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Park Hill Corp. v. Sharp

January 15, 1991; As Amended March 21, 1991.

PARK HILL CORPORATION, ET AL, APPELLANTS,
v.
DON SHARP, ET AL, RESPONDENTS



Thompson, J. Green, C.j., and Shields, J., concur.

Author: Thompson

The Sharps, et al., as assignees of Park Hill Corporation, appeal the dismissal of their cause of action for fraudulent transfer. They sought to hold parties to whom property had been transferred personally liable for the value of assets transferred to them. Because the court held the parties to whom the assets were transferred did not have the requisite intent to defraud, hinder or delay the creditor, the remedy prayed for is not available under either the Uniform Fraudulent Transfer Act (UFTA), RCW 19.40, or the Uniform Fraudulent Conveyance Act (UFCA), former RCW 19.40. Therefore, we affirm the dismissal.

Park Hill Corporation (PHC), as lessor, and Don Sharp, Incorporated -- Better Homes and Gardens (DSI), as lessee, executed a 5-year lease of office space dated March 1, 1980 (PHC lease). At the time the PHC lease was executed, Mary Beth Bryan and Sally B. Chambers were the sole shareholders and directors of DSI. In March 1981, DSI transferred substantially all its assets to Aaro Real Estate Center, Inc. In exchange, Ms. Bryan and Mrs. Chambers were issued Aaro stock. DSI then ceased doing business and vacated the leased premises.

In June 1981, Ms. Bryan and Mrs. Chambers signed a personal guaranty of the PHC lease as consideration for

PHC's execution of a covenant not to sue Aaro, DSI, and other third parties in connection with an unrelated matter. They paid the base rental through August 1981, but did not pay property taxes or subsequent rental payments due under the PHC lease. PHC filed its first complaint in January 1982 against "those parties named in the covenant not to sue". On or about April 1, 1982, a portion of the leased premises was relet and in December 1982, PHC sold the premises.

By agreement dated September 17, 1981, Mrs. Chambers sold real property located in Illinois to Fulks. The Fulks agreement required annual payments over a 10-year period commencing September 17, 1982. On September 15, 1983, Mrs. Chambers assigned all her rights in the Fulks agreement to her four children, Melinda Ann Chambers Fisette, James Cash Chambers, Brenda Sue Chambers Pistolas, and Brian Alan Chambers, in equal shares. No consideration was given for the transfer, other than love and affection. The transfer was by means of an unrecorded assignment. At the time the assignment was made, the Fulks owed Mrs. Chambers approximately $82,500. Fulks made the annual payments on the contract for the years 1983 through 1985, then prepaid the contract balance at a discount in 1986. Mrs. Chambers collected all payments under the Fulks agreement and between 1983 and 1986 delivered a total of $21,444 to each of the four Chambers children.

On March 3, 1988, PHC and the Sharps filed an amended and supplemented complaint, naming Mr. and Mrs. Chambers, Ms. Bryan, the Chambers children, and DSI as defendants. This complaint alleged that PHC had been liquidated and its assets (including the lawsuit) distributed to its shareholders (Sharps). PHC and the Sharps asserted claims for breach of lease, liability on personal guaranty and tortious interference as to Mr. and Mrs. Chambers and Ms. Bryan, and added the Chambers children as defendants, alleging they were the recipients of a fraudulent conveyance from Mrs. Chambers (i.e., assignment of the Fulks

agreement) in violation of RCW 19.40. They asked for an award of a money judgment against the Chambers children.

After trial, findings of fact and conclusions of law were entered. The court found that neither Mrs. Chambers nor the Chambers children intended to defraud, hinder or delay the creditors of Mr. and Mrs. Chambers. However, neither the findings nor conclusions indicated whether the trial court's decision was based on the UFTA*fn1 or the UFCA.*fn2 Based on the PHC lease and guaranty, the Sharps were given judgment against Ms. Bryan and Mr. and Mrs. Chambers in the principal amount of $24,461.10, which included rent, property taxes, commission costs, payments received under a sublease, together with an unspecified sum as interest. The trial court also awarded statutory costs and a $10,000 attorney fee to the Sharps under the lease provisions. The court dismissed the fraudulent conveyance claims against the Chambers children because of the extraordinary delay in prosecuting the lawsuit and the lack of diligence by the Sharps. Attorney fees requested by the Chambers children pursuant to RCW 4.28.185 were denied.*fn3

The Sharps appealed only the dismissal of the fraudulent transfer cause of action against the Chambers children. The judgment ultimately awarded was amended to correct the interest rate and interest calculation. The amount ...


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