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Schaefer v. Putnam

Court of Appeal of Iowa

May 30, 2013

LARRY D. SCHAEFER and ELAINE M. SCHAEFER, Plaintiffs-Appellants,
v.
DALE L. PUTNAM, PUTNAM LAW OFFICE; SMP, L.L.C.; and LIBERTY BANK, F.S.B., Defendants-Appellees.

          Appeal from the Iowa District Court for Cerro Gordo County, James M. Drew, Judge.

         Larry and Elaine Schaefer appeal district court judgments against them, their two sons, and G.R.D. Investments, L.L.C.

          Peter C. Riley of Tom Riley Law Firm, P.L.C., Cedar Rapids, for appellants.

          William W. Graham and Aimee R. Campbell of Graham, Ervanian & Cacciatore, L.L.P., Des Moines, and Dale L. Putnam, Decorah, for appellees, Putnam and Putnam Law Office.

          Bernard L. Spaeth, Jr., Kara M. Sinnard, and Thomas H. Burke of Whitfield and Eddy, P.L.C., Des Moines, for appellee, Liberty Bank.

          Considered by Vaitheswaran, P.J., and Tabor and Mullins, JJ.

          TABOR, J.

         Against a labyrinthine backdrop of property transfers and financing deals, Larry and Elaine Schaefer appeal district court judgments against them, their two sons, and G.R.D. Investments, L.L.C. They raise nine issues on appeal; we only reach the merits of two claims.

         First, Larry and Elaine contend the record contained insufficient evidence to sustain a creditor's fraudulent nondisclosure claim. Because the evidence shows the creditor was unaware only Larry and Elaine could bind G.R.D., the district court properly submitted the nondisclosure claim to the jury. Second, Larry challenges the court's award of common law attorney fees to his sons. We agree with the district court's assessment that Larry's conduct toward his sons was so oppressive or conniving that a fee award was appropriate. The district court's rulings that affect only the Schaefer sons or G.R.D. cannot be challenged by Larry and Elaine on appeal. We also decline to address several issues advanced without any supporting authority.

         I. Background Facts and Proceedings

         At the center of this dispute are husband and wife, Larry and Elaine Schaefer. Also involved are their sons, Ray and Dean Schaefer; the couple's former attorney, Dale Putnam; G.R.D. Investments, a limited liability company organized in the name of the sons; SMP, a limited liability company set up by Putnam; and creditor Liberty Bank, successor-by-merger to Hancock County Bank & Trust (Liberty).

          Before this action, in March 1998, Land O’Lakes, Inc. gained a judgment in an Iowa district court against Larry for $127, 125 stemming from a breach of four hedge-to-arrive grain contracts. In January 2001 attorney Putnam advised Larry and Elaine to form a limited liability company and transfer their nonexempt Iowa real estate to the entity to protect their assets from creditor claims—including that of Land O’Lakes. Named G.R.D., the limited liability company’s articles of organization, executed by sons Ray and Dean, list Larry and Elaine as managers. Ray and Dean executed an operating agreement for G.R.D. designating them as the initial members and managers, and describing the company’s purpose as “[t]he purchase, sale and rental of real estate.” That same month Larry and Elaine signed deeds transferring several parcels of real estate to G.R.D., including a video store, farmland, 1108 South Shore, Pascal property, and the Heartland building. The couple retained ownership of their homestead and farm.

         On July 23, 2001, Land O'Lakes filed suit in the United States District Court for the Northern District of Iowa, claiming the property transfers to G.R.D. were intended to hinder, delay, and defraud the company. Larry and Elaine settled with Land O'Lakes, agreeing to pay $85, 000 to satisfy the judgment.

         The couple and their sons later approached William Paulus, a commercial loan officer for Liberty, to obtain financing for G.R.D. Based on conversations among Paulus, Ray, Dean, and Larry, as well as financial statements and G.R.D. organizational documents provided, Paulus approved financing to G.R.D. Between March 2003 and May 2004, Liberty loaned G.R.D. $562, 807.21 in principal as consideration for seven promissory notes signed by Ray and Dean. The bank secured the promissory notes with mortgages on each parcel of property held by G.R.D. and by obtaining personal guarantees from Ray and Dean. Larry and Elaine used the proceeds from the G.R.D. notes to pay off prior existing indebtedness, liens, and real estate taxes of G.R.D. and their own.

         On April 2, 2003, G.R.D. loaned $85, 000 to Larry and Elaine in exchange for a mortgage on their homestead and forty acres of agricultural property. The couple used the proceeds to settle with Land O'Lakes in May 2003.

         In October 2003, Larry and Elaine filed for Chapter 7 bankruptcy. Putnam sent a letter to Larry, Elaine, Ray, and Dean in November 2005 regarding the amount of money they would need to settle Larry and Elaine's bankruptcy obligations. He estimated it would cost $180, 000 ...


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