Carl M. Dunham v. Roger S. Dunham and Belinda F. Dunham,
1994.ID.17255 (Idaho 11/29/1994)
Filed: November 29, 1994.
CARL M. DUNHAM, JR., PLAINTIFF-APPELLANT,
ROGER S. DUNHAM AND BELINDA F. DUNHAM, HUSBAND AND WIFE, DEFENDANTS-RESPONDENTS.
Appeal from the District Court of the First Judicial District, State of Idaho, Kootenai County.
Hon. Gary M. Haman, District Judge. 1994 Opinion No. CA-125
David A. Frazier, Coeur d'Alene, argued for appellant.
Prohaska Law Firm, Coeur d'Alene, for respondents. Thomas F. Prohaska argued.
Walters, Chief Judge. Perry, Judge, concurs. Lansing, Judge, Dissenting.
WALTERS, Chief Judge
Carl Dunham appeals from a district court's judgment which held that a fraudulent transfer of
real property did not occur between spouses. I.C. §§ 55-913 and 55-914. The court held that on
the date the real property was purchased and the quitclaim deed was executed, the spouse
executing the quitclaim deed had no interest in the property. Consequently, no "transfer" under
the Idaho Uniform Fraudulent Transfer Act took place. For the reasons explained below, we affirm.
FACTUAL AND PROCEDURAL BACKGROUND
Carl Dunham (Carl), of Connecticut, and Roger Dunham (Roger), of Idaho, are brothers who have
been involved in litigation between themselves in the State of Connecticut since 1982. Roger and
his wife, Belinda Dunham (Belinda), have been married since 1983. It appears that the litigation
between these brothers in Connecticut is ongoing and, as of the date of the Idaho district
court's memorandum opinion, had not resulted in any final determination. We first explain Carl's
actions against Roger, then, the chronology of events between Roger and Belinda upon which Carl
bases his claim.
On September 9, 1991, Carl filed a complaint in Idaho in which he alleged that Roger was indebted
to him by reason of a judgment entered by a Superior Court of the State of Connecticut on
February 26, 1990. He stated that the amount of indebtedness was $59,895.70, and that there had
accrued on the principal, interest amounting to $10,585.39 as of the filing date of the
complaint. He further claimed that additional interest continues to accrue at the rate of $21.77
per day. Additionally, Carl filed an "Affidavit for Filing of Foreign Judgment" on February 19,
1991, which set forth that he is a "judgment creditor" of Roger's as a result of the February 26,
1990, judgment entered by the Connecticut Judge.
In August 1989, Roger received an inheritance of approximately $27,000. Shortly thereafter, he
gifted the majority of this money to his wife. In September 1989, Belinda purchased a piece of
real property solely in her name for approximately $95,000. She used $25,071.31 of the gifted
inheritance money for the down payment, and entered into a promissory note with Mountain West
Savings Bank which was secured by a deed of trust, for the remaining balance. Belinda alone
signed both the promissory note and the deed of trust on September 6, and made the down payment
on September 11. The property's title was transferred by the seller to Belinda through a warranty
deed dated September 11, 1989. On the same date, Roger executed a quitclaim deed to her on the
property. Belinda gave no consideration in return for either the quitclaim deed or the gifted
At the time of Belinda's property purchase, Carl contends that Roger owned real property in
Connecticut worth approximately $500,000. However, outstanding claims against it allegedly
totalled over $850,000. Carl states that these claims include claims from Roger's own attorneys,
Carl himself, the property's mortgage, and an outstanding judgment lien. He further contends that
Roger owned personal property in 1989 but that the value was never determined. All of this
property was either disposed of or titled in Belinda's name.
On September 9, 1991, Carl filed a complaint against Roger and Belinda alleging that Roger made
the transfer of real property to Belinda through the quitclaim deed with the actual intent to
hinder, delay, and defraud him as a creditor; and that Roger did not receive a reasonably
equivalent value in exchange for the transfer at a time when he believed or should have believed
that he was indebted beyond his ability to pay that indebtedness. Carl requested that the court
declare the transfer fraudulent and, thus, void so Roger's interest in the property would be
subject to Carl's foreign judgment lien.
The trial court held that a fraudulent transfer of real property did not occur between Roger and
Belinda. The court found that Roger did not have an interest in the asset being transferred and,
therefore, could not have transferred an interest in the property by way of the quitclaim deed.
Carl then brought this appeal.
In his appellate argument, Carl contends that the issue before this Court is whether the trial
court erred in failing to set aside the transfer of real property from Roger to Belinda by way of
the quitclaim deed. In the trial proceedings, Carl did not seek review of the gift of money from
Roger to Belinda or whether Roger possessed a community property interest either in the loan
proceeds reflected by the promissory note or in the real property when it was purchased by
Belinda. Accordingly, we will not address those possibilities on this appeal. Matter of Estate of
Reinwald, 122 Idaho 401, 834 P.2d 1317 (1992); Whitehawk v. State, 119 Idaho 168, 170, 804 P.2d
341, 343 (Ct. App. 1991).
Carl contends that the trial court's decision should be set aside because: (1) a debtor's
transfer of an asset for no consideration is presumed fraudulent when he reasonably should have
believed he would incur debts beyond his ability to pay them when they became due, I.C. § 55-913
(1)(b)2; (2) a debtor's transfer of an asset to an insider for an antecedent debt when the debtor
was insolvent is presumed fraudulent, I.C. § 55-914(2); and (3) a person becomes the owner of an
equitable interest in the property when part or all of the property's purchase price is paid by
this individual, Erb v. Kohnke, 121 Idaho 328, 824 P.2d 903 (Ct. App. 1992).
Roger counters stating that the analytical framework for evaluating the district court's ruling
is the Idaho Uniform Fraudulent Transfer Act set out at I.C. §§ 55-901 through 55-921. He also
claims that Carl mistakenly relies upon Erb for the proposition that an equitable interest in the
property exists. Roger alleges that the court's reference to this idea in Erb was merely dictum
and not central to the Disposition of the case.
We agree with the trial court that the statutory analysis for the issue raised before this Court
is set forth in the Idaho Uniform Fraudulent Transfer Act. I.C. §§ 55-913 and 55-914 address the
ability of present and future creditors to have a transfer deemed fraudulent. Both statutes apply
to a creditor whose "claim arose before the transfer was made." I.C. §§ 55-913(1) and 55-914(1).
Therefore, we must first determine whether a claim existed at the time of the transfer.
A "claim" is defined as "a right to payment, whether or not the right is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal,
equitable, secured, or unsecured." I.C. § 55-910(3). The trial court found that Carl had a claim
which arose out of contempt of a court-ordered injunction against Roger regarding property in
Connecticut. Carl filed a motion for contempt on August 18, 1989; the quitclaim deed was executed
by Roger on September 11, 1989; and a Superior Court of the State of Connecticut issued an order
on February 25, 1990, requiring Roger to pay Carl in accordance with the motion for contempt.
Given the foregoing facts, we agree with the trial court that Carl was a creditor whose claim,
even though not yet reduced to a judgment, arose before the quitclaim deed was executed.
Next, we must determine when a "transfer" occurs. A transfer is defined as "every mode, direct or
indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an
asset or an interest in an asset, and includes payment of money, release, lease, and creation of
a lien or other encumbrance." I.C. § 55-910(12). A transfer of real property, including the
interest of the seller, is made "when the transfer is so far perfected that a good-faith
purchaser of the asset from the debtor against whom applicable law permits the transfer to be
perfected cannot acquire an interest in the asset that is superior to the interest of the
transferee." I.C. § 55-915(1)(a). However, a transfer is not made until the debtor has acquired
rights in the asset transferred. I.C. § 55-915(4).
Given the above-described definition of a transfer, this case turns on whether or not Roger had
an asset or an interest in an asset to transfer. In other words, did Roger have an interest in
the real property purchased by Belinda on the date he executed the quitclaim deed? A quitclaim
deed is a deed of conveyance operating by way of release. BLACK'S LAW DICTIONARY 1251 (6th ed.
1990). It is intended to pass any title, interest, or claim which the grantor may have in the
premises. Id. In essence, it is a mode of disposing of an asset or an interest in an asset.
An "asset" is "property of a debtor." I.C. § 55-910(2). The term, however, does not include
property "to the extent it is encumbered by a valid lien" or property "to the extent that it is
generally exempt under nonbankruptcy law." Id. Property, in turn, is defined as "anything that
may be the subject of ownership." I.C. § 55-910(10).
The evidence presented at trial indicates that Roger gifted most, if not all, of his inherited
money to Belinda in August of 1989. As noted above, the appellant did not challenge this gift or
transfer. On September 11, 1989, Belinda used a portion of the gifted money, which at this time
was considered her separate, personal property, as the down payment on the real property. The
warranty deed, dated September 11, 1989, lists the grantee solely as Belinda, and she alone
signed both the promissory note and deed of trust on September 6, 1989. When Roger executed the
quitclaim deed to Belinda on September 11, 1989, he had no interest in the real property to
convey. Therefore, without an asset or an interest in an asset, a transfer could not have
occurred as a matter of law.
Roger and Belinda seek attorney fees on appeal pursuant to I.C. § 12-121. This section, as
limited by I.R.C.P. 54(e)(1), allows for an award of attorney fees when an action has
been "brought, pursued or defended frivolously, unreasonably or without foundation." I.R.C.P. 54
(e)(1). This section and rule are a proper basis for awarding fees on appeal. Troche v. Gier, 118
Idaho 740, 742, 800 P.2d 136, 138 (Ct. App. 1990). However, we conclude that the appeal in this
case was not brought unreasonably and without foundation.
The district court correctly found that Roger was not an owner of an interest in the real
property purchased by Belinda. Without an interest in the property, no transfer could have taken
place when the quitclaim deed was executed.
Accordingly, the judgment entered below is affirmed. Costs, but not attorney fees, on appeal are
awarded to the respondents.
PERRY, Judge, concurs.
Judgment holding that a quitclaim deed to real property between spouses did not constitute a
fraudulent transfer, affirmed.
LANSING, Judge, Dissenting.
I Dissent from the majority's Conclusion that only a gift of money, not a transfer of an interest
in real property occurred, and that Carl Dunham's claim must therefore fail because his complaint
challenged only a conveyance of real property from Roger Dunham to Belinda Dunham.
The district court and the majority of this Court make what is, in my view, an artificial
distinction between the alleged monetary gift from Roger to Belinda and the purchase of real
property in Belinda's name alone. Their analysis depends upon an assumption that there was first
a completed gift of money and then a later, independent real estate purchase by Belinda. The
trial evidence showed, however, that there was an integral relationship between the transfer of
money and the use of that money as the down payment on the land to which Belinda took title.
A valid gift is not made until the property has been delivered to the donee and the donor has
relinquished all dominion over the gifted asset. Matter of Estate of Lewis, 97 Idaho 299, 302,
543 P.2d 852, 855 (1975); Boston Insurance Co. v. Beckett, 91 Idaho 220, 222, 419 P.2d 475, 477
(1966). Therefore, there was no accomplished gift of money from Roger to Belinda unless and until
Roger delivered the funds to Belinda. The evidence as to when and how Roger transferred the
inherited funds to Belinda or for her benefit is not well-developed. However, the financial
statement dated September 14, 1989, that Belinda submitted in support of her application for a
mortgage loan to purchase the property, indicates that as of that date the inherited money was
still held in a trust account of the decedent's estate in a bank in Connecticut. At trial, Roger
testified as follows:
Q. To the best of your knowledge who requested the quitclaim deed be prepared?
A. I believe it was the bank or the title, I think it was the bank, the lending institution is
the one who wanted it.
Q. Do you have any opinion as to why they would want that?
A. I think it was because the check was from the Connecticut bank from the trust of my aunt and
it was made out to me. And I think they were concerned that they were lending money to my wife,
and if the check was signed by me that I have no interest in it since they were lending the money
to my wife.
This testimony suggests that Roger did not gift the money to Belinda before the real estate
purchase but that the money was delivered at the closing of the real estate transaction in the
form of a check from his aunt's estate to Roger which was then conveyed to the closing agent.
This is the only testimony that bears upon the transfer of the funds from Roger. There is no
testimony that the money was delivered to Belinda at any time prior to or separate from the
consummation of the real estate transaction in mid-September 1989 and, thus, no showing of an
independent gift of the money.
In sum, the uncontradicted evidence showed that money belonging to Roger, promptly upon leaving
Roger's control, was used as the down payment in the real property purchase, that title to the
property thus acquired was taken in Belinda's name, and that Roger simultaneously transferred to
Belinda by quitclaim deed any interest that he held in the real property.
Regardless of the precise date when the funds were transferred or to whom, the substance of the
transaction is that Roger's money was used to purchase real property and that Roger relinquished
to Belinda any interest in the real property, to the detriment of Roger's creditors. This was in
substance a conveyance of a real property interest made without a reasonably equivalent value in
exchange, which falls within the purview of I.C. §§ 55-913(1)(b) and 55-914.
The defendants' characterization of this interchange as a gift of money rather than a gift of
real property is just that -- a convenient post hoc characterization. The Court should look
beyond either party's interpretation to the substance of the transaction. See, e.g., Pennington
v. Bigham, 512 So.2d 1344, 1347 (Ala. 1987) ("The form of the transaction by which property,
liable to the satisfaction of the demands of creditors, is fraudulently sought to be placed
beyond their reach is not material. This Court looks beyond mere form to the substance of the
transaction."); Tacoma Association of Credit Men v. Lester, 72 Wash. 2d 453, 433 P.2d 901, 903
(Wash. 1967) (in a fraudulent conveyance action, "courts will invariably look to the substance of
a transaction rather than its form.").
Very similar circumstances were presented in D.H.R. Construction Co., Inc. v. Donnelly, 180 Conn.
430, 429 A.2d 908 (Conn. 1980), where a debtor had made a gift to his wife of $3,000 which he had
recently borrowed. It was asserted by a creditor that the debtor made this gift for the purpose
of buying residential property, that title to the property was put in the wife's name alone, and
that the debtor thereafter made monthly payments on the mortgage. The creditor brought a
fraudulent conveyance action alleging that the debtor had caused the real property to be conveyed
to his wife without consideration. The trial court granted summary judgment to the defendant
debtor, reasoning, as did the district court here, that the debtor "did not own the property and
did not transfer it to [his wife]." The Connecticut Supreme Court reversed the summary judgment,
We conclude that there is no inherent difference between the act of a debtor conveying his
property to another without consideration and that of a debtor causing the title to the property
purchased to be placed in the name of another, where the object of such transfer is to hinder,
delay or defraud creditors.
Id. at 910. The Connecticut Supreme Court's approach is reasonable and fair and should be
It certainly would have been better practice for Carl's complaint to have alleged both the
asserted gift of money and the conveyance of real property as fraudulent transfers, and a more
complete record as to exactly how the transaction occurred could have been made at trial.
Nonetheless, the substance of what was proved -- an acquisition in Belinda's name of real
property purchased with Roger's assets -- was, in its essence, a relinquishment to Belinda of an
interest in real property that Roger otherwise would have held as a consequence of his
contribution of the down payment. Accordingly, I cannot agree with my colleagues' Conclusion that
Carl's claim is defeated because his complaint alleged a fraudulent transfer of an interest in
real property rather than a fraudulent gift of money.