375 F. Supp. 3d 175
N.D.N.Y.2019Background
- Long Oil supplied fuel to Land-Air Express (LAE) from 2012–May 2016; LAE later stipulated to a $204,733.58 judgment to Long Oil but other defendants remained.
- In Jan 2016 LAE, distressed financially, entered into negotiations/agreements involving Anagnost Investments, North East Freightways, Inc. (NEF), and Philip Palker; Palker communicated with vendors on LAE letterhead and arranged that some vendor invoices be billed to NEF.
- Palker signed a Long Oil credit application (account #101788) with the statement “In signing this document, I personally guarantee payment on the above account”; $32,823.81 remains unpaid on that account.
- In April–May 2016 LAE sold substantially all operating assets to NEF (asset purchase agreement) while real‑estate-related mortgages/claims were transferred to entities controlled by Anagnost; LAE’s business continued under LAX with similar goodwill, personnel, and operations.
- Plaintiff sued NEF, Palker, William and Thomas Spencer asserting breach of contract, enforcement of Palker’s personal guaranty, account stated, improper dissolution (fiduciary breach), fraudulent conveyance (actual and constructive), successor liability, and unjust enrichment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of Palker’s personal guaranty for account #101788 | Palker signed credit app and unequivocally guaranteed payment; Long seeks summary judgment on guaranty. | Palker does not dispute signature but contests other claims; no substantive defense to guaranty asserted. | Granted: court awarded summary judgment enforcing Palker’s personal guaranty for $32,823.81. |
| NEF liability for account #101788 (breach of contract/account stated) | NEF (through Palker) promised to back LAE’s post‑Jan 13 accounts and thus is liable. | NEF/Palker say Palker acted as a friend/consultant, not as NEF’s authorized agent; disputed acceptance of account. | Denied: triable issues whether Palker acted for NEF and whether NEF accepted/assented to account statements. |
| Improper dissolution / fiduciary breach by the Spencers | Spencers rendered LAE insolvent by asset sale and favored insiders; directors owed creditors fiduciary duties in zone of insolvency. | Spencers say sale preserved business and jobs; disputes about motivation, notice, and whether LAE was dissolved. | Denied: factual disputes (insolvency, breach, motive) preclude summary judgment. |
| Fraudulent conveyance (actual and constructive) against NEF, Palker, Spencers | Transfers (asset sale and real‑estate deeds) were intended to hinder creditors or lacked fair consideration; badges of fraud present (insider relationships, lack of assets post‑sale, vendor reliance). | Defendants assert transaction was legitimate, assumption of secured debt was fair consideration, and NEF was not an insider. | Denied for all: genuine disputes of material fact on intent, insolvency, insider status, and fair consideration; summary judgment inappropriate. |
| Successor liability / successor‑as‑mere‑continuation | NEF/LAX continued LAE’s business and goodwill so successor liability should attach. | NEF contends asset purchaser is not automatically liable; continuity of ownership not established. | Denied: factual issues (continuity of ownership, possible fraud exception) preclude resolving successor liability on summary judgment. |
| Unjust enrichment / quasi‑contract against NEF and Palker | NEF/Palker benefited from Long Oil’s continued fuel supply and LAE’s preserved goodwill without paying Long; restitution appropriate. | Defendants say no agency/assumption by NEF and point to contract remedies and successor liability defenses. | Denied: disputed fact whether NEF/Palker accepted/benefitted and whether quasi‑contract recovery is available; summary judgment denied. |
Key Cases Cited
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment standard) (establishes movant burden to show absence of genuine issue of material fact)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (summary judgment standard) (reasonable jury standard for genuine issue of material fact)
- McCombs v. United States, 30 F.3d 310 (2d Cir.) (fraudulent conveyance principles; distinction between actual and constructive fraud)
- Sharp Int'l Corp. v. State St. Bank & Trust Co., 403 F.3d 43 (2d Cir.) (analysis of good‑faith/fair consideration and insider transferee issues in DCL constructive‑fraud context)
- HBE Leasing Corp. v. Frank, 48 F.3d 623 (2d Cir.) (good faith—transferee without knowledge of fraud satisfies §272 good‑faith requirement)
- Fischer & Mandell, LLP v. Citibank, N.A., 632 F.3d 793 (2d Cir.) (elements of breach of contract under New York law)