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Pearson v. AVO General Services, LLC

Court of Appeals of Missouri, Western District, Fourth Division

May 30, 2017

TODD PEARSON, Appellant,

         Appeal from the Circuit Court of Boone County, Missouri The Honorable Jeff Harris, Judge

          Before Mark D. Pfeiffer, Chief Judge, and Lisa White Hardwick and Cynthia L. Martin, Judges.

          Mark D Pfeiffer, Chief Judge.

         Mr. Todd Pearson ("Pearson") appeals from the Judgment of the Circuit Court of Boone County, Missouri ("trial court"), after a bench trial, in favor of AVO General Services, LLC ("AVO"), on Pearson's petition seeking relief under the Missouri Uniform Fraudulent Transfer Act ("MUFTA"). We affirm.

         Factual and Procedural History[1]

         Kenneth Hough ("Hough"), a disabled American veteran, was the sole member of AVO, a Missouri limited liability company. AVO was a service-disabled veteran-owned business with the sole purpose of acquiring federal contracts. In May 2009, AVO was awarded a federal contract, which was only available to disabled American veterans, for a digital television project. Pearson's limited liability company, RP Squared, LLC, leased general office premises to AVO for six months in 2009 while AVO worked on the federal contract, which was completed in the summer of 2009. Additionally, with regard to the 2009 federal contract, Pearson had a separate agreement with AVO whereby AVO agreed to pay Pearson five percent of the net project profits from the 2009 digital television federal contract. Ultimately, Pearson's share of the net project profits was determined to be $40, 000.

         After the 2009 digital television federal contract was fully performed and AVO had been compensated, Pearson made demand in August 2009 for the net project profit share to which he was entitled.

         Also in August 2009, Needham Development Group, LLC, Mike Needham, and Brent Wood asserted claims totaling $525, 000 for work performed relating to the 2009 digital television federal contract. In August and September 2009, these entities were paid $400, 000, resulting in a remaining claimed balance as of September 2009 of $125, 000.[2]

         In October 2009, fully aware of the $165, 000 in claims that were pending, AVO acquired ownership of real property in Boone County, Missouri, having a fair market value of approximately $240, 000 ("the Property"), though the record is unclear where the consideration came from for this acquisition. No evidence was admitted at trial suggesting that AVO incurred debt to acquire the Property, or otherwise used its existing assets to acquire the Property.[3] The purpose of this real property acquisition was so that AVO would be able to obtain performance bonds enabling AVO to compete for larger federal contracts.

         However, within approximately six months, it became obvious to Hough and AVO that the real estate purchase and corresponding performance bonds business model would not accomplish the desired purpose and that AVO would only seriously be considered by the federal government for smaller contracts. Accordingly, in May 2010, AVO transferred-for nominal consideration- ownership of the Property to another of Hough's solely owned limited liability companies, Sundance Lake Surfer, LLC ("Sundance"), because Sundance's sole purpose was real estate investment and management. Sundance used the Property as collateral to acquire six other real properties.

         Thus, as of May 2010, AVO had remaining assets of approximately $89, 000 cash on hand plus accounts receivable relating to additional and continuing federal contracts. In fact, AVO generated federal contract income of approximately $58, 000 in 2010 and $116, 000 in 2011. And, though the record does not identify the receipts in 2012, AVO continued to receive revenue from the federal government in 2012.

         In March 2010, Pearson filed suit against Hough and AVO, alleging breach of lease and breach of contract for services rendered by Pearson, seeking payment of the $40, 000 he was owed ("original lawsuit"). In the original lawsuit, Pearson alleged that though the five percent net project profit agreement was with AVO, Hough's actions as the sole member of AVO were such that Pearson was entitled to pierce the corporate veil and to obtain a personal judgment against Hough. The trial court in the original lawsuit agreed and, in October 2011, entered judgment against both Hough and AVO, jointly and severally, in the amount of $40, 000. Thereafter, Hough filed for personal bankruptcy. The bankruptcy trustee did not seek to make any claim that Hough's personal bankruptcy estate was entitled to any interest in the Property. After distributing the bankruptcy estate-including a $6, 000 payment to Pearson-Hough's remaining debts were discharged, leaving AVO as the only party liable to Pearson for the original lawsuit judgment.

         In September 2013, Pearson filed the present lawsuit against AVO and others (including Sundance) under MUFTA as a judgment creditor. After a bench trial, judgment was entered in favor of AVO and the other defendants.

         Pearson appeals.

         Standard of Review

         In a bench-tried case, the judgment of the trial court will be affirmed by the appellate court unless there is no substantial evidence to support it, it is against the weight of the evidence, it erroneously declares the law, or it erroneously applies the law. Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976). "We view the evidence and the reasonable inferences that may be drawn therefrom in the light most favorable to the judgment, disregarding evidence and inferences to the contrary." Higgins v. Ferrari, 474 S.W.3d 630, 635 (Mo. App. W.D. 2015) (internal quotation omitted). "Appellate courts should exercise the power to set aside a decree or judgment on the ground that it is 'against the weight of the evidence' with caution and with a firm belief that the decree or judgment is wrong." Id. (internal quotation omitted). "We defer to the trial court's determination of the credibility of the witnesses." Id. (internal quotation omitted). However, we independently evaluate the trial court's application of the law. AAA Uniform & Linen Supply, Inc. v. Barefoot, Inc., 17 S.W.3d 627, 629 (Mo. App. W.D. 2000).

         "A party seeking to have a transaction declared void as fraudulent must prove his case by clear and convincing evidence." Bueneman v. Zykan, 52 S.W.3d 49, 54 (Mo. App. E.D. 2001). However, regardless of the burden of proof below, our standard of review on appeal remains the same. Ivie v. Smith, 439 S.W.3d 189, 199 (Mo. banc 2014).


         Pearson asserts two points of error. First, he contends that the trial court erred in its ruling relating to AVO's solvency at the relevant time frame relating to the lawsuit. Specifically, he maintains in Point I that: (a) the trial court erroneously applied the law because it considered factors other than AVO's debts and assets; and (b) the weight of the evidence was against the trial court's finding that the disputed transaction did not cause AVO's debts to exceed its assets.[4]Second, he contends that the trial court erred when it found that AVO did not have actual intent to defraud. Specifically, he maintains in Point II that: (a) the weight of the evidence was against the trial court's findings that five statutory badges of fraud were present; and (b) the trial court erroneously applied the law because it impermissibly "reverse pierced" AVO in the trial court's analysis of the fraud claim.

         Multifarious Point Relied On

         Before addressing Pearson's claims on appeal, we note that his second point relied on contains multifarious claims of error and, accordingly, violates Rule 84.04. Wennihan v. Wennihan, 452 S.W.3d 723, 728 (Mo. App. W.D. 2015). "A point relied on should contain only one issue, and parties should not group multiple contentions about different issues together into one point relied on." Id. (internal quotation omitted). A misapplication-of-the-law challenge and an against-the-weight-of-the-evidence challenge "are distinct claims. They must appear in separate points relied on in the appellant's brief to be preserved for appellate review." Ivie, 439 S.W.3d at 199 n.11 (citations omitted). However, "[b]ecause we are able to discern the claims being made and the defective nature of the point relied on does not impede our disposition of the case on the merits, we will exercise our discretion to attempt to resolve the issues on the merits." Wennihan, 452 S.W.3d at 728 (internal quotation omitted). "We will separate [Pearson's] contentions, as best we can discern them, and ...

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