Knoll, C. v. Uku, E.
154 A.3d 329
| Pa. Super. Ct. | 2017Background
- Knoll and Uku were co-owners of Yale, a construction company; Knoll was entitled to 49% of profits but received none while Uku diverted funds to himself and Exico.
- Knoll sued Uku and Yale; after a non-jury trial, the court entered judgment for Knoll for $175,882.09, which this Court affirmed.
- To collect, Knoll sought supplementary relief under Pa.R.C.P. 3118 and PUFTA, challenging February 9, 2010 transfers by Uku that converted three individually owned real properties into tenancy by the entireties with his wife, Shelley Fant.
- Fant simultaneously placed three of her sole-owned properties into entireties with Uku; all six transfers were without consideration.
- Trial court found Uku became insolvent as a result of the transfers but held the transfers were not fraudulent because Uku allegedly received Fant’s properties in exchange. Trial court denied Knoll’s petition; Knoll appealed.
- The Superior Court reversed, concluding the transfers violated 12 Pa.C.S. § 5105 and ordered voiding of Uku’s transfers of 8260 Chaske Street and 214 Farmington Road.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Were the February 9, 2010 transfers fraudulent under PUFTA § 5105? | Knoll: transfers rendered Uku insolvent, were for no reasonably equivalent value, and occurred after he owed Knoll money. | Uku/Fant: transfers were legitimate estate planning and involved exchange of properties, so not fraudulent. | Yes. Court held § 5105 applies: creditor claim predated transfers, transfers left Uku insolvent, and no reasonably equivalent value was received. |
| Did § 5104(a)(1) (actual intent) or § 5104(b) badges of fraud require separate analysis? | Knoll: transfers also reflect actual fraud and badges of fraud. | Defendants relied on lack of proof of intent and asserted consideration. | Court found resolution under § 5105 dispositive and did not need to decide § 5104 intent issues. |
| Were the properties Fant transferred of reasonably equivalent value to protect creditors? | Knoll: Fant’s transferred properties had little or no value and conferred no benefit to Uku’s creditors. | Fant: transfers were estate planning; the exchanged properties constituted consideration. | No. Court concluded transfers by Fant conferred no value to creditors and thus did not provide reasonably equivalent value. |
| Should adverse inference be drawn from Uku’s invocation of the Fifth Amendment at deposition? | Knoll: refusal to answer supports adverse inference and fraud finding. | Uku: invocation of privilege. | Court did not need to resolve adverse inference issue because § 5105 grounds were sufficient; prior trial-court factfinding that Uku became insolvent was accepted. |
Key Cases Cited
- Fell v. 340 Assocs., LLC, 125 A.3d 75 (Pa. Super. 2015) (standard for reviewing fraudulent-conveyance findings and qualitative review of PUFTA badges of fraud)
- Gallaher v. Riddle, 850 A.2d 748 (Pa. Super. 2004) (application of § 5105 requiring creditor claim before transfer and insolvency)
- First Nat’l Bank of Marietta v. Hoffines, 239 A.2d 458 (Pa. 1968) (spouse’s conveyance to tenancy by entireties invalidated under prior fraudulent conveyance principles)
- Garden State Standardbred Sales Co. v. Seese, 611 A.2d 1239 (Pa. Super. 1992) (entireties conveyance unavailable to satisfy claims of creditor of only one spouse when made legitimately; but may be set aside if made in fraud of creditors)
- In re Wettach, 811 F.3d 99 (3d Cir. 2016) (bankruptcy trustee could avoid transfers of debtor’s earnings into entireties account under PUFTA principles)