492 B.R. 117
Bankr. E.D.N.Y.2013Background
- Debtor Louise Chin transferred a 50% interest in the Maspeth Premises to her brother Lawrence for $10 in July 2007.
- Trustee filed an adversary proceeding to avoid the Transfer and recover the Debtor’s interest or its value.
- Debtor filed for Chapter 7 relief in August 2011; she was unemployed and did not disclose the Transfer.
- Court granted Defendant’s summary judgment motion after reviewing competing evidence and found Trustee failed to prove essential elements.
- Claims addressed include unjust enrichment (Claim Nine) and several NY DCL avoidance provisions (273, 274, 275, 276) and related fraud arguments.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Trustee proves unjust enrichment against Lawrence. | Trustee asserts Debtor’s transfer was at her expense for Lawrence’s benefit. | Lawrence contends there was no unjust enrichment since Debtor had bare legal title and adequate consideration. | Claim Nine granted; no genuine dispute of material fact. |
| Whether the Transfer was constructively fraudulent under DCL § 273. | Trustee argues Debtor insolvent or rendered insolvent by the Transfer. | Louise was solvent; lack of fair consideration presumed insolvent only if no solvency rebuttal. | Claim One granted; insolvency not shown. |
| Whether the Transfer violated DCL § 274 by causing unreasonably small capital. | Trustee alleges remaining property constituted inadequate capital. | No evidence of business or doomed-to-fail financial condition; no unreasonably small capital. | Claim Four granted; no show of unreasonably small capital. |
| Whether the Transfer violated DCL § 275 due to intent to incur debts beyond ability to pay. | Trustee argues debtor intended to incur debts beyond her ability to pay. | Louise denies such intent; she was solvent and believed she held only bare legal title. | Claim Six granted; no evidence of debtor’s intent to incur beyond means. |
| Whether the Transfer was made with actual intent to hinder, delay, or defraud creditors under DCL § 276. | Trustee relies on badges of fraud and intra-family transfer while debtor faced multiple creditors. | Evidence shows familial context and lack of retention of control; insufficient clear and convincing proof of intent. | Claim Seven (actual fraud) and Claim Eight (276-a) dismissed; no genuine issue of actual fraud. |
Key Cases Cited
- Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (Supreme Court 1986) (standard for summary judgment: evidence must show no genuine dispute of material fact)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (Supreme Court 1986) (genuine disputes require more than speculation; credibility not for court on SJ)
- Goenaga v. March of Dimes Birth Defects Found., 51 F.3d 14 (2d Cir. 1995) (burden on movant when movant bears ultimate burden of proof at trial; evidence must be probative)
- Lippe v. Bairnco Corp., 249 F.Supp.2d 357 (S.D.N.Y. 2003) (actual fraud analysis; badges of fraud; clear and convincing standard on summary judgment)
- Geltzer v. Borriello (In re Borriello), 329 B.R. 367 (Bankr.E.D.N.Y. 2005) (insolvency presumption for lack of fair consideration; balance sheet insolvency standard)