Lawyer, Law Firm And Bank Exposed To Liability For Assisting A Debtor Post-Claim In Kruse

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As I’ve explained several times, when there’s a plan for a debtor who already has a claim pending, it’s not something like an asset protection plan, but instead (outside of some very limited exemption plans and the like). that is permissible) is just plain old fraud creditor. Nevertheless, some planners feel that they should engage in this type of scheme, and so we regularly see reported views mostly in the area of ​​voidable transactions, where that kind of plan not only failed, but That should happen, but often it results in more dire consequences for the debtor. We’ve seen cases where debtors have been hit with punitive damages, large attorney fee awards, and lost their discharges in bankruptcy, all except for the assets they were trying to protect. But here we see another side of such post-claim planning, where the planner and the bank themselves sued for trying to assist the debtor in defrauding his creditors.

The subsequent opinion comes down to the motion of summary judgment, which does not include any factual findings by the court, but rather the conclusion that the creditor has presented at least minimal evidence that such facts may exist (which is very different). . I am advised that the matter is ultimately settled between the parties involved, so no decision will ever be taken by the Court on merits. In this case the defendants vehemently denied and disputed the factual allegations. Please keep this in mind as we go through this opinion.

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Also be advised that I was one of the expert witnesses for the creditor in this case, to testify on the fraudulent transfer issues it went to trial. Nevertheless, my intention is to stick strictly to the text of opinion in this matter, and to attempt to divorce myself from any point of view based on my particular knowledge of the facts, and which would be irrelevant in any way. This is nothing like an important matter as I was involved, but rather a published opinion on an important matter of planner and lender liability for alleged voidable transactions under Iowa’s Uniform Voidable Transactions Act (UVTA), which There is a Uniform Act, meaning that this opinion may extend to other cases in the many states that have adopted UVTA or its predecessor, the Uniform Fraud Transfer Act (UFTA).

It should go without saying that my summary of the case seems to be different from what the court actually wrote, View Control. This is a very long opinion, perhaps suitable for an extended law review commentary written by a legal mind far brighter than my own, and if you try to summarize it in this short article, some You will forgive me if I do wrong.

The case was the last of three lawsuits arising out of an auto accident in which Steven Weller ran into Christina Krause’s car, which later resulted in very serious injuries. In the first lawsuit, Krause sued Weller for personal injuries and won a $2.5 million personal injury award. In the second lawsuit, Krause sued Weller for making certain fraudulent transfers and won a judgment that set those transfers aside (saved). This brings us to the third trial in which this opinion arises on the motion of summary judgment.

In the third trial, the complaint alleged that Weller’s attorney, David Rep., and his law firm, Dickinson, McMann, et al., and First State Bank of Linville, Iowa (First State), assisted Weller in protecting their assets. conspired to do. Consequences of Krause’s personal injury judgment.

Essentially, Weller knew he was at fault from the auto accident, and he admitted it to a police officer who came to the scene. Fearing a liability award over his $500,000 auto accident policy, and fear of losing the family farm, Weller asked a local attorney, Randy Stravers (who was not a defendant in the lawsuit) to transfer his farm to a revocable one. ) retained the server. Gifting some cash to the “living” trust and family members. Thus, Weller opened accounts with First State and gave many cash gifts to family and friends. Later, Weller’s insurance defense attorney had to tell Weller that these transfers were not appropriate in light of Weller’s potential liability to the cross.

Weller also told two officers from First State, Brad Van Werk and Steven Russell, that he had been in an accident with Krause and would likely be prosecuted. On September 15, 2012, Weller was sued by Krause in the first action. A year later, on September 9, 2013, and although First State was aware of Weller’s liability to Krause, First State was engaged in an annual borrower review for Weller’s loans and at this time Weller gave First State a Submitted financial statements in which net worth was claimed. $365,745. Krause alleged that by this time First State knew Weller was working with legal counsel to attempt to transfer or burden Weller’s assets with debt so that they could meet Krause’s liability. may not be available, i.e., earlier the State knew or should have known that it would eventually play a significant role in the fraudulent transfer of the Weller through the weighting of his property.

By this time Weller had changed his legal advisor from Stravers to David Rape of the Dickenson law firm, who had positioned himself as an “asset protection attorney”. Just two months before the start of the trial, which will record a $2.5 million judgment against him, Weller first met with Rap and advised him of the cash gifts he had given to friends and family on the advice of Stravers. , Although Rep told Weller it was bad advice in the circumstances, the two hatched a plan to create a new entity, Weller Farms LLC, to keep Weller’s agricultural and commercial real estate with their son, Cody Weller. The stated objectives of building and funding the Weller Farm were, among other things, “continuing ownership of family property”, “restricting the right of non-family members to acquire interests in family property” and “family members”. To provide protection to the family property from the claims of future creditors against The effect, of course, was to raise the odds to enforce his judgment of crucifixion against the Weller. In addition, when Weller signed the deed and the trustee’s affidavit to give the land to Weller Farms LLC for his living trust, he stated that the land was free and clear of any known adverse claim, although that land was in the judgment of Krauss. was subject to enforcement.

A judgment of slightly over $2.5 million in favor of Krause and against Weller was entered on May 8, 2015. Exactly three days later, Weller and Rep prepare another financial statement for Weller, this time to be used in negotiations with Krause. The financial statements represented what reduced Weller’s net worth, based largely on playing with the value of Weller’s interest in Weller Fares LLC.

First State comes into the picture back on October 9, 2015, when Weller met with the bank’s loan officer to review his financing loan. Even though Weller’s agricultural land and personal assets had already been transferred to Weller Farms, LLC, these were listed on Weller’s personal financial statement. A few weeks later, First State gave Weller a “Pass” rating, despite he had negative net cash flow of $17,230 and his now former assets were owned by Weller Farms LLC. Listing an entity’s assets on the individual borrower’s financial statement was not a standard practice in the First State.

Nevertheless, First State relied on Weller’s financial statements to engage in the refinancing of Weller Farms real estate, which was completed on January 4, 2016. The bank loaned a little over $340,000, for which Weller signed two promissory notes and a Weller Form. LLC guaranteed repayment. Critically, according to Rai, the bank officer “Gunn admitted, however, that he knew Weller had transferred his farm and other assets to Weller Farm in order to protect him from crucifixion and minimize his financial condition.” date of these January 2016 transactions, and that it is unusual to secure a loan with property that is not formally owned by the borrower.” Additionally, First State expanded $500,000 in credits available to Weller Farms LLC.

Four days after Krauss garnished Weller’s accounts, First State raised another $23,000 for the cattle to Weller Farms LLC, without financial statements or personal guarantees from Weller, and again First State’s bank official acknowledged. That this was “not typical practice” of First State. Continued, although it is new that Weller’s actual financial statements included liabilities of $2.5 million. Cross.

Meanwhile, on March 3, 2016, Krause filed his second lawsuit against Weller for his fraudulent transfers. The lawsuit lasted a few years, until the Iowa State Court issued its ruling on March 13, 2018, abstaining from Weller’s transfer, and finding that Weller had taken Weller Farms LLC with the specific intention of protecting his assets from Krause. was formed. The state court also rejected (as is very common in these cases) Weller’s alleged explanation that the transfers were only part of his estate plan. At the end of the day, the state court granted Weller’s cash gifts to family members, later contributions to their children’s college savings accounts, the transfer of assets from Weller’s living trust to Weller Farms LLC, along with Weller’s First State. Refinance transaction opened.

The first case…

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