Appeal from Superior Court of Clark County. Docket No: 94-2-02902-2. Date filed: 11/04/94. Judge signing: Hon. Roger A. Bennett.
Authored by Elaine M. Houghton. Concurring: Carroll C. Bridgewater, Visiting Judge.
The opinion of the court was delivered by: Houghton
HOUGHTON, C.J. -- Eagle Pacific Insurance Co. (Eagle Pacific) had an outstanding judgment against the Christensen Motor Yacht Corporation (CMYC) for unpaid premiums. Eagle Pacific sued David Christensen, CMYC, the Christensen Group, Inc. (CGI), and Christensen Shipyards, Limited (CSL) (collectively Christensen) to recover the judgment under the Uniform Fraudulent Transfers Act (UFTA), successor liability theory, and the doctrine of disregard of corporate form. The trial court granted partial summary judgment in Eagle Pacific's favor. Having identified unresolved questions of fact as to whether the UFTA applies, and determined that disregarding CSL's corporate form was inappropriate, we reverse and remand for further proceedings.
David Christensen is the president and sole shareholder of CMYC, CGI, and CSL. CMYC's primary business is building custom luxury yachts. In September 1987, CMYC granted a security interest in substantially all of its assets, including all accounts, to Northwest National Bank (NW National) securing a $1.2 million line of credit. CGI agreed to guarantee payment to NW National. By December 1993, NW National had advanced CMYC $1.2 million.
During 1993, CMYC was under contract to build three luxury yachts. CMYC granted the buyers security interests in their respective hulls, materials, and hardware, thereby securing all progress payments. Additionally, David Christensen personally guaranteed completion of all three boats.
CMYC began experiencing financial troubles in 1993. In July 1993, Lloyd's of London obtained a $450,000 judgment against CMYC. Entry of this judgment was a default event under the yacht contracts. The buyers became uneasy with CMYC's deteriorating financial condition.
In an attempt to placate the buyers and to ensure that they would continue making their progress payments, David Christensen and CGI transferred cash to CMYC in return for security interests. On August 18, 1993, and November 11, 1993, CMYC granted CGI security interests in substantially all of its assets, including accounts, as security for all antecedent debt and future advances. CGI promptly perfected both security interests by filing UCC financing statements.
David Christensen's affidavit and CMYC's financial records show that by the end of 1993, CGI advanced approximately $1.6 million to cover CMYC's business expenses. Throughout 1993, CMYC made a series of cash transfers to CGI. Christensen characterizes these transfers as "loan payments." By the end of 1993, CMYC's cash transfers to CGI totaled $1.5 million.
On December 28, 1993, CMYC granted David Christensen a security interest in substantially all of its assets, including accounts, as security for all antecedent debt and future advances. On December 30, 1993, David Christensen perfected his security interest by filing a UCC financing statement. That same day, David Christensen advanced CMYC $925,000. CMYC used $500,000 of this advance to repay CGI and the remaining $425,000 to cover its payroll and general operating expenses.
One buyer, KHD Deutz, was not satisfied with CGI's and David Christensen's efforts to keep CMYC afloat and refused to make its December 1993, January 1994, and February 1994 progress payments.
In an attempt to hold off CMYC's creditors long enough to complete the three boats and collect payment, David Christensen formed CSL. In January, 1994, CMYC and CSL entered into a contract transferring the three boat contracts, the partially completed hulls, and all of CMYC's equipment to CSL. In return, CSL agreed to split any profit from the contracts with CMYC.
NW National demanded that CGI pay off CMYC's line of credit. On January 11, 1994, CGI paid NW National $1 million on behalf of CMYC, and in return, NW National assigned all of its rights against CMYC to CGI.
Eagle Pacific filed suit against CMYC on December 27, 1993, to recover unpaid premiums. On July 29, 1994, CMYC stipulated to judgment in favor of Eagle Pacific for $268,000. At the time this judgment was entered, CMYC was insolvent. Consequently, Eagle Pacific looked elsewhere to satisfy its judgment against CMYC, and sued CGI, claiming that the cash transfers it received from CMYC were voidable under the UFTA. The trial court granted Eagle Pacific's motion for summary judgment against CGI.
Eagle Pacific sued CSL claiming that: (1) CSL was liable for CMYC's debts under successor liability theory; and (2) that the assignment from CMYC to CSL violated various UFTA provisions. The trial court granted Eagle Pacific's motion as to its successor liability claim, but concluded that questions of fact remained precluding summary judgment on Eagle Pacific's UFTA claims.
Eagle Pacific also sued David Christensen, claiming that: (1) he was personally liable for CSL's debts under the doctrine of disregard of corporate form; (2) he was liable under the UFTA as a person benefited by the transfers form CMYC to CGI; (3) the security interests granted to him by CMYC were fraudulent transfers under the UFTA; and (4) he was personally liable under the UFTA for the transfers from CMYC to CSL.
The trial court ruled that it would disregard CSL's corporate form and allow Eagle Pacific to recover directly from David Christensen to the extent that Eagle Pacific was unable to satisfy its judgment against CSL. The trial court also concluded that David Christensen was liable under the UFTA as a person benefited by the transfers from CMYC to CGI and entered judgment against him to the extent Eagle Pacific was unable to recover from CGI. Finally, the trial court determined that a question of fact existed as to whether the security interests in favor of David Christensen were created with the intent to delay or to hinder CMYC's creditors. The trial court denied Eagle Pacific's motion for summary judgment on its claim that these security interests violated the UFTA.
The trial court directed that its summary judgment rulings in favor of Eagle Pacific be reduced to final judgments under CR 54(b) against each defendant for the full amount of Eagle Pacific's claim. The court did not enter written findings ...