Bowers v. Dougherty

615 N.W.2d 449, 260 Neb. 74, 2000 Neb. LEXIS 180
CourtNebraska Supreme Court
DecidedJuly 28, 2000
DocketS-99-261
StatusPublished
Cited by34 cases

This text of 615 N.W.2d 449 (Bowers v. Dougherty) is published on Counsel Stack Legal Research, covering Nebraska Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Bowers v. Dougherty, 615 N.W.2d 449, 260 Neb. 74, 2000 Neb. LEXIS 180 (Neb. 2000).

Opinion

Hendry, C.J.

INTRODUCTION

Bill R. Bowers and llene Sue Bowers brought a claim for legal malpractice against attorney Duane C. Dougherty. The court entered judgment in favor of Dougherty, finding that any negligence on Dougherty’s part did not proximately cause damage to the Bowerses. The Bowerses appealed, and we moved the case to our docket pursuant to our authority to regulate the caseloads of this court and the Nebraska Court of Appeals. Neb. Rev. Stat. § 24-1106(3) (Reissue 1995).

*76 FACTUAL BACKGROUND OF NORWEST BANK NEB. v. BOWERS

The nexus of this case involves litigation over transfers of property and assets from Henry and Eleanor Greenberg to their daughter, llene. For many years prior to the transfers, the Greenbergs operated Philips Stores, Inc., a chain of retail stores in and around Omaha, Nebraska. On June 30, 1976, Norwest Bank Nebraska, N.A. (Norwest), loaned Philips Realty Co. $975,000 to assist with financing the construction of a new Philips store in Council Bluffs, Iowa. Under the terms of the loan, full repayment would be completed no later than June 1, 1991. The loan was secured by certain real estate owned by Philips Realty.

As a part of this agreement, the Greenbergs both signed a mortgage loan guaranty agreement, which obligated each of them individually and personally on the $975,000 note. Henry, as president of Philips Stores, also signed a mortgage loan guaranty agreement obligating Philips Stores on the $975,000 note. Philips Realty’s holdings were later transferred into “MMP Trust.” Henry held a two-thirds interest in MMP Trust, and Philips Stores held the other one-third interest.

The profits of Philips Stores began to decline. The last year the business showed any profit was 1980, when a substantial debt owed by Philips Stores was written off. In 1984, Philips Stores posted a $348,000 loss. Also in 1984, Norwest required a personal loan guaranty, signed by Henry alone, for a separate debt owed by Philips Stores. Philips Stores’ debt to Norwest was in the form of a $750,000 revolving demand note secured by accounts receivable. In 1985, Philips Stores posted a $352,000 loss.

In the spring of 1985, Henry met with Michael McQuillan, the loan officer at Norwest responsible for Philips Stores’ revolving demand note from 1984 to 1986. At that meeting, according to McQuillan’s notes, Henry was told that if Philips Stores posted another year of losses, it would be necessary to liquidate all of the company’s assets to pay off the demand note because the loan had become too leveraged; that is, the bank did not believe that Philips Stores would have sufficient accounts receivable to secure the demand note if the company’s losses continued.

Philips Stores continued to lose money, and in September 1986, Henry again met with McQuillan and discussed the liqui *77 dation of the business. According to McQuillan, at that meeting, Henry presented a plan to liquidate the business, with the Philips store in Council Bluffs closing in January 1987, and the remainder of Philips Stores’ retail operations closing by July 1987. Henry asserted later that he was only considering closing one of the Philips stores in September 1986.

On January 5, 1987, the Greenbergs transferred three of their real estate assets to their daughter, llene. The attorney who handled these transfers was Eleanor’s younger brother, Sheldon Harris, who had served as the Greenbergs’ attorney for over 30 years. Henry met with Harris previously in November 1986, after the meeting with Norwest, to prepare these transfers to llene as part of the Greenbergs’ “estate planning.” At that time, Eleanor was suffering from terminal cancer and, according to Henry, was concerned for llene’s needs and wanted llene to have something in her name.

On January 5, 1987, Henry conveyed to llene all of his interest in the “108th and Q Street Farm Partnership,” an undeveloped area of commercial real estate. On the same day, the Greenbergs together conveyed to llene all of their interest in the Yorkshire Manor apartments, an apartment complex in Fremont, Nebraska, and their respective one-half interests in their residence, a condominium located in Omaha, Nebraska, with a life estate reserved in the condominium for the Greenbergs. llene gave no consideration for any of the transfers.

The Council Bluffs Philips store closed in January 1987, and by July 1987, all Philips Stores’ retail operations ceased. As of July, Philips Realty was in default on the $975,000 promissory note, and Philips Stores had an unpaid balance of approximately $75,000 on the revolving demand note.

In July 1987, Henry gave Philips Stores’ computer to llene. She took it home to continue collecting outstanding credit card debts in an effort to help pay off the remaining balance on the revolving demand note. On July 29, Eleanor transferred $68,869 in cash to llene, and on August 15, Henry transferred his 1986 Chevrolet Corsica to llene. Eleanor died on August 3.

The three real estate transfers, cash, car, and computer were all listed on the Greenbergs’ 1987 tax return as gifts to llene. The value listed for each of these items was as follows:

*78 (1) 25-percent interest in 108th and Q Street Farm Partnership from Henry: $150,000;
(2) 47-percent interest in the Yorkshire Manor apartments from the Greenbergs: $94,000;
(3) 50-percent interest from Henry and 50-percent interest from Eleanor in condominium: $150,000;
(4) Computer from Henry: $6,000;
(5) 1986 Chevrolet Corsica from Henry: $9,500;
(6) Cash from Eleanor: $68,869.
Total value of gifts stated on return: $584.369

Philips Stores’ revolving demand note with Norwest was eventually paid in full by liquidation of the Philips Stores’ inventory and by the collection of receivables. However, the remaining balance on the defaulted $975,000 promissory note was not paid. In December 1987, Norwest brought suit in Iowa against Philips Realty, Philips Stores, Henry, the trustees of the MMP Trust, and First National Bank of Council Bluffs (First National Bank), seeking to foreclose on the Council Bluffs property securing the promissory note and seeking a judgment in the amount of $844,459.96. This represented $796,030.32 still owed on the promissory note; $48,154.64 in unpaid interest beginning on July 1,1987; and title search fees of $275.

Norwest received a judgment in the district court for Pottawattamie County, Iowa, for the full amount against Henry, Philips Stores, and Philips Realty. The real estate securing the promissory note was then sold, leaving approximately $561,197 outstanding from the judgment. Norwest registered this judgment in Nebraska on December 9, 1988.

In order to collect the remaining $561,197 from the unsatisfied judgment, Norwest brought suit in 1989 in the district court for Douglas County, Nebraska, against the Bowerses to have the 1987 transfers to llene set aside as fraudulent.

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Bluebook (online)
615 N.W.2d 449, 260 Neb. 74, 2000 Neb. LEXIS 180, Counsel Stack Legal Research, https://law.counselstack.com/opinion/bowers-v-dougherty-neb-2000.