Opinion ID: 1279751
Heading Depth: 1
Heading Rank: 1

Heading: the fraudulent conveyance action

Text: A. Did the Trial Court Clearly Err in Finding that the 1977 Conveyance to Schnell was Fraudulent? This case arose when Wife sued to set aside the 1977 conveyance of the Anchorage home. A conveyance intended to hinder, delay or defraud creditors or other persons in their lawful suits is void. AS 34.40.010. [3] Existence of a fraudulent intent is a question of fact, often proven by circumstantial evidence. First National Bank of Fairbanks v. Enzler, 537 P.2d 517, 521-22 (Alaska 1975); AS 34.40.090. This court has stated that fraud is established by a preponderance of the evidence; clear and convincing proof is not required. Saxton v. Harris, 395 P.2d 71, 72 (Alaska 1964). [4] The trial court required clear and convincing evidence of fraud, citing Blumenstein v. Phillips Insurance Center, 490 P.2d 1213 (Alaska 1971). However, Blumenstein does not require clear and convincing evidence; it merely states that, under normal circumstances, fraud is not presumed. Id. at 1218. [5] Fraud is often established circumstantially with evidence of the badges of fraud. [6] The weight accorded the badges depends on the facts of each case; the badges are merely evidentiary facts tending to prove or disprove the ultimate fact  whether fraud was intended. Enzler, 537 P.2d at 522; Blumenstein, 490 P.2d at 1223. We will overturn the decision of the trial court only if it is clearly erroneous. Enzler, 537 P.2d at 525. The evidence at trial showed the existence of some of the badges of fraud: 1. Inadequate consideration. The parties stipulated that Wife received approximately $45,000 from the 1977 transfer. [7] The court noted that the money was provided by Husband from marital funds. Thus one-half of the $45,000 received by Wife came from her. Assuming, as the evidence indicates, that the price of $90,000 was not itself unfair, Wife netted $22,500 from the sale rather than the $45,000 she ought to have, and thought she had received. 2. Anticipation of pending suit. Although there was no suit pending at the time of the conveyance, Wife argued and the trial court concluded that Husband's motive was to avoid the equitable distribution statute in case of an eventual divorce. 3. Husband retained premises. Although Husband and Wife moved to California from 1977-78, they lived in the house from 1978-82. Charles never exercised ownership over the property. Husband told Wife he had repurchased the home, placing it in Charles' name. In lieu of paying rent to Charles, Husband agreed to finish construction and pay insurance and taxes. Husband invested $13,000 in construction from 1978-82. In other words, Husband acted as if he were the true owner of the property. 4. Relationship of the parties. This is the most telling factor. It appears that Husband set out to deprive Wife of her interest in the Anchorage home, even if it meant paying her for it and moving to California temporarily. If the conveyance were valid, Charles would own the house and receive all the appreciation in its value, Wife would have nothing to leave her children when she dies, nor would she be able to claim part of the house if they divorced. The trial court concluded that Charles was under Husband's control and held title for his benefit. After examining this evidence as a whole, we conclude that Wife presented sufficient evidence of fraudulent intent. Therefore, the trial court did not clearly err when it set aside the conveyance. [8] B. Did the Trial Court Err in Setting Aside the Conveyance of Husband's 50% Interest in the Anchorage Home? Husband and Wife owned the property as tenants in common. The general rule is that a tenant in common has the right to voluntarily convey that interest; the transferee acquires an undivided interest equivalent to the transferor's. Krug v. Krug, 5 Kan. App.2d 426, 618 P.2d 323, 325 (1980); Beckstrom v. Beckstrom, 578 P.2d 520 (Utah 1978). Consent of co-tenants is not required. Justus v. Clelland, 133 Ariz. 381, 651 P.2d 1206, 1207 (Ariz. App. 1982); Cox v. Lasley, 639 P.2d 1219, 1221 (Okla. 1982). Husband argues that he had the right to convey his 1/2 interest to Charles without Wife's consent; he therefore reasons that the trial court erred in setting aside the conveyance of his undivided 1/2 interest to Charles. We reject Husband's argument because of the marital relationship between the co-tenants. When a spouse makes a colorable transfer of her separate property intending to defraud the other, the defrauded spouse may have the transfer set aside. Scavello v. Scott, 194 Colo. 64, 570 P.2d 1, 2 (1977); Robinson v. Leonard, 274 Or. 635, 547 P.2d 629, 631 (1976). A colorable transfer is one which is not absolute but rather allows the transferor to maintain control of the property. Scavello, 570 P.2d at 2. See also Sanditen v. Sanditen, 496 P.2d 365, 367-68 (Okla. 1972). The burden of proof is on the defrauded spouse. Alexander v. Alexander, 538 P.2d 200, 204 (Okla. 1975). Therefore this court has the power to set aside a spouse's alienation of his separate property when the transfer is (1) merely colorable, leaving the transferor with effective control of the property and (2) made with the intent to deprive the other spouse of her marital rights. [9] Since the trial court found that Husband intended to defraud Wife and the evidence showed his continued possession of the Anchorage home, the trial court's decision to set aside the entire conveyance was not clearly erroneous. C. Did Wife Receive a Double Recovery? Although Judge Serdahely ordered the conveyance be set aside as fraudulent, he did not require Wife to return to Husband her share of the proceeds. Husband argues this is an abuse of discretion. Wife argues that forcing her to return the proceeds would be a meaningless act given the circumstances presented. Judge Serdahely properly left the division of money and property to the trial court in the divorce action. [10] That court found that Husband used marital funds to purchase Wife's interest in the home and awarded Wife all marital property currently in her possession. Therefore, even if Wife still had all the proceeds, their disposition is provided for in the decree of divorce. Had Judge Serdahely ordered otherwise, there would be conflicting orders on appeal. We conclude that the trial court did not abuse its discretion in failing to order disgorgement as a condition of rescission. D. Is the Award of Attorney's Fees an Abuse of Discretion? The trial court's order of July 18 requested that Wife's attorney submit an appropriate motion and affidavit as to fees within ten days of a decision. On August 24, Wife's attorney submitted an affidavit and proposed judgment for costs and attorney's fees. Final judgment issued on August 27. Although Wife's attorney failed to meet the deadline imposed in the July 18 order, the court awarded $4,000 attorney's fees. However, the court found Wife waived the cost award. Alaska R.Civ. P. 79(a). We conclude that the trial court did not abuse its discretion in awarding attorney's fees on the late motion. See State v. University of Alaska, 624 P.2d 807, 817 (Alaska 1981).