Plaintiff appeals from a judgment dismissing his suit to set aside debtor's transfer of property to defendant. Plaintiff contends that the conveyance was fraudulent under the Uniform Fraudulent Transfer Act (UFTA). ORS 95.200 et seq. He bases his arguments on two theories: (1) that debtor's preferential transfer to defendant was made "with actual intent to hinder, delay, or defraud any creditor" under ORS 95.230(1)(a); and (2) that the transfer to defendant constituted constructive fraud under ORS 95.230(1)(b) or ORS 95.240(1). We review de novo, ORS 19.125(3), and affirm.
Defendant and debtor were married for several years and had two sons. They were divorced in 1970. Defendant relinquished all of his interest in their marital home, but continued to provide debtor with goods and to perform extensive building maintenance and other services to enable her to live independently. Plaintiff is debtor's former attorney and the assignee of debtor's unpaid account to a now-dissolved law firm.
In July, 1992, plaintiff notified debtor that he was about to commence an action to obtain a judgment against her. Shortly thereafter, debtor executed a deed conveying the fee interest in her home to defendant, reserving a life estate to herself. The stated consideration was "love and affection." In October, 1992, after plaintiff commenced an action on the debt, debtor executed a second deed. It made the identical conveyance but "corrected" the first deed by specifying the consideration as "past care, support and miscellaneous expenses and future expenses for the care and support of the grantor."
Debtor and defendant had an express agreement that, in exchange for the services and materials defendant had provided and would continue to provide to debtor, defendant would receive the house when debtor dies. Both acknowledged that this agreement was the only way she could compensate defendant for his past and continuing assistance. There is no evidence, however, that debtor executed a will to carry out the agreement; prior to execution of the deeds, the agreement was oral.
We first address plaintiff's argument that the trial court erred in concluding that the transfer of debtor's house to defendant was not made with actual intent to hinder, delay or defraud. According to plaintiff, the trial court should have imposed on defendant the burden of proving that the transfer of debtor's house was not a fraudulent transfer. Plaintiff relies on Hughey v. Lind, 92 Or.App. 433, 437, 758 P.2d 431 (1988), for the proposition that, although the burden of proving fraudulent intent is normally on the plaintiff, the presence of several so-called "badges of fraud" may serve to shift to the defendant the burden of proving that the transfer was not fraudulent.
Although Hughey was decided in 1988, it, like Nelson, stated the rule under former ORS 95.010—ORS 95.100. Those provisions were repealed in 1985 by the UFTA.
In construing a statute, our task is to discern the intent of the legislature. The first level of analysis is to examine both the text and context of the statute, including other provisions of the same statute. PGE v. Bureau of Labor and Industries, 317 Or. 606, 610-11, 859 P.2d 1143 (1993). We are enjoined by ORS 174.010 from inserting into the statute what has been omitted or omitting what has been inserted. 317 Or. at 611, 859 P.2d 1143.
ORS 95.230 provides in part:
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(2) "In determining actual intent under paragraph (a) of subsection (1) of this section, consideration may be given, among other factors, to whether:
ORS 95.230(1)(a) clearly calls for a case-by-case factual determination of whether a transfer was made with actual intent to hinder, delay or defraud. ORS 95.230(2) provides a means for creditors to overcome the difficulties of proving actual fraudulent intent by direct evidence. It allows the inference of actual intent to be drawn from the presence of listed factors or other suspicious factual circumstances surrounding the transfer. Many of the listed factors are a codification of the "badges of fraud" that had been judicially engrafted to former ORS 95.070 (repealed by Or.Laws 1985, ch. 664, § 16). See, e.g., Evans v. Trude et al. and Champlin et al., supra n. 3, 193 Or. at 656-57, 240 P.2d 940. ORS 95.230(2) contains no suggestion that certain factors carry more weight than others or that the presence of several factors should shift the burden of proof to the defendant.
Other provisions of ORS chapter 95 bolster our conclusion that the UFTA does not contemplate the burden shifting suggested by plaintiff. ORS 95.230(1)(b) and ORS 95.240 expressly identify the circumstances that constitute constructive fraud.
In Allen v. Meinig, 109 Or.App. 341, 346, 819 P.2d 744 (1991), rev. den. 313 Or. 209, 830 P.2d 595 (1992), we followed the lead of the parties and applied the test stated in Nelson v. Hansen, supra, 278 Or. at 578, 565 P.2d 727, to shift the burden of proof to defendant. Here, for the first time, we are asked to construe the meaning of the UFTA according to its plain terms. In so doing, we recant the analysis in Meinig regarding the burden shifting under the UFTA.
On de novo review, we find the presence of three "badges of fraud" that suggest fraudulent intent on the part of defendant in this case: (1) debtor transferred her residence to defendant following notice of plaintiff's threat of suit; (2) defendant is an "insider" within the meaning of the statute;
Nevertheless, there is no doubt that defendant rendered substantial services and expended a significant amount of his own funds for the benefit of debtor. As recognized by the trial court, the crucial question is whether the transfer of property from debtor to defendant was intended as compensation for defendant's past efforts, or whether defendant had performed those services gratuitously,
The trial court concluded that, despite "room for doubt, and reason for skepticism," defendant's testimony was credible that "the real reason for the subject transfer" was to accomplish the objective of the agreement between debtor and defendant. Although we are not bound by the trial court's findings of fact, where evidence is conflicting, we afford great weight to those findings. Haines Com'l Equip. Co. v. Butler, 268 Or. 660, 664, 522 P.2d 472 (1974); Jewell v. Kroo, 268 Or. 103, 106, 517 P.2d 657, 518 P.2d 1305 (1973). We are persuaded by our review of the record that defendant had rendered services at least equivalent in value to that of the transferred property; that defendant and debtor had an agreement that predated plaintiff's threatened suit whereby defendant would receive the property in compensation for those services when debtor dies; and that fulfillment of that agreement was the primary reason for the transfer. Defendant has shown that the transfer was made for a legitimate purpose and was not made with actual fraudulent intent.
Plaintiff argues that the trial court erred in characterizing defendant's efforts and expenditures on debtor's behalf as "value" within the meaning of ORS 95.220,
Plaintiff next argues that an additional "badge of fraud" is present, because debtor's reservation of a life estate, along with a "secret reservation in the form of an understanding" that the property would ultimately go to the sons of debtor and defendant, amounts to a reservation of a benefit by her. That debtor chose to transfer less than all of her estate does not in itself constitute reservation of a benefit so as to make the transfer fraudulent. Plaintiff remains in a better position than if debtor had transferred all of her rights in the property. Moreover, whether the property is ultimately transferred to the sons of debtor and defendant depends entirely on defendant. Debtor retains no incidents of ownership other than a life estate. Debtor retains no rights in the property she actually transferred to defendant in that the transferred property interest was solely a remainder. Thus, we cannot say that, by reserving a life estate, debtor reserved any unfair or improper benefit in the transferred property. We conclude that the transfer of debtor's property was not made with the intent to defraud and was in exchange for reasonably equivalent value.
Finally, we address plaintiff's contention that the transfer should be voided, because it satisfies the statutory elements of constructive fraud. Plaintiff alleges two conclusive presumptions of constructive fraud: (1) inadequate consideration and prospective financial instability of debtor under ORS 95.230(1)(b), and (2) inadequate consideration and insolvency of debtor under ORS 95.240(1). Both grounds require plaintiff to show that the transfer was not made for reasonably equivalent value. Because defendant's past services constitute reasonably equivalent value, plaintiff's claims alleging constructive fraud are without merit.
De MUNIZ, Justice, dissenting.
I dissent. It is not entirely clear to me from the majority's opinion what either a plaintiff or a defendant must prove in an action under the UFTA. The majority accepts that the statutory scheme establishes a case-by-case determination of actual fraudulent intent from factors that include those set out in ORS 95.230(2). However, as I understand the majority's interpretation, irrespective of a plaintiff's proof of those factors, the burden never shifts to a defendant to negate the inference of fraudulent intent. As I discuss below, I do not agree with that interpretation of the UFTA. However, even if the majority's interpretation is correct, on my review of the record here, I conclude that plaintiff proved that the conveyance was fraudulent under the UFTA.
However, even if there was a debt, I do not agree that it was one that debtor could satisfy at the expense of plaintiff. There is no question that the transfer was between "insiders" and that debtor retained possession of the property after the transfer. I do not agree with the majority that satisfaction of defendant's debt was the "primary reason for the transfer." 132 Or.App. at 225, 888 P.2d at 577. I agree with the trial court's conclusion that the evidence shows that
Defendant testified that when plaintiff's letter came informing debtor of plaintiff's planned action, defendant and debtor discussed the letter and decided to talk to counsel. They did so and, as a result, signed the deeds transferring the property. Under ORS 95.230(1)(a), a transfer is fraudulent if it is made with intent to hinder any creditor. Plaintiff was a creditor, and his proof was more than sufficient to give rise to an inference of an actual intent to defraud by a transfer, the purpose of which was to hinder collection of plaintiff's debt.
Defendant presented no evidence to negate that proof of actual intent to defraud. Apparently, under the majority's interpretation of the UFTA, he did not need to do so. The majority appears to conclude that, under the UFTA, the burden does not shift to defendant. If that is so, I am unable to understand how the action proceeds.
Under earlier law, the presence of certain factors assisted a plaintiff by giving rise to an inference of the intent to defraud. I do not disagree with the majority that the codification of those factors under ORS 95.230(2) does not include the weight to be given to any one factor or require that a certain number of factors must exist before the burden shifts to a defendant. The majority is also correct that under the UFTA, as under earlier case law, the determination of actual intent to defraud is a factual determination to be made on a case-by-case determination, which may mean that some of the factors could weigh in favor of a defendant.
However, I do not understand how making that factual determination can be done without shifting the burden of persuasion, unless a plaintiff fails to establish a prima facie case. Whether a plaintiff's proof of factors in ORS 95.230(2) or other factors makes a prima facie case is a determination to be made by the court after the plaintiff rests. If the court determines that the evidence could support an inference of actual intent to defraud, then necessarily the burden must shift to the defendant to negate that inference.
I do not see how the UFTA changes that shifting burden, and, in Allen v. Meinig, 109 Or.App. 341, 819 P.2d 744 (1991), rev. den. 313 Or. 209, 830 P.2d 595 (1992), we held that it does shift. The majority is wrong to revisit the issue solely because PGE v. Bureau of Labor and Industries, 317 Or. 606, 859 P.2d 1143 (1993), reiterates principles of statutory
I would reverse and remand for entry of a judgment as requested by plaintiff, providing for a lien on the property that cannot be foreclosed while debtor lives on the property.
ORS 95.240(1) provides:
ORS 95.240(2) provides:
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The trial court erroneously concluded that defendant was not an "insider," because the spousal relationship had been terminated by divorce. The definition of "insider," however, is derived from the Bankruptcy Code, see 11 U.S.C. § 101(31), which makes clear that the word "includes" is not limiting, see 11 U.S.C. § 102(3). 7A ULA 647 (1985). Thus, the listed categories of "insider" are instead intended to be examples. The cases that have considered this issue generally consider it a question of fact that is analyzed by examination of two factors:
Matter of Holloway, 955 F.2d 1008, 1011 (5th Cir.1992) (transferee who was former spouse of debtor was held to be "insider" under the UFTA because of frequency of contact and efforts to protect each other even though they had been divorced for more than 20 years and both had subsequently remarried).
"(1) Value is given for a transfer or an obligation if in exchange for the transfer or obligation property is transferred or an antecedent debt is secured or satisfied, but value does not include an unperformed promise made otherwise than in the ordinary course of the promisor's business to furnish support to the debtor or another person."
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The parties concede that promises of future support do not constitute "value" and are not at issue here.