from the Iowa District Court for Monroe County, Randy S.
DeGeest and Lucy J. Gamon, Judges.
challenge the finding of a fraudulent transfer and subsequent
piercing of the corporate veil. REVERSED AND REMANDED.
A. Pabst of Pabst Law Office, Albia, for appellants.
L. LeGrant of LeGrant Law Firm, P.C., Urbandale, for
by Doyle, P.J., and Tabor and McDonald, JJ.
consolidated appeal concerns two separate but related actions
initiated by Zane Algreen against Timothy Gardner and Gardner
Crop Insurance, Inc. (GCI). The first action involved a claim
for unpaid wages arising under the Iowa Wage Payment
Collection Law, Iowa Code chapter 91A (2012). In that suit,
Algreen obtained judgment against GCI in the amount of $19,
770.05 for unpaid compensation, $2337.32 for liquidated
damages, and $46, 292.89 for attorney fees and expenses. In
the second action, Algreen sought equitable relief against
Gardner and GCI for the failure to pay the judgment in the
first action. Algreen asserted a claim for fraudulent
conveyance, arising under Iowa Code chapter 684 (2016), and
sought to pierce the corporate veil. The district court
granted Algreen's petition, held Gardner would be held
jointly and severally liable for the judgment in the first
case, awarded punitive damages in the amount of $22, 107.37
against Gardner and GCI, and directed Algreen to submit a
supplemental attorney-fee affidavit in the wage-payment case
for the award of additional attorney fees and costs incurred
in collecting the judgment. After Algreen submitted the
affidavit, the district court awarded an additional $22,
202.18 in attorney fees and costs in the wage-payment case.
Gardner and GCI timely filed this appeal.
record reflects the following. GCI was in the business of
selling multiple peril crop insurance and hail insurance
policies. Gardner was the founder and owner-operator of GCI.
He founded the company in 2001. Gardner owned 87% of the
company stock, and he served as the company's president,
secretary, treasurer, and director. Gardner's son owned
the minority share of the company.
commenced employment with GCI in May 2011. At that time,
Algreen was married to Gardner's sister. But when the
marriage ended in 2012, so did Algreen's employment.
Algreen believed GCI owed him base-wages and commissions at
the time of his termination. When Algreen informed Gardner he
expected payment, Gardner told him, "You'll never
see another dime."
one year later, in April 2013, Gardner began negotiating the
sale of GCI to CGB Diversified Services, Inc. In February
2014, Gardner and CGB Diversified finalized the terms of the
agreement. CGB Diversified purchased GCI's book of
insurance business for a maximum of $1.8 million pursuant to
a payment schedule with the final purchase price dependent on
the revenue produced from the book of business. CGB
Diversified also agreed to employ Gardner as a sales agent
with Gardner being subject to a non-compete and
non-disclosure agreement. GCI thus ceased operations at that
time. CGB Diversified was to pay the purchase price in a
series of installment payments, with each installment to be
split 87% to Gardner and 13% to the minority shareholder in
GCI. The first installment of $360, 000 was paid at the time
of closing. Additional installment payments have been made in
the amounts of $313, 200; $307, 388; $310, 954; and $311,
September 2013, after Gardner had commenced negotiation to
sell his business to CGB Diversified, Algreen filed his
action to collect unpaid wages. In April 2015, following a
jury trial, the district court entered judgment against GCI
in the amount of $19, 770.05 for unpaid compensation,
$2337.32 for liquidated damages, and $46, 292.89 for attorney
fees and expenses. The date of the judgment entry is more
than one year after Gardner sold his business to CGB
the entry of the judgment, Algreen began unsuccessful efforts
to collect on the judgment against the now-defunct business.
A writ of general execution was issued in September 2015 but
was returned unsatisfied. Algreen unsuccessfully attempted to
garnish GCI in November 2015. In March 2016, Algreen filed an
application to levy execution pursuant to Iowa Code section
684.7(2). GCI resisted, and the matter was litigated. Algreen
then withdrew his section 684.7(2) application and elected to
file an independent action alleging fraudulent transfer of
assets. Another writ of execution was issued but returned
unsatisfied, and Algreen's second attempt to garnish GCI
was also unsuccessful.
filed his petition for equitable relief asserting a claim of
fraudulent transfer against Gardner and GCI in May 2016. He
asked the court to pierce the corporate veil and hold Gardner
and GCI jointly and severally liable for the full amount of
the judgment in the wage-dispute action. He also asserted he
was entitled to an award of punitive damages because Gardner
and GCI acted with malice or reckless indifference to his
rights. The fraudulent-transfer matter was tried to the
bench. The district court concluded Algreen proved his
fraudulent transfer claim and proved the corporate veil
should be pierced. The court awarded punitive damages in the
amount of $22, 107.37-an award equal to the amount of damages
awarded by the jury in the wage-dispute suit. The district
court held Gardner and GCI jointly and severally liable for
the full amount of judgment in the wage-dispute action and
for the punitive damage award. The court also ordered Algreen
to submit a supplemental application for attorney's fees
and expenses in the wage-dispute action and held Gardner and
GCI jointly and severally liable for any such fees and
expenses awarded. Gardner and GCI's motion to amend and
enlarge findings of fact and conclusions of law was denied.
Gardner and GCI appeal.
first address Algreen's fraudulent-transfer claim arising
under Iowa Code chapter 684. Gardner and GCI contend there is
insufficient evidence supporting the fraudulent-transfer
claim. This case was tried in equity, and our review is de
novo. See Iowa R. App. P. 6.907. We give weight to
the district court's factual findings, especially those
involving credibility determinations, but we are not bound by
them. See Iowa R. App. P. 6.904(3)(g). We examine
the entire record and adjudicate anew the rights of the
parties on the issues presented. See City of Wapello v.
Chaplin, 507 N.W.2d 187, 188 (Iowa Ct. App. 1993). At
the time this action was filed, the party alleging a
fraudulent transfer had the burden of proving the claim by
clear and convincing evidence. See Ralfs v. Mawry,
586 N.W.2d 369, 373 (Iowa 1998) (addressing burden); 2016
Iowa Acts ch. 1040 (codified as amended at Iowa Code §
684.4(3) (Supp. 2016)) (amending section 684.4 to state the
burden of proving the elements of the claim is a
preponderance of the evidence).
Uniform Fraudulent Transfer Act (UFTA), Iowa Code chapter
684, governs fraudulent transactions. The UFTA sets forth two
types of fraudulent transfer: those transfers made with
"actual intent to hinder, delay, or defraud any creditor
of the debtor" and those made without reasonably
equivalent value for the transfer. Iowa Code § 684.4(1).
Only the first type of claim is at issue in this proceeding.
"When a debtor disposes of property with the intent to
delay or defraud creditors, we deem the disposition
inequitable and will set it aside." Benson v.
Richardson, 537 N.W.2d 748, 756 (Iowa 1995). "The
rationale for the right to reclaim fraudulently conveyed
property is, and always has been, to prevent a debtor from
frustrat[ing] his creditor's rights and avoid[ing] his
obligations by changing title to his assets."
Schaefer v. Schaefer, 795 N.W.2d 494, 498 (Iowa
Code section 684.4(2) sets forth the factors to be considered
in determining actual intent. Those factors, also referred to
at times as "indicia of fraud" or "badges of
fraud, " include: a.Whether the transfer or obligation
was to an insider.
b. Whether the debtor retained possession or control of the
property transferred after the transfer.
c. Whether the transfer or obligation was disclosed or
d. Whether, before the transfer was made or obligation was
incurred, the debtor had been sued or threatened with suit.
e. Whether the transfer was of substantially all the
f. Whether the debtor absconded.
g. Whether the debtor removed or concealed assets.
h. Whether the value of the consideration received by the
debtor was reasonably equivalent to the value of the asset
transferred or the ...