VK Brewer, LLC v. Duffell

STATE OF MAINE SUPERIOR COURT
WALDO, SS. DOCKETNO. CV-19-51

VK BREWER, LLC )
Plaintiff )
) DECISION & JUDGMENT
v. )
)
JOHN DUFFELL )
Defendant )

FACTUAL BACKGROUND AND FINDINGS

The Plaintiff operates a nursing home, Brewer Center for Health and
Rehabilitation, (hereinafter referred to as "Brewer Center") at which the
Defendant's mother, frmguard Duffell, (hereinafter referred to as
"Irmguard") was a resident for a period in the latter part of2017 and early
2018. Innguard, although originally a Defendant in this matter, died July 8,
2019, and was dismissed from the Complaint. The Defendant, John Duffell,
is Irmguard' s son, and the transferee of ce1tain assets previously owned by
Irmguard.

The specific asset, which is the subject of Brewer Center's claim based upon
an alleged fraudulent transfer by Irmguard, was some portion of a $20,000
check made payable to Irmguard, and discovered by the Defendant
sometime in July 2015. At the time the check was discovered in the home
where hmguard had previously been living, Irmguard was a resident at a

Entered on the Docket If)_--~;/ ::;J
different long-term care facility. In 2015, when the check was discovered,
that $20,000 represented substantially all of Irmguard's assets.

In 2006, Irmguard transferred her home to the Defendant by warranty deed,
and retained a life estate in the same property. At the time of the 2015
transfer of the check proceeds, it was the Defendant's intent and hope that
Ilmguard would return from the nursing facility to live out her remaining
days in the home she had transferred to her son. In order to accomplish that
hoped-for result, certain repairs and improvements at the home were
required to accommodate I1mguard's retmn.

Upon discovering the $20,000 check, the Defendant initially confirmed with
the issuing bank that the instrument was still valid, and then sought advice
from his attorneys as to how the proceeds ofthe $20,000 check should be
handled. Specifically, the Defendant's attorney advised that the proceeds
should be used for needed repairs on the house, and that once such spending
was completed the Department of Health and Human Services (DHHS)
should be informed of the details regarding the spending and repairs made to
the home. {Plaintiffs Exhibit 11 and 12). The Defendant documented
$18,982.49 in expenditures associated with the house at issue. {Plaintiffs
Exhibit 13), 1 and provided that information to DHHS sometime in the Fall of
2015.

1 Plaintiff's closing argument acknowledges that $560.92 of the $18,982.49 was paid for
attorneys' fees and should be subtracted from the total spent toward "homestead related
expenses."

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DHHS concluded, based upon Mainecare eligibility regulations, that
Irmguard's ownership percentage in the home resulting from her life estate
interest in the home was 29.526%. {Plaintiffs Ex. 15). DHHS also
concluded that the expenditure of the check proceeds for the home repairs
not reflective of Irmguard's ownership percentage, constituted a transfer of
assets for which she "did not get something of equal value." As a result of
this conclusion, DHHS determined a transfer penalty would apply with
respect to I1mgard 1s eligibility for paytnent for Nursing Home Level of Care.
This Court has no basis upon which to challenge the ownership percentage
utilized by DHHS, and therefore adopts the 29.526% figure as an
appropriate measure for valuing Irmgard's life estate interest in the property
which was repaired and improved in 2015.

Slightly over two years after the transfer of some portion of the $20,000
check proceeds was made, and the repairs to the home were completed,
Ilmguard became a long term care resident at the Plaintiffs Brewer Center
facility. Because of the transfer penalty referred to above, Itmguard incurred
charges from Brewer Center in the a1nount of $23,097.27 which were not
covered by Mainecare, and which remained unpaid as of the time of the trial
in this matter.

Near the time Irmguard began her stay with the Brewer Center facility, the
Defendant and/or his wife, Pamela Duffell, provided the Plaintiff with a
copy of the information they had received from DHHS regarding Irmguard's
eligibility and potential transfer penalty. Personnel associated with the

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Plaintiff provided assurances to the Defendant and/or his wife that a waiver
of the transfer penalty would likely happen. The Defendant also reasonably
anticipated that he would be receiving further assistance from the Plaintiff in
formally pursuing such a waiver request with DHHS. No such waiver was
ever formally requested or granted.

Plaintiff now contends it is entitled, in accordance with the Uniform
Fraudulent Transfer Act, (UFTA) 14 Jv1RSA §§3571 et seq., to a judgment,
in its favor and against the Defendant transferee, in an amount reflecting
some portion of the $20,000 transfer from 2015.

LEGAL ANALYSIS

Section 3575 of the UFTA states, in pertinent part,
1. A transfer made or obligation incurred by a debtor is fraudulent as
to a creditor, whether the creditor's claim arose before or after the
transfer was made or the obligation was incurred, if the debtor
made the transfer or incurred the obligation:
A. With actual intent to hinder, delay or defraud any creditor of
the debtor; or
B. without receiving a reasonably equivalent value in exchange
for the transfer or obligation and the debtor:
(1) was engaged or was about to engage in a business or
transaction for which the remaining assets of the
debtor were unreasonably small in relation to the
business or transaction; or

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(2) intended to incur, or believed or reasonably should
have believed that she would incur, debts beyond her
ability to pay as the debts became due.

The Plaintiff contends that the transfer of at least some portion the $20,000
check proceeds to the Defendant in 2015 constituted a fraudulent transfer
under either §3575(1 )(A) or (B). This Court does not believe the Plaintiff
has proven, by clear and convincing evidence, that there was "actual intent"
to defraud sufficient to constitute a violation under subsection (A). Even
applying the factors for determination of "actual intent 11 as set forth in
§3575(2) the Court concludes that some of these factors applied to the
transfer, while a significant number of the other listed statutory factors did
not (eg. transfer was disclosed; before transfer debtor was not sued or
threatened with suit; the debtor (or transferee) did not abscond; the debtor
did not remove or conceal assets).

The Court does conclude, however, that the transfer of a certain amount of
assets to the Defendant in 2015, in the nature of the improvement made to
the home, was a transfer by which Irmguard did not receive a reasonably
equivalent value and, at the time, she was engaged in a transaction involving
her own nursing home care, for which her remaining assets were
unreasonably small to cover. 14 MRSA §3575(1)(B)Q). Also, pursuant to
§3575(l)(B)(2.), given the need for nursing home care that the debtor was
experiencing around the time of the transfer, she reasonably should have
believed that she would incur debts beyond her ability to pay (without
Mainecare coverage) as the debts became due.

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To the extent this Comi has concluded that there was a transfer of an asset in
violation of the UFTA, the Plaintiff is entitled to a judgment against the
Defendant, transferee in accordance with §3579(2). Any such judgment may
be awarded to the creditor "for the value of the asset transfened, as adjusted
under subsection 3, or the amount necessary to satisfy the creditor's claim,
whichever is less." In this case, the asset transferred was less than the
amount of the creditor's claim. Subsection 3 of section 3579 also requires
that any judgment based upon an amount equal to the value of the asset at
the time of the transfer, would be subject to "adjustment as the equities may
require."

The Couii concludes that the total amount of the improvements made in
2015 to the home owned by the Defendant, and subject to a life estate owned
by Irmguard, equaled $18,421.57. Given the percentage ownership of
Irmgard's life estate, (29. 526% ), she received reasonably equivalent value in
the amount of $5,439.15. The value of the asset transferred to the Defendant
was, thus, the balance in the amount of $12,982.42.

It is that amount which must then be subjected to an "adjustment as the
equities may require." This Court concludes that such an adjustment is
required based upon the Plaintiffs own failure to meet its commitment to
assist the Defendant with the waiver process involving DHHS. The Court
finds that an equitable adjustment would reflect half of the value of the asset
transferred to the Defendant.

Accordingly, the Court concludes that the Plaintiff is entitled to judgment
against the Defendant in the amount of $6,491.21 plus interest and costs.

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The Clerk is directed to incoqJorate this Decision & Judgment, by
reference, in accordance with MRCivP 79(a).

Date:

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