Opinion
No. 836 WDA 2005.
Filed: February 23, 2006.
Appeal from the JUDGMENT Entered April 13, 2005 In the Court of Common Pleas of ALLEGHENY County CIVIL at No(s): G.D.-04-4117
BEFORE: ORIE MELVIN, PANELLA, and POPOVICH, JJ.
¶ 1 Appellant, Kristie Fisfis-Prewett, appeals from the judgment entered on April 13, 2005 by the Honorable Paul F. Lutty and the Honorable Eugene B. Strassburger, III, following a verdict entered by Judge Lutty on January 31, 2005, in favor of Appellee, Steven T. Siwiak. After a careful review, we reverse.
¶ 2 Over a period running from September 2001 to May 2002, Siwiak gave Fisfis-Prewett a series of three checks totaling approximately $150,000.00. When questioned by his attorney on the reason for these checks, Siwiak testified:
I was involved in a frivolous law suit that had nothing to do with myself, but I was worried about what would happen. I trusted her, and I confided in her through my friendship with her, and I trusted her as a friend, and I was worried about what would happen with the law suit, and I made a big mistake. N.T., 1/28/2005, at 5. Siwiak's attorney subsequently questioned Siwiak on the instructions he gave Fisfis-Prewett regarding what she should do with the money. Siwiak responded:
I asked her to hold the money for me until the frivolous law suit was over. I knew it would be over in a while, but I was still worried, and I used irrational judgment at the time.
. . .
I told her to hold the money and keep it until the law suit was over.
Id., at 7-8.
¶ 3 When the second of the three checks was entered into evidence at trial, it was noted that the check contained a notation of "loan repayment." Asked to explain this notation, Siwiak testified that he "was worried about any questions regarding how the money got to [Fisfis-Prewett]." Id. at 7. Siwiak then admitted that the check was not in any way related to a loan repayment. Id.
¶ 4 After Siwiak was finished testifying, his attorney called Fisfis-Prewett to the stand as part of his case-in-chief. Siwiak's attorney asked Fisfis-Prewett if the checks at issue constituted the repayment of any loan. Fisfis-Prewett testified "[n]o, he was just trying to hide the money." Id., at 37. ¶ 5 Fisfis-Prewett further testified that she had always intended to return the money to Siwiak. N.T., 1/28/2005, at 37. According to Fisfis-Prewett, she had invested some of the money in a Certificate of Deposit, put some in a bank account, and spent some of it as if it were her own money, so that "there wouldn't be a trail of money." Id. at 40. Additionally, Fisfis-Prewett combined some of Siwiak's money with her own money and invested in stocks through her stockbroker. Id. at 41. Fisfis-Prewett testified that she and her boyfriend had subsequently filed a complaint against her stockbroker for mismanagement of funds, and that she had promised Siwiak a share of the proceeds from that lawsuit. Id. at 63, 65.
¶ 6 At the conclusion of the non-jury trial, the trial court entered a verdict in favor of Siwiak. Post-trial motions were filed, and denied, and judgment was entered on the verdict. This timely appeal followed.
¶ 7 It is well-established Pennsylvania law that if a transaction is illegal, the courts will not enforce it. New York Pennsylvania Co. v. Cunard Coal Co., 286 Pa. 72, 82, 132 A. 828, 831 (1926). In the aforesaid case, Justice Sadler of the Pennsylvania Supreme Court wrote:
It is clearly established by our authorities that, where a transaction is illegal, and this fact necessarily appears in the testimony which is produced, the courts will lend their aid to neither party, and it is not necessary that such a defense appear in the pleadings of record.
286 Pa. at 81, 132 A. at 831. The Supreme Court referred to an earlier decision by the Pennsylvania Superior Court in Conemaugh Brewing Co. v. Bennett, 60 Pa.Super. 543, 1915 WL 4460 *1 (1915): "Courts will not enforce contracts which are . . . against public good, or which will encourage violations of the law." As stated by Justice Sadler, this is true even if the defendant does not raise the illegality of the contract as a defense in the matter. Cunard Coal Co., 286 Pa. at 82, 132 A. 828 at 831; see also Cobaugh v. Klick-Lewis, Inc., 561 A.2d 1248, 1252 (Pa.Super. 1989) (Popovich, J., dissenting) (noting that courts lack jurisdiction to enforce illegal contracts).
¶ 8 Applying these concepts to the case sub judice, we note that under the Pennsylvania Uniform Fraudulent Transfer Act ("PUFTA"), a transfer of assets made with the intent to hinder, delay, or defraud any creditor of the transferor, even if the creditor's claim has not yet been perfected, is fraudulent. 12 PA. CONS. STAT. ANN. § 5103(a)(1). While PUFTA provides for the return of any such assets to the nominal possession of the transferor, this return is clearly for the benefit of the creditor, not the transferor.
¶ 9 Similarly, it is a second degree misdemeanor for a person, in anticipation of attachment by creditors, to conceal or transfer any property with the intent to defeat or obstruct the claim of any creditor. 18 PA. CONS. STAT. ANN. § 4111. The Historical Note for this statute states that it is similar to Section 224.11 of the Model Penal Code. The Explanatory Note for Section 224.11 provides that it is intended to cover a variety of fraudulent behavior by a debtor who knows that an "arrangement for the benefit of creditors is imminent." ULA Model Penal Code, Explanatory Note for Sections 224.1-224.14.
¶ 10 The direct application of Section 4111 to Siwiak's conduct in the case sub judice may be questionable, as no such proceeding was apparently "imminent." However, it is clear that Siwiak's testimony established that the contract constituted an attempt to violate Section 4111. A person is guilty of an attempted crime when, with intent to commit that crime, he does any act which constitutes a substantial step towards commission of the crime. 18 Pa. Cons. Stat. Ann. § 901 (a).
¶ 11 In the case sub judice, Siwiak admitted in his testimony at trial that he gave the money at issue to Fisfis-Prewett with the intent to conceal it from a possible judgment creditor. Specifically, Siwiak admitted to labeling a check falsely with the description of "loan repayment" in order to conceal the true nature of the transaction from a possible judgment creditor. While Siwiak's insurer settled that claim, allegedly without any inquiry into Siwiak's personal assets, the agreement Siwiak entered into with Fisfis-Prewett was clearly intended to defraud a future judgment creditor. As such, the agreement was void and unenforceable as a matter of law from the outset, and the court system will leave parties to such an agreement as it finds them. See Davis v. Fleshman, 245 Pa. 224, 91 A. 489 (1914). As such, it was error for the trial court to enter a verdict in favor of Siwiak, and we reverse.
¶ 12 Judgment reversed. Jurisdiction relinquished.
¶ 13 Judge Orie Melvin concurs in the result.