BRIAN HALE v. ROBERT W. GREEN
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RENDERED: February 14, 2003; 2:00 p.m.
NOT TO BE PUBLISHED
Commonwealth Of Kentucky
Court of Appeals
NO. 2001-CA-002203-MR
BRIAN HALE
v.
APPELLANT
APPEAL FROM BELL CIRCUIT COURT
HONORABLE JAMES L. BOWLING, JR., JUDGE
ACTION NO. 01-CI-00026
ROBERT W. GREEN
APPELLEE
OPINION
AFFIRMING IN PART,
AND REVERSING AND REMANDING IN PART
** ** ** ** **
BEFORE: BARBER AND BUCKINGHAM, JUDGES; AND JOHN D. MILLER,
SPECIAL JUDGE.1
BARBER, JUDGE:
The Appellant, Brian Hale (“Brian”), seeks
review of a summary judgment of the Bell Circuit Court entered
in favor of the Appellee, Robert W. Green (“Robert”).
Brian
maintains that genuine issues of material fact exist regarding
the date stock was conveyed to him, making summary judgment
inappropriate.
1
We affirm the judgment in Robert’s favor, and
Senior Status John D. Miller sitting as Special Judge by
assignment of the Chief Justice pursuant to Section 110(5)(b) of
the Kentucky Constitution.
reverse, in part, and remand as to the extent of Brian’s
liability.
On January 19, 2001, Robert filed a complaint in the
Bell Circuit Court against Lee Roy Hale, his wife, Mary Hale,2
and their son, Brian Hale, seeking to set aside, as fraudulent,
the transfer to Brian of 500 shares of stock in Arbor Realty,
Inc.
According to the complaint:
On May 22, 2000, the Bell Circuit Court
entered a default judgment against defendants
Hale [Lee Roy and Mary] in favor of plaintiff
[Robert] in the amount of $250,000.00 together
with interest at 9½% per annum (simple) from
and after January 23, 1998, through the date
of judgment together with interest at the
legal rate of 12% from and after date of
judgment until paid and satisfied in full in
civil action styled Robert w. Green vs. Lee
Roy Hale and Mary Hale, his wife, and Arbor
Realty, Inc., Bell Civil Action No. 00-CI00047. Such judgment further awarded
plaintiff an attorney fee equal to 15% of the
outstanding balance due, including prejudgment
interest, and ordered defendants Hale to
produce and deliver to plaintiff their stock
certificate in Arbor Realty, Inc., duly
endorsed and blank, as required under the
terms of a Security Agreement of January 28,
1998. A copy of such default judgment is
attached hereto as Exhibit “1” and
incorporated herein by reference.3
On March 6, 2001, the three Hales filed an answer, stating,
in part, that:
2
Mary Hale is Robert W. Green’s sister.
No exhibit is attached to the complaint. We have searched the
record, and cannot locate a copy of the default judgment from
the prior action. Nevertheless, the Hales admit that said
judgment was entered against Lee Roy and Mary.
3
-2-
The allegations of Paragraph Four of the
Plaintiff’s Complaint are admitted to the
extent that a judgment was entered in the
Bell Circuit Court against Lee Roy Hale
and Mary Hale. Said judgment speaks for
itself. Furthermore the foregoing does
not constitute an admission as to the
validity of that judgment.
On July 13, 2001, Robert filed a motion for summary
judgment and memorandum of law.
Robert explained that Lee Roy
and Mary had made a promissory note payable to him in the amount
of $250,000.00, with interest at 9½% per annum, secured by a
quitclaim deed conveying their interest in a 95-acre tract of
land in Virginia and further secured by the 500 shares of common
stock they owned in Arbor Realty, Inc.4 On January 26, 1998, Lee
Roy and Mary executed a contract and security agreement,
evidencing the indebtedness, and granting Robert a secured lien
against the stock.
The Hales subsequently defaulted in payment,
ultimately resulting in the entry of the above default judgment
against them.
Thereafter, Robert took depositions in aid of
judgment, learning that Lee Roy and Mary claimed to have gifted
their 500 shares of Arbor Realty stock to Brian on June 5, 1996,
a year and a half before the loan.
In their depositions, Lee
Roy and Mary were asked why they pledged stock that they did not
own to secure the $250,000 debt.
Lee Roy’s response was, “I
4
Lee Roy and Mary owned 50% (25% each) of the stock in Arbor
Realty, Inc.
-3-
just did, I guess.”
Mary testified that she had forgotten that
they no longer owned the stock.
Robert maintained that there were no genuine issues of
material fact and that he was entitled to judgment, as a matter
of law, because the transfer of the stock to Brian was
fraudulent under KRS 378.010 or KRS 378.020.
KRS 378.010 provides:
Every gift, conveyance, assignment or
transfer of, or charge upon, any estate,
real or personal, or right or thing in
action, or any rent or profit thereof, made
with the intent to delay, hinder or defraud
creditors, purchasers or other persons, and
every bond or other evidence of debt given,
action commenced or judgment suffered, with
like intent, shall be void as against such
creditors, purchasers and other persons.
This section shall not affect the title of a
purchaser for a valuable consideration,
unless it appears that he had notice of the
fraudulent intent of his immediate grantor
or of the fraud rendering void the title of
such grantor.
KRS 378.020 provides:
Every gift, conveyance, assignment, transfer
or charge made by a debtor, of or upon any of
his estate without valuable consideration
therefor, shall be void as to all his then
existing creditors, but shall not, on that
account alone, be void as to creditors whose
claims are thereafter contracted, nor as to
purchasers from the debtor with notice of the
voluntary alienation or charge.
Robert disputed that the stock was actually transferred
to Brian on June 5, 1996.
Robert contended that numerous badges
-4-
of fraud indicated a fraudulent transfer; that the motivating
purpose was to defeat creditors; that Lee Roy and Mary had
continued possession of the stock after it was allegedly given to
Brian; that there was no consideration paid for the stock, and
that it was an inter-family transfer.
Robert noted the
deposition testimony of Sharon Warriner, CPA for Arbor Realty,
Inc., which established that the corporation’s K-1’s for the
years 1995, 1996, 1997, 19985 reflect that Lee Roy and Mary Hale
owned the stock.
A 1999 K-1 reflected that Brian Hale owned 50%
of the stock; however, that return was not prepared until
September 2000.
According to Warriner’s testimony, it was not
until early 2000, that she received a call from Mary Hale to
change the shareholder on the K-1.
Prior to that, Warriner had
not received any notice from Lee Roy or Mary they were no longer
shareholders in Arbor Realty, Inc.
On July 23, 2001, the defendants Hale filed a response
to the motion for summary judgment, and argued that the date of
the transfer was in dispute.
Lee Roy and Mary Hale attached
their affidavit that they had transferred the stock to Brian, on
June 5, 1996 “out of love and affection,” and that they were in
5
Lee Roy and Mary pledged the stock to Robert in 1998.
-5-
excellent financial condition at the time, as evidenced by an
October 31, 1996 financial statement.6
On August 21, 2001, the trial court entered summary
judgment against Brian, as follows:
1. Judgment in the amount of $250,000.00 plus
9½% interest from and after January 23, 1998,
through May 22, 2000, and interest at the rate
of 12% per annum from and after May 22, 2000,
until the judgment amount is paid and
satisfied in full consistent with judgment
entered May 22, 2000, in civil action styled
Robert W. Green v. Lee Roy Hale, Mary Hale and
Arbor Realty, Inc., Bell CA No. 00-CI-00047.
2. Brian Hale shall, within ten (10) days of
the entry of this summary judgment, endorse
over to plaintiff Stock Certificate No. 5,
representing 500 shares of common stock in
Arbor Realty, Inc. Should defendant Hale fail
to timely endorse over such stock certificate,
plaintiff may request the Master Commissioner
to execute a Bill of Sale for such stock.
3. Judgment in favor of plaintiff and his
counsel for attorney fees equal to fifteen
percent (15%) of the judgment amount hereby
entered consistent with May 22, 2002 judgment
entered in same Robert W. Green v. Lee Roy
Hale, Mary Hale and Arbor Realty, Inc., Bell
CA No. 00-CI-00047.
This judgment is limited to defendant Brian
Hale, and this action is otherwise retained on
the docket for further proceeding pending
resolution of pro se bankruptcy filing of
defendants Lee Roy Hale and Mary Hale.7
6
Curiously, the financial statement, signed on November 25, 1996,
lists ownership of 50% of the shares in Arbor Realty valued at
$250,000, under the heading, “Stocks and Bonds.”
7
On August 10, 2001, the defendants Hale filed a notice7 that Lee
Roy and Mary had filed a Petition in the U.S. Bankruptcy Court
-6-
Defendant shall be given credit against the
full judgment amount for the fair market value
of his stock in Arbor Realty, Inc.
As to defendant, Brian Hale, this is a final
and appealable judgment, and there is no just
cause for delay. Plaintiff shall have
immediate execution of this judgment.
On August 27, 2001, Brian filed a motion to alter,
amend or vacate, which was denied by order entered September 25,
2001.
Brian filed a notice of appeal to this Court on October
10, 2001.
On appeal, Brian argues that the trial court erred in
granting summary judgment against him, because issues of material
fact exist regarding the date of the stock transfer.
Brian
maintains that Robert’s evidence cannot overcome the testimony of
his parents, and the stock certificate itself, reflecting a date
of transfer of June 5, 1996.
Brian ignores the effect of the May 22, 2000 (default)
judgment ordering Lee Roy and Mary Hale to produce and deliver to
Robert their stock certificate in Arbor Realty, Inc.
That
judgment is necessarily a determination that Lee Roy and Mary
owned the stock when they pledged it to secure their
indebtedness.
(1901).
See Kimbrough v. Harbett, 110 Ky. 94, 60 S.W. 836
Brian’s attempt to argue otherwise is an impermissible
for the Eastern District of Kentucky, Case Number 01-60994, on
July 23, 2001.
-7-
collateral attack on that judgment.
“A domestic judgment
rendered in a court of general jurisdiction may not be attacked
collaterally unless want of jurisdiction appears on the
record....”
Hays v. Adams, 220 Ky. 196, 294 S.W. 1039, 1041
(1927).
Thus, we affirm the summary judgment of the Bell
Circuit Court entered August 21, 2001 ordering Brian to endorse
over to Robert the subject stock certificate.8
Brian argues, and
Robert concedes, that the summary judgment is in error, to the
extent that the judgment against Brian should have been limited
to the value of the stock, not to exceed Robert’s judgment
against Lee Roy and Mary for debt, interest, and attorney fees.
To that extent only, we reverse and remand with direction that
Brian’s liability should be the value of the transferred stock,
not to exceed the current amount of Robert’s existing judgment
for debt, interest and attorney fees against Lee Roy and Mary
Hale.
ALL CONCUR.
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE:
Frank C. Medaris, Jr.
Hazard, Kentucky
J.P. Cline
Middlesboro, Kentucky
8
We have considered Brian’s argument that the trial court erred
in failing to strike Robert’s reply to the response to summary
judgment, and find no abuse of discretion there.
-8-
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