Court Opinion

ID: 2705237
Source: CourtListenerOpinion
Date Created: 2014-08-04 22:33:38.499755+00
Date Added: 2024-06-11T12:28:48.726767
License: Public Domain

[Cite as Witschey, Witschey & Firestine Co., L.P.A. v. Daniele, 2013-Ohio-5724.]

STATE OF OHIO                     )                         IN THE COURT OF APPEALS
                                  )ss:                      NINTH JUDICIAL DISTRICT
COUNTY OF SUMMIT                  )

WITSCHEY, WITSCHEY & FIRESTINE                              C.A. No.         26811
CO., LPA

        Appellant
                                                            APPEAL FROM JUDGMENT
        v.                                                  ENTERED IN THE
                                                            COURT OF COMMON PLEAS
JOSEPH F. DANIELE, JR., et al.                              COUNTY OF SUMMIT, OHIO
                                                            CASE No.   CV 2011-11-6338
        Appellees

                                 DECISION AND JOURNAL ENTRY

Dated: December 26, 2013

        HENSAL, Judge.

        {¶1}     Witschey, Witschey & Firestine Co., LPA appeals a judgment from the Summit

County Court of Common Pleas that found in favor of Joseph Daniele, his wife, and their son on

its fraudulent-conveyance-of-real-property claim. For the following reasons, we reverse and

remand to the trial court to reapply Revised Code Section 1336.04(A)(1) to the evidence already

presented at trial.

                                                      I.

        {¶2}     According to Mr. Daniele, in 2004, while reviewing his estate plan, he determined

that he and his wife should transfer their house to their son so that they would not risk losing it if

they had to enter a long-term care facility. At the time, their son was operating a lucrative

business renovating and reselling homes in Florida. Mr. Daniele and his wife did not have a

lawyer, but Witschey had represented their son for several years, so their son had Witschey

prepare a deed transferring the property to Mr. Daniele and his wife for life, and the remainder to
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their son. The Danieles did not receive any compensation in exchange for the remainder interest

transferred to their son.

        {¶3}    A few years after the transfer, the Danieles’ son’s business failed and he

accumulated over $160,000 in unpaid legal fees with Witschey. According to Mr. Daniele,

around the same time, he discovered that, because of a change in the law, he and his wife did not

have to divest themselves of the house in order to be assured that they would not lose it if they

had to enter a long-term care facility. He, therefore, asked their son to transfer his interest in the

house back to them. In May 2009, the Danieles’ son transferred his interest in the property to

them for no cost. Mr. Daniele’s wife later transferred her interest in the property to Mr. Daniele.

        {¶4}    Following the transfer of the deed back to the Danieles, Witschey obtained a

judgment against their son for his unpaid legal fees. While investigating the son’s assets, it

learned about the transfer of the remainder interest in the property back to the Danieles. In

November 2011, it filed an action for fraudulent conveyance against Mr. Daniele, his wife, and

their son, seeking to invalidate the transfer. Following a trial to the bench, the court entered

judgment in favor of the defendants. Witschey has timely appealed the trial court’s judgment,

assigning one error.

                                                 II.

                                   ASSIGNMENT OF ERROR

        THE TRIAL COURT ERRED IN FINDING THAT THERE WAS A
        “REASONABLY EQUIVALENT VALUE” EXCHANGED BETWEEN THE
        DEFENDANTS/APPELLEES PURSUANT TO R.C. 1336.08(A) OF OHIO’S
        FRAUDULENT CONVEYANCE ACT.

        {¶5}    Witschey argues that the trial court incorrectly rejected the claim that it brought

under Revised Code Section 1336.04(A)(1). In its decision, the court noted that, under Section

1336.08(A), a transfer is not fraudulent under Section 1336.04(A)(1), “against a person who took
                                                 3

in good faith and for a reasonably equivalent value.” The trial court determined that, because the

Danieles had transferred the property to their son in 2004 as a gift, “there is no requirement that

there be value for the 2009 transfer.” It, therefore, entered judgment for the Danieles.

       {¶6}    At trial, Witschey argued that it was entitled to relief under Section 1336.04(A)

and 1336.05(A). On appeal, it has limited its argument to its claim under Section 1336.04(A)(1).

Under that section, “[a] transfer * * * is fraudulent as to a creditor * * * if the debtor made the

transfer * * * [w]ith actual intent to hinder, delay, or defraud any creditor of the debtor[.]”

“[T]he existence of fraudulent intent is to be determined based on the facts and circumstances of

each case.” UAP-Columbus JV326132 v. Young, 10th Dist. Franklin No. 09AP-646, 2010-Ohio-

485, ¶ 29.

       {¶7}    “The burden of proof in an action to set aside a fraudulent conveyance must be

affirmatively satisfied by the complainant.” Stein v. Brown, 18 Ohio St.3d 305, 308 (1985).

Recognizing the difficulty in finding direct proof of a defendant’s intent, courts have held that

there are certain “badges of fraud” that may give rise to an inference that a conveyance was

fraudulent. Cardiovascular & Thoracic Surgery of Canton, Inc. v. DiMazzio, 37 Ohio App.3d

162, 166 (5th Dist.1987), quoting 24 Ohio Jurisprudence 3d, Creditors’ Rights, Section 754, at

422 (1980); See Stein at 308. In 1990, Ohio adopted the Uniform Fraudulent Transfer Act,

which codified a non-exclusive list of these badges under Section 1336.04(B). Abood v. Nemer,

128 Ohio App.3d 151, 159 (9th Dist.1998); Atlantic Veneer Corp. v. Robbins, 4th Dist. Pike No.

01CA678, 2002-Ohio-5363, ¶ 27; R.C. 1336.04(B). This Court has followed the reasoning of

other district courts of appeal that, if a plaintiff presents “proof of enough of these indicia of

fraud,” the burden of proof shifts to the defendants “to rebut the presumption of fraud.” Abood

at 162. In this case, the trial court found that there were enough badges of fraud present that the
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burden shifted to the Danieles to “go forward with * * * proof and explain the transaction.”

DiMazzio at 166, quoting 24 Ohio Jurisprudence 3d, Creditor’s Rights, Section 884, at 559

(1968).

          {¶8}   Section 1336.08(A) provides one way that a defendant can rebut the presumption

of fraud. Abood at 163. It provides that “[a] transfer * * * is not fraudulent under division

(A)(1) of section 1336.04 of the Revised Code against a person who took in good faith and for a

reasonably equivalent value or against any subsequent transferee or obligee.” The trial court

determined that the Danieles could use Section 1336.08(A) to rebut the presumption of fraud

even though they did not give their son anything of monetary value in exchange for the deed

because their son had not given them anything of monetary value at the time of the first transfer.

          {¶9}   Section 1336.03(A) provides that “[v]alue is given for a transfer or an obligation

if, in exchange for the transfer or obligation, property is transferred or an antecedent debt is

secured or satisfied * * *.” Under Section 1336.01(J), “‘[p]roperty’ means anything that may be

the subject of ownership.” According to Mr. Daniele, he did not give his son any property in

exchange for the return of the deed of his house. The transfer also did not satisfy or secure any

pre-existing debt that his son owed to him. Accordingly, there is no evidence in the record to

support a finding that the transfer of the deed back to the Danieles was for property of reasonably

equivalent value.

          {¶10} The trial court, accepting Mr. Daniele’s testimony that he originally transferred

the property to his son “under the auspices of estate planning,” reasoned that, because the

Danieles’ son obtained the deed to the house as a gift, the Danieles did not need to demonstrate

that his return of the deed was for reasonably equivalent value under Section 1336.08(A). Under

the plain language of the statute, however, to satisfy the requirements of Section 1336.08(A), a
                                                 5

transfer must be “for a reasonably equivalent value * * *.” We, therefore, conclude that the trial

court incorrectly relied on Section 1336.08(A) in its judgment entry.

       {¶11} Witschey argues that, because the trial court misapplied Section 1336.08, this

Court should order the transfer set aside.      Just because the Danieles failed to satisfy the

requirements of Section 1336.08(A), however, does not mean that they did not rebut the

presumption that their son’s transfer of the deed was fraudulent. Section 1336.08(A) merely

codifies one way in which a transferee can defend against an action under Section

1336.04(A)(1). See Abood, 128 Ohio App.3d at 163. The fact that Witschey established several

badges of fraud simply shifted the burden to the Danieles and their son to “go forward with * * *

proof and explain the transaction.”      DiMazzio, 37 Ohio App.3d at 166, quoting 24 Ohio

Jurisprudence 3d, Creditors’ Rights, Section 884, at 559 (1980). “The ultimate burden of proof

in fraud cases rests with the party asserting fraud.” Baker & Sons Equip Co. v. GSO Equip.

Leasing, Inc., 87 Ohio App.3d 644, 651 (10th Dist.1993).

       {¶12} Because the trial court incorrectly determined that the Danieles could use Section

1336.08(A) to defend against Witschey’s claim under Section 1336.04(A)(1) even though his son

did not receive anything of “[v]alue” under Section 1336.03(A), Witschey’s assignment of error

is sustained. We note that, because of the mistake, the trial court, while finding that the transfer

was not made in bad faith for purposes of applying Section 1336.08(A), did not proceed to

analyze whether the evidence that the Danieles presented rebutted the presumption of fraud

under Section 1336.04(A)(1). Accordingly, we remand this case to the trial court to determine in

the first instance, based on the evidence that was already presented at trial, whether the Danieles’

evidence about the circumstances of the transfer rebutted Witschey evidence that the transfer was

fraudulent under Section 1336.04(A)(1). We note that Section 1336.04(A)(1) requires proof of
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the debtor’s “actual intent to hinder, delay, or defraud any creditor of the debtor.” On remand,

therefore, it is the intent of the Danieles’ son that is at issue, as there was no evidence in the

record that the Danieles were debtors of Witschey.

                                                III.

       {¶13} The trial court incorrectly determined that Section 1336.08(A) applies to the facts

of this case. The judgment of the Summit County Court of Common Pleas is reversed, and this

matter is remanded for further proceedings consistent with this decision.

                                                                              Judgment reversed,
                                                                             and cause remanded.

       There were reasonable grounds for this appeal.

       We order that a special mandate issue out of this Court, directing the Court of Common

Pleas, County of Summit, State of Ohio, to carry this judgment into execution. A certified copy

of this journal entry shall constitute the mandate, pursuant to App.R. 27.

       Immediately upon the filing hereof, this document shall constitute the journal entry of

judgment, and it shall be file stamped by the Clerk of the Court of Appeals at which time the

period for review shall begin to run. App.R. 22(C). The Clerk of the Court of Appeals is

instructed to mail a notice of entry of this judgment to the parties and to make a notation of the

mailing in the docket, pursuant to App.R. 30.

       Costs taxed to Appellees.

                                                       JENNIFER HENSAL
                                                       FOR THE COURT
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MOORE, P. J.
WHITMORE, J.
CONCUR.

APPEARANCES:

JEFFREY T. WITSCHEY and ALEX RAGON, Attorneys at Law, for Appellant.

CARMEN V. ROBERTO, Attorney at Law, for Appellees.

JOSEPH DANIELE, JR., pro se, Appellee.