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Heritage Properties Limited Partnership v. Walt & Lee Keenihan Foundation, Inc.

Supreme Court of Arkansas

December 12, 2019

HERITAGE PROPERTIES LIMITED PARTNERSHIP APPELLANT
v.
WALT & LEE KEENIHAN FOUNDATION, INC. APPELLEE

          APPEAL FROM THE PULASKI COUNTY CIRCUIT COURT [NO. 60CV-16-6419] HONORABLE TIMOTHY DAVIS FOX, JUDGE

          Davidson Law Firm, by: Charles D. "Skip" Davidson and Drew C. Benham, for appellant.

          Friday, Eldredge & Clark, LLP, by: William A. Waddell, Jr., for appellee.

          KAREN R. BAKER, Associate Justice

         Appellant Heritage Properties Limited Partnership ("Heritage") appeals the Pulaski County Circuit Court's order granting appellee Walt & Lee Keenihan Foundation, Inc.'s (the "Foundation") motion for summary judgment and dismissing Heritage's complaint with prejudice. Heritage's complaint sought to set aside an alleged fraudulent conveyance to the Foundation pursuant to a Transfer on Death ("TOD") beneficiary designation on an account owned by Leta Keenihan.[1] Heritage presents two arguments on appeal: (1) the circuit court has jurisdiction under the Fraudulent Transfers Act (the "Act")[2] to hear claims to pursue assets from a transferee that received assets pursuant to a payable-on-death clause; and (2) the circuit court erred in granting the Foundation's motion for summary judgment. We hold that the circuit court erred in deciding this case by summary judgment and reverse and remand for trial.

         I. Facts and Procedural History

         On May 13, 2014, Leta Keenihan created an Ameriprise SPS Advantage Account in the amount of $500, 000 at Ameriprise Financial and designated the Foundation as the beneficiary of the account on her death. On June 9, 2014, Leta executed a TOD beneficiary form naming the Foundation as beneficiary of the account. Leta died on December 8, 2015, and the balance of the Ameriprise account, $1, 114, 000, was transferred to the Foundation pursuant to the TOD beneficiary designation.

         On February 22, 2016, the Pulaski County Circuit Court, Fifteenth Division entered an order probating Leta's will and appointing John B. Peace as personal representative of the Leta Keenihan Estate (the "Estate").[3] Peace accepted appointment, and he was issued letters testamentary authorizing him to act as executor for and on behalf of the Estate. On August 22, 2016, Heritage filed three claims against the Estate based on various contracts with Leta. Heritage's claims totaled approximately $851, 000.

         On November 22, 2016, after learning that the Estate was insolvent-tax claims and claims of other creditors will exceed the reasonable value of the estate-Heritage filed its complaint in the Pulaski County Circuit Court, Sixth Division, against the Foundation. Heritage alleged that it is a creditor of the Estate; the Foundation was a nonprofit corporation Leta established prior to her death; and the transfer in excess of $1, 000, 000 from Leta to the Foundation was a fraudulent conveyance and should be set aside. Heritage alleged that its claim is for approximately $851, 000, the Foundation should be ordered to pay the $851, 000 claim to Heritage, and the Estate is entitled to the remaining funds to pay off creditors. Heritage also sought a lien on the recovery to the extent of its claim and asserted that the balance should be paid to the Estate. Finally, Heritage asserted that it is entitled to a restraining order against the Foundation to prevent the Foundation from spending the transferred funds.

         On December 19, 2016, the Foundation filed its answer. The Foundation acknowledged that Heritage has filed a claim against the probate estate but noted that the claim has not been allowed. The Foundation denied that Heritage is a creditor of the Foundation within the meaning of the Act. For its four affirmative defenses, the Foundation asserted that (1) Heritage does not have standing to bring its claim against the Foundation; (2) Heritage's complaint should be dismissed pursuant to Rule 12(b)(6) of the Arkansas Rules of Civil Procedure for failure to state facts upon which relief can be granted; (3) Heritage's complaint should be dismissed pursuant to Rule 9(b) and 10(d) of the Arkansas Rules of Civil Procedure for failure to plead the alleged fraudulent conveyance with particularity; and (4) Heritage's complaint should be dismissed pursuant to Arkansas Code Annotated section 4-59-210 based on estoppel and the terms of the beneficiary designation of the Ameriprise Financial account. The Foundation requested that the circuit court dismiss Heritage's complaint with prejudice. Attached as exhibit A to its answer were letters from Ameriprise Financial to Leta which listed her primary beneficiary designation for her Ameriprise Brokerage account and SPS Advantage accounts as follows: WALT & LEE KEENIHAN FOUNDATION, INC., FOUNDATION 100%.

         On December 26, 2017, the Foundation filed its motion for summary judgment on Heritage's complaint. The Foundation argued that Heritage did not have standing to bring the present action. The Foundation asserted that Heritage was required to bring its claim pursuant to Arkansas Code Annotated section 28-49-109 (Repl. 2012), which authorizes the personal representative of a grantor who has fraudulently transferred any interest in real or personal property to apply to a court of competent jurisdiction to have the conveyance or transfer set aside and to recover the property, or the value thereof, for the use and benefit of all persons having an interest in the estate of the alleged fraudulent grantor. The Foundation argued that Heritage has not presented proof that either Peace or the probate court had authorized it to bring the current action. Further, the Foundation argued that Heritage's complaint, which seeks preference for Heritage to the alleged transfer to the exclusion of other estate creditors, is not for the use and benefit of all persons having an interest in the Estate. Finally, the Foundation argued that the transfer pursuant to a TOD beneficiary designation was not a fraudulent transfer as a matter of law and undisputed fact.

         On January 15, 2018, Heritage filed its response to the Foundation's motion for summary judgment. Heritage argued that it has standing under the Act for it to pursue its claims against the Foundation, despite the personal representative's option to pursue fraudulent conveyances by the decedent pursuant to Arkansas Code Annotated section 28-49-109. On February 13, 2018, Heritage filed a cross-motion for summary judgment. In support of its motion, Heritage contended that there is no genuine issue of material fact that the transfer of the account funds constitutes a fraudulent transaction under Arkansas law and Heritage is entitled to a voidance of the transfer to the extent necessary to satisfy its claims against the Estate. In its brief in support of its motion for summary judgment, Heritage asserted that several claims have been filed in the probate case, including three claims by Heritage. Heritage attached the July 10, 2017 joint amended petition for approval and classification of claims and petition for instructions by trustee filed in the probate case. The petition was filed by Peace in his capacity as the executor of the Estate, and it acknowledged that Heritage had filed affidavits of secured claims against the Estate in the following amounts: $170, 000, $181, 376, and $500, 170. Heritage also attached its three affidavits of secured claims against the Estate and supporting documents that were filed in the probate case. These documents also demonstrated that the Estate was subject to other claims, specifically, a 2005 claim by the IRS for tax deficiencies in excess of $350, 000. Heritage argued that because the federal government was entitled to be paid first, the remaining claims would not be satisfied due to insolvency of the Estate. Heritage contended that Leta "knew or should have known that she had debts beyond her ability to pay as they came due." Further, Leta nor her Estate received anything in exchange for the transfer to the Foundation and her Estate was rendered insolvent based on the transfer. Accordingly, Heritage asserted that once the transfer occurred, its only remedy was to seek a voidance of the transfer under the Act.

         On March 2, 2018, the Foundation filed its response to Heritage's motion for summary judgment. The Foundation asserted that as demonstrated by the July 10, 2017 joint petition filed by Peace, the issue of whether Heritage has standing to assert a valid claim against the Estate is disputed by the executor. The Foundation stated that, at most, Heritage has a disputed unsecured, nonpriority claim against the Estate. Based on this position, the Foundation contended that Heritage cannot establish that it is a creditor with a claim within the meaning of Arkansas Code Annotated section 4-59-201(4). Further, the Foundation asserted that the transfer pursuant to a TOD beneficiary designation was not a fraudulent transfer as a matter of law and undisputed fact.

         On March 14, 2018, the after a hearing on the motions, the circuit court entered its order denying Heritage's motion for summary judgment and granting the Foundation's motion for summary judgment. The order stated in pertinent part:

1.With regard to [Heritage's] standing, the court finds that the probate court has exclusive jurisdiction over claims against a decedent, and that this Court lacks jurisdiction to make a determination of the merits of this lawsuit.
2. With regard to [Heritage's] claim against [the Foundation] under the Uniform Voidable Transaction Act, the court finds that [Heritage] has failed to provide proof of the decedent's intent at the time of her execution of the transfer on death beneficiary form in May 2014.

         The circuit court dismissed Heritage's complaint with prejudice. Heritage appealed to the Arkansas Court of Appeals. Our court of appeals certified the present case to this court pursuant to Arkansas Supreme Court Rules 1-2(b)(1), (4), (5), and (6) as an issue of first impression; an issue of substantial public interest; a significant issue needing clarification or development of the law; and an appeal involving the interpretation of an act of the General Assembly. On February 14, 2019, we granted certification of the appeal.

         II. Law and Analysis

         The basic rule of statutory construction is to give effect to the intent of the legislature by giving words their usual and ordinary meaning. Ark. Soil & Water Conservation Comm'n v. City of Bentonville, 351 Ark. 289, 92 S.W.3d 47 (2002). "When a statute is clear, it is given its plain meaning, and we will not search for legislative intent; rather, that intent must be gathered from the plain meaning of the language used. In other words, if the language of the statute is plain and unambiguous, the analysis need go no further." Yamaha Motor Corp., U.S.A. v. Richard's Honda Yamaha, 344 Ark. 44, 52, 38 S.W.3d 356, 360 (2001). This court is very reluctant to interpret a legislative act in a manner contrary to its express language, unless it is clear that a drafting error or omission has circumvented legislative intent. Id., 38 S.W.3d at 360. Further, we must give effect to the specific statute over the general. Searcy Farm Supply, LLC v. Merchants & Planters Bank, 369 Ark. 487, 256 S.W.3d 496 (2007). "This court has long held that a general statute must yield to a specific statute involving a particular subject matter." Comcast of Little Rock, Inc. v. Bradshaw, 2011 Ark. 431, at 9, 385 S.W.3d 137, 142-43.

         We now turn to the circuit court's finding as set forth above:

1. With regard to [Heritage's] standing, the court finds that the probate court has exclusive jurisdiction over claims against a decedent, and that this Court lacks jurisdiction to make a determination of the merits of this lawsuit.

         On appeal, Heritage argues that the circuit court erroneously ruled that the probate court has exclusive jurisdiction over the claims against a decedent because the Act expressly allows a creditor to pursue a claim against a transferee as a result of a voidable transfer. Ark. Code Ann. § 4-59-207. Heritage argues that the debtor, whether alive or deceased, is not required to be a part of an action by a creditor to recover ...


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