Opinion ID: 200761
Heading Depth: 1
Heading Rank: 2

Heading: the bench decision

Text: 9 All of these claims were tried to the court. The trial ended in a bench decision handed down on April 23, 2002. As we explain below, each side got half a loaf.
10 The first count of Federal's complaint asked the court to invalidate the stock transfer as a fraudulent conveyance under section 4 of the Uniform Fraudulent Conveyance Act (UFCA). 2 The UFCA's constructive fraud provision, in force in 1988, read: 11 Every conveyance made and every obligation incurred by a person who is or will be thereby rendered insolvent is fraudulent as to creditors without regard to his actual intent if the conveyance is made or the obligation is incurred without fair consideration. 12 Mass. Gen. Laws ch. 109A, § 4 (repealed 1996). The district court determined that Romano's 1988 conveyance violated this section. It set aside the transfer to the trust and decreed that the 17,500 shares of stock were deemed to be in the unencumbered possession of ... Romano.
13 Counts II through IV of Federal's complaint alleged that the purpose and effect of the creation and funding of the partnerships was to dilute the value of Romano's stock. On this basis, Federal sought to collapse the limited partnerships. In mounting this attack, it relied upon both UFCA § 4, quoted supra, and UFCA § 7. The latter provision is an actual fraud provision. Throughout the relevant time frame, it read: Every conveyance made and every obligation incurred with actual intent, as distinguished from intent presumed in law, to hinder, delay or defraud either present or future creditors, is fraudulent as to both present and future creditors. 14 Mass. Gen. Laws ch. 109A, § 7 (repealed 1996). 15 The district court ruled against Federal on these counts. It rejected Federal's constructive fraud claim, finding that the corporations were the actual transferors and that they were not insolvent at the times of the transfers. The court likewise rejected the claim of actual fraud, crediting evidence that there was a legitimate business purpose behind the creation and funding of the limited partnerships, namely, that the restructuring was a prerequisite to obtaining needed financing from the United States Department of Housing and Urban Development (HUD).