FRAUDULENT CONVEYANCES Nassau Academy of Law CLE Live ...

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397 B.R. 642 Page 1397 B.R. 642(Cite as: 397 B.R. 642)Westlaw Delivery Summary Report for DANIELS,JEFFREYDate/Time of Request:Wednesday, October 21, 2009 18:22 EasternClient Identifier:NALDatabase:FBKR-CSCitation Text: 397 B.R. 642Lines: 1015Documents: 1Images: 0The material accompanying this summary is subject to copyright. Usage is governed by contract with Thomson Reuters,West and their affiliates.United States Bankruptcy Court,E.D. New York.In re Michael ZERBO, Debtor.Robert L. Pryor, as Chapter 7 Trustee of the BankruptcyEstate of MichaelZerbo, Plaintiff,v.Debra Zerbo, Defendant.Bankruptcy No. 804-81573-ast.Adversary No. 06-08124-ast.Nov. 26, 2008.Background: Trustee of debtor-husband's Chapter 7 estatebrought adversary proceeding to avoid, on fraudulenttransfer and preference theories, certain transfers made bydebtor as part of division of marital assets in state courtdivorce action that shortly preceded petition date. Bothparties moved for summary judgment.Holdings: The Bankruptcy Court, Alan S. Trust, J., heldthat:(1) prior determination by state divorce court to incorporateprovision of marital settlement agreement awardingresidence to wife did not prevent trustee, in subsequentChapter 7 case filed by debtor-husband, from seeking toset aside transfer of residence to wife as fraudulent conveyanceon theory that any such cause of action threatenedto overturn results of state court's judgment in violationof Rooker-Feldman doctrine;(2) state divorce court's approval of this division of maritalassets as part of regularly conducted divorce proceedingsconclusively established "reasonably equivalentvalue"; and(3) trustee failed to establish that debtor was insolvent attime of alleged insider preference.Ex-wife's motion granted in part and denied in part; trustee'smotion denied.West Headnotes[1] Fraudulent Conveyances 54(1)186k54(1) Most Cited Cases[1] Fraudulent Conveyances 64(1)186k64(1) Most Cited Cases[1] Fraudulent Conveyances 77186k77 Most Cited CasesUnder New York fraudulent conveyance law, transfer canbe fraudulent either as result of actual intent by transferorto hinder, delay or defraud, or as the result of financialstatus of transferor and economic equivalence of transaction.N.Y.McKinney's Debtor and Creditor Law §§ 272-276.[2] Fraudulent Conveyances 277(1)186k277(1) Most Cited CasesIn general, party seeking to avoid transfer as constructivelyfraudulent to creditors under New York law bearsburden of proving lack of fair consideration.N.Y.McKinney's Debtor and Creditor Law § 272.[3] Fraudulent Conveyances 77186k77 Most Cited CasesDetermination as to whether fair consideration has beengiven, within meaning of constructive fraud provisions ofNew York fraudulent conveyance law, turns on facts ofeach specific case. N.Y.McKinney's Debtor and Creditor© 2009 Thomson Reuters. No Claim to Orig. US Gov. Works.
397 B.R. 642 Page 2397 B.R. 642(Cite as: 397 B.R. 642)Law §§ 272-275.[4] Fraudulent Conveyances 273186k273 Most Cited CasesBurden of proving actual intent of transferor is on partyseeking to set aside conveyance as actually fraudulent tocreditors under New York law. N.Y.McKinney's Debtorand Creditor Law § 276.[5] Fraudulent Conveyances 15186k15 Most Cited Cases[5] Fraudulent Conveyances 16186k16 Most Cited CasesParty seeking to set aside conveyance as actually fraudulentto creditors under New York law can establish requisiteintent on part of transferor to hinder, delay or defraudby demonstrating existence of certain "badges of fraud,"badges that include: (1) lack or inadequacy of consideration;(2) family, friendship or close associate relationshipbetween parties; (3) retention by transferor of possession,benefit or use of property in question; (4) financial conditionof transferor before and after transfer; (5) existenceor cumulative effect of pattern or series of transactions orcourse of conduct after debt was incurred, after the onsetof financial difficulties, or during pendency of threat ofsuit by creditors; and (6) chronology of events and transactionsunder inquiry. N.Y.McKinney's Debtor and CreditorLaw § 276.[6] Courts 509106k509 Most Cited CasesPrior determination by state divorce court to incorporateprovision of marital settlement agreement awarding residenceto wife did not prevent trustee, in subsequent Chapter7 case filed by debtor-husband, from seeking to setaside transfer of residence to wife as fraudulent conveyanceon theory that any such cause of action threatened tooverturn results of state court's judgment in violation ofRooker-Feldman doctrine; doctrine did not bind trustee,as nonparty to prior divorce action.[7] Courts 509106k509 Most Cited CasesRooker-Feldman doctrine applies only to individuals thatwere parties to state court proceeding; nonparties to statecourt proceeding cannot be bound by doctrine.[8] Bankruptcy 2650(2)51k2650(2) Most Cited Cases[8] Bankruptcy 270451k2704 Most Cited Cases[8] Fraudulent Conveyances 95(11)186k95(11) Most Cited CasesTransfer of debtor's interest in former marital home to hisestranged wife as part of distribution of marital assets instate court divorce action, just 125 days prior to debtor'sfiling for Chapter 7 relief, was not subject to avoidance bytrustee in exercise of strong-arm powers, as constructivelyfraudulent under New York law, nor could it be avoidedunder bankruptcy fraudulent transfer statute, though transferwas effected as part of marital settlement agreementbetween parties, which was only later approved by statecourt and incorporated into judgment of divorce; no evidencewas presented of any fraud or collusion betweenparties, so that state divorce court's subsequent approvalof that division as part of regularly conducted divorceproceedings conclusively established "reasonably equivalentvalue." 11 U.S.C.A. §§ 544, 548(a)(1)(B);N.Y.McKinney's Debtor and Creditor Law §§ 272, 273,275.[9] Bankruptcy 2650(2)51k2650(2) Most Cited Cases[9] Fraudulent Conveyances 95(11)186k95(11) Most Cited CasesAbsent extrinsic fraud or collusion among divorcing parties,the division of marital assets which is agreed to byparties and which is contemporaneously or subsequentlyapproved by matrimonial court, and incorporated intodivorce decree, conclusively establishes "reasonablyequivalent value," so as to prevent subsequent attempt toset that division aside on constructive fraudulent transfertheory.[10] Bankruptcy 2650(1)51k2650(1) Most Cited Cases[10] Bankruptcy 270451k2704 Most Cited Cases[10] Fraudulent Conveyances 95(11)186k95(11) Most Cited CasesBankruptcy court should not interfere with outcome ofstate court divorce action, by setting aside its distributionof marital assets on constructive fraudulent transfer theory,if this distribution was result of regularly conducted© 2009 Thomson Reuters. No Claim to Orig. US Gov. Works.
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Nassau Academy of LawCLE Live Class
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McKinney's Debtor and Creditor Law
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BAKER & HOSTETLER LLP45 Rockefeller
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usiness of defendant Bernard L. Mad
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BACKGROUND, THE TRUSTEE, AND STANDI
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Madoff who received fraudulent tran
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ased on fictitious profits and for
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28. BLMIS funds were also used to p
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Madoff, and her niece, Shana Madoff
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42. Ruth Madoff was never an employ
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FIRST CAUSE OF ACTIONTURNOVER AND A
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66. At the time of each of the Two-
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Transfers; (b) directing that the S
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FRAUDULENT TRANFERENCESRonald M. Te
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Nursing home case_ Transfer of pers
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Sections 548 and 544 work in concer
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U.S. Supreme CourtBFP v. Resolution
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example, from net 15 to COD; or cha
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Bankruptcy Code Section§ 548. Frau
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Ron Terenzi is a founding partner a
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