Opinion ID: 200761
Heading Depth: 1
Heading Rank: 5

Heading: the transfer to the b & t trust

Text: 23 UFCA § 4 sets out two basic conditions for setting aside a transfer on the ground of constructive fraud: the transferor must have (i) been insolvent at the time of the conveyance (or rendered insolvent by it), and (ii) made the conveyance without fair consideration. Boston Trading Group v. Burnazos, 835 F.2d 1504, 1510 (1st Cir.1987). A person is insolvent for these purposes when the readily realizable market value of his assets is less than the amount required to pay his existing debts as they become due. First Fed. Sav. & Loan Ass'n v. Napoleon, 428 Mass. 371, 701 N.E.2d 350, 353-55 (1998). Fair consideration is given in exchange for transferred property when, as a fair equivalent therefor, and in good faith, [other] property is conveyed or an antecedent debt is satisfied. Boston Trading Group, 835 F.2d at 1512 (quoting former Mass. Gen. Laws ch. 109A, § 3 (repealed 1996)). 24 On appeal, Romano mounts a rather anemic attack on the district court's initial insolvency determination. He argues, in substance, that the court could not reach a decision as to his solvency without some evidence as to the value of the Essex stock. This argument is jejune. His own testimony established that the 17,500 shares of Essex stock were his only significant asset at the relevant time (1988) and that he was then personally obligated to repay over $10,000,000 in loans that were about to go into default. If the stock had little value, Romano was insolvent. Conversely, if the stock's value exceeded Romano's massive liabilities, then the transfer would have rendered him insolvent. Either way, Romano's attack misfires. 25 His challenge to the court's conclusion that the transfer lacked fair consideration is hopeless. He admitted that he received no money or property in return for the shares. And although his brief includes a perfunctory assertion that the transfer was in fact adequately supported by the love and affection of his children, he points us to no case law that suggests that, for purposes of the UFCA, such intangibles may supplant money, property, or satisfaction of an antecedent debt as fair consideration. 26 Romano's only colorable argument implicates the district court's ruling in response to a motion in limine. In the pretrial proceedings, Romano identified an expert witness whose testimony was intended to show that, at the time of the conveyance to the B & T Trust, the 17,500 shares were worthless. Federal moved in limine to exclude the testimony. Romano objected, exhorting the court to allow his expert to testify on the theory that a fraudulent conveyance action will not lie if the asset conveyed is worthless at the time of transfer. 3 The court granted the motion in limine, holding that the value of the stock was legally irrelevant. Romano asks us to overturn this ruling, vacate the order setting aside the transfer, and remand for further proceedings. 27 As framed, this assignment of error presents an abstract legal question regarding the proper interpretation of a state statute. Such questions engender de novo review. See Salve Regina Coll. v. Russell, 499 U.S. 225, 231, 111 S.Ct. 1217, 113 L.Ed.2d 190 (1991); Protective Life Ins. Co. v. Dignity Viatical Sett. Partners, 171 F.3d 52, 54 (1st Cir.1999). 28 Our starting point is, of course, the statutory text. UFCA § 4 authorizes the setting aside of certain conveyances. It defines a conveyance as every payment of money, assignment, release, transfer, lease, mortgage or pledge of tangible or intangible property, and also the creation of any lien or incumbrance. Nothing in the statute qualifies the term property or in any way indicates a legislative intent to limit the statute's reach to conveyances involving property having a positive market value. 29 Finding no comfort in the language of the UFCA, Romano falls back upon the decision in Richman v. Leiser, 18 Mass. App.Ct. 308, 465 N.E.2d 796 (1984). That decision cannot carry the weight that Romano loads upon it. 4 30 In Richman, an unsecured creditor attempted to set aside a conveyance of property encumbered by liens exceeding its market value. Despite a showing of fraudulent intent, the court refused to invalidate the transfer. The court began with the proposition that [a] conveyance is not established as a fraudulent conveyance upon showing of a fraudulent intention alone; there must also be a resulting diminution in the assets of the debtor available to creditors. Id. at 798. It found no such diminution, reasoning that the complaining unsecured creditor could not have reached the property before the conveyance, and so the conveyance itself could not have been fraudulent as to him. Id. at 799 (quoting Stauffer v. Stauffer, 465 Pa. 558, 351 A.2d 236, 245 (1976)). 31 Romano reads this language to signify that a fraudulent conveyance claim will not lie unless a debtor has equity in the transferred property. Richman, however, does not sweep so broadly. The linchpin of the Richman decision is the principle that a transfer of fully encumbered property (i.e., property that is mortgaged for more than it is worth and, thus, has no residual value) puts no otherwise available assets beyond the grasp of an unsecured creditor. That principle makes good sense: whether or not the debtor effects a transfer, the accumulated security interests will prevent an unsecured creditor from reaching and applying the overencumbered property. Cf. Stauffer, 351 A.2d at 245 (refusing to set aside a conveyance of property held by the entireties because the husband's creditor could not have reached the asset pre-conveyance). 32 The case at hand is cut from a different cloth. The shares of Essex's stock were free and clear at the time that Romano signed them over to the B & T Trust. Absent the transfer, Federal could have reached the stock — whatever its value — in an effort to satisfy the judgment. Thus, the transfer put property that would otherwise have been available out of the complaining creditor's reach. For that reason, Richman is inapposite. 33 This result comports with the policies underlying the UFCA. The purpose of the UFCA is to preserve a debtor's assets so that creditors may look to them in the event that the debtor ceases payments.... First Fed. Sav. & Loan, 701 N.E.2d at 354-55 (citations omitted). A debtor may not give [his assets] away and thereby put them beyond the reach of creditors. Id. at 355. Given the district court's factual findings, Romano's conduct falls into the heartland of the prohibition against fraudulent conveyances. Allowing an exception on the ground that the shares were worthless would be at odds with the rationale underlying that prohibition. We conclude, therefore, that the district court did not err in granting the motion in limine. 34 Romano makes a related claim of error implicating the district court's denial of his motion for judgment as a matter of law. See Fed.R.Civ.P. 52(c). In the course of arguing that motion, he vouchsafed that Federal could not make the required prima facie showing of Romano's insolvency at the time of the transfer without some evidence as to the value of the shares. He now assigns error to the court's denial of this motion. This is an old whine in a new bottle. The argument essentially repeats a claim already made and rejected. See supra p. 10. As said, the evidence established that Romano was deeply in debt at the time of the transfer and that the transferred stock had been his only substantial asset. Hence, Federal made out a prima facie case of insolvency. Since Romano did not rebut this showing — indeed, he made no discernible effort to do so — the lower court did not err in denying the motion for judgment as a matter of law. 35 Before leaving this transfer, we address one related item. At the tail end of its brief, Federal makes a perfunctory argument to the effect that the district court erred in denying its request for attorneys' fees. 36 We need not tarry. Federal's offhand pitch is unaccompanied by any developed argumentation. Under our precedents, therefore, it merits summary rejection. See, e.g., Blake v. Pellegrino, 329 F.3d 43, 50 (1st Cir.2003); Ryan v. Royal Ins. Co., 916 F.2d 731, 734 (1st Cir.1990); United States v. Zannino, 895 F.2d 1, 17 (1st Cir.1990). In all events, neither the UFCA nor the guaranty contains a fee-shifting provision, and Federal offers us no reason to exempt this case from the usual rule that, absent a specific statutory or contractual fee-shifting provision, a prevailing party cannot recover attorneys' fees as of right from the losing party. See Chambers v. NASCO, Inc., 501 U.S. 32, 45, 111 S.Ct. 2123, 115 L.Ed.2d 27 (1991); Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240, 258-59, 95 S.Ct. 1612, 44 L.Ed.2d 141 (1975). 37