## In the



# U n ited S ta tes Co urt o f Ap p ea ls

F o rth eS e v e n th C ir cu it

____________ N o. 07

- 1995 H ONG K ONG E LEC TRO -C HEMICAL W OR KS, L TD ., Plai nt i f f

-Appe l l ant, v.

G ARRY L ESS, etal. , D efend a nts-A pp ellees.

____________ A pp eal from the United S t ates Di strictC our t fo r the N o rthernDi stricto f Illino is, Eas tern Div isi on. No . 05 C3582

— SamuelD er-Yegh iayan, Judge
.

____________ A RG UE D J AN UA RY 16, 2008

— D ECI DE D A UGUS T 27, 2008

____________ Befo re M A NI ON, W OO D , a nd S YKES, C ircu it Judges. W OO D , C ircu it Judge. T his ap p eal i s p art of a long eff ort by H ong K ong Elec tr o- Ch em i calW or ks, Ltd. ( “H K EW ”) to g etpa i d f o r g o o ds th ati t so l d t o de f en dan t Gar r y Les s an d a b u s i n e s s h e a n d h i s w i f e Mi c h e l l e r a n u n d e r th e n a me Tod d Ind us tr i es . ( W e r efert o the m a l l a s Les s, unl es s th e conte xt r equi res otherwise

. ) The di str i ct c ourtf ound that Less o w es H K EW $1 66, 252. 88 plus i nter est. Less di d not p ay, lead ing H K E W to se arch for a ssets that w ou ld satisfy2 N o. 07

- 1995 i ts j ud gm ent. The d i spute here center s on a house that Less and his fam i l y occupie d and arg uabl y o w ned. The di str i ct cour t r ej ecte d H K E W ’s cl ai m thata 2002 co nveya nce o f th at ho us e to M ichelle Less ’s m oth er, Ch arlene W erne r, and a l ate r 2006 co nveya nce o fthe sam e ho use t o Roth H oldings , L L C , w ere fraud ulen t tran sfers an d w ere voi dabl e under the I l l i noi s Un i f or m Fr audu l ent Tr ansfer A ct ( I U FTA ) , 74 0 I LC S 160/ 1 ets eq . W e r eve rs e.

I Garr y Less e ar ned a si gni fi cant s um o fm oney i n 198 8 a s a c o mm o di t i e s tr a de r . He f a i l e d, h o we v e r, t o s e ta s i de en ou gh m on ey to p ay h is t ax es , an d as 19 89 op en ed , his l uck r an o ut. Less w ound up with t ax debts h e c ou l d not pay, lie ns i m posed by the I RS, and a y oung f am i l y t o su p p ort. D uring this pe riod, L ess refrained f r o m pu rc h as in g a h ou se in h is ow n n a m e . In st ea d , L es s a n d h is w ife M ichelle entered i nt o a n a g r eem en t w ith W erne r, unde r whi ch W erne r woul d pur ch as e a ho us e f o r the Lesses to l i ve i n and the Less es w oul d cove r the m or tga ge p ay m en ts

. T h is l ed to th e 2 00 2 c on ve ya n c e a t is su e h er e. In that year, W er ner pu rchas ed f ro m S cot t W ar re n ( an unrel ate d thi rd party) a house i n Ri ver w oo ds, I l l i noi s, that Gar r y p i c k e d o u t

. T h e L e s s e s mo v e d i n a n d ma d e t he m or tga ge paym ents f orthe next few ye ar s. I n the m eanti m e, L ess w ent into busi ness as an i m port er offry i ng pan handle s. H e co nd ucted thi s busi ness thro ugh Todd I nd ustr i es, a cor pora ti on wh ol l y o w ned by M i chel l e. InJu ly 2 00 0 t h e c or p or at ion w as d iss ol v e d by th e Illino is S ec r e t a r y o f S t a t e f o r f a i l u r e t o fi l e a n a n n u a l r e p o r t an dN o. 07

- 1995 3 pay st atuto ryfees . A fterdi ss olutio n, Less nonethel ess e nt e r e d i n t o a c o n t r a c t s u p p o s e d l y o n b e h a l f o fT o dd In d u st rie s t o p u rc h as e fry in g p an h an d les from H K E W ; i n tha ta g r e e men t, he m i s r e pr e s e nt e d t he l e g a l s t a t us o fT o dd I nd ustr i es. A fter re cei vi ng the w ar es, nei ther Les s nor To dd I nd us t r i e s p ai d f o r the m. I n J un e 2 0 0 5 HKEW ( re l yi ng on di ver si ty j uri sdic ti on) fi l ed a b re ach o fco ntra ct cl ai m ag ai nst Less , M i chel l e, and Todd I nd u st ries t o re cove r $166 , 252. 88. W hi l e that su i t was pending, Less m ade ar ra ngem ents for th e R ive rw oo d s h ou se to be s old t o h is law ye r, M itc h ell Roth. Roth pur c ha s e d the house thr ough hi s wholl y- own ed c o r po r a t i o n, R o th Ho l d i n g s , L L C

. ( Whe n a p p r o p r i a t e , we re f erto them co l l ecti vel y as “Roth. ”) M i tchel l Roth i s, acco rd i ng t o Le s s , a v e r y o l d a nd c l o s e f r i e nd o f Le ss, as w el l as the re gi ste re d agent f orTodd I nd ustr i es. Roth’ s l aw firm w as h an d lin g t h e litig at ion w i t h H K E W for L es s. A centr alco nd i ti on o fthe sal e o f the house w as that the Less f ami l y b e per m i tt ed to r emai n o n th e pr emi se s. ( I n l o o k i ng f ora buyerwh o w as am enabl e t o thi s a rr an ge m en t, Less a l so ap p ro ac h ed th e a c c ou n tin g firm th at h an d led h is ta x es an d an ot h er p ar ty w h o s e rela tio n sh ip to L es s is u n c er ta in ; b o t h d ec lin ed .) In 20 06 , L es s s ign ed th e s ale co nt r ac t as “ at to r ne y-i n- f ac t” f o r W erne r . ( Thi s i s th e tr ansact i on r efer re d to i n thes e pr oce edi ngs a s the 20 06 co nv eyance . ) Le ss a l so s i g ne d the l ea se fr o m Ro tht o the Les se s, whi chre qui r ed the Les se s t o pay al l m o r tg ag e, t ax , and otherexpenses o fthe proper ty and ga ve t hem an op tion to buythe pr o per tywi th i n a y ea r . Not ab l y , i n the m eanti m e the I RS l i ens had be en extingui shed by oper at i o n o fl a w; th i s me a n tth a tL e s s c o u l d o n c e a g a i n o wn4 N o. 07

- 1995 p ro p er ty w ith ou t w or ry in g t h at th e IR S w o u ld se ize it in s a t i s f a c t i o n o fh i s d e b tf o r th e 1 9 8 8 t a x e s . A s o fth e t i me the di s t r i c tc o ur ta wa r de d s um m ar y j ud g men tt o HKEW f o r th e fu l l a mo u n to f$ 1 6 6 , 2 5 2

. 8 8 , ma k i n gH K E W a j ud gm ent-cr edi toro fthe Lesses , the Riv er w oo ds house h ad be en co n ve ye d to R ot h

. H KEW fi l e d a mo t i o n i n th e d i s t r i c tc o u r tt o v o i d the 2006 conv eyan ce to R oth as a frau d ul e n t e ff ort on L ess’s pa r tt o a v o i d c r e dit or s. I ta l s o a s k e d the c o ur tt o s e ta s i de th e 20 02 c o nv ey an ce i n w hi chW erne r pur ch as ed th e Riv er w oo ds house , al though a cl ose r l oo k a t the m oti on s h ow s t h at it w as rea lly a re q u es t t o re for m th e 2 00 2 t itle and to est abl i sh a const ructi ve tr ust that r eco gni zes Less as the t rue pu rchas er a n d that a l l ows H K EW to r each th e prop erty to satisfy i ts j ud gm en t. T he d is t r ic t cou rt denie d the m oti on, and H K EW now app eal s.

II W e re view the dist ri ct c ourt ’ s l ega l co ncl usi ons deno vo, an d i t s find ings of f act for clear error. H ere, th e prim ary l e g a l i s s u e s c o n c e r n wh a tr u l e t o a p p l y f o r e v a l u a t i ng r es ul ting tr us ts , c o ns tr uct i ve t r us ts , a nd fr au dul en t co nve ya n c es . Th e fa c ts are larg ely u n c on te st e d . Illino is l aw go ver ns i n thi s di ver si ty sui t. T h e firs t is su e fo r u s is w h et h er t h e d ist ric t c ou rte rre d in fi nd i ng that the Lesses did not have any o w ners hi p i nter est i n the Riv er w oo ds house at a n y poi nt. H K EW r eco gni zes th at L es s a vo id e d ta kin g leg al t itle to th e h ou se , bu t it ar gu es th at h e h ad an eq u ita b le i n te re st in itth at it is en tit led to rea c h . Th e d ist ric t c ou rth ad th is t o s ay :N o. 07

- 1995 5 H K EW has not poi nted to any evi dence thati nd i cate s th at th e L ess D efend an ts ever h ad any legal or eq uitabl e i nt er es t i n the Hous e, either i n who l e o r i n pa r t. The parti es agr ee that W er ner pu rchas ed the H ouse f ro m W ar r en . Howev er, HK EW ha s no t po inted to a ny co nne ct i o n b etwee n the Les s Defen dan ts and W ar r en . N orhas H K EW sho w n that the Le ss Def endants gave a ny m o ney to Werner fo r th e pu rch a se ofthe H ouse. Thus, the undis pu ted f acts sho w thatthe 20 02 Convey ance did noti nvol ve a t ra nsf ero fany i nter estto o r f ro m the Less Def endants. (E m p h as is a d d ed .) The dis tr i ct c ou rt se em s t o have been ass um i ng tha t, u n d e r Illin ois law , an eq u ita b le in te re st (su c h as a b en efici ar y ’ s i nt er es t vi a a r es ul tingt r us t) c an no t ar i se unl es s th e partywh o enj oys the benefi ci ali nter estin the house an d who pay s th e m o r tg ag e al so c o ntri bu ted s o m e o fthe u p- f r o nt mo n e y t o wa r d th e p u r c h a s e o fth e h o u s e . As we expla i n bel ow, thi s i s no t the ca se, and a ny deci si on ba sed on that a ssum pti on ca nnot s tand. M or eov er, the i tal i ci zed l anguage i n the prece ding quote dem onst ra tes thatRoth i s i ncor re ct when i t a rg ues th at H K EW waive d the r esu l ting - tr us t a rgum en t byf ai l i ngt o r ai se i t be l o w. The di st r i ctc o ur t’ s l an g ua g e l ea ve s no do ubttha t i t co nsid er ed th e q u es tio n w h et h er L es s h ad an eq u ita b le i nter esti n the house. T he resul ti ng- tr ust a rg um ent has not been w ai ved, and thi s co urt m ay re vi ew the dist ri ct c o u r t ’ s r e s o l u t i o n o fth i s c l a i m. “[ A ] resul ti ng trust [ ar i ses ] w here verthe ci rcum sta nces surr ounding the di sposi ti on o fpro pertyr ai se an i nfe re nce, no t r eb ut te d, tha t th e tr an sfer o r do es no t i nt en d tha t th e6 N o. 07

- 1995 per so n t ak i ngo r ho l di ngthe pr o per ty

. . . s ho ul d ha ve the benefi ci al i nter est th er ei n. ” Kaibab Indus. , Inc. v. Fam ily R eady H om es, Inc. , 44 4 N

. E.2 d 1119, 11 26 ( I l l

. A pp . Ct. 19 83) ( o m i ss i o n i n o r i g i na l )

. A r es ul tingt r us t “c o m es i nt o b eing at the instant the t i tl e v est s o r not at al l

. ” Suwal skiv. Suwal s ki, 24 0 N .E. 2d 677, 67 9 ( I l l

. 19 68)

. N eve rthel ess , “[u]n d er Wr ight, Suwal s ki, a nd West, the suprem e co urt has exam i ned the co nd uct o fthe parti es su bs eq uent to the que st i o ne d c o nv ey an ce t o deter m i ne the i nt en t o fthe parti es at t he t im e of the c onvey ance. ” Key v . Key , 44 3 N

. E.2 d 81 2, 8 16 ( I l l

. App. Ct

. 1 98 2) ( em p ha si s adde d)

. “ [ T] he bur deno f pr o o f r es ts upo n the pa r tys ee k i ngt o e st ab l i sha re su ltin g t ru st, an d th e e vid en c e t o b e e ffec tiv e f o r th is pur po se mustb e cl ea r, c o nv i nc i ng, u nequi vo ca l, a nd unm i sta kabl e. ” Kaib ab , 44 4 N

. E.2 d at 1126

. The “cr uci al el em ent in cr eat i ng a re sul ting tr ust i s ‘ i ntent’ ” a nd “s uch i nt e n tc a n b e p r o v e d b y s u r r o u n d i n gc i r c u ms t a n c e s , b ut such proo fm ust be cl ea r and convi nci ng. ” Id. at11 26. A p p lyi ng those p r in ciples to th is case, th e d istri ct cou rt shoul d hav e c ond ucted an a nal ysi s o fthe ci rcum sta nces b efo re , d u rin g, an d aft er th e 2 00 2 c on ve ya n c e t o a sc er ta in th e i nt en t o fthe pa r ti es , r athe r tha n r el y i ngon th e si ngl e i nd i ci um o fup-fro nt paym ent o fpurchase pri ce. I l l i noi s co urts have f ound res ult i ng tr usts i n a v ar i etyo f ci rcum sta nces. S ee Key, 4 43 N. E. 2d at8 16 ( findi ng re sul ti ng tr ust i n f avo r ofa f at h er w h er e the co nveya nce w as i n the nam es of hi s tw o sons but the f atherpai d part of th e d ow n p ay m en t a n d m ad e a ll p ay m en ts to w ar d p rin c ipal and i nter esto n th e m or tga ge i nd ebte dn ess , as wellas paym ents f orr epai rs , i nsurance, and ta x es, and re cei ved th e cr ops fro m the l and). S ee al so Suwal s ki, 2 4 0 N. E.2 d at 67 9 ( r ev er sing appe l l at e co ur t an d ho l di ng th ata r es ul tingN o. 07

- 1995 7
tr us t, r athe r tha n a c o - te na nc y , was c r ea te d i n f av o r o fthe par e nt s wh e r e the s o n f r o nt e d $ 1 , 5 0 0 t o wa r d p ur chase pr i ce o fpr o per tya nd c o - si g ne d f o r the l o an but pai d no ne ofthe m or tga ge paym ents, taxes, insur ance prem i um s, o r costs of rep airs an d i m p rovem en ts, allof w hich w ere p aid by the fath er and m oth er). I n Wr ightv. Wr ight, 118 N .E .2d 28 0, 28 1-8 2 (Ill. 19 54 ), pl ai nt i ffr eque st ed defen dan t to a ppl y f o r a “ G. I

. l o an ” to assist her in raisi ng the p urc ha se p rice.

. . . Plaintiff said that she w ou ld p ay th e m ortgage d ebt. .

. . Plaintiff t e s t i fi e d th a ta tth e t i me o fth e t r a n s a c t i o n d e f en dan t s a i d : “ I d o n ’ t w a n t th e p r o p e r t y b e c a u s e i t i s i n my na m e only and you w il l ha ve to p ay for it, M oth e r, because Idon’ t want i t. ” The Wright cou rt fou nd th at “[t]i tle w as taken in th e son’s n am e fo r th e c on ve n ien c e o f h i s m ot h er an d for h er so le b en efit

. ” Id. at 283- 84 ( re ver si ng tr i alco urt and hol ding that p lai nt iff estab li sh ed a resultin g t r us t, w he re plaintiff pai d no part of the pu rchas e pri ce o fthe house but di d pay $206 up f ro nt f orthe pai nti ng o fthe house, as m andated by the s ale c ontr act, and pai d the m onthl y m or tga ge p aym en ts). The i denti ty ofthe parti es to the t ra nsacti on i n questi on i s al so r el ev an t unde r I l li no i s l aw. I n Kaib ab , the cou rt obs er ved thatthe pu rchas er i n a s uspect co nveya nce “was a bu sine ss a ss o ci at e an d fr i en d o fthe j udg m en t deb tor. Evi den ce fur th erdi sc l o se s th at[ th e j udg m en t deb to r ] a nd h is w ife re sid ed in t h e p re m ise s . . . p ro b ab ly c on tin u ou sly f r o m s o met i me i n the 1 9 5 0 ’ s”

— th ati s, b o thb efo r e an d af ter t he t r an sfero ft i tl e f r o m the j udg m en t deb to r t o the8 N o. 07

- 1995 f ri end-purchase r. 44 4 N

. E .2d at 112 6. The purchase r w as “a c r o ny o fthe j udg m en t deb to r . . . . Thr o ug ho utthe y ea r s, the pr o per tywas ti tl ed i n a m o th er - i n- l aw, s o n a nd f ri end ofthe j ud gm ent debt or . ” Id. at 1127 ( re ver si ng tr i al c ou rtan d h old in g t h at a re su ltin g t ru st w as cr ea te d in f av o r o f th e j udg m en t deb to r, th us al l o wi ng th e j udg m en t cre dit orto r each the pro pertythatthe j ud gm ent debt or ha d conv eyed to the cron y). The dis tr i ct c ou rt i n thi s ca se note d that “ W er ner al so had a per sonalinc en tive to al l ow the Less Defe nd ants to re si de i n the H ou se s in c e i t would as si st her daughter w i th housi ng and i t would al l ow her g ra nd chi l dren t o re m ai n i n the sam e schooldi str i ct. ” As H K EW poi nts o ut, how eve r, thi s “ perso nal i ncenti ve” is not a per sonal be ne fi t; i t i s i ns te ad a wi l l i ng ne ss t o a cc epta de tr i m en t ( l i ab i l i ty to p ayf o r the ho us e) , a nd i s hi g hl y c o ns i st en t w ith an int en t t o c re at e a res u ltin g t ru st for t h e b en efit ofW er ner’ s daughterand so n-i n-l aw , the Lesses

. The c o ur t al so st at ed th at “HKEW ha s no t sh o wn th atthe r en t pay m en ts made to W erne r pr ovi ded th e Les s Defen da n ts w i th any thi ng o therthan tem pora ryhousi ng fro m mo n th t o mo n th

. ” T h e c i r c u ms t a n t i a l e v i den ce s h o ws othe r wi s e . T he Le s s e s a dmi ttha tthe y we nts ho pp i ngf or a hou se, foun d on e they l iked, arranged f or M ichelle’ s m othe r to pu rchas e i t be cause Less a lleg ed l y c oul d not obt ai n cr edi t, and prom i sed to “pay re nt i n the f or m o f m or tga ge paym ents. ” In ad d iti on, al though Roth re peatedl y cl ai m s th at W erne r was r es po ns ibl e f o r paying the proper ty taxes ( presum abl y t o show that s he sho ulder ed the r esponsibi l i ti es ofow ners hi p), there i s r eas on t o bel i eveN o. 07

- 1995 9 th atthi s i s no t tr ue e i th er . W erne r t ec hni ca l l y o wned the h o u s e f or three an d a half years, and she w as th ree years b eh in d on th e p ro p er ty ta x es . W h en it ca m e t im e t o s ell ( whethe r b ec au se a c r edi to r ’ s j udg m en t l o o m ed on the ho r i z o n o r b e c a us e the Le s s e s c o ul d no l o ng e r a ff or d to m ake the m or tga ge paym ents) , i t w as Less w ho s c ou ted ou t a (cr on y) b u ye r an d n eg ot iat ed an d sign e d t h e sa le c o n t r a c ta s “ a t t o r n e y - i n - f a c t ” f o r W e r n e r . T h i s i s c o mpel l i nge vi den ce tha t Les s was the t r ue o wnerb utthe p a p e r wo r kh a d t o b e do n e i n We r n e r ’ s n a me . T h e c i r c u msta nces ofthe Roth- Less “l eas e” l end add i ti onalweight to th e i nfer en ce tha t Les s i nt en ded al la l o ng to ac t as the t r ue own er o fthe Riv er w oo ds house: he a gr eed to pay al l m or tga ge, ta x, i nsurance, m ai nten ance, and other o wne r s hi p e xp e ns e s o fthe pro per t y , a nd h e o b t a i ne d a ri ght- to- pu rchas e cl ause i n the l eas e. H KEW ha s pr es en te d c o m pel l i nge vi den ce o fa r es ul ting tr ust i n f avo r ofthe Lesses

. The d istr i ct c ourtf ai l ed to e v a l ua t e thi s e v i de nc e i n a c c o r da nc e w i th the s t a nd a r ds es ta b lish ed by Il lin ois law . In st ea d , it u se d a n ina p p ro p riate ly n ar ro w l ega l st andard w hen i t s houl d have eval uated Less’ s i ntent by exam i ni ng al l the ci rcum sta nces. Bef o r e l ea vi ng th i s to pi c, we add a wor d abo utthe k i nd of e q u ita b le in te re st L es s m ay h a v e h ad . In br iefin g t h is c as e, th e p ar tie s re fer re d int er c h an ge ab ly to an eq u ita b le i nt er es t an d to bo th co ns tr uct i ve an d r es ul ting tr us ts

. The do ct r i ne ofre su l tingtr us t r ec o g ni ze s an d g i ve s eff ec t to the ac tu almutua l i nt en t o fthe pa r ti es . By co nt r as t, the do ct r i ne ofco nstr ucti ve tr ust i s a n equi tabl e r em edy ba sed o n f ai rnes s. A co urt m ay i m pose a co nstr ucti ve tr ust o n10 N o. 07

- 1995 pr o per tya cqui r ed th r o ug h fr au d or th eft, wi ththe vi cti m as bene fi ci ar y, ev en tho ugh the defr auding party cer tai nl y di d not i ntend such an o utcom e. Al tho ugh i n the en d i tdo e s n o tma t t e r muc h f o r HKEW w hetherwe proce ed und erthe l aw o fr esul ti ng t ru sts or const ructi ve tr usts, i t s eem s to us that the 2002 tr ansact i on i s be tte r approached under the the or y o fr esul ti ng tr usts. The evi dence sugg est s t h at b oth W er ner and the Less es actual l y i ntended, at the t i m e the R iverw oo ds house was pur ch as ed byW erne r, tha t th e Les se s e nj o y the benefi ci ali nter esti n the proper ty. The theo ry ofco nstr uctiv e t ru st s b e c om es m or e a p p lica b le for th e p ot en tia lly f ra ud ule nt 20 06 tr ansact i on. W e n eed notdw el l o n w hi ch j ud i ci al l y c re ate d rem edy is b et tersui ted to thi s ca se, how eve r, bec ause i n I U FTA I l l i noi s has enact ed a s tatute to add re ss speci fi cal l y the fra ud ule nt tr ansfero fpro perty wi thi nt en t to e va de cr edi to r s. W e th er efo r e tu r n t o the o th erpr i nc i palque st i o n o n a ppea l, wh eth er Le ss fr au dul entl y t ra nsf er re d his i nter esti n the Riv er w oo ds house (w h et h er a re su ltin g t ru st or a co n st ru c ti ve tru st ) in 20 06 wheni t was c o nv ey ed to Ro th

.

III I U FTA , 74 0 I LC S 160/ 1 ets eq . , es tablishes th at a d ebtor’s tr ansfero fan a sse t be f or e o r aftera c re d i tor ’ s cl ai m ar ose is fra udul en t i fthe t r an sferwas made “wi tha ctua l i nt en t to h in d er , d ela y, or d efr au d an y cre d ito r of t h e d eb to r . . . .” 740 I LC S 160/5( a)

. I n de te rm i ni ng wh ethera tr ansferwas m ade wi th“ ac tu ali nten t,” c o ur ts s ho ul d c o ns i derthe f ol l owing f acto rs :N o. 07

- 1995 11 (1) th e trans fer orobli gation w as to an i ns ider; ( 2) th e deb to r r et ai ne d po ss es si o n o r co nt r o l of th e p rop erty tran sferred after the tran sfer; ( 3) the t r an sfero r o bl i g at i o n was di sc l o sed orc o nc e a l e d; ( 4) bef or e the tr ansferw as m ade oro bl i gat i on was i ncurr ed, the debtorh ad been sued orthr eat ened w i th sui t; (5) th e trans fer w as of subs tan tiall y allof th e d ebtor’s ass ets ; ( 6 ) the de b t o r ab s c o nd e d; ( 7) the debtorr em ove d orco nceal ed ass ets ; ( 8) the v al ue o fthe c o ns i d er at i o n r ec ei ve d b y the deb to r was r ea so nabl y e qui va l en t to the v al ue o fthe ass et tr ansfer re d orthe am ount o fthe obl i gat i on i nc ur r e d; ( 9) the de btor was i ns o l ve nto r b ec ame i ns o l ve nt shor tl y a fterthe tr ansferw as m ade orthe obl i gat i on wa s i nc ur r e d; (10 ) th e t ra n sfe r oc c u rre d sh or tly be for e o r sh or tly afte r a s ubs ta nt i alde btwas i nc ur r ed; a nd ( 11 ) the de bt o r t r an sfer r ed th e es se nt i ala ss et s ofthe busi ness to a l i enorwh o tr ansfer re d the as set s t o an inside r ofthe d ebtor. 740 ILC S 160/5(b). The dis tr i ct c ou rt hel d that, ev en supposi ng tha t Less po s s e s s e d a n o wne r s hi p i nt e r e s ti n the R i v e r wo o ds12 N o. 07

- 1995 ho us e, the r e ar e i ns uffi ci en t i ndi ci a po i nt i ngto fr au dul en t i nt en t i n the 2 00 6 co nv ey an ce . I n s uppo r t, i t no te d tha t “the Less De f e nd a nt s ma k e r e ntp a y men t s t o ” R o th, tha t “H K EW has not shown thatthe [ 2006 purch as e] pri ce o f [ $590 , 000] w as unreas onabl e i n l i ght of f acto rs su c h as unpa i d r ea l e st at e ta xe s,” and ( co nc l us o r i l y ) tha t “n o ev id e nc e has been pres en ted of w rongd oing on th e pa rt of W er n er , [Ro th ], or th e L es s D efe n d an ts .” This anal ysi s i s i nadequ ate. Esse nti al l y, the dist ri ct cour t add re sse d o nl y f acto r ( 8)

. I t apparentl y d id n ot consi der the o therf acto rs , f or i f i t had i t w oul d surel y hav e noti ced how m any poi nt to fr aud. ( 1) R oth, the tr ansfer ee, was a n i ns i der ; ( 2) the Le ss es r et ai ne d po ss essi o n o fthe proper ty afterthe tr ansfer ; ( 3) ther e i s s om e e vi dence that th e trans fer w as con cealed becau se t h e Le sses w ere evas i ve to H K EW about thei r hom e add re ss, possibly to av o i d i n q u i r y i n t o th e h i s t o r y o fth e i r r e l a t i o n t o t he Ri ve r woo ds pr o per ty ; ( 4) bef o r e the tr an sferwas made, the Lesses had b ee n sued by H K EW ; ( 5) the tr ansferwas of substa nti al l y a l l o fthe Lesses ’ ass ets ; ( 7) ther e i s e vi dence ofco ncealm en t ofas set s: i n hi ghl y e vasi ve tes ti m ony, Less a cknowle dges that he to ld the H K EW at torney that h e h ad n o m o n ey an d lat er ad m itt ed th at h e p aid h is expenses out ofa draw erfull ofcas h and that “I ’ ve had cash that I ’ ve kept on the si de”; ( 9) the Les se s w er e a l l egedl y i n so lvent ( though i t i s har d to tel l how the ca sh draw erfi gure s i nto thi s) ; and ( 10) the tr ansfero ccurr ed shor tl y b ef or e s um m ar y j ud gm ent was e nt er ed aga i nst the Less es i n an am ount e xceedi ng $1 60, 000. The di str i ct cou rt erred by f ail ing to con d uc t th e t horou gh i nq uiry re quir ed by I U FTA t o deter m i ne wh etherthe tr ansfer w as f ra ud ule nt.N o. 07

- 1995 13 IV H K EW has shown that i t i s enti tl ed to one m or e c h an ce to show t h at t h e Ri ver w oo ds house shoul d be t re ate d as an assetbel ongi ng to Less and that i t m ay re ach that a sse t i n sat i sf acti on o fi ts debt. W e R EV ERSE the j u d gm ent o f the di s t r i c tc o ur ta nd R EMA ND fo r furtherpro ceedi ngs consi ste nt with thi s o pini on. On re m and, Cir cui t Rul e 3 6 shal l apply

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