Robert S. Westermann (VSB No. 43294)

Franklin R. Cragle, III (VSB No. 78398)

HIRSCHLER FLEISCHER, P.C.

The Edgeworth Building

2100 East Cary Street

Post Office Box 500

Richmond, Virginia 23218-0500

Telephone: 804.771.9500

Facsimile: 804.644.0957

E-mail: rwestermann@hirschlerlaw.com

fcragle@hirschlerlaw.com

Counsel for BMST, Inc. and Mark Beltrami

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE EASTERN DISTRICT OF VIRGINIA

Richmond Division

)

In re: )

)

DIGITAL INK, INC., and ) Case No. 18-30056-KLP

CHRISTOPHER DAVID McGINNIS, )

) Chapter 7

Debtors. )

)

)

HARRY SHAIA, JR., TRUSTEE, )

)

Plaintiff, )

v. ) Adv. Pro. No. 18-03098-KLP

)

BMST, INC., et al., )

)

Defendants. )

)

BMST DEFENDANTS’ REPLY TO TRUSTEE’S 

MEMORANDUM IN OPPOSITION TO MOTION TO DISMISS

Defendants, BMST, Inc. and Mark Beltrami (together, the “BMST Defendants”), by

counsel, for their reply to Plaintiff/Trustee Harry Shaia, Jr.’s (the “Trustee”) Memorandum in 

Opposition to Motion to Dismiss (the “Memo in Opposition”) state as follows:

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I. COUNTS V AND VII

The Complaint avers that McGinnis1, as DII’s sole member, took $400,000 out of the 

company, and that DII’s financial condition never recovered. See Compl. at ¶¶ 28-29. DII was 

unable to pay its debts as they came due, and its assets were used as collateral to secured lenders. 

See Id. at ¶¶ 29, 40. BMST then acquired DII’s assets for approximately $1,250,000. See Id. at 

¶ 42. Given that the Complaint avers that DII was unable to pay its bills, and assets acquired 

were by secured lenders, a fair inference of the allegations is that absent BMST’s seven-figure 

purchase of DII’s assets, DII’s secured creditors would have foreclosed, which would have shut 

DII down – leaving no source of recovery for any unsecured creditors. That is not – and cannot 

be – fraud. That does not sufficiently allege fraud. The allegations that BMST acquired assets 

that otherwise would have been foreclosed upon and turned a profit does not fraud make. As the 

Complaint tacitly avers that, absent BMST’s acquisition of assets, DII would have been shut 

down and its assets foreclosed upon, any assertion of fraud is belied by the express allegations.

II. COUNTS VI AND VIII

Counts VI and VIII fail as a matter of law for two independent reasons:

1. The statutory relief sought is only to the transferee, not the 

transferor, and BMST is the transferor;

2. No cause of action for aiding and abetting fraudulent conveyance 

or conspiracy to commit fraudulent conveyance exists under 

Virginia or Federal law.

A. STATUTORY LIABILITY ATTACHES SOLELY TO THE TRANSFEREE

BMST is the transferor. Ragland is the transferee. 

 

1

Capitalized terms not otherwise defined herein shall retain the meaning ascribed in the BMST Defendants’ 

Memorandum in Support of Motion to Dismiss Complaint to Avoid Transfers, Impress Successor Liability, and 

Obtain an Order of Substantive Consolidation (the “Memo in Support”).

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Section 550(a) of the Bankruptcy Code provides that the avoidance of a transfer under §§ 

548 or 544 allows the trustee to recover only from “the initial transferee of such transfer or the 

entity from whom such benefit such transfer was made” or from “any immediate or mediate 

transferee of such transferee.” 11 U.S.C. §§ 550(a)(1) & (2); see Matson v. Rescue Rangers, 

LLC, 576 B.R. 521, 527 (Bankr. E.D. Va. 2017) (Phillips, J.)

Virginia Code § 55-80 provides that transfers made with the intent to “delay, hinder or 

defraud creditors . . . be void.” As this Court stated in Rescue Rangers: 

The Trustee’s claims that the Transfers are also avoidable under Va. Code Ann. 

55-80 and 55-81 likewise do not overcome the limitations imposed by § 550(a). 

Sections 55-80 and 55-81 void certain transfers but neither statute imposes 

liability who are not transferees or beneficiaries.

576 B.R. at 528-29.

Similarly, in Price v. Hawkins – as heavily relied upon by the Trustee – the Supreme 

Court of Virginia stated that: “[w]hen the property ‘cannot be identified in any form,’ such as 

money placed in a transferee’s checking account . . . “the grantee [(a/k/a transferee)] should 

respond personally for the value of the property . . .” 247 Va. 32, 36 (1994).

Liability under these statutory schemes provides for the voiding of the transfer, or, in 

cases of fungible goods, such as cash, personal liability can be ascribed to the transferee. 

Because BMST is the transferor, and because no authority exists providing for liability to the 

transferor, the claim fails.

B. NO CAUSE OF ACTION EXISTS FOR AIDING AND ABETTING AND/OR CONSPIRACY 

TO COMMIT FRAUDULENT TRANSFER

The Trustee concludes that he has “specifically alleged that the BMST Defendants 

knowingly aided McGinnis’ efforts to avoid his creditors.” Memo in Opp. pg. 6; see also

Compl. at ¶¶ 81 & 88 (“At McGinnis’ direction, BMST knowingly and intentionally helped

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McGinnis hinder, delay and defraud his creditors . . .”). In essence, the Trustee attempts to assert 

a claim for aiding and abetting and/or conspiracy to commit fraudulent transfer.

No cause of action exists for aiding and abetting and/or conspiracy to commit fraudulent 

transfer. In Matson v. Rescue Rangers, this Court stated: “[t]o the extent the Trustee contends 

that liability would exist for aiding and abetting, or conspiracy to commit, a fraudulent

conveyance as a matter of federal law under the Bankruptcy Code, his contention is without 

merit.” 576 B.R. 521, 528 (Bankr. E.D. Va. 217) (Phillips, J.) (citing, inter alia, Ray v. Garland 

(In re Martin), Adv. No. 10-5059, 2011 Bankr. LEXIS 4830, at *5 (Bankr. E.D. Tenn. Dec. 8, 

2011) (“[C]ourts have consistently held that there is no such thing as liability for aiding and 

abetting a fraudulent conveyance as a matter of federal law under the Code.”).

In La Bella Dona Skin Care, Inc. v. Belle Femme Enters., LLC – a case relied on by the 

Trustee – the Supreme Court of Virginia held: “because avoidance of a transaction is the only 

remedy available under Code § 55-80, a claim for fraudulent conveyance is not a predicate 

unlawful act from which liability can be spread to others on a theory of civil conspiracy.” 294 

Va. 243, 257 (2017) (This holding is found under the heading: “ii: Conspiracy to Effectuate a 

Fraudulent Conveyance is Not an Actionable Claim.”).

Because no claims for aiding and abetting and/or conspiracy to commit fraudulent 

conveyance are recognized under Virginia or Federal law, these claims fail.

III. COUNTS VII AND IX

Counts VII and IX are untimely and barred by the statute of limitations as evidenced on 

the face of the Complaint. The Trustee does not contest this and instead argues that the Court 

should consider McGinnis’ – not DII’s – filing date as the operative date. No law is cited for this 

proposition. 

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The Trustee further argues that because the Complaint asks for declaratory relief in Count 

X, the Court should consider McGinnis’ filing date as the operative date. McGinnis has filed an 

answer opposing this relief. Moreover, as argued previously (and below), Declaratory Judgment 

is not an independent cause of action.

The Trustee admits the claims are untimely as pled. Despite this, he asks the Court to 

permit the claims to proceed based on the assumption that the Court will grant substantive 

consolidation – that is opposed by McGinnis. Implicit in this request is asking the Court to 

require the BMST Defendants to defend these claims based upon the Trustee’s hopes of 

prevailing on this contested claim. Again, no law is cited for this proposition. The Court should 

not permit such claims to remain. Currently, the matters are procedurally consolidated. Nothing 

more. In the event the Trustee prevails on Count X, then new claims can be asserted or new 

actions filed. The BMST Defendants should not be required to defend against admittedly 

deficient claims on the Trustee’s hopes he can get a favorable ruling at trial that, only then, will 

create legal justification for the action. Stated simply, the Trustee should not be able to put the 

cart before the horse – specifically on an extraordinary remedy on a contested claim.

IV. COUNT XI

Declaratory Judgment is not an independent cause of action. It is a remedy. In the 

Memo in Opposition, the Trustee argues that “Count XI appropriately seeks a remedy within 

this Court’s jurisdiction.” Memo in Opp. at pg. 7. This argument misses the mark. It is 

axiomatic that without a cognizable cause of action, there can be no remedy. The BMST 

Defendants incorporate their argument under Section VI of their Memorandum in Support of 

Motion to Dismiss [Doc. 11], and reiterate that, without pleading a cognizable cause of action, 

there can be no remedy.

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WHEREFORE, for the foregoing reasons, the BMST Defendants request that this Court 

enter an Order: (i) dismissing the Complaint against them, in full, with prejudice; (ii) granting 

the BMST Defendants their reasonable costs and fees incurred; and (iii) granting such other and 

further relief as this Court deems just and proper.

Dated: December 10, 2018 Respectfully submitted,

BMST, INC. and MARK BELTRAMI

 /s/ Franklin R. Cragle, III

Counsel

Robert S. Westermann (VSB No. 43294)

Franklin R. Cragle, III (VSB No. 78398)

HIRSCHLER FLEISCHER, P.C.

The Edgeworth Building

2100 East Cary Street

Post Office Box 500

Richmond, Virginia 23218-0500

Telephone: 804.771.9500

Facsimile: 804.644.0957

E-mail: rwestermann@hirschlerlaw.com

fcragle@hirschlerlaw.com

Counsel for BMST, Inc. and Mark Beltrami

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CERTIFICATE OF SERVICE

I hereby certify that on December 10, 2018, a true and complete copy of the foregoing 

Reply to Memorandum in Opposition was filed and served electronically using the Court’s ECF 

System and was also sent by e-mail and first class mail, postage prepaid, as follows:

Kimberly A. Taylor, Esq.

William A. Broscious, Esq.

Kepley Broscious & Biggs, PLLC

2211 Pump Road

Richmond, Virginia 23233

(ktaylor@kbbplc.com)

 Counsel for Harry Shaia, Jr., Trustee

Robert A. Canfield, Esq.

Canfield Wells & Kruck, LLP

4124 E. Parham Road

Henrico, Virginia 23228

(bob@cwkllp.com)

 Counsel for Christopher McGinnis

Daniel M. Press

Chung & Press, P.C.

6718 Whittier Ave., Suite 200

McLean, Virginia 22101

(dpress@chung-press.com)

 Counsel for Gabrielle Ragland

 /s/ Franklin R. Cragle, III

Counsel

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