775
Argued and submitted November 30, 2021; affirmed on appeal, reversed and
remanded on cross-appeal January 5; on respondents-cross-appellants’ petition
for reconsideration filed January 18 and appellants-cross-respondents’ response
to petition for reconsideration filed January 25, reconsideration allowed by
opinion February 24, 2022
See 317 Or App 815,
505 P3d 516 (2022)
Weston TWIGG
and Carrie Twigg,
Plaintiffs-Respondents
Cross-Appellants,
and
RAINIER PACIFIC
DEVELOPMENT, LLC (RPD),
an Oregon limited liability company,
Defendant,
v.
Gregg OPSAHL,
Hana Opsahl, and Erik Opsahl,
Garnishees-Appellants
Cross-Respondents.
Multnomah County Circuit Court
18CV58804; A174051
505 P3d 486
Garnishees (the Opsahls) appeal a supplemental judgment awarding
$106,000 to plaintiffs (the Twiggs) to satisfy a portion of the money owed to plaintiffs by judgment debtor Rainier Pacific Development, LLC (RPD), of which the
Opsahls were the managing members. The trial court awarded garnishment in
the amount of unlawful distributions made by RPD to Erik Opsahl but denied
garnishment of allegedly fraudulent transfers made by RPD to Gregg and Hana
Opsahl. The Twiggs cross-appeal that denial, contending that a transferee’s liability for fraudulent transfers is garnishable. The Opsahls contend that previously unlitigated liabilities are not garnishable. Held: A member’s liability to an
LLC for unlawful distributions and a transferee’s liability for fraudulent transfers are garnishable, and both liabilities may be determined within a garnishment proceeding.
Affirmed on appeal; reversed and remanded on cross-appeal.
Leslie M. Roberts, Judge.
J. Kurt Kraemer argued the cause for appellants-cross-respondents. Also on the briefs was McEwen Gisvold LLP.
776 Twigg v. Opsahl
Steven F. Cade argued the cause for respondents-cross-appellants. Also on the briefs were Charles R. Markley and
Williams Kastner.
Before Kamins, Presiding Judge, and Lagesen, Chief Judge,
and Landau, Senior Judge.
KAMINS, P. J.
Affirmed on appeal; reversed and remanded on cross-appeal.
Cite as 316 Or App 775 (2022) 777
KAMINS, P. J.
Garnishees (the Opsahls) appeal a supplemental
judgment awarding $106,000 to plaintiffs (the Twiggs) to
satisfy a portion of the money owed to plaintiffs. The Twiggs
cross-appeal, assigning error to the trial court’s denial of
their claim for garnishment based on a fraudulent transfer
theory. We affirm on the appeal and reverse and remand on
the cross-appeal.
I. FACTUAL BACKGROUND
Rainier Pacific Development, LLC (RPD) was a general contracting company owned and managed by a married couple, Hana and Gregg Opsahl, and their son, Erik
Opsahl. On October 20, 2018, an arbitrator ordered RPD to
pay $604,594.80 to plaintiffs, Carrie and Weston Twigg, in
a dispute that arose out of RPD’s construction of the Twiggs’
home in 2013. RPD dissolved shortly after the judgment
issued with no remaining assets to fulfill its obligation to the
Twiggs. The Twiggs, in search of assets to satisfy the judgment, served writs of garnishment on each of the Opsahls
on August 8, 2019. Hana’s and Gregg’s responses indicated
that the only property they held belonging to RPD was some
office equipment and leftover construction material, and
Erik responded that he did not hold any of RPD’s property.
The Twiggs disputed the responses, alleging them to be deficient for failing to identify assets owed to RPD. Specifically,
the response failed to identify assets that had been unlawfully distributed or fraudulently transferred to the Opsahls
while RPD was in operation. The Twiggs contended that the
Opsahls intentionally kept RPD in a judgment-proof state
by periodically scraping out all of its cash assets, thereby
depriving RPD’s creditors of recovery. They asserted that
the Opsahls owed obligations to RPD for unlawful distributions and fraudulent transfers at the time of garnishment and that those obligations constituted garnishable
property.
The unlawful distribution claim is predicated on
ORS 63.229(1), which prohibits LLCs from making distributions to members if the LLC is insolvent, and ORS
778 Twigg v. Opsahl
63.235(1), which imposes personal liability on members who
receive or approve unlawful distributions. The trial court
found that RPD had been consistently insolvent at all relevant times and yet made a distribution of $106,000 to Erik
Opsahl during the two-year statute of limitations imposed
by ORS 63.235(4). It thus awarded garnishment of that
amount.
The Twiggs’ fraudulent transfer claim is based on
the Uniform Fraudulent Transfer Act (UFTA), ORS 95.200
to 95.310. The Twiggs presented evidence that RPD’s lease
of a building owned by the Opsahls was essentially a sham,
such that the rent payments were fraudulent transfers as
defined by the UFTA. The trial court did not determine
whether the rent arrangement was fraudulent because it
concluded that it could not grant a remedy under the UFTA
in a garnishment proceeding where the money had since
been spent.
The Opsahls appeal, assigning error to the trial
court’s award of $106,000 to recover for the unlawful distribution, and the Twiggs cross-appeal the denial of their
fraudulent transfer claim. On the appeal, we affirm the trial
court’s award of $106,000 due to the unlawful distribution.
On the cross-appeal, we reverse the trial court’s determination that it could not grant the Twiggs’ requested remedy
under the UFTA, and remand for further proceedings on
whether the rent payments were fraudulent.
II. ANALYSIS
We review statutory garnishment proceedings for
legal error. Jones v. Bhattacharyya, 305 Or App 503, 506,
471 P3d 135, adh’d to as modified on recons,
307 Or App 200,
474 P3d 464 (2020). We are bound by the trial court’s factual
findings if they are supported by any evidence in the record.
Wilson v. Gutierrez,
261 Or App 410, 411,
323 P3d 974 (2014).
This case requires us to examine the interplay
between Oregon’s garnishment statutes and statutes defining business torts. As relevant here, ORS 18.775 provides
that a court may find a garnishee liable for an amount equal
to the value of unreported “garnishable property” held by
Cite as 316 Or App 775 (2022) 779
the garnishee at the time of garnishment.1 “Garnishable
property” is defined as
“all personal property of the debtor, including but not limited to property in safe deposit boxes, stocks, wages, monetary obligations owing to the debtor that are then in existence
whether due or to become due, property held on expired and
unexpired bailments and leases, and property held by the
garnishee pursuant to a security interest granted by the
debtor to the garnishee.”
ORS 18.615 (emphasis added). The issue on appeal with
regard to the unlawful distribution claim is whether a
member’s liability to an LLC for unlawful distributions
constitutes a “monetary obligation[ ] owing to the debtor,”
such that a court may order garnishment in the amount of
that liability.
Id. On the cross-appeal, the issue is whether a
transferee’s liability for fraudulent transfers is similarly garnishable. We conclude that both liabilities are garnishable.
A. Liability for Unlawful Distributions
The Opsahls advance several arguments for why
a member’s liability to an LLC for unlawful distributions
is not “garnishable property.” They first assert that the
obligation was not “then in existence” for purposes of ORS
18.615 when the writs of garnishment were served, because
it had not yet been adjudicated or liquidated. However, our
1
ORS 18.775(1) and (2) provide:
“(1) If a garnishee fails to file a garnishee response within the time
required by law, or fails to deliver all garnishable property required to be
delivered under the writ of garnishment within the time required by law, the
garnishee is liable to the creditor in an amount equal to the lesser of:
“(a) The amount required to satisfy the garnishment; or
“(b) The value of the debtor’s garnishable property held by the garnishee
at the time the writ is delivered to the garnishee.
“(2) A judgment may be entered against the garnishee for the amounts
specified in this section if, after a hearing, the court finds that:
“(a) The garnishee at the time of the delivery of the writ of garnishment
held garnishable property of the debtor beyond the amount reported in the
garnishee response;
“(b) The garnishee held any garnishable property of the debtor and the
garnishee failed to make a response; or
“(c) The garnishee failed to deliver garnishable property required to be
delivered under the writ.”
780 Twigg v. Opsahl
precedent has long recognized that plaintiffs may assert previously unlitigated claims within a garnishment proceeding. See, e.g., FountainCourt Homeowners v. FountainCourt
Develop., 360 Or 341, 358-59,
380 P3d 916 (2016) (affirming
determination of insurer’s liability to insured in a garnishment proceeding); Castleman v. Stryker et al.,
109 Or 207,
228-29,
219 P 1084 (1923) (holding that a transfer violated
the Bulk Sales Act and was garnishable). The trial court
correctly concluded that a garnishees’ liability to the debtor
for unlawful distributions is properly considered in a garnishment proceeding.
The Opsahls next contend that the trial court erred
in determining that the unlawful distribution statutes can
create a garnishable obligation. ORS 63.235(1) provides that
a member “who votes for or assents to a distribution made
in violation of ORS 63.229, … is personally liable to the
limited liability company for the amount of the distribution
that exceeds the amount that could have been distributed
without violating ORS 63.229.” ORS 63.229(1), in turn, prohibits LLCs from making distributions to members if the
distribution would leave the LLC insolvent. As the trial
court found, RPD was already insolvent when it made the
$106,000 distribution to Erik Opsahl in 2018. Because all
three Opsahls approved of that distribution, each Opsahl
was jointly and severally liable to RPD for that amount.
The Opsahls argue that the trial court erred in garnishing that liability because it was owed to RPD, not to
the LLC’s creditors. Generally, ORS 63.235 does not independently provide an LLC’s creditors with a cause of action
against members; rather, the cause of action lies with the
LLC against its members. See Wakeman v. Paulson/Peake,
264 Or 524, 529,
506 P2d 683 (1973) (so holding when interpreting the predecessor statute to ORS 63.235, former ORS
57.231 (1973)). In a garnishment proceeding, however, the
plaintiffs “stand[ ] in the shoes of the judgment debtor.”
FountainCourt Homeowners v. FountainCourt Develop.,
264
Or App 468, 479,
334 P3d 973 (2014), aff’d,
360 Or 341,
380
P3d 916 (2016); see also Weyerhaeuser Co. v. Lynch,
268 Or
142, 146,
520 P2d 351 (1974) (“The law is well settled in
Oregon that a garnishing creditor takes only such rights
Cite as
316 Or App 775 (2022) 781
or interest as his debtor had at the time the notice of garnishment was served.”). Garnishment thus provides a mechanism for creditors to stand in the shoes of a debtor and
pursue a debtor’s claims against third parties—in this case,
an LLC’s claim against its members for unlawful distributions. The trial court did not err in concluding that a member’s liability to a debtor LLC for unlawful distributions is
garnishable.
The Opsahls further contend that the trial court
erred in finding that they held garnishable property at the
time of garnishment because there was no evidence that Erik
Opsahl still possessed the distributed sum. That argument,
however, misapprehends the nature of what was garnished
in this case. The trial court did not garnish the distribution itself; it garnished the amount of the liability that was
incurred as a result of the distribution. The trial court did
not err in doing so because it properly found that all three
Opsahls were personally liable to RPD for the unlawful distribution at the time of garnishment. Regardless of whether
Erik had already spent the distribution, each Opsahl thus
held a “monetary obligation[ ] owing to the debtor” at the
time of garnishment, which is garnishable property as
defined by ORS 18.615. The trial court did not err in garnishing the amount of liability owed to RPD by the Opsahls
due to the unlawful distribution.
B. Liability for Fraudulent Transfers
The Twiggs cross-assign error to the trial court’s
determination that it could not garnish the allegedly fraudulent rent payments because the remedies under the UFTA,
ORS 95.200 to 95.310, are limited in a garnishment proceeding. The UFTA defines a transfer as fraudulent as to present creditors if it was made “without receiving a reasonably
equivalent value in exchange for the transfer or obligation
and the debtor was insolvent at that time.” ORS 95.240(1).
The Twiggs contend that RPD’s lease of a building owned
by the Opsahls was not for “reasonably equivalent value”
because “rent” was paid with whatever money happened to
be left after paying all other bills, and the Opsahls would
never have evicted RPD if it failed to pay. The trial court
did not reach the merits of whether the rent payments were
782 Twigg v. Opsahl
fraudulent because it construed the statute describing a
creditor’s remedies to preclude garnishment in this case.
ORS 95.260 describes a creditor’s remedies in fraudulent transfer cases.2 Subsection (1) provides creditors with
a panoply of remedies against debtors and transferees
in “action[s] for relief … under” the UFTA, including
avoidance, attachment, injunctive relief, appointment of
a receiver, or “[a]ny other relief the circumstances may
require.” Subsection (2) “provides for an in rem judgment
against the transferred asset or its proceeds,” allowing
creditors to claw back property that has subsequently been
transferred again, even if the subsequent transferee took
the property in good faith. Cadle Co. II v. Schellman, 126 Or
App 372, 378,
868 P2d 773 (1994). In sum, ORS 95.260 provides creditors with two avenues for relief: They may obtain
broad and flexible remedies against debtors and transferees
in actions “under” the UFTA, and they may also proceed
directly against the transferred asset itself.
The trial court determined that garnishment is
not an action “under ORS 95.200 to 95.310,” ORS 95.260(1),
so it reasoned that the only available remedy was garnishment of the transferred asset itself under ORS 95.260(2), not
garnishment of liability resulting from the transfers under
2
“(1) In any action for relief against a transfer or obligation under ORS
95.200 to 95.310, a creditor, subject to the limitations provided in ORS
95.270, may obtain:
“(a) Avoidance of the transfer or obligation to the extent necessary to
satisfy the creditor’s claim.
“(b) An attachment or other provisional remedy against the asset transferred or other property of the transferee in accordance with the procedure
prescribed by any applicable provision of any other statute or the Oregon
Rules of Civil Procedure.
“(c) Subject to applicable principles of equity and in accordance with
applicable rules of civil procedure:
“(A) An injunction against further disposition by the debtor or a transferee, or both, of the asset transferred or of other property;
“(B) Appointment of a receiver to take charge of the asset transferred or
of other property of the transferee; or
“(C) Any other relief the circumstances may require.
“(2) If a creditor has obtained a judgment on a claim against the debtor
and if the court so orders, the creditor may levy execution on the asset transferred or its proceeds.”
ORS 95.260.
Cite as 316 Or App 775 (2022) 783
ORS 95.260(1). Because the Opsahls had subsequently spent
the rent payments, the trial court concluded that the Twiggs
failed to prove that the Opsahls still held the transferred
asset so that it could be garnished under ORS 95.260(2). For
the reasons that follow, we disagree with the trial court’s
interpretation of ORS 95.260(1).
The question is whether a UFTA action can proceed
in garnishment. At first blush, garnishment does not appear
to be an action for relief “under ORS 95.200 to 95.310” because
it is described within ORS 18.600 to 18.850. However, the
UFTA does not name any specific causes of action; rather,
the statutes simply describe when a transfer is considered
fraudulent and provide remedies for affected creditors.
ORS 95.230 - 95.270. The UFTA was not intended to displace other legal remedies unless explicitly provided by its
terms. See ORS 95.290 (“Unless displaced by the provisions
of ORS 95.200 to 95.310, the principles of law and equity
… supplement its provisions.”); see also Morris v. Nance,
132 Or App 216, 220,
888 P2d 571 (1994), rev den,
321 Or
340 (1995) (recognizing that the UFTA “codifies principles
recognized by the courts prior to its enactment”); Uniform
Fraudulent Transfer Act (Refs & Annos) § 7 comment (1), (6)
(1984) (noting that the remedies are “cumulative” and “not
exclusive”). Indeed, the remedies specified in the statute
include “[a]n attachment or other provisional remedy …
in accordance with the procedure prescribed by any applicable provision of any other statute.” ORS 95.260(1)(b).
Rather than limit remedies to claims that are brought
exclusively under the UFTA, the statute itself references
remedies obtainable through other statutes. Thus, when
an action for relief—such as garnishment—is based on and
seeks a remedy authorized by the UFTA’s provisions, it is an
action for relief “under” the UFTA.
Case law from other UFTA jurisdictions is instructive. See ORS 95.300 (stating that the statutes “shall be
applied and construed to effectuate [the UFTA’s] general
purpose to make uniform the law … among states enacting
it”). It appears that the majority approach is to construe the
remedies outlined in the UFTA to include garnishment. See,
e.g., Englert v. Englert, 881 SW2d 517, 519 (Tex App 1994)
(“The ability of a garnisher to attack transactions between
784 Twigg v. Opsahl
debtors and garnishees in a garnishment proceeding is also
well established. We find no indication that the enactment
of the Texas Uniform Fraudulent Transfer Act alters these
basic principles.” (Citations omitted.)); Jensen v. Eames,
30
Utah 2d 423, 428,
519 P2d 236, 239 (1974) (“A judgment creditor may litigate the question of a fraudulent conveyance in
a garnishment proceeding, in a creditor’s bill in equity, or in
an execution proceeding[.]”); Retzke v. Larson, 166 Ariz 446,
448,
803 P2d 439, 441 (Ariz Ct App 1990) (“Legal action to
prove a fraudulent conveyance need not be separate from the
garnishment proceeding.”). Indeed, some state legislatures
in adopting the UFTA specifically identify garnishment as
one of the remedies obtainable. See, e.g., Ariz Rev Stat Ann
§ 44-1007(A)(1); Nev Rev Stat § 112.210(1)(b).
The functions of the UFTA and garnishment are
easily integrated. “The purpose of the law of fraudulent
conveyances is to enable creditors to reach property of the
debtor which the debtor has concealed or endeavored to put
out of reach of creditors by some type of transfer.” Honor
S. Heath, Charles A. Heckman, & Keara M. O’Dempsey,
1 Business Torts § 8.03 (2021). Garnishment enables a creditor to invoke the authority of a court “to acquire garnishable property of a debtor that is in the possession, control
or custody of a person other than the debtor.” ORS 18.602.
Both garnishment and the UFTA are thus mechanisms for
creditors to look to a third party for satisfaction. Together,
they allow creditors to garnish assets that the debtor fraudulently transferred to a third party. Here, the creditors (the
Twiggs) seek to garnish property belonging to the debtor
(RPD), which was purportedly transferred fraudulently to
the Opsahls.
Because the Twiggs’ case for garnishment was based
on allegations of fraudulent transfers, it was an “action for
relief … under” the UFTA. ORS 95.260(1). In order to prove
their case, the Twiggs presented evidence and made arguments that the Opshals’ rent payments violated the UFTA,
i.e., that the payments were not transferred for “reasonably
equivalent value” at a time when RPD was insolvent. ORS
95.240. The trial court erred in declining to consider that evidence based on its conclusion that the Twiggs’ garnishment
Cite as 316 Or App 775 (2022) 785
claim was not an “action for relief … under ORS 95.200 to
95.310.” ORS 95.260(1). On remand, the trial court should
determine whether the rent payments were fraudulent in
order to determine whether they are garnishable.
Affirmed on appeal; reversed and remanded on cross-appeal.
