Druyvestein v. Gean ( 2014 )

Cite as 2014 Ark. App. 559
ARKANSAS COURT OF APPEALS
DIVISION II
No. CV-14-270
TERRY DRUYVESTEIN Opinion Delivered October 22, 2014
APPELLANT
APPEAL FROM THE SEBASTIAN
V. COUNTY CIRCUIT COURT, FORT
SMITH DISTRICT
[NO. CV-2012-34]
ROY GEAN, JR.
APPELLEE HONORABLE JAMES O. COX,
JUDGE
REVERSED AND REMANDED
RITA W. GRUBER, Judge
Appellant Terry Druyvestein appeals from an order of the Sebastian County Circuit
Court granting summary judgment to appellee Roy Gean, Jr. Appellant filed a complaint
against appellee alleging fraudulent transfer and also requesting the court to impose a
constructive trust on certain funds held by appellee that were acquired from Lois
Druyvestein. We hold that there were genuine issues of material fact to be decided on both
claims; accordingly, we reverse the circuit court’s order and remand for further proceedings.
This case arose out of a dispute over the ownership of a bond account after the death
of appellant’s uncle, H.J. “Humpy” Druyvestein. Humpy died on February 24, 2007,
survived by his wife Lois Druyvestein. It was unclear at Humpy’s death whether he intended
to leave the bond account at Summit Brokerage to either Lois or appellant. Appellant filed
a complaint against Lois in October 2007 seeking a constructive trust over the bond account,
Cite as 2014 Ark. App. 559
which the circuit court dismissed. In an opinion dated June 16, 2010, this court reversed that
dismissal, and the circuit court subsequently entered judgment in favor of appellant for an
amount in excess of $200,000. Druyvestein v. Summit Brokerage Servs., Inc., 2010 Ark. App.
500, 375 S.W.3d 777. Lois’s daughter, Linda Van Divner, appeared in lieu of her mother in
that case and also answered postjudgment interrogatories, through which appellant learned
that the funds from the bond account in the amount of $208,830.72 had been liquidated.
According to a letter from Ms. Van Divner attached to appellant’s complaint in this case,
Lois’s lawyer in the previous case, appellee, received a check for the entire proceeds of the
account made out to Lois. He drove to Kansas to have Lois endorse the check; he placed the
proceeds in his own account; then he wrote a check to Ms. Van Divner for $105,625.72 and
kept the remaining $103,205, presumably for his fee. When Ms. Van Divner asked appellee
for a statement for services rendered to explain the amount, appellee never provided one.
On January 11, 2012, appellant filed a complaint against Ms. Van Divner and appellee
for the creation of a constructive trust and for relief pursuant to the Arkansas Fraudulent
Transfer Act, found in Ark. Code Ann. § 4-59-201 et seq. He filed an amended complaint
on February 9, 2012.1 Appellant alleged that Ms. Van Divner and appellee took control of
the entire funds to which he was entitled and requested the court to create a constructive
trust over the funds. He alleged that Ms. Van Divner concealed the location of the funds for
more than a year and defrauded the court by failing to reveal in requested interrogatories the
location of the funds. Appellant also alleged that Ms. Van Divner and appellee transferred the
1
Lois passed away sometime before appellant filed his amended complaint.
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funds to themselves without the knowledge or consent of Lois, the court, or any guardian
acting on behalf of Lois.
In addition, appellant requested relief under the Arkansas Fraudulent Transfer Act,
claiming that Lois’s estate was insolvent, that this fact was known or should have been
known to Ms. Van Divner and appellee, that Ms. Van Divner and appellee were aware of
appellant’s claim to the funds at the time they transferred them to themselves, and that Lois
did not have sufficient funds to satisfy the judgment to appellant upon her death. He claimed
that the transfers to Ms. Van Divner and appellee left Lois’s estate unable to pay appellant,
her creditor. He alleged that, pursuant to Ark. Code Ann. § 4-59-207, the transfers to Ms.
Van Divner and appellee were not made for value received and thus were fraudulent under
the statute. Finally, he alleged that appellee’s fee was six times the fee that his counsel charged
for similar work on the same matter and was not based on value. He concluded by requesting
the court to void the transactions.
I. Summary Judgment
On July 20, 2012, appellee filed a motion for summary judgment, alleging that
appellant had no standing to question the payment of an attorney’s fee from Lois to him. He
asserted that he had no direct relationship to appellant and that they lacked privity of
contract. He alleged that it was undisputed that appellee “provided legal services for Lois
Druyvestein based upon a agreement between Ms. Druyvestein and Mr. Gean and the
attorney fee was voluntarily paid by Lois Druyvestein.” Although there were no attachments
to the motion, appellee did file a brief in support, which contained the following legal
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arguments: (1) appellant assumed the risk of Lois transferring the money by failing to file a
supersedeas bond in the earlier case; (2) appellant could not recover under a valid contractual
theory and was not a third-party beneficiary to appellee’s fee contract; (3) appellant could not
recover under a valid tort-based theory; (4) appellant had no standing under the Declaratory
Judgment Act to require appellee to pay his attorney’s fee collected from a non-party to the
case; (5) appellant could not collect under a fiduciary-duty theory because appellee owed
appellant no fiduciary duty; and (6) appellant could not establish a constructive trust because
there was no fraud or confidential relationship. Appellant filed no response to appellee’s
motion.
On May 29, 2013, the circuit court granted appellee’s motion for summary judgment,
stating that it had considered the motion, “attachments[,] and Brief.” The court found that
appellee “performed legal services for Lois Druyvestein and that Mr. Gean was paid for such
services based upon an agreement between him and Ms. Druyvestein. Said agreement
reflected the understanding of Ms. Druyvestein and Mr. Gean as to the value of the services
rendered.” The court then concluded that by failing to file a supersedeas bond in the earlier
case, appellant bore the risk that Lois would no longer have the money to pay him if he
obtained a favorable judgment on appeal. The court then found that appellant had no “direct
relationship” with appellee and thus no viable theory of law to recoup the money paid by
Lois to appellee. The court’s order then essentially parroted appellee’s brief, rejecting
recovery based on a contractual theory, a tort theory, and declaratory-judgment law. Finally,
the court found that there must be clear, cogent, and convincing evidence of fraud or a
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confidential relationship to establish a constructive trust and that there was no fraud or
confidential relationship between appellant and appellee in this case. The court’s order did
not mention the Arkansas Fraudulent Transfer Act.
Appellant filed a petition to set aside the order granting summary judgment, attaching
billing records provided by appellee to Ms. Van Divner for services he had rendered to Lois.
Ms. Van Divner provided this statement and testified regarding the statement in a deposition
that was also attached to appellant’s motion to set aside the order. Appellant’s petition
restated his fraudulent-transfer and constructive-trust allegations, specifically referring to
appellee’s billings. There were many days on which appellee billed over 24 hours; on one
day he billed over 60 hours. Sample entries included a five-hour call to a brokerage company
to review disbursement arrangements and one day that included 3 three-hour calls with Ms.
Van Divner (which she disputed in her deposition), eight hours to review the Reporter’s
Index pertaining to Depositions, eight hours to review a file, and eight hours to review
exhibits. Without further detailing the statement, we note that no entry, including entries
to review a letter or make a phone call, took less than two hours.
II. Final Order
On January 23, 2014, the court entered a final order, finding that appellant was a
creditor of Lois as a result of funds held by Summit Brokerage, which were “improperly paid
over to [Lois] when they should have been paid to [appellant]” and recognizing that the
court had entered a judgment in favor of appellant in the previous case. The court then
found that Lois had transferred the funds to Ms. Van Divner and appellee and noted that it
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had previously entered an order of summary judgment in favor of appellee. The court denied
appellant’s motion to reconsider. The court then found that Lois had made the transfer to
Ms. Van Divner “without receiving reasonably equivalent value in exchange for the transfer
and [Lois] believed or reasonably should have believed that she was incurring debts beyond
her ability to pay as they became due.” The court found that appellant was damaged by the
transfer “in the amount of at least $60,000,” ordered Ms. Van Divner to pay that amount to
the court, and granted appellant a judgment for that amount. Appellant filed a notice of
appeal designating the court’s final order and order granting appellee’s motion for summary
judgment. Neither appellant nor Ms. Van Divner appealed from the $60,000 judgment
against her.
A circuit court may grant summary judgment only when it is clear that there are no
genuine issues of material fact to be litigated and that the party is entitled to judgment as a
matter of law. Mitchell v. Lincoln, 366 Ark. 592, 596, 237 S.W.3d 455, 458 (2006). The
burden of sustaining a motion for summary judgment is always the responsibility of the
moving party. New Maumelle Harbor v. Rochelle, 338 Ark. 43, 45–46, 991 S.W.2d 552, 553
(1999). Once the moving party has established prima facie entitlement to summary judgment
by affidavits, depositions, or other supporting documents, the opposing party must meet
proof with proof and demonstrate the existence of a material issue of fact. Id. at 46, 991
S.W.2d at 553. When the proof supporting a motion for summary judgment is insufficient,
there is no duty on the part of the opposing party to meet proof with proof. Inge v. Walker,
70 Ark. App. 114, 120, 15 S.W.3d 348, 352 (2000). Summary judgment is not granted simply
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because the opposing party fails to respond to the motion. Id. at 119, 15 S.W.3d at 352. On
appellate review, we determine if summary judgment was appropriate based on whether the
evidentiary items presented by the moving party in support of its motion leave a material fact
unanswered. Kachigian v. Marion Cnty. Abstract Co., 2011 Ark. App. 704, at 6. This court
views the evidence in a light most favorable to the party against whom the motion was filed,
resolving all doubts and inferences against the moving party. Id.
III. Point on Appeal
The issue on appeal is whether summary judgment was appropriate in this case. We
hold that it was not, and we reverse and remand for further proceedings.
Appellant’s complaint requested relief under two theories: constructive trust and
fraudulent transfer. Thus, we note first that appellee’s arguments and the circuit court’s
findings regarding contractual third-party beneficiaries, tort law, and the declaratory-
judgment act are irrelevant to this case. We turn to appellant’s claim under the Arkansas
Fraudulent Transfer Act. Under the Act,
a transfer made or obligation incurred by a debtor is fraudulent as to a creditor whose
claim arose before the transfer was made or the obligation was incurred if the debtor
made the transfer or incurred the obligation without receiving a reasonably equivalent
value in exchange for the transfer or obligation and the debtor was insolvent at that
time or the debtor became insolvent as a result of the transfer or obligation.
Ark. Code Ann. § 4-59-205(a) (Repl. 2011).
A transfer is fraudulent as to a creditor regardless of whether the creditor’s claim arose
before or after the transfer if the debtor made the transfer “without receiving a reasonably
equivalent value in exchange” for the transfer and the debtor either intended to incur, or
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“believed or reasonably should have believed” that she would incur, debts beyond her ability
to pay as they became due. Ark. Code Ann. § 4-59-204(a) (Repl. 2011). A creditor may
obtain avoidance of the transfer under the Act. Ark. Code Ann. § 4-59-207 (Repl. 2011).
A transfer is not voidable under the Act against a person who took in good faith and for a
reasonably equivalent value. Ark. Code Ann. § 4-59-208(a) (Repl. 2011).
Appellant alleged in his complaint that Lois’s estate was insolvent, that this fact was
known or should have been known to Ms. Van Divner and appellee, that Ms. Van Divner
and appellee were aware of appellant’s claim to the funds at the time they transferred Lois’s
funds to themselves, and that Lois did not have sufficient funds to satisfy the judgment to
appellant upon her death.2 He claimed that the transfers to Ms. Van Divner and appellee left
Lois’s estate unable to pay appellant, her creditor. He alleged that the transfers to Ms. Van
Divner and appellee were not made for value received and thus were fraudulent under the
statute. He specifically alleged that appellee’s fee was six times the fee his counsel charged for
similar work on the same matter and was not based on value.
Appellee’s motion for summary judgment mentioned the Fraudulent Transfer Act
only by stating that appellant’s complaint asserted it. Appellee gave no explanation why it did
not apply. He stated only that he and appellant had no “direct relationship” and lacked
“privity of contract,” and that appellant lacked “standing.” He then alleged in his motion that
2
We note that the circuit court found in its final order that Lois made the transfer to
Ms. Van Divner without receiving reasonably equivalent value in exchange for the transfer
and that, at the time, she believed or reasonably should have believed that she was incurring
debts beyond her ability to pay as they became due.
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it was undisputed that he provided legal services for Lois “based upon an agreement”
between Lois and him and that “the attorney fee was voluntarily paid” by her. He did not
attach this alleged agreement to his motion or an affidavit detailing facts about the agreement.
Indeed, he attached no documents at all to his motion—only a nine-page brief that did not
contain any arguments about the fraudulent-transfer allegations. It did not even mention the
Act; rather, appellee explained why appellant could not proceed under four theories that
were not alleged—contract, tort, declaratory-judgment, and fiduciary duty.
In granting appellee’s motion for summary judgment, the court stated that it had
considered the motion, attachments (of which there were none), and brief and had found
good cause. The court then found that appellee “performed legal services for Lois
Druyvestein and that Mr. Gean was paid for such services based upon an agreement between
him and Ms. Druyvestein. Said agreement reflected the understanding of Ms. Druyvestein
and Mr. Gean as to the value of the services rendered.” We are not certain how the circuit
court made this finding, as the agreement was not attached to the motion nor was there an
affidavit describing the details of this agreement. Although there are summary-judgment cases
in which there are no factual issues, only legal issues, this is not one of those. When there are
factual issues, in deciding a motion for summary judgment, a trial court may consider
“pleadings, depositions, answers to interrogatories and admissions on file, together with
affidavits, if any.” Pyle v. Robertson, 313 Ark. 692, 695, 858 S.W.2d 662, 663 (1993) (quoting
Ark. R. Civ. P. 56(c)). A trial judge may not base his or her decision whether to grant
summary judgment on factual allegations made in the briefs. Id.
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It is undisputed that appellant was a creditor of Lois. It is also undisputed that Lois
transferred money from the Summit Brokerage bond account to appellee. Further, the circuit
court found in its final order that, at the time Lois made the transfer to Ms. Van
Divner—which was the same time the transfer was made to appellee—Lois believed or
reasonably should have believed that she was incurring debts beyond her ability to pay as they
became due. We hold that there are genuine issues of material fact regarding whether Lois
received a “reasonably equivalent value” from appellee for the transfer. Because there are no
documents or other evidence to review, we cannot determine what other factual issues may
arise.
Appellant’s complaint also requested the court to impose a constructive trust over the
funds held by appellee. The circuit court granted appellee’s summary judgment motion,
finding that, because there was no fraud or confidential relationship between appellee and
appellant, there could be no constructive trust. Again, no evidence has been provided to the
court, only allegations. Thus, there are genuine issues of material fact before the circuit court,
and summary judgment was inappropriate. Moreover, the doctrine of constructive trust is
not as narrow as the circuit court’s order suggests. A constructive trust is an implied trust that
arises by operation of law when equity demands: “It is imposed where a person holding title
to property is subject to an equitable duty to convey it to another on the ground that he
would be unjustly enriched if he were permitted to retain it.” Druyvestein, 2010 Ark. App.
500, at 7, 375 S.W.3d at 781(holding the doctrine applied in a case of mistake).
Accordingly, we reverse and remand this case for further proceedings.
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WALMSLEY and HARRISON, JJ., agree.
Brett D. Watson, Attorney at Law, PLLC, by: Brett D. Watson, for appellant.
Gean, Gean & Gean, by: Roy Gean, III, for appellee.
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