* T h e H o n o r a b l e J o s e p h M
. H o o d , U n i t e d S t a t e s D i s t r i c tJ u d g e f

o r t h e E a s t e r

nD i s t r i c to f

K e n tu c ky, sitti ng by desig nation. NOT RECOMMENDED F OR FUL L -TEXT PUB L I CATI ON

File Na me: 14a0477n.06
No. 13-6007 UN ITED STA TES C OU RT OF AP P EA LS F OR THE SI XT H C IR CU IT
CN H C API TA LAM ERI CA L L C, ) ) Plaintiff-Appellant, ) ON APPEALFROM THE U NI TED ) STATES DI STRI CT COURT FOR v. ) THE WESTERN DI STRI CT OF ) KENTUCKY HUNT TRACTOR, I

NC., et al., ) ) De fe nd ants -A

pp e lle e s. ) AM EN DE D O P IN ION
Before: COLE and ROGERS, Circ uit Jud ges; and HOOD, District Judge. *
HO O D , D i s t r i c tJu d g e . P l a i n t i f f

- A p p e l l an tC N H C a

p i t a l A m e r i c a

L L C ( “ C N H ” ) a

p p e a ls from the summary

judgme nt entere d in favor of the Def endant- Appellee Dominick Pagano (“Pag ano”) by

the district court on CNH’ s cl ai m s for c onversion, bre ach of contra ct, fra

udulent conveyance , and civil conspira cy to commit fraudulent conve y ance , as we ll as the dis t ri ct court’s de c is io nto d e n y

CN H ’ s o w nmo ti o nf

o r s u mm ar y ju d g me n t o nit s c la im s o f c o n v e r s io nand fra udulent conveyance . Hunt Trac tor, I nc., of w hich Pag ano wa s a minority share holder, a

nd CNH enter ed into a Who le sa le F ina

nc ingand

Se c ur ity Ag re e me nt t o c ov e r C a se br and e art h- mov inge qu ipm e nt. F oll ow ing the re c e ipt of a larg e su m of pr oc e e ds c ov e re d b y the a g re e me nt, Hunt T ra c tor fu lly pa id2

of f i ts te rm loa n a nd lin e of c re dit loa n w ithano the r c re dit or , Co mmo nw e a lthB ank and Tr us t Company (“Commonwea lth”), re mitti ng n o n e o f t he proc eeds to CNH, in contr avention of the ag ree ment betwee n Hunt Trac tor and CNH. The pay ment to Commonwealth benef itted Paga no by
a llo wi ng him to te rm inate his pe rs on a l g ua ra nty and re qu e st t he re le a se of

pr e vio us ly

ple dg e d a sse ts
secur ing the loans from Commonwealth to Hunt Tra ctor. B a se d u po n H un t T ra c tor ’s vio la tio n o f t he F ina nc ingAg re e me nt, CN H b ro ug ht m ult ipl e claims ag ainst Hunt Trac tor, Scott Hunt, J r. (“H unt”), a nd Dominick Pag ano. CNH a ppeals the district court’s g rant of summar y judgme nt in favor of P ag ano on its claims of conve rsion, brea ch of contra ct, fra

udulent conveyance , and civil conspira cy to commit fraudulent conv ey an ce . CNH further appea ls the district court’s denial of i ts own m otion for summary judgme nt on its claims of
conver sion and fra

udulent conveyance . For the re asons that follow, the Court will aff irm in part and
re ve rs e in p art
. I. Hunt Trac tor was in the business of se ll in g , r e nti ng , and re pairing new a nd used ea

rth-moving equipment. [R. 110–36, P ag e I D 1634]. I n 2007 , at t h e i n sistence of Hunt, Pag ano’s son-in- law, P a g an o m a d e a

n u mb e r o f l o an s t o H u n t T r a c t o r , w h i c h f a c i l i t a t e d H u n t ’ s p u r c h a s e o f t h e c o mp an y. After loaning Hunt Trac tor $400,000, Pag ano conve rted the de bt to equity in the company , making Pag ano a minority share holder. [R
. 110–11, Pag e I D 1481–83; R. 102–5, Pag e I D 879–84]. Once
a stockholder, Pag ano made additional advanc es of $225,000. [R
. 102–4, Pag e I D 874; R. 102–9; Pag e I D 892; R. 110–11, Page I D 1508, 1511]. P ag ano g ave busine ss advice to Hunt a bout running the company , [R
. 1 0 2

– 4 , P age I D 867], but was never an off icer , employ ee, or

direc tor of Hunt Trac tor, [R
. 102–2, Pag e I D 859; R. 102–7, Pag e I D 887], despite being listed as Chairman of the3

Boa rd on an or g anizational char t pr epar ed whe n Hunt was a pply ing f or Hunt Tra ctor to continue a s a Case br and dea lership. See [R
. 1 1 0

– 3 7 , Pa g e I D 1 6 3 7 ]. Hunt Trac tor operated as a licensed Case brand e q u i p ment deale r many y ear s befor e Hunt purcha sed the c ompany . See [R
. 102–2, Pag e I D 860]. On May 30, 1991, befor e Hunt bec ame the
owner , and bef

ore Pag ano wa s a stockholder , Hunt Trac tor enter ed into a W holesale F inancingand Se c u r it y A g r e e me n t ( “ WF SA ” ) w it h Ca s e Credi t C o r

p o r a ti o n . [R
. 1 1 0

– 2 , Pa g e I D 1 3 6 3

– 7 8 ]. Sub se qu e ntl y , Ca se Cr e dit Cor po ratio n w a s c on ve rt e d f ro m a c or po ratio n to a

lim ite d- lia

bil ity
c omp any and c ha ng e d it s n a me to C NH Ca

pit a l A me ri c a

L L C. [R. 11 0– 3, Pa g e I D 1 38 0– 81 ]. T hu s, C N H b e c a m e t h e s u c c e s s o r t o t h e W F S A
. T h e W F S A g r an t e d C N H a s e c u r i t y i n t e r e s ti ni n v e n t o r y, equipment, all p ro ce eds of inventory , Hunt Trac tor’s ac counts with CNH, and other collater al reque sted by

CNH. [R . 110–2 , Pag e I D 1363–64]. Hunt’s interrog atory response s indicate that “[t] he standa

rd protocol was that proce eds wer e used to ke ep the door s open bef ore a ny vendor w as paid.” [R. 110–13, Page I D 1550]. Acc ording to H unt, CNH was a war e of this pra ctice a

nd knew H u n t T r a c to r

w a s r e g u la

r ly b e h in d o np ay me n ts
. [R
. 1 1 0

– 1 3 , Pa g e I D 1 5 5 0 ]. CNH was not H unt T rac tor’s only source of financ ing. After acquir ing Hunt T ra ct o r, and with help from Pag ano, Hunt beg an m o v in g H u nt Trac tor’s cor

porate bank ac counts from F ifth Third Ba nk to Comm onwea lth. [ R. 110–11, Pag e I D 1488]. I n Marc h 2008, Hunt Trac tor enter ed into a $ 5 0 0 , 0 0 0 l i n e o f c re d i tan d t o o k o u ta $ 6 0 0 , 0 0 0 t er m l o an wi t h C o m m o n we al t h
. [ R
. 1 1 0

– 1 4 , P age I D 1562–63; R. 110–17, Page I D 1572–73]. Accordingto H u n t , t h e n egotiations for these loans
wer e complete ly

handled by

Pag ano bec ause “he had done busi ness wit h banks and loa ns befor e.” [R . 110–10, Pag e I D 1452–53]. P ag ano cla ims that he was only t he initial contact a

nd was not4

i n v o l v e d i n t h e d i s c u s s i o n s w i t h C o m m o n w e a l t h o nb e h a l f o f H u n tT r a c t o r . [ R
. 1 0 2

– 4 , P a g e ID 870]. B e fo re e xten din gfi na nc ingto H un t T ra c tor , Co mmo nw e a lthre qu ir e d H un t T ra c tor , H un t, and Pag ano to provide se curity for the loa

ns. Pag ano and H unt executed non-re vocable persona l g uara nties for the f

ull amount of Hunt Trac tor’s line of c redit. [R. 1–6 P ag e I D 70–72; R. 110–15, Pa g e I D 156 5– 67 ; R. 11 0– 12 , Pag e I D 153 6– 37 ]. Hunt Tr a c tor g ra nte d Co mmo nw e a ltha

se c ur ity in te r e s t i nit s b u s in e s s a s s e ts
. [R
. 1 0 3

– 2 2 , Pa g e I D 1 1 5 7 ]. Additionally , Commonwealth, after noting that Pag ano had sig nificant we alth, re q u ired a pledg e of c ollatera l from Pag ano. Pag ano pledg ed secur ities a nd executed a control ag ree ment for a Commonwealth trust acc ount, which was composed of EDAC s tock, a company owned a nd run by Pag ano. [R. 1 1 0

– 1 6 , P age I D 1569–70; R. 110–11, Page I D 1497]. P ag ano initially place d
ar o u n d 3 0 0 , 0 0 0 s h ar e s o f E D A C s to c k in th e tr u s t a c c o u n t. [R
. 1 1 0–11, Pag e I D 1 5 0 2 ]. Commonwealth demande d more c ollatera l wh en t h e value of the EDA C stock fell, and Pag ano p l a c e d ana d d i t i o n a l 1 4 8 , 3 3 3 s h ar e s o f E D A C s t o c k i nt h e t r u s ta c c o u n t
. [ R
. 1 1 0

– 1 1 , P a g e ID 14 97

– 9 8 , 1 5 0 1 ; R
. 1 1 0

– 1 9 , P a g e I D 1 5 8 2 ]. P a g an o c o u l d o n l y h a v e h i s c o l l a t e r a l i nt h e t r u st
acc ount relea sed whe n “all of the obligations secure d by Collateral ha[d] been satisfied,” or upon the consent of Commonwealth Ba nk. [R
. 110–16, Pag e I D 1569; R. 110–18, Pag e I D 1575] . Pag ano als o p le d g e d

a T D B an kn o rth

b r o k e r a g e a c c o u n t. [R
. 1 1 0

– 2 2 , Pa g e I D 1 5 9 2

– 9 8 ]. T h e c o n trol ag ree ment executed on the TD Ba nknorth broker ag e ac count was e x pressly ir revoc able. [R. 110–22, Pag e I D 1595]. Eventually , Hunt Trac tor beg an having problems m eeting its pay ment obligations to C NH. I n ear ly 2009, CNH extended some of the pay ments, but Hunt Trac tor reque sted furthe r extension5

in J une. [ R
. 1 0 2

– 1 0, Pag e I D 893]. I n J uly 2009, Pag ano lea

rned that Hunt Trac tor had be en mis sin g pr inc ipa l pa

y me nts to C NH
. [R. 1 10 –1 1, Pa g e I D 1 51 3]. T his le d Pa g ano to b e g in consideringwithdrawinghis personal guara nty and collate ral on the l o an s ex tended by C o m monwealth. [R. 102–4, P ag e I D 875]. However , under the terms of the a g ree ments, Pag ano could only

be re lease d from his o b l i gat i o n s when the te rm note and line of cre dit reac hed a zer o b a la n c e . [R
. 1 1 0

– 2 5 , Pa g e I D 1 6 0 5 ]. Meanw hile, in July 2009, the Kentuc ky Depa rtment of Tra

nsportation (“K

YDOT” ) plac ed
a larg e or de r w ithHunt Tr a c tor
. [R. 110 –1 3, Pa g e I D 156 0]. Hunt T ra c tor re c e ive d p ay

me nt f or thi s order on November

9, 2009. [R . 110–13, Pag e I D 1560]. The chec k from the KY DOT, made out for $825,347.00, wa s deposited i n Hunt Trac tor’s bank acc ount at C ommonwealth on November 12. [R
. 110–27, Pag e I D 1609]
. On the same day , Commonwealth rec eived notification from Pag ano that he wished to re move his g uara nties from the ter

m loan and line of cre dit and Pag ano re quested the payoff a

mounts and documents to relea se his collater al. [R. 110–28, P ag e I D 1611]. On November

13, 2009, Hunt was sent pa y off and close out le tters for both he and Pag ano. [R. 110–29, Pa g e I D 1 61 5]. Ad dit ion a lly , Hun t wa s in fo rm e d th a t, i f H un t T ra c tor int e nd e d to ma int a in a

c re dit relationship wit h Commonwealth, Pag ano would need t o notify the bank, within 48 hours, that he was willing to continue to g uara ntee the de bts of Hunt Trac tor. [R . 110–29, Pag e I D 1615]. Th e re a ft e r, on

No ve mbe r 1 6 a

nd 17 , 2 00 9, Hun t Tractor f ull y pa id o ff its de bts to Commonweal th
. T h e li n e o f c r e d it w a s p a id

d o w nto ze r o o nN o v e mb e r 1 6 , 2 0 0 9 w h e nan automatic swe ep of H unt Trac tor’s bank a ccount with Commonwealth took place , pursuant to t he conditions pla ced on Hunt Trac tor’s deposit acc ount. See [R
. 110–33, Pag e I D 1627] . The ter m loan
w a s p a id o f f w h e nH u n t w r o te c h e c k s f o r $ 5 0 1 , 5 4 9
. 8 7 o n N o v e mb e r 1 6 , [R
. 1 1 0

– 3 1 , Pa g e I D 1 6 2 2 ],6

and anothe r for $27,089.77 on November 17. [R . 110–31, Pag e I D 1623]. On November 16, H unt informed Commonwea lth not to advance a ny mo re fu n d s o n t h e li ne of c redit and to turn of f the automatic sweep feature of the ba nk acc ount. [ R. 102–14, Page I D 903]. The majority of the money
us e d to pa

y of f t he loa ns c a me fr om the sa le to the KY DO T. No ne of the pr oc e e ds fr om the sa le to the KYDO T wer e re mitted to C NH, as r equire d by the WFSA. On the mor nin g of No ve mbe r 1 8, 20 09 , at 6: 52 a .m. , Pa g ano a g a in r e qu e ste d th a t hi s p e r s o n a l gu ar an ty

an d a s s e ts b e r e le a s e d
. [R
. 1 1 0

– 1 1 , Pa g e I D 1 5 2 4 ; R
. 1 1 0

– 3 2 , Pa g e I D 1 6 2 5 ]. Wit h the loans fully paid off, and af ter c ompleting the ne cessa ry paper work, Pag ano wa s relea sed
o f h i s p er s o n al gu ar an t y

an d t h e se cu ri t y i n t er es t o n h i s co l l at er al wa s re l ea s ed
. [ R
. 1 1 0

– 3 2 , P age I D 1625]. P ag an o testified that he did not re call the pa y ment from the KY DOT c oming to Hunt T r a c to r an d h e w a s n o t n o ti f

ie d o f it s r e c e ip t. [R
. 1 0 2

– 4 , Pa g e I D 8 7 7 ]. Acc ording to Mike L itke, the reg ional supervisor for C NH and manag er of Hunt Trac tor’s
a c c ount w ithCN H, CN H w a s noti fi e d o f H un t T ra c tor ’s tr ans a c tio ns wi th C omm on we a lthby Hunt. [R. 1 10 –6 , Pa g e I D 1 39 4]. L itk e te sti fi e d th a t H un t to ld h im the ba nk ha d c a lle d th e lin e of

c re dit
an d a ll th e mo n e y

f r o m t h e s a le to th e K

Y D O T h a d

g o n e to th e b an k
. [R
. 1 1 0

– 6 , Pa g e I D 1 3 9 4 ]. Ultimately , despite attempting to operate wit hout Pag ano, Hunt Trac tor was unable to meet its obli g ations to CNH. CNH notified Hunt Trac tor of def ault and t er mination of the dea ler ag ree ment on Marc h 15, 2010. [R . 102–19, Pag e I D 909]. Hunt Trac tor is no longe r an ope rating business. Ba sed upon Hunt Tra ctor’s f ai l u re t o re m i t the proce eds of the K YDOT sa le to CNH pursuant to the WFSA, CNH broug ht claims ag ainst Hunt Trac tor, Hunt, and P ag ano. CNH broug ht claims of bre ach of co n t ra ct ag ainst Hunt Trac tor, brea ch of guara nty ag ainst Hunt, brea ch of7

fi du c iary du ty a g a ins t Pa g ano and

Hunt, fr a ud ulent c on c e a lme nt a g a ins t Pa g ano and Hunt, c ivi l conspirac y

to commit fraud ag ainst Pag ano and H unt, prefe rential c onvey ance ag ainst Pag ano and Hunt, civil conspirac y

to make a pr efe rential c onvey ance ag ainst Pag ano an d Hu nt, fraudule nt
c on ve y anc e a g a ins t Pa g ano and Hunt, c ivi l c on sp ir a c y

to m a ke a

pr e fe re nti a l c on ve y anc e a g a ins t Pag ano and H unt, brea ch of c ontrac t under a theory of pierc ing the corpor ate ve il ag ainst Pag ano,
co n v er s i o naga i n s tP aga n o an d Hu n t , an d

p u n i t i v e d am age s aga i n s tP aga n o an d Hu n t
. [ R
. 1 , P age I D 1–34]. The district cour

t gr anted CNH’ s motion for summary judgme nt on the brea ch o f contra ct
c la im a g a inst H u n t T r a c to r

an d f o r b r e a c h o f

g u ar an ty a g a in s t H u n t. [R
. 1 1 7 , Pa g e I D 1 8 6 1

– 7 4 ]. The district cour

t gr anted summary

judgme nt in favor of Pag ano on all claims ag ainst him. [ R. 117, Pag e I D 1874–87]. CNH appea ls the district c ourt’s decision to g rant Pag ano’s motion for summary jud g me nt o n it s c la ims of c on ve rs ion , b re a c h o f c on tr a c t un de r a the ory of pie rc ingthe c or

po rate
ve il, fr a ud ule nt c on ve y anc e , a

nd c ivi l c on sp ir a c y

to c omm it f

ra ud ule nt c on ve y anc e . CN H a lso ap peals the district c ourt’s dec ision to deny its mot ion for summary judgme nt on its claims of
conver sion and fra

udulent conveyance . II.

“ Th e sta nd ard of re vie w f or a dis tr ic t c ourt ’s g ra

nt o f s umm ary ju dg me nt i s de novo .” Ag ris tor Fi n. Cor p. v . V an Sic k le , 9 6 7 F. 2 d 2 3 3 , 2 3 5 (6 t h C i r. 1 9 9 2 ) ( ci t i n g Massey v. Ex xon Corp. , 942 F.2d 340, 342 (6th Cir. 1991)). A m otion for summ ary judgme nt may only be g rante d “if the
mov ant s ho ws that th e re is no g e nu ine dis pu te a s to any ma te ri a l fa c t and the mov ant i s e nti tle d to judgme nt a s a matter of law.” Fe d. R. Civ. P. 56( a). “On summary judgme nt the infere nces to be draw n from the unde rlying fac ts . . . must be viewed in the lig ht most favorable to the party opposing8

t h e m o tion.” United States v. Die bold, Inc. , 3 6 9 U
. S. 6 5 4 , 6 5 5 ( 1 9 6 2 )
. “ [T ]h e p la in la n g u a g e of Rule 5 6 (c ) m andates the entry of summary

judgme nt, after

adequate time for discove ry and upon motion, aga inst a p ar t y who fails to m ake a showing sufficie nt to establish the exi stence of an element e ssential to that pa rty ’s case , and on which that party will bear the burden of

proof at trial.” Ce lot e xCor p. v . Ca tre tt , 477 U.S. 317, 3 2 2 (1986). “ Once the moving pa rty has prove d that no materia l fac ts ex ist, the non-moving p ar t y m u s t do more than r aise a metaphy sical or c onjectura l doubt about issues requiringresolution at trial.” Agristor Fin. Corp. , 967 F.2d at 2 3 6 (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 586 (1986)). III . CNH appe als the district court’ s decision to g rant Pag ano’s motion for summary judgme nt on the claims of c onversion, brea ch of contra ct under a veil pierc ing the ory , fra

udulent conveyance , and civil conspira cy . Additionally , CNH appe als the district court’ s decision to deny its own moti on fo r s umm ary

jud g me nt o n th e c la ims of c on ve rs ion

and fr a ud ule nt c on ve y anc e . T he Court wi ll
reve rse a nd rema nd the district court’s g rant of s u mmary judgme nt in favor of

Pag ano on the
c on ve rs ion

c la im a nd a ff ir m in a ll o the r r e sp e c ts. First, CNH ap p ea l s the district court’s de termination that Pag ano wa s not liable for
conver sion beca

use he did not exercise do m i n i o n an d co ntrol over the pr ocee ds of the sale to the KYDOT . Finding g enuine issues o f materia l fac t on the issue of whe ther Pag ano exerc ised dominion and contr ol over the pr ocee ds, this C ourt will rever se. To prove c onversion under Kentucky

law, a pla intiff must show: (1) the pla intiff had leg al title to the conve rted prope rty ; (2) the plaintiff ha d possession o f t h e p ro p erty or the rig ht to possess it at the tim e of the conver sion; (3) the de fenda

nt exercised dominion over the pr operty in a manner

which denie d the plaintiff’s rig hts to use and enjoy the property and which w as to the def endant’ s own9

use and b e n e f

ic ia l e n jo y me n t; ( 4 ) th e d e f

e n d an t in te n d e d to in te r f e r e w it h the plaintiff’s possession; (5) the pla intiff made some de mand for the proper ty ’s re turn which the de fenda

nt refuse d; (6) the de fenda nt’s act was t h e l ega l cause of the plaintiff’s loss of the prope rty ; and (7) the plaintiff suffe red damag e by the loss of the proper ty
. Ky. Ass’n of Cntys. All Li nes Fund Trust v. McClendon , 157 S.W .3d 626, 632 n . 1 2 (Ky . 2005) (citations omitted). The district cour

t gr anted summary

judgme nt on this i ssue base d o n a finding that Pag ano d i d n o t e x e r c i s e c o n t r o l o v e r t h e p r o c e e d s o f

t h e s a l e t o t h e K

Y D O T b e c a

u s e t h e f u n d s a l w ays
rema ined in acc ounts held by Hunt Trac tor. [R . 117, Pag e I D 1886]. Finding it dispositive, the district court only

analy zed the dominion and control eleme nt of conve rsion. CNH argues that bec ause Pag ano wa s neither an employ ee or office r of Hunt Tra ctor, Pag ano claims to have ha d no authority to act on beha lf of Hu n t T ra ctor, and that the district court found Pag ano dire cted the f

unds to be paid, Pagano must have asser ted dominion and control over the proce eds. CNH fur

ther a rg ues that a c orporate offic er can be persona lly liable for a cts committed on behalf of a c orporation. Paga

no argues that he c o u l d n o t h ave e x erc ised dominion and control
over the funds beca

use the Hunt Trac tor bank acc ount was controlled sole ly by Hunt, and that any be ne fi t r e c e ive d b y

Pa g ano did

no t amou

nt t o d omi nio n a

nd c on tr ol. Th e dis tr ic t cou

rt e rr e d whe n it fo un d tha t Pa g ano wa s r e sp on sib le fo r o rd e ri ngthe loa ns to be re paid. Ther e re mains a g enuine issue of materia l fac t as to Pag ano’s involvement in using the proce eds of the sa le to the KYDO T to pay off the loans owed to C ommonwealth. Pag ano testified that he was “plea santly surprised” to f ind out the term loan had been pa id in full and that he had no
n o ti c e th a t H u n t T r a c to r w o u ld b e p ay in g o f

f th e te r m l o an . [R
. 103–1 2 , Pa g e I D 1 0 9 4 ].10

F ur the rm or e , Pa g ano te sti fi e d th a t he did no t know ho w H un t T ra c tor mana g e d to pa

y of f t he loa ns , but he assumed Hunt Tr actor had ac quired some r ece ivables. [R. 110–11, P ag e I D 1522]. Conversely , Scott Hunt testified that Pag ano had told Commonwealth “that we we re g oing to b e p ay in g [th e te r

m lo an ] o f

f
. ” [R
. 1 0 2

– 2 , Pa g e I D 8 6 0 ]. A d d it io n a ll y , H u n t te stified that the decision to close out the line of cre di t wa s m ad e by

Pag ano. [R. 110–10, P ag e I D 1460]. Hunt further testified that he and Pag ano discussed the decision to pay Commonwealth instead of CNH. [R . 102–2, Pag e I D 860]. Theref ore, the district court er

red in g rant i ng summary judgme nt on CN H’ s c on ve rs ion

c la im. The district cour

t also err ed, as a matter of law , when it found that Pag ano could not be persona lly

liable for c onversion bec ause the proce eds we re a lway s mai n t ai ned within the bank
a c c ount o f H un t T ra c tor . “ [T]he law i s w e ll s e ttl e d th a t an ag e nt of a c or po ratio n is pe rs on a lly

lia ble for a tort committed by

him though he w as ac ting f or t h e co rp o ra tion. There a re nume rous ca ses ho ldi nga c or po rate of fi c e r lia ble fo r c on ve rs ion of pe rs on a l pr op e rt y by him fo r t he be ne fi t of

his corpor ation.” Small v. Bailey , 356 S.W. 2d 75 6, 75 7 (K y . 1 96 2) (c itatio ns omi tte d) ; see also KR S 271B.6- 220(2) ( “Unless other wise provided in the ar t icles of incor poration, a sha

reholde r of a corpor ation . . . may

become persona lly

liable by rea son of his own acts or c onduct.”) . Whil e Pag ano
was ne ver of

ficially an off icer , he wa s a m inority

share holder a

nd regularly

g ave a dvice to Hunt, the president of

the cor poration. Thus, if Pag ano wa s responsible for the t ransf er of the funds, and was there fore acting on behalf of Hunt Tra ctor, he could be pe rsonally liable for the tort of conve rsion. Acc ording ly , we affirm the district court’s denial of C NH’s moti on for summary judgme nt on the
c la im o f c on ve rs ion

and re ve rs e the dis tr ic t c ourt ’s g ra nt o f P a g ano ’s mot ion fo r s umm ary jud g me nt. We remand this issue for pr ocee dings c onsistent with thi s opinion.11

Next, C NH appe als the district court’ s decision to g rant Pag ano’s motion for summary judgme nt on the brea ch of c ontrac t claim under a theory of pierc ing the corpor ate veil. The district court g rante d Pag ano ’s m o t i o n for summary judgme nt on CNH’s claim for veil pierc ing upon a finding that observingthe cor porate form would not sanc tion fraud or promote injustice. [R. 117, Pa g e I D 1 88 5]. T he dis tr ic t c ourt did not a dd

re ss w he the r H un t T ra c tor ha d lo st i ts c or

po rate
se pa rate ne ss. B e c a

us e CN H doe s n ot p re se nt a n in jus tic e be y on d th e me re ina bil ity to c oll e c t a

de bt, the Court wi ll a ff ir m th e dis tr ic t c ourt ’s g ra

nt o f s umm ary

jud g me nt. “[T] he doctr ine of pier cing the cor porate v eil arises in e quity .” Schultz v. Ge n. Elec. Healthcare Fin. Servs., Inc

. , 3 60 S.W. 3d 17 1, 17 5 ( Ky . 2 01 2) (c itatio ns omi tte d) . “ [A] c ourt wi ll disturb the legal fi ction of cor porate separ atene ss only

in the rar est of cir cumstance s.” Id. at 174. Un de r a ny the or y , a su c c e ssf ul v e il p ie rc ingc la im i n

K e nt u c k y mus t sh ow“ tw o d isp os iti ve e le me nts : (1 ) d omi natio n o f the c or

po ratio n re su lti ng in a

los s o f c or

po rate se pa

ra te ne ss and (2) c ircumstance s under w hich continued r ecog nition of the corpor ation would sanction fra ud or promote injustice.” In te r- Te l Te c hs ., In c . v . Li nn Sta tio n P ro ps . , L.L. C. , 3 60 S .W .3 d 15 2, 16 5 ( Ky . 2 01 2) . T his te st require s “the trial court [to] state spec ifically the fra ud or injustice that would be sa nctioned if the
cour t d ec lined to pierce the cor porate veil[,] ” and the fra ud or injustice identified “ must be something be y ond the mere inability to collect a de bt from the cor poration.” Id. at 165. Fr aud will be sanc tioned or injusti ce pr omoted “whe re ‘ a par ty would be unjustly

enric hed; [wh e re ] a p are nt c or

po ratio n th a t c a

us e d a su b’ s li a bil iti e s and

its ina bil ity to p ay fo r t he m w ou ld
esca pe those liabilities; or an intentional scheme to squirrel asse ts into a l i ab i l i ty -fr ee c orporation while heaping liabiliti es upon an asset-f ree corpor ation would be succ essful.’” Id. at 164 (a lteration i no ri gi n al ) ( qu o t i n g Sea-Land Serv s., Inc. v . Peppe r Source , 941 F.2d 519, 524 ( 7th Cir. 1993)).12

CNH has not asser

ted an injustice be y ond the mere inability to collect a de bt. Hunt Trac tor pa id o ff a le g iti ma te bu sin e ss d e bt w ithfu nd s it re c e ive d, a lbe it i n v iol a tio n o f its a g re e me nt w ith CNH. As a r esult of making the pay ments to Commonwea lth, Hunt Trac tor was left with no money with which to pay

its debts t o CNH. Pag ano’s a bility to have his per sonal g uara nty and pledg ed
a sse ts r e le a se d w a s ju st a

by pr od uc t of the pa y me nt, wh ic h, a c c or din g to H un t, w a s ma de be c a us e H u n tb e l i e v e d

a l o c a l b an k

“ h a s a l i t t l e b i t m o r e p o w e r t h a [ n ] C N H C a p i t a l
. ” [ R
. 1 0 2

– 2 , P a g e ID 860]. On these fac ts, the only injusti ce is that Hunt Trac tor was unable to pay CNH. As stated by the Ke ntu c ky

Sup re me Court , th is i s si mpl y no t e no ug h to jus tif

y pie rc ingthe c or

po ra te ve il. Moreove r, the e quitable doctrine of pi erc ing the corpor ate veil is the i ncorr ect remedy for the wrongalleg ed by

CNH. The ty pe of f raud t h at [pl aintiff] alleg es is prec isely that protec ted by

fra udulent c on ve y anc e law a

nd do es no t ri se to the le ve l r e qu ir e d to pie rc e the c or po ra te ve il.
. . . F ra

ud ule nt c on ve y anc e law is m or e c are fu lly ta ilo re d to the int e re sts of a ll pa rt ie s th an th e blunt ins tr

ume nt o f p ie rc ingthe c or po rate ve il.
. . . T he re me dy in fr a ud ule nt c on ve y anc e sta

nd s in sh arp c on tr a st w iththe g e ne ral rem edy in v e il pierc ing. When the c orporation’s veil is p i er ced, the individual shareholder s are lia ble fo r t he c or po ratio n’ s d e bts , w hic h c ou ld e xce e d th e va lue o f t he a sse ts fra udulently convey ed. W aste Conversion Techs., Inc. v. W arren Recyc ling, Inc. , 191 F. App’x 429, 434–35 (6th Cir. 2006). Thus, the district c ourt’s g rant of Pag ano’s summary judgme nt motion on the brea ch o f c o ntrac t claim is aff

irmed. CNH also appe als t h e dis trict court’ s g rant of Pag ano’s motion for summary judgme nt on CNH’s c l ai m s of fr audulent conve y ance under K entucky Revised Statutes 378.010 and 378.020. The district court g rante d Pag ano’s motion for summary judgme nt on the basis that Pag ano wa s not
a t r an s f e r o r o r t r a n s f e r e e , a n d t h e s t a tu t e s d o n o ta

u t h o r i z e t h i r d

- p art y

l i a b i l i t y . [ R
. 1 1 7 , P a g e ID 1880]. The district court furthe r conc luded that compensatory d amag es we re not available f or13

fra udulent conveyance under Kentucky law and, even if they wer e, dama g es could only be aw arde d ag ainst a transf

eror or transf er ee . [ R. 117, Page I D 1880–81]. W e af firm the district cour

t’s decision. Kentucky Revised Statute 378.010 provides, in per tinent part, that: “Eve ry

g ift, convey ance , a ssi g nme nt or tr ans fe r . . . ma de wi th the int e nt to de lay , hin de r or de fr a ud c re dit or s . . . s ha ll b e vo id
a s a g a ins t su c h c re dit or s. ” KR S 37 8. 01 0. Ke ntu c ky Re vis e d St a tut e 37 8. 02 0 p ro vid e s th a t: Every g ift, conveyance , assig nment, transfe r or char g e made by a debtor, of or upon any of his e state wi tho ut v a lua

ble c on sid e ratio n ther e fo r, sh a ll b e vo id a s to a ll h is then exis ting cre ditors, but shall not, on that acc ount a lone, be void a s to cr ed itors wh os e c la ims are the re a ft e r c on tr a c te d, no r a s to purc ha se rs fr om t he de bto r w ith notice of the voluntary

alienation or c harg e. KRS 378.020. First, the Court must deter mine which tra

nsfer CNH alleg es wa s fra

udulent, as CNH see ks to i mpo se lia

bil ity up on Pa g ano ba se d u

po n th e fa c t that his ple dg e d a sse ts we re tr ans fe rr e d to h im fre e o f an y s ec urity

interest whe n Hunt Trac tor paid off its loans from Commonwealth. The fra udulent transfe r at issue must be the transfe r fr om Hunt Trac tor to Commonwealth beca use CNH
asser ts no w rong doing on the part of Commonwea lth. See Ap pe lla nt B r. , p . 5 2 ( “ Com monwe a lth Ba nk was m er ely

a conduit.”) ; [ R. 110, Page I D 1341] (“[Com monwealth B ank] was mere ly an int e rm e dia

ry fo r t he tr ans fe r. ” ). Ad dit ion a lly , CN H’ s argume nts that Com monwe a lthwa s a c on du it
an d t h at co l l ap s i n g t h e t ra n s ac t i o nca n al l o w P aga n o t o b e c o n s i d er edt h e t ra n s fe re e a re u n av ai l i n g. CN H c ite s McM

urray v. M

cMurray , 4 10 S.W. 2d 13 9 ( Ky . 1 96 6) , f or the pr op os iti on

that a benef iciary can be liable under Kentucky statutes and that the transac tions c an be collapsed, such that Hunt Trac tor is the transfe ror a nd Pag ano is the transf

ere e. See Appellant Br., p. 47. CNH misreads McM urray’s ho ldi ngon

bo th a c c ounts . In it s c itatio n o f the c a se , CN H c ha ra c te ri zes McM

urrayas14

making a wife liable for a transfe r re ceive d by

a third p ar t y . Appellant B r., p. 46 (“[H]usbanddebtor’s pa

y ment of funds to bank held t o be a fra udulent transfe r t o wife by incre asing the value of wife’ s interest in proper

ty .”). H oweve r, McM

urrayfo un d “ that th e c on ve y anc e of an in te re st t o J oy ce w ithout consideration was a voidable as to B illy ’s then existi ng debts.” McM urray , 410 S.W .2d at 141. Thus, even though multiple transf ers we re involved in the c ase, the fra udulent transfe r at issue wa s fro m Bi l l y to J oy ce, a

nd J oy ce w as the tra

nsfer ee, not a

benef iciary . I t was B ill y ’s tr ans fe r o f a

n inte re st in re a l pro pe rt

y to Joy c e , with ou t c on sid e ra tio n, that w a s f

ra ud ule nt. I n this transaction, Joy ce w as the dire ct, and only , transfe ree . The court did not collapse any of the transac t i ons and did not cre ate a leg al fiction to deter

mine the transf

eror and tra nsfer ee. Sec ond, when the c ourt collapsed multipl e transactions it did so only to determine the amount of the fra udulent transfe r, not to deter mine if there was a

fra udulent transfe r. Id. Thus, McM urraydoes
n o ts u p p o rtt h e c o n c l u s i o nt h a tP a g an o c anb e l i a b l e a s a b e n e f i c i ar y. CNH’s ar g ument that Commonwealth was a conduit is a lso misg uided. The case s cited by CNH bear no fac tual rese mblance to the matter befor e this Court. I n Harris v. N ational Investment & Finance Company

( In re Ak in) , the debtor w as transfe rring persona l a ssets into a corpor ation he
c o n t r o l l e d

s o t h a t t h o s e a s s e t s c o u l d

n o tb e r e a c h e d b y c r e d i t o r s . 6 4 B
. R
. 5 1 0 , 5 1 8 ( B an kr . W
. D
. K y. 19 86 ) ( “Nat io nal , as th e con du it andreci pi ent of t hes e tr ans fers , wa s m erel y th e con ven ien t co rpo rat e
ve hic le thr ou g h w hic h A kin iso la te d th os e a sse ts. ” ). Hunt Tr a c tor wa s not atte mpt ingto h ide a sse ts they could later

control, but was instea d, by paying one leg itimate cr ed i t o r o v er a nother, relinquishing its rig ht to control the proce eds. The othe r ca se re lied upon by CNH, Schilling v. Montalvo (

In re M ontalvo) , simply held that a fathe r wa s not a rec ipient of a fr audulent conve y ance when his son mailed him a loan pa y m en t , which the f

ather took from a post off

ice to the c reditor15

bank. 324 B .R. 619, 622–23 (B ankr. W.D. Ky
. 2005). He re, Commonwea lth, unlike the father , had a right t o the m oney and kept the m oney , rathe r t han fa cilitating a transfe r to the rig htful transfe ree . Thus , th e tr ans fe r that was alleg e dly fr a ud ule nt w a s th e tr ans fe r o f t he loa n p ay me nt t o Commonwealth from Hunt Tra ctor. As an ini tial matter, the Court finds that CNH’s c laim under KRS 378.020, and CNH’s argument that Pag ano re ceive d a g ift under KRS 378.010, must fa il be cause adequate consider ation, the l oan, was transfe rre d for the loan pay ments from Hunt Trac tor to Commonwealth. See Sc hilling v. Montalvo (

In re M ontalvo) , 324 B.R. 619, 623 (B ankr. W
. D. Ky
. 2 0 0 5) (“ The c hecks ma de direc tly pay able to the B ank we re c lear ly made f or valua ble consider ation, i.e. , the initial loan.”). The Ke ntucky

statutes for f

rau d u l en t conveyance s only allow re cover

y for a fra udulent conveyance from a tr ansfe ror or transfe ree . Unlike the Unifor m Fra udulent Transf

er A ct, t he Kentucky statutes do not expli citly allow re cover y from a be nefic iary

of the tra nsfer
. Com

pa re Unif. Fr audulent Transfer Act § 8(c) with KRS 378.010 – .100. The Ke ntucky statutes under w hich CNH br ou g ht i ts c la ims bo th pr ov ide that a fr a ud ule nt t ra ns fe r “ sh a ll b e vo id. ” KR S 37 8. 01 0 – .0 20 . T his lang uag e does not sug g est t h at a m ere bene ficiar y of a tra nsfer can be held liable for

the transf

er. To void a transf

er implies only

those party

to the transfe r n ee d b e involved. See Bla ck’s L aw Dictionary

763 (3d pocke t e d. 2006) (def ining void a s “of no le g al ef fec t”). The Kentucky

Gene ral Assembly has spec ifically

chosen not to adopt the U niform Fr aud u l ent Tra nsfer Act or a simil ar section that would explicitl y allow re cover

y from benef

iciarie s. This Court will not provide a
reme dy the Kentuc ky

leg islature has not included in the statute. Fur thermore , althoug h Kentucky state cour ts are silent on the issue, Kentucky fede ral district c ourts have interpre ted the statutes as prec luding recove ry from a benef iciary
. See G

ATX Corp. v. Addington , 879 F. Supp. 2d 633, 6421 The Court will not address CNH’ s argument that Kent u ck y l aw a llows compensatory

damag es as a

reme dy for f raudule nt convey ance . Kentucky courts ar e si l en t o n t h i s issue and the Court will no t w a d e in to mu r ky w a te r s w h e nth e Co u rt’ s d e c is io nw o u ld h a v e n o b e ar in g o nthe outcome of this appe al. See Princesse D’Ise nbourg et Cie, Ltd. v. Kinder Caviar, Inc. , No. 3:12-cv004-DCR, 2013 WL 147841, at *6 (E.D. Ky . J an. 14, 2013) ( “B eca use ‘Ke ntucky

courts have not expli citly rea ched this conc lusion,’ the Court declines to ex tend Kentuc ky law to allow for co mp en s at o ry

d am age s fr o m a t ra n s fe re e. ” ( qu o t i n g GATX Corp. , 879 F. Supp. 2d at 642))
. 16 (E .D . Ky
. 2 0 1 2 ) ( c i t a t i o n s o m i t t e d ) ( “ [A ] d i r e c tl i a b i l i t y f r a u d u l e n tc o n v e y an c e c l a i m i s o nly
a c tio na ble a g a ins t th e tr ans fe ro r o r t ra ns fe re e .” ); see also Prince sse D’I senbourg et C i e, L td. v. Kinder Cav iar, Inc. , No. 3: 12-cv- 4-DCR, 2013 WL 147841, at *6 (E.D. Ky . J an. 14, 2013) ( citing GATX Corp. , 879 F. Supp. 2d at 642) ( holding that only the transf eror or transf ere e ca n be liable f

or a fr audulent conve y ance claim ). As P aga no was not wa s a direc t transfe ree or transf eror , Com monwe a lthwa s n ot a c on du it, and

the re is n o just if

ic a tio n f or c oll a ps ingthe tr ans a c tio ns , Pag ano ca

nnot be liable for

fra udulent conveyance . 1 The Court has c onsidered the dissent and its position, and finds fault with the analy sis for the
re a so ns wh ic h f

oll ow . Th e Court fi nd s f

a ult wi th t he dis se nt’ s r e lia

nc e on Ke ntu c ky

c a se s th a t ho ld a pay ment of a va lid, preexisti ng debt ca n serve as a f

raudule nt c onvey ance . Kentucky case law on this point is mix ed. See Jadco Enterprises, Inc. v. Fannon , No. 6:12-cv- 225-DCR, 2014 WL 66521, at * 4 (E.D. Ky . J an. 8, 2014) ( “[T] here is some inconsistency in Kentucky

opinions discussing fra udulent conveyance s.”). To this end, the c ase c ited by the dissent, Fa rm ers ’ Ba nk of F ou nta in Run v. Hagan , holds t h at t h e t ra n s fer of a mortg ag e fr om a husband to a w ife in satisfac tion of a valid, pree x isting debt was not a fra udulent conveyance . Farmers’ Bank of Fountain Run v. Hagan , 4 6 S
. W
. 2 d

1 0 8 4 , 1 0 8 7

– 8 8 (Ky . 1 9 3 2 ). T h e co u rt af fi rm ed t h e ju d gm en t gi v i n g t h e w i fe a m o rt gage in the amount of $880.00, id . at 1086, af ter finding it was c ompelled to follow ca se law holding that17

a tr ans fe r t o s a tis fy a

va lid , p re e xistin g de bt c ou ld b e pr e fe re nti a l, n ot f ra ud ule nt. Id . at 1088. Specifica lly , the cour

t relied on Se ile r v . W

alz , w hic h s ta te d: By pref err ing the son as a c reditor, the f ather committed no actual f

raud on his other cre d i t o rs. I t was commenda ble in him to pay

his debts, and he mig ht prefe r one c re di t o r o v e r an o t h e r w i t h o u t c o m m i t t i n g a c t u a l f r a u d , o r d o i n g a

u g h t t ha t is de no un c e d in

the statut e re lie d o n b y the a pp e lle e . Re lie f f

ro m su c h a

pr e fe re nc e mus t be soug ht under a

nother a nd differ ent statute. Se ile r v . W

alz , 29 S.W. 33 8, 33 9 (K

y . 1 89 5) ; see also Farme rs’ Bank of Fountain Run , 46 S.W .2d at 1 0 8 7 (q u o t i n g Seiler , 29 S.W . at 339). Eve n if Farmers’ Bank had found a

fra udulent conveyance ba se d u po n the pa

y me nt o f a va lid , p re e xistin g de bt, it w ou ld f ur the r s up po rt

that Co mmo nw e a lth was the pr oper pa

rty to sue. I n that case , the husband wa s the trans fe ro r an d t he wife was the transfe ree . Those fa cts are analog ous to this case, with Hunt Trac tor in the pos ition of t he husband and Commonwealth the wife . The c reditor in Farmers’ Bank sued th e d i rec t transfe ree , the wife , not a bene ficiar

y of the tra nsfer . Thus, the prope r par ty for suit was the wife, or Commonwealth, and thi s c a se do e s n ot p ro vid e su pp or t that Ke ntu c ky law a llo ws a be ne fi c iary of a tr ans fe r to be lia ble on a theor y of fra udulent conveyance . The c ases r elied upon by the dissent that allow a f

raudule nt conveyance claim wh en a debtor improves the value of the prope rty of anothe r likewise do not involve a re cover

y ag ainst a benef

iciary beca

use, even though the owner of the prope rty may have benef itted, as owner of t he land they are the di rec t transfe ree of the va lue of the improve ments. See, e.g. , Piercev. J.B . Pierce ’s Trustee in Bankruptcy , 3 8 S. W.2 d 254 , 259 (K y . 1 93 1) (“ Th e lot

of Mr s. Pierce was not liable for the debts of her husband; but, to the ext ent his expenditures had incre ased the vendible va lue of he r lot, his creditors ha d a cla im.”). Whil e the Court dec lines to ad d re s s C NH ’s ar gu m en t t h at i t is entitled to rec over compensatory

damag es, a discussion of the proper reme dy for a

succe ssful fra

udulent conveyance18

claim furthe r illustrates that a be nefic iary cannot be liable for a

fra udulent conveyance under Kentucky law. Kentucky courts have not rea ched the conclusion t hat m oney damag es are ava ilable. S ee P r i n cesseD’Ise nbourg et Cie, Ltd. v. Kinder Caviar, Inc. , N o . 3 :1 2
- c v - 4
- D CR , 2 0 1 3 WL 14 78 41 , at *6 (E .D . K

y . Jan . 1 4, 20 13 ) (“ B e c a

us e ‘K e ntu c ky c ourt s have no t e xplic itl y re a c he d th is conclusion,’ the Court decl i n es to extend Kentucky law to allow for

compensatory

damag es fr om a t ra n s fe re e. ” ( qu o t i n g GATX Corp. v. Addington , 879 F. Supp. 2d 633, 642 (E.D. K y . 2012)))
. Rather, “ the prope r re medy for a fra udulent conveyance claim is the nullification of the tra nsfer by returningthe prope rty

at issu e b ac kto the transfe ror.” Id
. (q u o t i n g GA TX C or p ., 879 F. Supp. 2d
a t 64 1) ; se e als o M

att ing ly v . G e ntr y , 4 19 S.W. 2d

74 5, 74 7 ( Ky . 1 96 7) (“[T ]he purp os e of KR S 378.020 is to put t he cr editors bac k in the same position they would have e njoy ed immediately prior to the voi dable convey ance .”). This reme dy is best illust rate d by the portion of the Farmers’ Bank opinion that found t he transfer of an automobile, without valuable c onsideration, wa s a fr audulent transfe r. See Farmers’ Bank, 46 S.W. 2d a t 10 86 –8 7 (d e c lari ng that the e vid e nc e sh ow s that, a s to the automobile, “ther e wa s no consideration for the tra nsfer ”). “ [T] he only

relief appellant wa s entitled to on this score wa s to have the tra nsfer set aside a

nd the a u t o mobile sold to satis fy the attachme nt lien.” Id . at 10 88 . T hu s, the pr op e r r e me dy , a n unw ind ingof

the tr ans a c tio n, c an o nly b e e n f o r c e d a g a i n s tt h e t r an s f

e r o r o r a t r an s f e r e e t h a t a c tu a l l y r e c e i v e d

t h e p r o p e r

t y, n o ta b e n e f i c i ar y. I n eff ect, the dissent would r equire Pag ano to re turn an a utomobile he never

rec eived. Th e Court

do e s n ot a g re e tha

t GATX Corp. v . Addington is disti ng uishable fr om the case at hand. The holding in G A TX Co r p. wa s d i ct at ed by

the fa ct that “a

direc t liabilit y

fra udulent conveyance claim is only

actionable ag ainst the transfe ror or transfe ree .” GATX Corp. , 879 F. Supp. 2d at 642 (c itations omitted). The Court finds that the a lleg ed fr audulent tra nsfer was the tra

nsfer19

fr om H un t T ra c tor

to C omm on weal th , and

Pa g ano wa s n e ith e r t

ra ns fe ro r, no r t

ra ns fe re e . T hu s, Pag ano ca

nnot be direc tly

liable on a f

raudule nt convey ance claim. The diss ent may

be per suaded by

CNH’s jewe lry

store hy pothetical bec ause it is nonsensical for the c reditors of the husband to be for ced to sue the jewe lry store, rather than th e wife, the be ne fi c iary

of the tr ans fe r. Ho we ve r, thi s ou tc ome is d ic ta te d b y the e xpre ss l angua g e of

the statut e
and the int e rp re ta tio ns of

the statut e by

Ke ntu c ky

c ourt s. Whe the r t

he stat ute pr ov ide s th e mos t log ic a l or mos t de sir a

ble a ve nu e of

re lie f i s im ma te ri a l to our d e c isi on . Si mpl y pu t, i t is inappropriate to rea d a re medy into a statute that is not there, espe cially g iven that in the 108 y ear history of KRS 378.010 not a single rec orded Kentucky case allows for rec overy of a m o ney judgme nt ag ainst a bene ficiar y of a f raudulen t t ra n s fer. Acc ording ly , the district court’s g rant of Pag ano’s motion for summary judgme nt and denial of

CNH’s m otion for summary judgme nt on the fra udulent conveyance claim is aff irmed. Finally , CNH appe als the district court’ s decision t o gra n t Pag ano’s motion for summary judgme nt on the count alleg ing c ivil conspiracy to commit a fraud u l en t co n vey ance . The district court de termined that CNH, by bring ing this cla im, was attempting to by pass Kentuc ky

law, which does not allow non-tra

nsfer ees to be liable for fra udulent conveyance . Thus, acc ording to the district court, CNH c ould not use a conspirac y claim t o rea ch a r esult that could not be re ache d by bring ing a cla im for the complete d tort. [R . 117, Pag e I D 1882–83]. “Civil conspiracy

. . . has been define d as ‘a corr upt or unlawful c ombination or ag ree ment betwee n two or more pe rsons to do by conc er t o f ac tion an unlawful a ct, or to do a la wful ac t by unlawful mea

ns.’” Peoples Bank

of N. Ky., Inc. v . Crowe Chiz ek & Co. , 277 S.W .3d 255, 260–61 (Ky . C t
. Ap p . 2 0 0 8 ) ( qu o t i n g Smith v. Bd. of Educ. of Ludlow , 94 S.W .2d 321, 325 (Ky . 1936)). The20

damag e mu s t r e s u lt

“ f r o m s o me o v e rt a c t d o n e p u r s u an t t o o r in f u rth e r an c e o f

th e c o n s p ir a c y .” Dave nport’s Adm’x

v. Crummies C

r ee k Coal Co. , 1 84 S.W. 2d 88 7, 88 8 ( Ky . 1 94 5) . “ Civ il conspirac y

is not a fre e-standingclaim; rathe r, it merely provides a the ory

under w hich a pl aint iff may rec over f rom multipl e def

endants for

an under ly ing tor

t.” Stonestreet Farm, L.L.C. v. Buckram Oak Holdings, N.V. , Nos. 2008-CA-002389-MR, 2009-CA-000026-MR, 2010 WL 2696278, at *13 (Ky . Ct. App. J uly

9, 2010) (citations omitted). Thus, for a claim of civil conspirac y to be viable, it must be base d upon an under ly ing tor t. See id. at *14 (“ Stonestreet’s c laim of civil conspirac y thus has no tort to be base d upon and ca nnot survive as a

matter of la

w.”)
. C NH ’s cl ai m of civil conspira cy to commit a fraudule nt convey ance must fail. Paga no cannot be liable for fra

udulent conveyance beca use he was neither the transfe ree n o r t ra nsfer or. Pag ano ca

nnot be liable for

conspiring to perfor

m a tort he c ould not commit as a matter of la w. CNH’s ar g ument, that Kentucky law s h o u l d n ot protect those who be nefit fr om a fra udulent conveyance , ignor es the fa ct that, despite whatever CNH thinks the law should be, the Ke ntucky Gene ral Asse mbly

has chosen not to create a statute makingbenef iciarie s of a f

raudule nt transfe r liable for that transfe r. Ther efor e, the “ claim of c ivil conspiracy thus has no tort to be based upon and ca nnot survive as a matter of law.” Id. The district cour t’s decision to g rant Pag ano’s motion for summary

judgme nt on the civil conspirac y claim is aff

irmed. IV. For all of the re asons stated a

bove, we AF F IRM the district c ourt’s g rant of Pag ano’s motion fo r s umm ary ju dgmen t on the c la im o f b re a c h o f c on tr a c t, f ra ud ule nt c on ve y anc e , a

nd c ivi l conspirac y

to commit a f

raudule nt c onvey ance , as well as the district c ourt’s denia l of CNH’s motion for summ ary judgme nt on the claims of conversion and fr audulent conve y ance . We RE VE RSE and21

REMAND the district court’s g rant of Pag ano’s motion for summ ary judgme nt on the conve rsion
c la im.22

RO GE R S , J
. , concur

ring in part and dissenting in part. I ag ree with all aspec ts of the majority opinion, ex cept with re spect to the fr audulent conve y ance claim. I n this case, Scott Hunt tr ans fe rr e d c or

po rat e fu nd s to re lie ve his fathe r- in- law o f e nc umb ra nc e s h e ld b y

Com monwe a lth Ba nk on his father-in-law’ s proper ty . Assuming that the f

unds, while owed to Commonwealth, should have g one first to CNH (the rec ord is not clea r on that point), the fac t that CNH did not sue Commonwealth should not preclude a fra udulent conveyance claim ag ainst Pag ano for the value of the lifted enc umbranc e. So stated, this case is not materia l l y differ ent from a hy pothetical sug g ested by

CNH. Suppose a debtor tr ansfe rs funds to relieve his spouse ’s debt to a jewelr y deale r for

a ringthat the spouse bought
. I f t h e debtor is try ing the reby

to protect his assets fr om his creditor, the c reditor should not have to sue the jew elry deale r. I nstead, the jewele r should be able to sue the spouse for t h e v al u e o f t h e r i n g. This conclusion is supported by the numerous Ke ntucky case s that hold that the pay ment of a valid, pre exis ting de bt can be a fra udulent conveyance if done with intent to defr aud or hinder a
cre ditor. See, e .g. , Farmers’ Bank of Fountain Run v. Hagan , 46 S.W .2d 1084, 1087 (Ky . 1932); Jadco E nters., Inc. v . Fannon , No. 6:12-225, 2 0 1 4 W L 66521, at *3 (E.D. K

y . J an 8, 2014). Simi larly , Kentucky

courts have held that a c reditor may have a fraudulent conve y ance claim when a debtor improves the prope rty

of anothe r in an e ffor

t to keep his a ssets from fa lling into the hands of cr editors. See P ierce v. J.B . Pierce ’s Trustee in Bankruptcy , 38 S.W .2d 254, 259 (Ky . 19 31). Th is c a se is s imi lar b e c a us e Hunt’s a c tio ns c a

us e d Pa g ano to r e c e ive lie n- fr e e c oll a te ra l. Fur thermore , CNH has identified fac tually simil ar cases involvi ng actions aga inst g uara ntors. For example, Permastee lisa CS Corp. v. The Airolite Co. , No. 2:06-CV-569, 2007 WL4615779 (S.D.23

Ohio Dec . 31, 2007), involved a dire ct liability fra udulent conveyanc e cl ai m b rought ag ainst the p re s i d ent of a corpor ation. The pre sident argued that bec ause “ he [was] not t he ‘tra nsfer ee,’ no judgme nt [could] be enter ed ag ainst him,” id. at *7 n.3, i.e. t he same argument Pag ano make s here
. The Pe rm as te e lis a c ourt

c on c e de d th a t th e pr e sid e nt w a s not the fi rs t tr ans fe re e , b ut n ote d th a t “ it
c ou ld c e rt a inl y

be argue d that the tr ans fe r wa s ma de fo r his be ne fi t. He so ug ht to se ll TA C’ s a sse ts so that he could pa

y off the debt to People ’s Ba nk to a void be ing held per sonally liable on the loan.” Id. On the other

hand, GATX Corp. v. Addington , 8 79 F . Su pp . 2 d 6 33 (E .D . K

y . 2 01 2) , is distinguishable. I n that case , the def endant L arr

y Adding ton had g uara

nteed the de bts of a founder ing c ompany . Id. at 637. Ostensibly to a void pa y ing the g uara

nty , Addin gt o n t ra n s fe rre d many of his a ssets into a

n irrevoc able trust a

nd named Stephen and Rober t as co-tr ustees. Id. at 638. GATX the n sued Stephen a nd Robert i n their individual capa cities. Id. at 641. The c ourt rea soned that GATX could not bring a fra udulent transfe r ac tion ag ainst Stephen and Rober t beca use they
wer e not transf

ere es of any proper

ty in the ir individual c apac ity (prope rty had only been tr ansfe rre d to the trust and to the two in their ca pacities a s trustees). Id. a t 64 2–43 . T hat r uli ngis perfec tly
rea sonable. The reme dy

for a fra udulent conveyance is the undoi ng of t he transfer, but if no transfe r
oc c u r r e d , t h e r e i s n o t h i n g t o u n d o . F u rt h e r , ani n d i v i d u a l t h a td o e s n o tr e c e i v e a t r an s f e r c o uld h ar d l y b e c o n s i d e r e d a t r an s f e r e e . B u t h e r e , P a g an o d i d r e c e i v e a t r an s f e r o f pr op e rt y : hi s
un e nc umb e re d, ple dg e d c oll a te ra l. Finally , case s like Pe rm as te e lis a are per s uasive e ven thoug h they discuss the law of jur isd ic tio ns that ha

ve ado pt ed the Un if

or m F ra ud ule nt T ra ns fe r A c t. T he UF TAsp e c if ic a lly pro v i d es t h at “judg ment may be ente red a g ainst . . . the person f or whose be nefit the tra

nsfer was24

made.” See, e .g. , Ohio Rev. Code § 1336.08. Kentucky has not adopted the U FTA , but rather has
enac ted a f

raudule nt convey ance s t at u t e b as ed on the Eng lish S tatute of 13 Elizabeth. For that
rea son, the distri ct co u rt held that ca se law involving the UF TA wa s not persuasive. Se e CNH Capital Am. LLC v. Hunt Tr actor Inc. , No. 3:10-CV-350, 2013 WL 1310878, at *16 (W.D. Ky . Mar. 26, 2013). The fac t that the Kentucky leg islature has not c hosen to adopt the UF TA does not mea n that Kentucky

has re jected the possibili ty that a fra udulent transfe r suit c an be broug ht a g ainst the be ne fi c iary

of a tr ans fe r. As the Ke ntu c ky Sup re me Court

re c ent ly he ld, “ le g isl a tiv e ina c tio n is a
weak ree d upon which to lean a nd a poor be acon to fo l l o w i n co n s t rui ng a statute.” Shawnee Te lecomm . R es. , I

nc . v . B ro wn , 3 5 4 S
. W
. 3 d 5 4 2 , 5 6 0 ( K

y . 2 0 1 1 ) ( i n t e r

n a l a l t e r a t i o n s o m i t t e d )
. It is just as li kely

that the Kentuc ky

leg islature chose not to adopt the UFT A bec ause it assumed that pe rs on s f or wh os e be ne fi t a

tr ans fe r w a s ma de we re a lr e a dy lia ble un de r t

he c ur re nt r e g ime a s it

is that the leg islature chose not to enact the U FTAto prec lude liability ag ainst such individuals. Assuming that there is a g enuine issue as to w hether Hunt acte d with the requisite fr audulent int e nt, Iwo uld

a llo w this c la im t o p ro c e e d to tr ia l.