2011 Ohio 5185
Ohio Ct. App.2011Background
- Global Reader Services and Displays are related companies with Lachowicz as director, president, and sole shareholder; they formed a joint venture where Displays bids on jobs and Saez earns commissions.
- Saez submitted a $420,000 bid to Tompkins Builders; contract awarded to Displays for that project, yielding a claimed Saez commission of $46,585.39 that Displays allegedly did not pay.
- Saez sued in Florida for payment after Displays defaulted; a Florida default judgment was entered against Displays.
- Saez filed in Cuyahoga County, Ohio, to set aside Displays’ $50,000 transfer to Global on February 26, 2007, as a fraudulent transfer under R.C. 1336.04.
- The trial court granted summary judgment for Saez, finding five badges of fraud under R.C. 1336.04(B).
- On accelerated appeal, the Ohio Court of Appeals reversed, finding genuine issues of material fact and remanding for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether there are genuine facts about fraudulent intent | Saez contends Displays intended to defraud by transferring to an insider. | Displays argues lack of actual intent; transfer was to repay a debt to Global. | Genuine issues of material fact preclude summary judgment on intent. |
| Whether the badges of fraud support actual intent | Five badges (insider, retained control, concealment, near-debt incurrence, insolvency) show intent. | Badges insufficient or disputed; some are not proven. | Badges create triable issues; not all established, so judgment improper. |
| Whether the transfer occurred to an insider and under control of debtor | Transfer to insider Lachowicz, who controlled both entities, demonstrates insider transfer. | Insider transfer uncontested; control evidence exists. | Insider status and control are established; this badge supports fraud finding but not conclusively. |
| Whether there is evidence of insolvency or near-insolvency at transfer | Suits and judgments show debtor was insolvent or became insolvent around transfer. | Statements show some litigation but not clear insolvency; bank balance after transfer undermines claim. | Material facts exist; insolvency issue remains for trial. |
Key Cases Cited
- Wagner v. Galipo, 97 Ohio App.3d 302 (1994) (actual fraud may be inferred when direct evidence is unavailable)
- Stein v. Brown, 18 Ohio St.3d 305 (1985) (direct evidence of intent not essential; badges of fraud used)
- Baker & Sons Equip. Co. v. GSO Equip. Leasing, Inc., 87 Ohio App.3d 644 (1993) (badges of fraud need not be all-present; three can support actual fraud)
- Aristocrat Lakewood Nursing Home v. Mayne, 133 Ohio App.3d 651 (1999) (badges of fraud used to prove actual intent)
- Abood v. Nemer, 128 Ohio App.3d 151 (1998) (defendant may rebut fraud presumption by showing value received)
- McKinley Fed. S. & L. v. Pizzuro Ents., Inc., 65 Ohio App.3d 791 (1990) (trial context to fraud evaluation; standard on badges of fraud)
- John Deere Indus. Equip. Co. v. Gentile, 9 Ohio App.3d 251 (1983) (elements of fraudulent transfer require showing intent and effect on creditors)
- BancOhio Natl. Bank v. Nursing Ctr. Svcs., Inc., 61 Ohio App.3d 711 (1988) (standard for evaluating fraudulent transfers in context of creditors)
- McKinley Fed. S. & L. v. Pizzuro Ents., Inc., 65 Ohio App.3d 791 (1990) (reiterated importance of badges and burden of proof)