The opinion of the court was delivered by: ROBERT W. SWEET
Plaintiff pro se Ruth Welt ("Ruth Welt"), wife of third party defendant Dr. Martin Welt, Ph.D. ("Martin Welt") has moved pursuant to Rule 56, Fed. R. Civ.P., for summary judgment on a promissory note made out to Martin Welt by defendant Alvin Abrams ("Abrams") and assigned by Martin Welt to Ruth Welt on October 24, 1989. Abrams has cross-moved for summary judgment against Ruth Welt with respect to assignment of the Note. For the reasons given below, the motion of Ruth Welt is denied and the motion of Abrams is granted and the complaint dismissed.
Martin Welt, a nuclear physicist formerly associated with the United States Atomic Energy Commission, founded Radiation Technology Incorporated (RTI) in 1968. RTI owned several irradiation facilities, including one in Rockaway, New Jersey (the "Rockaway Plant"). The Rockaway Plant was licensed by the U.S. Nuclear Regulatory Commission to use a radioactive byproduct, Cobalt-60, as part of its operations. A variety of safety mechanisms had been installed at the Rockaway Plant in order to prevent any person from coming into contact with radiation from the Cobalt-60. Proceedings before the Federal Nuclear Regulatory Commission (NRC) concerning these safety mechanisms led to a criminal action by the United States government against RTI and Martin Welt, suspension of RTI's license to operate the Rockaway plant starting in June, 1986, and a fine which the corporation paid.
On December 24, 1986, RTI stopped paying Martin Welt under his consulting contract, and in January, 1987, Martin Welt filed suit in New Jersey Superior Court for breach of contract. Presumably as part of arrangements to sever his relationship with RTI, Martin Welt then sold 483,835 shares of RTI stock to Abrams, a former underwriter of RTI, for $ 1,088,628.70, on February 12, 1987 in New York City. This amounts apparently represented about half of the shares which Martin Welt then owned in RTI; at that time, at least another 27,000 shares were owned by his wife and some 50,000 were owned by his children. Martin Welt received $ 200,000 in cash and was given a promissory note (the "Note") by Abrams for the balance of $ 888,628.70. RTI's shares trade over the NASDAQ exchange.
RTI filed counterclaims against Martin Welt in the breach of contract suit in New Jersey, in February, 1987, alleging loss of customers and other damages to the company ultimately based on his actions, and began conducting an internal investigation of Martin Welt's activities. Martin Welt then began to transfer his property to other members of his family (the "Welt Group"); among these transactions were a transfer of 31,500 shares of RTI stock to his wife in April, 1988, and a transfer of the Note to her on October 24, 1989.
Ruth Welt then filed this action to collect on the Note in the Southern District of New York on January 5, 1990. Abrams counterclaimed alleging that Welt had concealed from him the extent to which Welt's activities had damaged both RTI's business and the value of its stock.
In the parallel New Jersey action, however, RTI alleged that certain of Martin Welt's transfers of his property, including the transfer of the Note, were fraudulent conveyances under New Jersey law. In an Opinion dated February 18, 1993, the Honorable Burrell Ives Humphreys agreed:
It is inconceivable that a person of Dr. Welt's intelligence and scientific and business experience would not realize that he was facing enormous damage claims by RTI. His transfer of his property was to "protect" himself against that eventuality, to quiet his "fear" and to give his family "security". In other words, his purpose was to hinder, delay and defraud RTI in the collection of their damages. . . . This is a classic fraudulent conveyance case. . . . Welt's transfers are all invalid as against RTI.
Welt v. RTI Technologies, Inc., 1306-87E, slip op. 11, 13-14 (N.J. Sup. Ct., Feb. 18, 1993). By Order filed April 1, 1993, Judge Humphreys stated that Ruth Welt had never had an interest in the Note and directed the Special Master in the New Jersey action, who has current possession of the Note, to continue to hold it until RTI could levy upon it to satisfy any judgments which might be awarded against it on its counterclaims against Martin Welt. By order dated May 13, 1993, Judge Humphreys denied Martin Welt's motion for reconsideration. At a hearing held June 11, 1993, Judge Humphreys determined that Martin Welt owed his former company RTI $ 1.7 million on its counterclaims against him.
Ruth Welt filed this motion for summary judgment on the Note on May 29th, and the papers were taken on submission on June 3rd. Abrams cross moved for summary judgment on June 9th, 1993. Late filed papers were accepted by the Court, ...