Opinion ID: 2621569
Heading Depth: 1
Heading Rank: 6

Heading: Intent to Punish

Text: [¶ 17] Husband contends that the trial court attempted to punish him by awarding substantially all of his inherited assets to Wife. He claims that in order to accomplish this end, the trial court issued erroneous findings of fact that are not supported by the record. We have stated that when making a property division, the trial court in its discretion may consider the fault of the respective parties, but the division must not be done with the intent to punish one of the parties. Carlton v. Carlton, 997 P.2d 1028, 1034 (Wyo.2000). Accordingly, [f]indings of fact not supported by the evidence, contrary to the evidence, or against the great weight of evidence cannot be sustained. Id. (citing Jones v. Jones, 858 P.2d 289, 291 (Wyo.1993)). Generally, evidence of an intent to punish a party can be found in an unjust or inequitable property division. Beckle v. Beckle, 452 P.2d 205, 208 (Wyo. 1969). As noted above, we do not find the award to be unjust or inequitable. However, because Husband asserts the district court made erroneous and unsupported findings of fact in an attempt to punish him, the issue bears further analysis. [¶ 18] The particular finding of fact that Husband takes issue with states: The [family] Trust was created for the sole purpose of defrauding the defendant's creditors and potential creditors, including the plaintiff, Nancy L. Breitenstine. In determining whether such a finding is erroneous, we begin our analysis by considering the Uniform Fraudulent Conveyance Act as expressed in Wyo. Stat. Ann. § 34-14-108. Every conveyance made and every obligation incurred with actual intent, as distinguished from intent presumed in law, to hinder, delay, or defraud either present or future creditors, is fraudulent as to both present and future creditors. (emphasis added). Our case law indicates that an intent to hinder or delay creditors is enough to consider the conveyance fraudulent even if there was no actual fraud. Matter of Estate of Reed, 566 P.2d 587, 590 (Wyo.1977). The determining factor in this instance is Husband's intent when transferring marital assets to the trust. If Husband transferred the assets to the family trust with the intent to hinder, delay, or defraud either his present or future creditors, then such a transfer is fraudulent. [¶ 19] A fraudulent conveyance is by its very nature hard to substantiate. Considering § 34-14-108, much of the difficulty stems from the virtual impossibility of proving actual fraudulent intent. In response to the difficulty, this court and other courts have come to rely on inferences and presumptions drawn from the surrounding circumstances. We have stated: It is not necessary to prove a fraudulent conveyance by direct evidence, circumstantial evidence being sufficient. Reed, 566 P.2d at 591. The only way of determining actual intent to hinder or delay creditors is by a consideration of the circumstances surrounding the transaction. Smith, Keller & Assoc. v. Dorr & Assoc., 875 P.2d 1258, 1269 (Wyo.1994) (quoting Matter of Estate of Reed, 566 P.2d at 591). Circumstantial evidence of intent in these cases also often takes the form of certain badges of fraud. We have defined badges of fraud as a fact tending to throw suspicion upon the questioned transaction, excites distrust as to bona fides, raises an inference that a conveyance is fraudulent and by its presence usually requires a showing of good faith. Reed, 566 P.2d at 589. [¶ 20] In Reed, we enumerated several badges of fraud including transfers of property without consideration, hurried transaction not in the normal course of business, the conveyance occurs after notice of pending action, and the relationship between the parties to the conveyance. Id. at 590. The badges of fraud now recognized by courts have grown too numerous to completely list. However, the more common badges of fraud include: lack or inadequacy of consideration, close familial relationship or friendship among the parties, retention of possession or benefit of the property transferred, the financial condition of the transferor both before and after the transfer, the chronology of events surrounding the transfer, the transfer takes place during the pendency or threat of litigations, and hurried or secret transactions. See Walsh v. Walsh, 841 P.2d 831, 839 (Wyo.1992); Consumers United Ins. Co. v. Smith, 644 A.2d 1328 (D.C. 1994); Diss v. Agri Bus. Int'l, 670 N.E.2d 97 (Ind.Ct.App.1996); Berger v. Hi-Gear Tire & Auto Supply Inc., 257 Md. 470, 263 A.2d 507 (1970); Coleman-Nichols v. Tixon Corp., 203 Mich.App. 645, 513 N.W.2d 441 (1994); Jones v. Arnold, 272 Mont. 317, 900 P.2d 917 (1995). Even though the catalog of badges of fraud is lengthy, a single badge of fraud may stamp a transaction fraudulent. Reed, 566 P.2d at 589. Because it is impossible to look into Husband's mind to determine his actual intent, we consider the surrounding circumstances and the family trust itself. [¶ 21] The trial court found that the family trust was an asset protection trust. A special expert was appointed by the court to review the family trust and present testimony. The special expert intimated that because the family trust was located in the Commonwealth of the Bahamas the family trust would be considered an offshore asset protection trust (OAPT). [1] We agree. We would note that many badges of fraud can be found in the very form of the family trust. Even though OAPTs themselves are legal, we must consider the purpose for which the assets were transferred to the family trust. If the sole purpose of the transfer was to place assets beyond the reach of present or future creditors, we consider this an intent to hinder or delay under the fraudulent conveyance act. While there are surely some legitimate reasons for establishing OAPTs, such as estate planning or tax planning, the exclusive intent to hinder creditors is not such a legitimate reason. [¶ 22] Considering, as the district court did, the family trust itself and the circumstances surrounding the establishment of the family trust, we see many badges of fraud. The transfer to the family trust named the children as beneficiaries. Certainly this would be a close familial relationship. Furthermore, although the family trust names the children as beneficiaries, Husband receives the benefit from the family trust. Looking at the overall scheme of the family trust, the children get no benefit because the income is accumulated and the family trust ends in 2005 at which time the assets will be returned to Husband. Husband would not even have to wait until 2005 to realize income from the trust as the family trust allows Husband himself to become a beneficiary. [¶ 23] Further, Husband has retained the possession or benefit of the property transferred. The family trust assets are entirely within Husband's control, which is why he is being taxed on the income to the family trust, and the family trust assets would be included in his estate should he die. Husband has named a protector [2] over the trust assets who is a long-time friend of Husband's who even Husband agreed would act in Husband's best interests not necessarily the children's. For all practical purposes, Husband has given the assets to himself with the benefit of a spendthrift provision. [¶ 24] Moreover, the timing of the family trust is suspicious. Only after the first separation and the subsequent reconciliation did Husband decide to make the family trust. Clearly, Husband was on notice of threatened litigation as the couple had separated for a time before he created the family trust. Husband created the family trust in secret and then continued to transfer assets to the family trust up until the property division hearing. The district court also heard evidence of other transfers Husband made into corporations to protect his assets. Husband's own accountant agreed such steps were taken solely for asset protection from creditors. The special expert stated that the purpose of the family trust was to protect the assets from Husband's creditors, perhaps including Wife. [¶ 25] The district court has discretion to weigh the evidence and the credibility of the witnesses. The district court clearly recognized the multiple badges of fraud accompanying the transfers to the family trust and determined Husband's actual intent in making such transfers was simply to hinder, delay, or defraud Husband's creditors including Wife. Reviewing the record as discussed above, we cannot say these findings of fact are erroneous.