#26581-a-SLZ

2013 S.D. 76

IN THE SUPREME COURT

OF THE

STATE OF SOUTH DAKOTA

* * * *

DAVID NIELSEN, Plaintiff and Appellee,

v.

LOGS UNLIMITED, INC., 

A SOUTH DAKOTA CORPORATION;

ABSOLUTE LOG HOMES AND

RESTORATION, INC., A SOUTH 

DAKOTA CORPORATION; THOMAS 

SCHRAMEL; STEPHANIE WOOD; 

and S & S EQUIPMENT, LLC, Defendants and Appellants.

* * * *

APPEAL FROM THE CIRCUIT COURT OF

THE FOURTH JUDICIAL CIRCUIT

LAWRENCE COUNTY, SOUTH DAKOTA

* * * *

THE HONORABLE RANDALL L. MACY

Judge

* * * *

ROGER A. TELLINGHUISEN

MICHAEL V. WHEELER of

DeMersseman, Jensen, Tellinghuisen,

 Stanton & Huffman, LLP

Rapid City, South Dakota Attorneys for plaintiff 

and appellee. 

GEORGE J. NELSON of

Abourezk & Zephier, PC

Rapid City, South Dakota Attorneys for defendants 

and appellants.

* * * *

CONSIDERED ON BRIEFS 

ON AUGUST 27, 2013

OPINION FILED 10/23/13
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ZINTER, Justice

[¶1.] David Nielsen obtained a judgment against Logs Unlimited, Inc. (Logs 

Unlimited). The corporation subsequently transferred its assets to Thomas 

Schramel, Schramel’s daughter Stephanie Wood, and Absolute Log Homes and 

Restoration, Inc. Schramel was the sole shareholder, director, and officer of both 

corporations. Proceeds from the transfer were used to pay some of Logs Unlimited’s

creditors, but Nielsen was not one of the creditors paid. Nielsen sued, claiming that 

Logs Unlimited fraudulently transferred its assets to prevent satisfaction of his 

judgment. The circuit court found that the transfer was fraudulent, and the court 

set it aside. We affirm. 

Facts and Procedural History

[¶2.] In July 2010, Nielsen obtained a $35,374.95 judgment against Logs 

Unlimited. A writ of execution was returned unsatisfied. The sheriff’s return

indicated that Logs Unlimited had been dissolved, a new corporation named 

Absolute Log Homes and Restoration, Inc. (Absolute Log Homes) had been formed, 

and a bank’s lien on Logs Unlimited’s assets had carried over to the new 

corporation.

[¶3.] In a July 2011 debtor’s examination, Schramel disclosed that about 

two weeks after Nielsen obtained the judgment, Logs Unlimited held a special 

meeting of the corporation. Nielsen’s judgment was discussed, and Schramel

decided to dissolve Logs Unlimited and lease its assets either to Schramel or to a 

new corporation “effective immediately.” 
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[¶4.] After the meeting, Schramel formed Absolute Log Homes. As with

Logs Unlimited, Schramel was the sole shareholder, officer, and director of the 

corporation. Absolute Log Homes also maintained the same address, phone 

number, and fax number as Logs Unlimited.

[¶5.] The minutes of a second special meeting of Logs Unlimited confirmed 

that Absolute Log Homes was leasing Logs Unlimited’s assets as of October 2010. 

The minutes also reflected that Absolute Log Homes had been paying some of Logs 

Unlimited’s debts. Those debts included secured loans ($132,000 from First 

National Bank and $9,100 from Telco Credit Union (Telco)) and unsecured credit 

card debt ($16,800). The minutes further disclosed that Logs Unlimited approved 

the sale of its assets to Schramel and Wood for $141,000, the approximate amount 

of the secured debt. 

[¶6.] Financing for the transfer of assets was arranged through a personal 

loan obtained by Schramel and Wood. The loan proceeds were used to pay Logs 

Unlimited’s secured debt, unsecured credit card debt, and other liabilities, including

a personal loan Schramel had made to Logs Unlimited. However, Nielsen’s

judgment was not satisfied.

[¶7.] Nielsen sued Logs Unlimited, claiming that it had fraudulently 

transferred its assets to Schramel, Wood, and Absolute Log Homes.1 Nielsen 

contended that Logs Unlimited transferred the assets without receiving fair 

 

1. During trial, it was discovered that after the transfer, Schramel and Wood 

formed S & S Equipment, LLC, and capitalized it with vehicles and 

equipment they purchased from Logs Unlimited. S & S Equipment was 

added as a defendant.
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consideration and that it transferred the assets to prevent Nielsen from satisfying

his judgment. 

[¶8.] Conflicting evidence was presented at trial concerning the fair market 

value of the transferred assets. Nielsen’s expert witness, certified public accountant 

Paul Thorstenson, testified that the fair market value was $259,215. His opinion 

was based on the values claimed on both corporations’ 2011 tax returns. 

[¶9.] Logs Unlimited called two valuation experts: Jerry Casteel, an auction 

and real estate company owner, and Garrett Tenbroek, Logs Unlimited’s 

accountant. Casteel testified that his May 2012 appraisal of the assets reflected a 

fair market value of $150,440. Casteel acknowledged that his appraisal occurred 

after the transfer and did not include the value of buildings and improvements. 

Tenbroek testified that the fair market value of the assets was approximately 

$150,000. However, he conceded that, as the accountant for Logs Unlimited, he had

indicated that the fair market value was $259,215 on the corporation’s 2011 tax 

return. Tenbroek explained that the value listed on the tax return was derived 

from Wood’s internet research and Schramel’s best estimate of what the assets were 

worth.2 

[¶10.] The circuit court found that the fair market value of the assets far 

exceeded the $183,500 consideration given by Schramel and Wood ($154,900 for the 

assets plus forgiveness of Schramel’s $28,600 personal loan to Logs Unlimited). The 

 

2. Schramel testified that, in July 2010, he valued the assets at $131,225. 

However, Schramel admitted that there were assets omitted from this 

valuation. 
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court ultimately found that the transfer was fraudulent. The court set the transfer 

aside. Logs Unlimited appeals, contesting a number of the court’s findings of fact.

Decision

[¶11.] South Dakota has adopted the Uniform Fraudulent Transfer Act (the 

Act). Prairie Lakes Health Care Sys., Inc. v. Wookey, 1998 S.D. 99, ¶ 6, 583 N.W.2d 

405, 410. The purpose of the Act “is to protect a debtor’s estate from being depleted 

to the prejudice of the debtor’s unsecured creditors.” Glimcher Supermall Venture,

LLC v. Coleman Co., 2007 S.D. 98, ¶ 9, 739 N.W.2d 815, 820 (citation omitted).

[¶12.] The Act “subdivides fraudulent transactions into two categories: 

actually fraudulent transfers . . . and constructively fraudulent transfers[.]” Prairie 

Lakes Health Care Sys., Inc., 1998 S.D. 99, ¶ 7, 583 N.W.2d at 411. Actually

fraudulent transfers are defined as follows: 

(a) Any transfer made or obligation incurred by a debtor is 

fraudulent as to a creditor, whether the creditor’s claim arose 

before or after the transfer was made or the obligation was 

incurred, if the debtor made the transfer or incurred the 

obligation:

(1) With actual intent to hinder, delay, or defraud any 

creditor of the debtor[.]

SDCL 54-8A-4(a)(1). The Act also identifies “badges of fraud” that are nonexclusive, 

indicative factors of actual intent to defraud a creditor:

(b) In determining actual intent under subsection (a)(1) of this 

section, consideration may be given, among other factors, to 

whether:

(1) The transfer or obligation was to an insider;

(2) The debtor retained possession or control of the 

property transferred after the transfer;

(3) The transfer or obligation was disclosed or concealed;

(4) Before the transfer was made or obligation was 

incurred, the debtor had been sued or threatened 

with suit;
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(5) The transfer was of substantially all the debtor’s 

assets;

(6) The debtor absconded;

(7) The debtor removed or concealed assets;

(8) 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) The debtor was insolvent or became insolvent shortly 

after the transfer was made or the obligation was 

incurred;

(10) The transfer occurred shortly before or shortly after a 

substantial debt was incurred; and

(11) The debtor transferred the essential assets of the 

business to a lienor who transferred the assets to an 

insider of the debtor.

SDCL 54-8A-4(b). “No factor or set of factors need be given talismanic 

significance—they are only indicia, which by themselves or in combination with 

others may give rise to an inference of fraudulent intent.” Prairie Lakes Health 

Care Sys., Inc., 1998 S.D. 99, ¶ 13, 583 N.W.2d at 412-13 (citation omitted). But “a 

‘[c]lose relationship [between the grantor and the grantee] justifies a careful 

scrutiny of the challenged transaction for badges of fraud[.]’” Kary v. Kary, 318 

N.W.2d 334, 338 (S.D. 1982) (first and second alterations in original) (quoting 

Counts v. Kary, 67 S.D. 607, 612, 297 N.W. 442, 444 (1941)).

[¶13.] In determining whether Logs Unlimited’s transfer was fraudulent, the 

circuit court found that: the transfer was to insiders (Schramel, Wood, Absolute Log 

Homes, and S & S Equipment); the transfer was not disclosed to Nielsen; the 

transfer was of substantially all of Logs Unlimited’s assets; following the transfer, 

all of Logs Unlimited’s outstanding liabilities were paid, except for Nielsen’s 

judgment and a shareholder loan that Schramel had made to the company; after the 

transfer, Logs Unlimited was insolvent; and, Nielsen obtained the judgment against 
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Logs Unlimited before the transfer. The court also found that Logs Unlimited 

would have had $114,000 in equity available after the transfer had the assets been 

transferred for their fair market value. The court’s findings explained that “[t]he 

values shown on the 2011 tax return of [Logs Unlimited] [was] the fair market 

value[ ] of the property at the time of the transfer,” and according to that tax return, 

“the fair market value of [Logs Unlimited’s] assets [$259,215] minus liabilities . . . 

[equaled] $114,000.” The court ultimately found that Logs Unlimited did not 

receive “reasonably equivalent value in exchange for the transfer,” and Logs 

Unlimited’s “transfer of its assets . . . was made with the actual intent to hinder, 

delay, or defraud” Nielsen.

[¶14.] Logs Unlimited first contests the circuit court’s finding regarding fair 

market value. The valuation of assets is a question of fact. See Endres v. Endres, 

532 N.W.2d 65, 68 (S.D. 1995). Findings of fact are reviewed under the clearly 

erroneous standard of review. Nemec v. Goeman, 2012 S.D. 14, ¶ 11, 810 N.W.2d 

443, 446. 

[¶15.] Logs Unlimited argues that the fair market value of the assets was 

$150,440, not $259,215. However, Paul Thorstenson’s trial testimony supported the 

circuit court’s finding. He testified that, according to Logs Unlimited’s 2011 tax 

return, the fair market value of the transferred assets was $259,215. He pointed 

out that, according to Absolute Log Homes’ 2011 tax return, the fair market value of
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the acquired assets was $231,849.94.3 Thorstenson testified that there was no 

reason why Schramel would overstate the fair market value of the assets on those 

returns because Schramel was a Subchapter S taxpayer and a higher fair market 

value would increase his tax liability. He also testified that “[t]he numbers 

assigned seemed to make sense in relation to the age and the cost of the 

equipment.”

[¶16.] On the other hand, Casteel testified that he appraised Logs 

Unlimited’s assets in May 2012 and determined that the fair market value 

(excluding buildings and improvements) was $150,440. Logs Unlimited argues that

more weight should have been given to Casteel’s appraisal because he personally 

inspected the assets and conducted research on their value. Logs Unlimited argues 

that no weight should have been given to Thorstenson’s opinion because he was not 

a certified appraiser, he never reviewed Casteel’s appraisal, and he used the values 

on the corporations’ tax returns. 

[¶17.] We acknowledge the conflicting valuations, but “[i]t is up to the trier of 

fact to weigh the testimony, resolve conflicting testimony, and evaluate the 

credibility of witnesses.” Welch v. Auto. Co., 528 N.W.2d 406, 411 (S.D. 1995)

(citation omitted); see also Great W. Bank v. H & E Enters., LLP, 2007 S.D. 38, ¶ 10, 

731 N.W.2d 207, 209 (“As with all witnesses, it falls on the trier of fact to decide 

whether to believe all, part, or none of an expert’s testimony.” (citations omitted)). 

We also note that Schramel was under oath and subject to the penalty of perjury

 

3. The difference between the value claimed on Logs Unlimited’s tax return and 

the slightly lesser value claimed on Absolute Log Homes’ tax return was due 

to third-party purchases of $28,000 in assets. 
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when reporting the valuations on the tax returns, and there was evidence that

Schramel had no incentive to overstate the values on the tax returns. Therefore, 

the circuit court did not clearly err in finding that the fair market value of the 

assets was $259,215.

[¶18.] Additionally, considering its valuation finding, the circuit court did not 

err in finding that Logs Unlimited did not receive consideration reasonably 

equivalent to the value of the transferred assets. “Whether the transfer is for 

reasonably equivalent value in every case is largely a question of fact, as to which 

considerable latitude must be allowed to the trier of facts.” Prairie Lakes Health 

Care Sys., Inc, 1998 S.D. 99, ¶ 11, 583 N.W.2d at 412 (citation omitted) (internal 

quotation marks omitted). In this case, although the fair market value of the assets 

was $259,215, Logs Unlimited received only $183,500 in consideration.

[¶19.] In determining reasonably equivalent value, “the proper focus is on the 

net effect of the transfers on the debtor’s estate, the funds available to the 

unsecured creditors.” Glimcher Supermall Venture, LLC, 2007 S.D. 98, ¶ 20, 739 

N.W.2d at 823 (alteration in original) (quoting In re Jeffrey Bigelow Design Grp., 

Inc., 956 F.2d 479, 484 (4th Cir. 1992)). In this case, if Logs Unlimited had received 

reasonably equivalent value for the transfer, the corporation would have had a 

sufficient estate to pay Nielsen’s $35,374.95 judgment. But because Logs Unlimited 

did not receive reasonably equivalent value for the transfer, there were insufficient 

funds to pay the unsecured creditors, and Nielsen was worse off because of the 

transfer. The circuit court did not clearly err in finding that Logs Unlimited did not 

receive consideration reasonably equivalent to the fair market value of the assets.
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[¶20.] Logs Unlimited next challenges the circuit court’s finding that Logs 

Unlimited was insolvent after the transfer. Logs Unlimited contends that no 

witness testified that it was “insolvent.” It also contends that because the court 

stated that Logs Unlimited had equity of $114,000 remaining after the transfer, it

could not have been insolvent as a matter of law. 

[¶21.] A debtor is “insolvent” if “the sum of the debtor’s debts is greater than 

all of the debtor’s assets at a fair valuation[,]” and insolvency is presumed when the 

debtor “is generally not paying his debts as they become due[.]” SDCL 54-8A-2(a)-

(b). Here, Schramel testified that after the transfer, Logs Unlimited did not have 

sufficient assets to pay the debt represented in Nielsen’s judgment. Tenbroek

confirmed that Logs Unlimited would not be solvent if Nielsen’s judgment was 

considered. Although neither witness used the term “insolvent,” their testimony 

established insolvency because, after the transfer, Logs Unlimited’s debts exceeded 

the fair market value of its remaining assets and it was unable to pay its debts as 

they became due.

[¶22.] Logs Unlimited, however, points out that the circuit court found that 

“[a]ccording to [Logs Unlimited’s] tax returns for 2011, after the transfer of all its 

assets, [Logs Unlimited’s] outstanding liabilities were paid and there was $114,000 

left over.” But that finding was based on the tax return, which valued the assets at

$259,215. Therefore, Logs Unlimited had $114,000 in equity only if the full 

$259,215 fair market value of its assets had been received for the transfer, a fact 

that did not occur. Moreover, Logs Unlimited may not, as a matter of law, include 

the value of any of the transferred assets in determining insolvency. Under the Act, 
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the debtor’s countable assets for purposes of determining insolvency “do not include 

property that has been transferred, concealed or removed with intent to hinder, 

delay or defraud creditors or that has been transferred in a manner making the 

transfer voidable[.]” SDCL 54-8A-2(d). In this case, the transferred assets may not 

be considered in determining insolvency, and even if they could, the actual 

consideration received for those assets was not sufficient to avoid insolvency. The 

circuit court did not err in finding that Logs Unlimited was insolvent. 

[¶23.] Logs Unlimited finally argues that there was no transfer of an “asset” 

within the meaning of the Act. Logs Unlimited points out that the transfer of an 

asset does not include the disposal of “[p]roperty to the extent it is encumbered by a 

valid lien[.]” SDCL 54-8A-1(2)(i). However, in this case, the secured loans held by 

First National Bank and Telco ($141,100) encumbered much less than the fair 

market value of the transferred property ($259,215). Because there was sufficient 

unencumbered property to satisfy the judgment, the transfer involved “assets” 

within the meaning of SDCL 54-8A-1(2)(i).4

[¶24.] Considering the relevant factors, the transfer was fraudulent under 

SDCL 54-8A-4(a)(1). The assets were transferred to insiders. Through Logs 

Unlimited and Absolute Log Homes, Schramel retained possession and control of 

the assets after the transfer. Schramel admitted that he did not disclose the 

transfer to Nielsen. Nielsen obtained the judgment before the transfer. The 

 

4. Logs Unlimited also argues that “Nielsen provided no proof that Logs 

Unlimited had any equity, or excess value, in the assets he list[ed] in his 

complaint[.]” We disagree. Logs Unlimited’s 2011 tax return disclosed that 

$114,000 in equity would have been available after payment of all liabilities if 

the assets had been transferred for fair market value. 
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consideration for the transfer was not reasonably equivalent to the fair market 

value of the assets, and Logs Unlimited was insolvent after the transfer. These 

facts show that Schramel and Logs Unlimited had the actual intent to hinder, 

delay, or defraud Nielsen. In fact, when asked in his debtor’s examination whether 

the reason he ceased doing business as Logs Unlimited was to avoid paying Nielsen, 

Schramel answered, “that could be[.]” We affirm the circuit court’s determination

that Logs Unlimited fraudulently transferred its assets.5

[¶25.] GILBERTSON, Chief Justice, and KONENKAMP, SEVERSON and 

WILBUR, Justices, concur. 

 

5. Logs Unlimited’s other arguments are without merit.