Considered on Briefs on Aug. 27, 2013.
Rehearing Denied Dec. 19, 2013.
Roger A. Tellinghuisen, Michael V. Wheeler, Demersseman, Jensen, Tellinghuisen, Stanton & Huffman, LLP, Rapid City, South Dakota, Attorneys for plaintiff and appellee.
George J. Nelson, Abourezk & Zephier, PC, Rapid City, South Dakota, Attorneys for defendants and appellants.
[¶ 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."
[¶ 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. Nielsen contended that Logs Unlimited transferred the assets without receiving fair 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 ...