[Cite as Witschey, Witschey & Firestine Co., L.P.A. v. Daniele, 2013-Ohio-5724.]
STATE OF OHIO ) IN THE COURT OF APPEALS )ss: NINTH JUDICIAL DISTRICT COUNTY OF SUMMIT )
WITSCHEY, WITSCHEY & FIRESTINE C.A. No. 26811 CO., LPA
Appellant APPEAL FROM JUDGMENT v. ENTERED IN THE COURT OF COMMON PLEAS JOSEPH F. DANIELE, JR., et al. COUNTY OF SUMMIT, OHIO CASE No. CV 2011-11-6338 Appellees
DECISION AND JOURNAL ENTRY
Dated: December 26, 2013
HENSAL, Judge.
{¶1} Witschey, Witschey & Firestine Co., LPA appeals a judgment from the Summit
County Court of Common Pleas that found in favor of Joseph Daniele, his wife, and their son on
its fraudulent-conveyance-of-real-property claim. For the following reasons, we reverse and
remand to the trial court to reapply Revised Code Section 1336.04(A)(1) to the evidence already
presented at trial.
I.
{¶2} According to Mr. Daniele, in 2004, while reviewing his estate plan, he determined
that he and his wife should transfer their house to their son so that they would not risk losing it if
they had to enter a long-term care facility. At the time, their son was operating a lucrative
business renovating and reselling homes in Florida. Mr. Daniele and his wife did not have a
lawyer, but Witschey had represented their son for several years, so their son had Witschey
prepare a deed transferring the property to Mr. Daniele and his wife for life, and the remainder to 2
their son. The Danieles did not receive any compensation in exchange for the remainder interest
transferred to their son.
{¶3} A few years after the transfer, the Danieles’ son’s business failed and he
accumulated over $160,000 in unpaid legal fees with Witschey. According to Mr. Daniele,
around the same time, he discovered that, because of a change in the law, he and his wife did not
have to divest themselves of the house in order to be assured that they would not lose it if they
had to enter a long-term care facility. He, therefore, asked their son to transfer his interest in the
house back to them. In May 2009, the Danieles’ son transferred his interest in the property to
them for no cost. Mr. Daniele’s wife later transferred her interest in the property to Mr. Daniele.
{¶4} Following the transfer of the deed back to the Danieles, Witschey obtained a
judgment against their son for his unpaid legal fees. While investigating the son’s assets, it
learned about the transfer of the remainder interest in the property back to the Danieles. In
November 2011, it filed an action for fraudulent conveyance against Mr. Daniele, his wife, and
their son, seeking to invalidate the transfer. Following a trial to the bench, the court entered
judgment in favor of the defendants. Witschey has timely appealed the trial court’s judgment,
assigning one error.
II.
ASSIGNMENT OF ERROR
THE TRIAL COURT ERRED IN FINDING THAT THERE WAS A “REASONABLY EQUIVALENT VALUE” EXCHANGED BETWEEN THE DEFENDANTS/APPELLEES PURSUANT TO R.C. 1336.08(A) OF OHIO’S FRAUDULENT CONVEYANCE ACT.
{¶5} Witschey argues that the trial court incorrectly rejected the claim that it brought
under Revised Code Section 1336.04(A)(1). In its decision, the court noted that, under Section
1336.08(A), a transfer is not fraudulent under Section 1336.04(A)(1), “against a person who took 3
in good faith and for a reasonably equivalent value.” The trial court determined that, because the
Danieles had transferred the property to their son in 2004 as a gift, “there is no requirement that
there be value for the 2009 transfer.” It, therefore, entered judgment for the Danieles.
{¶6} At trial, Witschey argued that it was entitled to relief under Section 1336.04(A)
and 1336.05(A). On appeal, it has limited its argument to its claim under Section 1336.04(A)(1).
Under that section, “[a] transfer * * * is fraudulent as to a creditor * * * if the debtor made the
transfer * * * [w]ith actual intent to hinder, delay, or defraud any creditor of the debtor[.]”
“[T]he existence of fraudulent intent is to be determined based on the facts and circumstances of
each case.” UAP-Columbus JV326132 v. Young, 10th Dist. Franklin No. 09AP-646, 2010-Ohio-
485, ¶ 29.
{¶7} “The burden of proof in an action to set aside a fraudulent conveyance must be
affirmatively satisfied by the complainant.” Stein v. Brown, 18 Ohio St.3d 305, 308 (1985).
Recognizing the difficulty in finding direct proof of a defendant’s intent, courts have held that
there are certain “badges of fraud” that may give rise to an inference that a conveyance was
fraudulent. Cardiovascular & Thoracic Surgery of Canton, Inc. v. DiMazzio, 37 Ohio App.3d
162, 166 (5th Dist.1987), quoting 24 Ohio Jurisprudence 3d, Creditors’ Rights, Section 754, at
422 (1980); See Stein at 308. In 1990, Ohio adopted the Uniform Fraudulent Transfer Act,
which codified a non-exclusive list of these badges under Section 1336.04(B). Abood v. Nemer,
128 Ohio App.3d 151, 159 (9th Dist.1998); Atlantic Veneer Corp. v. Robbins, 4th Dist. Pike No.
01CA678, 2002-Ohio-5363, ¶ 27; R.C. 1336.04(B). This Court has followed the reasoning of
other district courts of appeal that, if a plaintiff presents “proof of enough of these indicia of
fraud,” the burden of proof shifts to the defendants “to rebut the presumption of fraud.” Abood
at 162. In this case, the trial court found that there were enough badges of fraud present that the 4
burden shifted to the Danieles to “go forward with * * * proof and explain the transaction.”
DiMazzio at 166, quoting 24 Ohio Jurisprudence 3d, Creditor’s Rights, Section 884, at 559
(1968).
{¶8} Section 1336.08(A) provides one way that a defendant can rebut the presumption
of fraud. Abood at 163. It provides that “[a] transfer * * * is not fraudulent under division
(A)(1) of section 1336.04 of the Revised Code against a person who took in good faith and for a
reasonably equivalent value or against any subsequent transferee or obligee.” The trial court
determined that the Danieles could use Section 1336.08(A) to rebut the presumption of fraud
even though they did not give their son anything of monetary value in exchange for the deed
because their son had not given them anything of monetary value at the time of the first transfer.
{¶9} Section 1336.03(A) provides that “[v]alue is given for a transfer or an obligation
if, in exchange for the transfer or obligation, property is transferred or an antecedent debt is
secured or satisfied * * *.” Under Section 1336.01(J), “‘[p]roperty’ means anything that may be
the subject of ownership.” According to Mr. Daniele, he did not give his son any property in
exchange for the return of the deed of his house. The transfer also did not satisfy or secure any
pre-existing debt that his son owed to him. Accordingly, there is no evidence in the record to
support a finding that the transfer of the deed back to the Danieles was for property of reasonably
equivalent value.
{¶10} The trial court, accepting Mr. Daniele’s testimony that he originally transferred
the property to his son “under the auspices of estate planning,” reasoned that, because the
Danieles’ son obtained the deed to the house as a gift, the Danieles did not need to demonstrate
that his return of the deed was for reasonably equivalent value under Section 1336.08(A). Under
the plain language of the statute, however, to satisfy the requirements of Section 1336.08(A), a 5
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[Cite as Witschey, Witschey & Firestine Co., L.P.A. v. Daniele, 2013-Ohio-5724.]
STATE OF OHIO ) IN THE COURT OF APPEALS )ss: NINTH JUDICIAL DISTRICT COUNTY OF SUMMIT )
WITSCHEY, WITSCHEY & FIRESTINE C.A. No. 26811 CO., LPA
Appellant APPEAL FROM JUDGMENT v. ENTERED IN THE COURT OF COMMON PLEAS JOSEPH F. DANIELE, JR., et al. COUNTY OF SUMMIT, OHIO CASE No. CV 2011-11-6338 Appellees
DECISION AND JOURNAL ENTRY
Dated: December 26, 2013
HENSAL, Judge.
{¶1} Witschey, Witschey & Firestine Co., LPA appeals a judgment from the Summit
County Court of Common Pleas that found in favor of Joseph Daniele, his wife, and their son on
its fraudulent-conveyance-of-real-property claim. For the following reasons, we reverse and
remand to the trial court to reapply Revised Code Section 1336.04(A)(1) to the evidence already
presented at trial.
I.
{¶2} According to Mr. Daniele, in 2004, while reviewing his estate plan, he determined
that he and his wife should transfer their house to their son so that they would not risk losing it if
they had to enter a long-term care facility. At the time, their son was operating a lucrative
business renovating and reselling homes in Florida. Mr. Daniele and his wife did not have a
lawyer, but Witschey had represented their son for several years, so their son had Witschey
prepare a deed transferring the property to Mr. Daniele and his wife for life, and the remainder to 2
their son. The Danieles did not receive any compensation in exchange for the remainder interest
transferred to their son.
{¶3} A few years after the transfer, the Danieles’ son’s business failed and he
accumulated over $160,000 in unpaid legal fees with Witschey. According to Mr. Daniele,
around the same time, he discovered that, because of a change in the law, he and his wife did not
have to divest themselves of the house in order to be assured that they would not lose it if they
had to enter a long-term care facility. He, therefore, asked their son to transfer his interest in the
house back to them. In May 2009, the Danieles’ son transferred his interest in the property to
them for no cost. Mr. Daniele’s wife later transferred her interest in the property to Mr. Daniele.
{¶4} Following the transfer of the deed back to the Danieles, Witschey obtained a
judgment against their son for his unpaid legal fees. While investigating the son’s assets, it
learned about the transfer of the remainder interest in the property back to the Danieles. In
November 2011, it filed an action for fraudulent conveyance against Mr. Daniele, his wife, and
their son, seeking to invalidate the transfer. Following a trial to the bench, the court entered
judgment in favor of the defendants. Witschey has timely appealed the trial court’s judgment,
assigning one error.
II.
ASSIGNMENT OF ERROR
THE TRIAL COURT ERRED IN FINDING THAT THERE WAS A “REASONABLY EQUIVALENT VALUE” EXCHANGED BETWEEN THE DEFENDANTS/APPELLEES PURSUANT TO R.C. 1336.08(A) OF OHIO’S FRAUDULENT CONVEYANCE ACT.
{¶5} Witschey argues that the trial court incorrectly rejected the claim that it brought
under Revised Code Section 1336.04(A)(1). In its decision, the court noted that, under Section
1336.08(A), a transfer is not fraudulent under Section 1336.04(A)(1), “against a person who took 3
in good faith and for a reasonably equivalent value.” The trial court determined that, because the
Danieles had transferred the property to their son in 2004 as a gift, “there is no requirement that
there be value for the 2009 transfer.” It, therefore, entered judgment for the Danieles.
{¶6} At trial, Witschey argued that it was entitled to relief under Section 1336.04(A)
and 1336.05(A). On appeal, it has limited its argument to its claim under Section 1336.04(A)(1).
Under that section, “[a] transfer * * * is fraudulent as to a creditor * * * if the debtor made the
transfer * * * [w]ith actual intent to hinder, delay, or defraud any creditor of the debtor[.]”
“[T]he existence of fraudulent intent is to be determined based on the facts and circumstances of
each case.” UAP-Columbus JV326132 v. Young, 10th Dist. Franklin No. 09AP-646, 2010-Ohio-
485, ¶ 29.
{¶7} “The burden of proof in an action to set aside a fraudulent conveyance must be
affirmatively satisfied by the complainant.” Stein v. Brown, 18 Ohio St.3d 305, 308 (1985).
Recognizing the difficulty in finding direct proof of a defendant’s intent, courts have held that
there are certain “badges of fraud” that may give rise to an inference that a conveyance was
fraudulent. Cardiovascular & Thoracic Surgery of Canton, Inc. v. DiMazzio, 37 Ohio App.3d
162, 166 (5th Dist.1987), quoting 24 Ohio Jurisprudence 3d, Creditors’ Rights, Section 754, at
422 (1980); See Stein at 308. In 1990, Ohio adopted the Uniform Fraudulent Transfer Act,
which codified a non-exclusive list of these badges under Section 1336.04(B). Abood v. Nemer,
128 Ohio App.3d 151, 159 (9th Dist.1998); Atlantic Veneer Corp. v. Robbins, 4th Dist. Pike No.
01CA678, 2002-Ohio-5363, ¶ 27; R.C. 1336.04(B). This Court has followed the reasoning of
other district courts of appeal that, if a plaintiff presents “proof of enough of these indicia of
fraud,” the burden of proof shifts to the defendants “to rebut the presumption of fraud.” Abood
at 162. In this case, the trial court found that there were enough badges of fraud present that the 4
burden shifted to the Danieles to “go forward with * * * proof and explain the transaction.”
DiMazzio at 166, quoting 24 Ohio Jurisprudence 3d, Creditor’s Rights, Section 884, at 559
(1968).
{¶8} Section 1336.08(A) provides one way that a defendant can rebut the presumption
of fraud. Abood at 163. It provides that “[a] transfer * * * is not fraudulent under division
(A)(1) of section 1336.04 of the Revised Code against a person who took in good faith and for a
reasonably equivalent value or against any subsequent transferee or obligee.” The trial court
determined that the Danieles could use Section 1336.08(A) to rebut the presumption of fraud
even though they did not give their son anything of monetary value in exchange for the deed
because their son had not given them anything of monetary value at the time of the first transfer.
{¶9} Section 1336.03(A) provides that “[v]alue is given for a transfer or an obligation
if, in exchange for the transfer or obligation, property is transferred or an antecedent debt is
secured or satisfied * * *.” Under Section 1336.01(J), “‘[p]roperty’ means anything that may be
the subject of ownership.” According to Mr. Daniele, he did not give his son any property in
exchange for the return of the deed of his house. The transfer also did not satisfy or secure any
pre-existing debt that his son owed to him. Accordingly, there is no evidence in the record to
support a finding that the transfer of the deed back to the Danieles was for property of reasonably
equivalent value.
{¶10} The trial court, accepting Mr. Daniele’s testimony that he originally transferred
the property to his son “under the auspices of estate planning,” reasoned that, because the
Danieles’ son obtained the deed to the house as a gift, the Danieles did not need to demonstrate
that his return of the deed was for reasonably equivalent value under Section 1336.08(A). Under
the plain language of the statute, however, to satisfy the requirements of Section 1336.08(A), a 5
transfer must be “for a reasonably equivalent value * * *.” We, therefore, conclude that the trial
court incorrectly relied on Section 1336.08(A) in its judgment entry.
{¶11} Witschey argues that, because the trial court misapplied Section 1336.08, this
Court should order the transfer set aside. Just because the Danieles failed to satisfy the
requirements of Section 1336.08(A), however, does not mean that they did not rebut the
presumption that their son’s transfer of the deed was fraudulent. Section 1336.08(A) merely
codifies one way in which a transferee can defend against an action under Section
1336.04(A)(1). See Abood, 128 Ohio App.3d at 163. The fact that Witschey established several
badges of fraud simply shifted the burden to the Danieles and their son to “go forward with * * *
proof and explain the transaction.” DiMazzio, 37 Ohio App.3d at 166, quoting 24 Ohio
Jurisprudence 3d, Creditors’ Rights, Section 884, at 559 (1980). “The ultimate burden of proof
in fraud cases rests with the party asserting fraud.” Baker & Sons Equip Co. v. GSO Equip.
Leasing, Inc., 87 Ohio App.3d 644, 651 (10th Dist.1993).
{¶12} Because the trial court incorrectly determined that the Danieles could use Section
1336.08(A) to defend against Witschey’s claim under Section 1336.04(A)(1) even though his son
did not receive anything of “[v]alue” under Section 1336.03(A), Witschey’s assignment of error
is sustained. We note that, because of the mistake, the trial court, while finding that the transfer
was not made in bad faith for purposes of applying Section 1336.08(A), did not proceed to
analyze whether the evidence that the Danieles presented rebutted the presumption of fraud
under Section 1336.04(A)(1). Accordingly, we remand this case to the trial court to determine in
the first instance, based on the evidence that was already presented at trial, whether the Danieles’
evidence about the circumstances of the transfer rebutted Witschey evidence that the transfer was
fraudulent under Section 1336.04(A)(1). We note that Section 1336.04(A)(1) requires proof of 6
the debtor’s “actual intent to hinder, delay, or defraud any creditor of the debtor.” On remand,
therefore, it is the intent of the Danieles’ son that is at issue, as there was no evidence in the
record that the Danieles were debtors of Witschey.
III.
{¶13} The trial court incorrectly determined that Section 1336.08(A) applies to the facts
of this case. The judgment of the Summit County Court of Common Pleas is reversed, and this
matter is remanded for further proceedings consistent with this decision.
Judgment reversed, and cause remanded.
There were reasonable grounds for this appeal.
We order that a special mandate issue out of this Court, directing the Court of Common
Pleas, County of Summit, State of Ohio, to carry this judgment into execution. A certified copy
of this journal entry shall constitute the mandate, pursuant to App.R. 27.
Immediately upon the filing hereof, this document shall constitute the journal entry of
judgment, and it shall be file stamped by the Clerk of the Court of Appeals at which time the
period for review shall begin to run. App.R. 22(C). The Clerk of the Court of Appeals is
instructed to mail a notice of entry of this judgment to the parties and to make a notation of the
mailing in the docket, pursuant to App.R. 30.
Costs taxed to Appellees.
JENNIFER HENSAL FOR THE COURT 7
MOORE, P. J. WHITMORE, J. CONCUR.
APPEARANCES:
JEFFREY T. WITSCHEY and ALEX RAGON, Attorneys at Law, for Appellant.
CARMEN V. ROBERTO, Attorney at Law, for Appellees.
JOSEPH DANIELE, JR., pro se, Appellee.