2013 WL 4312272
3d Cir.2013Background
- Kohn, bankruptcy Trustee of IBG, sues Haymount Defendants and McGuire Woods seeking to recover a finder’s fee under theories including fraudulent conveyance and conspiracy.
- Haymount financed its Virginia project with GMAC debt and a $5 million mezzanine loan from HMezz, recorded as a mortgage July 30, 2004.
- In 2008, Avanti Properties Group II, LLP bought Haymount property to satisfy GMAC and paid $5 million to HMezz; funds were then transferred to Miller Development and ultimately distributed to Miller Development’s shareholders and officers.
- Kohn filed an adversary complaint on October 29, 2010 alleging the $5 million transfer was a fraudulent conveyance to thwart IBG’s finder’s fee litigation.
- The District Court granted summary judgment for Haymount Defendants and McGuire Woods; this appeal followed seeking reversal of the grant of summary judgment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether IBG’s unrecorded claim is superior to HMezz’s recorded mortgage | IBG's contract constitutes a 'contract in writing' under Va. statute | IBG’s contract not within the statute; HMezz’s mortgage remains superior | IBG’s interest inferior; HMezz’s mortgage superior |
| Whether the HMezz–Haymount transaction was a bona fide transfer | Insider relationship and lack of clear evidence of loan show a fraudulent conveyance | Insider status does not per se render the transfer fraudulent; evidence supports loan existence | No genuine issue that HMezz lent $5 million; transaction not fraudulent as to IBG |
Key Cases Cited
- In re Smith, 348 F. Supp. 1290 (E.D. Va. 1972) (contract in writing not satisfied by attenuated real estate connection)
- Fox Rest Assocs., L.P. v. Little, 717 S.E.2d 126 (Va. 2011) (insider transactions must be scrutinized for fairness)
- In re Carr & Porter LLC, 416 B.R. 239 (Bankr. E.D. Va. 2009) (non-valuable consideration may render conveyance void as to creditors)