNSEL: Michael Bowlus and Katherine Schnauss of Ford, Jeter, Bowlus, Duss, Morgan, Kenney
& Safer, P.A., Jacksonville, for appellants.

Steven J. Gutter of Kahn & Gutter, Plantation, for appellee.

JUDGES: KLEIN, J. SHAHOOD and TAYLOR, JJ., concur.

OPINIONBY: KLEIN

OPINION: KLEIN, J.

The issue in this case is whether judgment creditors of an insolvent corporation, who are also
insiders, are fraudulent transferees as to payments made on those judgments, under the Uniform
Fraudulent Transfer Act. We conclude that they are and affirm.

Appellants J.E. Carter and Joe Cowart were officers and directors of Southlake Nursing and
Rehabilitation Center, which was insolvent. They obtained substantial judgments, uncontested,
against Southlake in 1996, for loans they had allegedly made to Southlake.

In 1999 Southlake sold its assets to Mied, Inc., which was owned and controlled by Carter, for $
11.7 million, [*2] but Mied paid only $ 9.8 million to Southlake. As part of the transaction
Carter and Cowart assigned their judgments against Southlake to Mied, which executed
satisfactions of the judgments. From the proceeds of the closing, Southlake paid Carter $ 58,192
and Cowart $ 39,716 as interest payments. At the time these payments were made, appellee Summit
Healthcare, Inc. was a creditor of Southlake, which was insolvent.

After obtaining a judgment against Southlake, which was uncollectible, Summit commenced these
supplementary proceedings against Mied, Carter and Cowart, alleging fraudulent transfers under
Chapter 726, Florida Statutes (2002). The trial court found that the interest payments were
fraudulent transfers and entered a judgment for Summit against Carter and Cowart, which is the
subject of this appeal.

Appellants argue that, because they were judgment creditors of Southlake, and these judgment
liens had to be satisfied before Southlake could be sold to Mied, they were as a matter of law
not fraudulent transfers. What this argument ignores is section 726.106(2) of our Fraudulent
Transfer Act, which provides:

A transfer made by a debtor is fraudulent as to a creditor whose claim [*3] arose before the
transfer was made if the transfer was made to an insider for an antecedent debt, the debtor was
insolvent at that time, and the insider had reasonable cause to believe that the debtor was
insolvent.

The payments to Carter and Cowart satisfy all of the requirements of section 726.106(2). It is
undisputed that Carter and Cowart were insiders, that Summit's claim arose before the payments
were made to Carter and Cowart, and that Carter and Cowart knew that Southlake was insolvent at
the time of the transfers. Their argument that this statute does not apply to insiders who have
judgments against the insolvent transferor is without merit. The statute does not distinguish
between creditors who hold judgments and those who do not. If insiders could avoid section
726.106 by obtaining consent judgments, as these appellants did, it would take all of the teeth
out of it. We have considered the other issues raised and find them to be without merit. Affirmed.

SHAHOOD and TAYLOR, JJ., concur.