Verna Mae P. Carroll v. Anna F. Carroll
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IN THE COURT OF APPEALS OF THE STATE OF MISSISSIPPI
NO. 2009-CA-00328-COA
VERNA MAE P. CARROLL
APPELLANT/CROSSAPPELLEE
v.
ANNA F. CARROLL
DATE OF JUDGMENT:
TRIAL JUDGE:
COURT FROM WHICH APPEALED:
ATTORNEYS FOR APPELLANT:
ATTORNEY FOR APPELLEE:
NATURE OF THE CASE:
TRIAL COURT DISPOSITION:
DISPOSITION:
APPELLEE/CROSSAPPELLANT
12/15/2008
HON. TALMADGE D. LITTLEJOHN
MONROE COUNTY CHANCERY COURT
RICHARD SHANE MCLAUGHLIN
NICOLE H. MCLAUGHLIN
CARTER DOBBS JR.
CIVIL - OTHER
FOUND TRANSFER OF FUNDS TO BE
FRAUDULENT AND ORDERED THE
MONEY TO BE REPAID TO THE
REGISTRY OF THE CHANCERY COURT
OF MONROE COUNTY FOR EQUITABLE
DISTRIBUTION IN THE DIVORCE
PROCEEDINGS
AFFIRMED IN PART AND REVERSED
AND RENDERED IN PART - 12/14/2010
MOTION FOR REHEARING FILED:
MANDATE ISSUED:
BEFORE LEE, P.J., IRVING AND GRIFFIS, JJ.
LEE, P.J., FOR THE COURT:
¶1.
This case involves the sale of a gravel business during the pendency of a divorce
proceeding and the subsequent distribution of the sale proceeds to satisfy a debt. We must
determine whether the distribution of the sale proceeds was appropriate under the
circumstances.
FACTS AND PROCEDURAL HISTORY
¶2.
Roger A. Carroll and Anna F. Carroll were married in 1983. Roger’s parents, William
and Verna Mae Carroll, owned Mississippi Gravel Sales, Inc. (MGS) and Carroll’s Gravel.
On January 15, 1999, Roger and his parents signed an “Agreement for Sale and Transfer of
Assets,” under which Roger would purchase MGS for $450,000. The terms of the contract
provided that Roger would pay $150,000 at the time of closing and pay the remaining
$300,000 in monthly installments over ten years at the rate of seven percent per year. As part
of the purchase price, Roger obtained ownership of MGS’s equipment. Roger was the
president and sole shareholder of MGS.
¶3.
In September 2003, Anna filed a complaint for divorce in the Monroe County
Chancery Court against Roger. While the divorce case was still pending, Roger sold MGS
for $500,000 to Mississippi Gravel Sales, LLC 1 in November 2004. From the sale proceeds,
Roger paid several creditors as well as $191,772.29 to Verna Mae.2 The money paid to
Verna Mae included $153,274.65, which was the amount Roger still owed her under the
purchase agreement, and $38,497.64 for certain equipment. While operating MGS, Roger
had used certain equipment belonging to Verna Mae.3 Roger included this equipment in the
1
Roger had no ownership interest in or connection with Mississippi Gravel Sales,
2
William died the previous year on May 29, 2003.
3
This equipment had belonged to Carroll’s Gravel, not MGS.
LLC.
2
sale of MGS to Mississippi Gravel Sales, LLC.
¶4.
In the judgment of divorce, the chancellor divided the marital assets and ordered
Roger to pay Anna certain sums including alimony in the amount of $4,000 per month. In
regard to MGS, the chancellor stated that if the sale of MGS was ever set aside, Anna would
be entitled to one-half of the net proceeds from the sale of MGS’s assets. Roger appealed,
and we reversed and remanded in part for the chancellor to determine whether Roger
complied with dividing the marital estate and to make an on-the-record determination as to
whether the award of periodic alimony was justified. Carroll v. Carroll, 976 So. 2d 880, 889
(¶22) (Miss. Ct. App. 2007).
¶5.
On January 27, 2005, Anna filed a complaint in the Monroe County Chancery Court
against Roger, Verna Mae, Cynthia Ann Carroll Loden, Tim Parker, MGS, and Mississippi
Gravel Sales, LLC. The complaint asserted several claims relating to the sale of MGS to
Mississippi Gravel Sales, LLC, as well as a purported fraudulent conveyance.4 Loden,
Parker, and Mississippi Gravel Sales, LLC, were subsequently dismissed.
¶6.
Following a trial on the matter, the chancellor found that Roger’s payment of
$153,274.65 to Verna Mae was fraudulent and ordered Verna Mae to pay that amount into
the registry of the chancery court for equitable distribution in Anna and Roger’s divorce
proceeding. The chancellor found that the transfer of $38,497.64 to Verna Mae was not
fraudulent.
¶7.
Verna Mae now appeals, asserting the following issues: (1) the chancellor erred in
4
The claim relating to the fraudulent conveyance was resolved in favor of Verna Mae
and is not contested on appeal.
3
applying the Uniform Fraudulent Transfer Act (UFTA); (2) the chancellor erred in setting
aside the transfer of $153,274.65 to Verna Mae; and (3) the chancellor failed to dismiss
Anna’s complaint pursuant to the doctrine of judicial estoppel. Finding that the chancellor
erred in setting aside the payment to Verna Mae, we reverse and render.
¶8.
Anna also filed a cross-appeal, asserting that the chancellor erred in finding that there
was no presumption of fraud in connection with the payment of $38,497.64 to Verna Mae.
DISCUSSION
I.
¶9.
UFTA
In her first issue on appeal, Verna Mae argues that the chancellor improperly applied
the UFTA. See Miss. Code Ann. § 15-3-101 to -121 (Rev. 2003). The UFTA repealed the
former Mississippi Code Annotated section 15-3-3 and became effective from and after July
1, 2006. The Mississippi Supreme Court has stated that “[i]f the statutory language mandates
that the statute is to apply from and after passage, it is not to be applied retroactively to
causes of action which accrued prior to passage of the statute.” Jones v. Baptist Mem’l
Hosp.-Golden Triangle, Inc., 735 So. 2d 993, 998 (¶11) (Miss. 1999).
¶10.
In his judgment, the chancellor stated the following:
Pursuant to the provisions of § 15-3-107 . . . and also pursuant to the
predecessor fraudulent conveyance statute, § 15-3-3, . . . the court determines
that there is a presumption of fraud as to the payment of the aforesaid sum of
$153,274.56 to Defendant Verna Mae P. Carroll, which presumption has not
been rebutted by the Defendants by clear and convincing evidence.
In his bench ruling, the chancellor noted that section 15-3-3 had been repealed and then
conducted an analysis of the issues following several factors as listed in section 15-3-107.
¶11.
According to section 15-3-3, a conveyance is fraudulent if it results from fraud or with
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the “intent or purpose to delay, hinder, or defraud creditors . . . .” This section also deems
fraudulent a transfer made for consideration not “deemed valuable in law” and a fraudulent
loan of goods and chattels. Miss. Code Ann. § 15-3-3. “When examining a conveyance to
determine if it is fraudulent, a court searches for certain ‘badges of fraud,’ or suspicious
circumstances, which usually accompany a fraudulent conveyance.” Se. Bank of Broward,
Fla., N.A. v. I.P. Sarullo Enter., Inc., 555 So. 2d 704, 707 (Miss. 1989) (quoting Reed v.
Lavecchia, 187 Miss. 413, 193 So. 439 (1940)). These “badges of fraud” can include the
following:
Inadequacy of consideration, transaction not in usual course or mode of doing
business, absolute conveyance as security, secrecy, insolvency of grantor,
transfer of all his property, attempt to give evidence of fairness, retention of
possession, failure to take a list of the property covered by the conveyance,
relationship of the parties, and transfer to person having no apparent use for
the property.
A & L, Inc. v. Grantham, 747 So. 2d 832, 843 (¶48) (Miss. 1999). In addition, transfer in
anticipation of litigation and amount of control over property by debtor after transfer are
considered badges. Se. Bank of Broward, 555 So. 2d at 708.
¶12.
According to Mississippi Code Annotated section 15-3-107(1) (Supp. 2009), a
conveyance is fraudulent if the debtor “made the transfer or incurred the obligation with
actual intent to hinder, delay or defraud any creditor of the debtor.” This section then lists
fourteen factors that may be given consideration in determining actual intent. Most of these
factors are similar to those considered “badges of fraud.” Since most of the factors from
section 15-3-107 that the chancellor relied upon to make his decision are similar to those
listed as “badges of fraud,” we can determine from the record whether the chancellor abused
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his discretion in finding that the transfer was fraudulent.
II.
¶13.
TRANSFER OF $153,274.65 TO VERNA MAE
Verna Mae next argues that the chancellor erred in setting aside the transfer as
fraudulent since the transferred sum was legitimately owed to her. The chancellor found that
there was a presumption of fraud as to the payment made to Verna Mae and that presumption
was not rebutted by clear-and-convincing evidence.
¶14.
The Mississippi Supreme Court has stated that in cases such as this, “there must be
clear and convincing proof of the existence of a valid debt, including disclosure of details as
to the items and amount of the debt, and it must clearly appear that the conveyance was in
fact made in consideration of such debt.” Barbee v. Pigott, 507 So. 2d 77, 85 (Miss. 1987).
The court further stated that “[a] debtor does have the right to prefer one creditor over
another . . . .” Id.
¶15.
There is no evidence in the record that Roger intended to defraud Anna – a fact which
Anna admitted at trial. Documentation in the record to support Verna Mae’s contention that
the debt was legitimate includes the contract for sale, an affidavit signed by Verna Mae,
numerous bank statements, and an amortization schedule which shows as of the sixty-ninth
payment Roger would owe Verna Mae $153, 274.65. Furthermore, the transaction was well
documented; Anna was notified of the transaction; Roger did not retain any interest in the
funds after transfer; and Verna Mae used the funds after the transfer from Roger. There was
clear-and-convincing evidence that the transfer of funds to Verna Mae by Roger to pay an
outstanding debt was legitimate. The chancellor erred in finding otherwise; therefore, we
reverse and render. Verna Mae is entitled to receive $153,274.65.
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III.
¶16.
JUDICIAL ESTOPPEL
In her final issue on appeal, Verna Mae argues that Anna’s claims should have been
dismissed pursuant to judicial estoppel. Prior to trial in the chancery court, Anna filed a
claim in the Monroe County Circuit Court alleging that the chancery matter had been settled
and that Verna Mae and Roger had tortiously breached the settlement agreement. However,
this matter was later dismissed. The doctrine of judicial estoppel is applied to prevent a party
from achieving an unfair advantage by taking inconsistent positions in litigation. Kirk v.
Pope, 973 So. 2d 981, 991 (¶¶31-32) (Miss. 2007). There are three requirements: “(1) the
party is judicially estopped only if its position is clearly inconsistent with the previous one;
(2) the court must have accepted the previous position; and (3) the non-disclosure must not
have been inadvertent.” Id. (citation omitted).
¶17.
In this case, it is clear that Anna’s position is not inconsistent with her previous
position. Anna thought a settlement had been reached and filed suit to enforce it. The record
is unclear as to whether a settlement agreement had been reached, but Verna Mae does not
admit that a settlement had been reached. The chancellor did, however, accept Anna’s
previous position as he found the conveyance to be fraudulent. In regard to the third
requirement, non-disclosure is inapplicable as Verna Mae filed a motion to dismiss on the
ground of judicial estoppel. We find that the doctrine of judicial estoppel is inapplicable in
this case. This issue is without merit.
Cross-appeal
¶18.
On cross-appeal, Anna argues that the transfer of $38,497.64 to Verna Mae was
fraudulent. This amount represented the value of certain equipment that Verna Mae testified
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she owned. According to Verna Mae, she continued to own this equipment even though
Roger began to use it when he bought MGS. When Roger sold MGS, he included this
equipment in the sale price. Roger testified that $38,497.64 was a fair value for the
equipment. This amount is listed as a lien payable to Verna Mae on the settlement statement.
Attached to the settlement statement is an affidavit by Verna Mae that states the specific
equipment involved and its value at $38,497.64.
¶19.
The chancellor found that this particular transfer to Verna Mae was not fraudulent,
and we agree. This issue is without merit.
¶20. THE JUDGMENT OF THE MONROE COUNTY CHANCERY COURT IS
REVERSED AND RENDERED ON DIRECT APPEAL AND AFFIRMED ON
CROSS-APPEAL. ALL COSTS OF THIS APPEAL ARE ASSESSED ONE-HALF TO
T H E A P P E L L A N T /C R O SS -A P P E L L E E A N D O N E -H A L F T O T H E
APPELLEE/CROSS-APPELLANT.
KING, C.J., IRVING, GRIFFIS, BARNES, ISHEE, ROBERTS, CARLTON
AND MAXWELL, JJ., CONCUR. MYERS, P.J., NOT PARTICIPATING.
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