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Hurricane Deck Holding Co. v. Spanburg Investments LLC

Court of Appeals of Missouri, Southern District, Second Division

March 28, 2018

SPANBURG INVESTMENTS, LLC, et al., Defendants-Respondents.

          APPEAL FROM THE CIRCUIT COURT OF CAMDEN COUNTY Honorable Stanley Moore, Circuit Judge.

         This appeal arises from a lawsuit filed by plaintiff Hurricane Deck Holding Company (HDHC) against three defendants: Spanburg Investments, LLC (Spanburg Investments); Daniel Spanburg, the sole member and manager of the company (Spanburg); and his wife, Karen Sellers (Sellers). HDHC's two-count petition alleged that: Spanburg and Sellers fraudulently transferred assets, in violation of Missouri's Uniform Fraudulent Transfer Act (UFTA), §§ 428.005-.059[1] (Count 1); and Spanburg and Sellers used Spanburg Investments as their alter ego to justify piercing the corporate veil (Count 2). The case was tried to the court, and no party requested that the court issue findings of fact. The court found in favor of all defendants on both counts.

         On appeal, HDHC presents four points. We need only address the first, which is dispositive of this appeal. In Point 1, HDHC contends the judgment was against the weight of the evidence because "the overwhelming weight of the evidence showed [Spanburg's and Sellers'] actual intent to strip Spanburg Investments of its assets." We disagree because: (1) HDHC had the burden of proving that Spanburg and Sellers had the intent to defraud, which was a necessary element in each count in the petition; (2) HDHC's evidence on that intent element required the court to make a credibility determination; (3) the trial court did not find HDHC's evidence persuasive; and (4) after reviewing the record, we do not have a firm belief that the judgment was wrong.

         Factual and Procedural Background

         We view the evidence and permissible inferences drawn therefrom in the light most favorable to the judgment. Suffian v. Usher, 19 S.W.3d 130, 136 (Mo. banc 2000). So viewed, the following evidence relevant to this appeal was adduced at trial.

         In August 2005, Spanburg Investments acquired four lots from HDHC. The purchase price of $125, 000 was fully financed by HDHC, so Spanburg Investments was not required to make any cash investment in the property at the time the transaction closed. HDHC required Spanburg Investments to execute a promissory note (the Note), but neither Spanburg nor Sellers were individually required to sign or personally guarantee the Note. HDHC secured the Note with a deed of trust (Deed of Trust). With respect to payment, HDHC required interest-only payments until January 1, 2010. At that time, the Note matured, and a balloon payment for the entire outstanding balance became due.

         In November 2005, Spanburg Investments borrowed $200, 000 from the Bank of Versailles, secured by the first lot (Lot 1) of the four lots purchased from HDHC. The purpose of the loan was to procure funds to construct a speculation home on Lot 1 and develop infrastructure common to all four lots. HDHC agreed to subordinate its Deed of Trust to the Bank of Versailles' loan as to Lot 1. Spanburg and Sellers also personally guaranteed the Bank of Versailles' loan. The balance of the loan was not immediately paid out to Spanburg Investments. Instead, Spanburg Investments took draws as needed to pay expenses and wages associated with the speculation home project and the development of the lots.

         With respect to the Note, Spanburg Investments made all required interest payments. When the Note matured on January 1, 2010, Spanburg Investments failed to make the balloon payment and defaulted. The Bank of Versailles foreclosed on Lot 1 with the unfinished house. HDHC foreclosed on the remaining lots and sued Spanburg Investments for the remaining deficiency. In November 2012, HDHC obtained a judgment against Spanburg Investments in two separate amounts of $15, 000 and $116, 512.48. By that time, Spanburg Investments was insolvent.

         Thereafter, HDHC filed the underlying action against Spanburg Investments, Spanburg and Sellers (hereinafter referred to collectively as Defendants) alleging a violation of the UFTA and seeking to pierce the corporate veil of Spanburg Investments. A two-day bench trial was conducted. In addition to documentary evidence, several witnesses testified, including Spanburg. Because neither party requested specific findings, the trial court entered a judgment stating that on each count, "the Court finds the issues in favor of Defendants and against Plaintiff." This appeal followed.

          Standard of Review

         On review of a court-tried case, this Court will affirm the circuit court's judgment unless there is no substantial evidence to support it, it is against the weight of the evidence, or it erroneously declares or applies the law. Ivie v. Smith, 439 S.W.3d 189, 198-99 (Mo. banc 2014); see Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976); 84.13(d). To prevail on an against-the-weight-of-the-evidence challenge, a litigant must show that the trial court could not have reasonably found, from the trial record, the presence of a fact necessary to uphold the judgment. Ivie, 439 S.W.3d at 206. In such a challenge, the trial court may believe all, part, or none of the evidence, and we must defer to its factual findings when the issues of fact are contested and when the facts ultimately found depend on credibility determinations. Id. "The against-the-weight-of-the-evidence standard serves only as a check on a circuit court's potential abuse of power in weighing the evidence, and an appellate court will reverse only in rare cases, when it has a firm belief that the decree or judgment is wrong." Id. We presume the trial court's judgment is valid, and it is the appellant's burden to show otherwise. See Williams v. Frymire, 186 S.W.3d 912, 916 (Mo. App. 2006).[2]

         In addition, Rule 73.01(c) applies to court-tried cases and requires:

• the trial court, "if requested by a party, " to issue written findings on "controverted fact issues specified by the party, " and
• appellate courts to view fact issues without specific findings "as having been found in accordance with the result ...

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