the complaint or in plaintiff's papers in opposition to the motion that the transaction was not made at arm's length with an unrelated purchaser or that the assets of Title-Dallas were depleted in any way in connection with the sale of its stock to Title-USA.
In 1986, Martes filed suit against Title-Dallas and others, apparently with respect to his claim on his title policy. (Martes Aff. P 3; Cpt P 3) In July 1989, Martes obtained a judgment against Title-USA for $ 165,000 and Title-USA appealed.
(Hohn Aff. Ex. E; Martes Aff. P 4) In November 1989, however, Title USA was placed in receivership by the California Commissioner of Insurance who, on December 7, 1989, ordered its liquidation. (Hohn Aff. Ex. D) In January 1990, when Title-USA's appeal was dismissed, plaintiff was left with a judgement against a company in liquidation and allegedly was prohibited from seeking to execute on the judgment by order of the California authorities. (Martes Aff. P 5)
Plaintiff commenced this action against USLIFE on December 26, 1995. The complaint contains two claims for relief. The first alleges that USLIFE's 1985 transfer of the stock of Title-Dallas to Title-USA was fraudulent as to plaintiff, allegedly a creditor, because it was made with actual intent to defraud, hinder or delay plaintiff and in June 1994 prevented plaintiff from collecting his judgment against Title-USA. The second is based on the same events, claiming that USLIFE's receipt of the $ 22 million purchase price for the Title-Dallas stock in February 1985 unjustly enriched USLIFE.
The parties have spent a good deal of energy debating the timeliness of plaintiffs claims, which indeed is questionable. But there is a far more direct route to disposition of the case. There was no fraudulent conveyance and no unjust enrichment.
The only basis alleged for plaintiff's fraudulent conveyance claim is the contention that USLIFE knew at the time of the sale of Title-Dallas to Title-USA that plaintiff had an unliquidated claim against Title-Dallas and that Title-Dallas "would be left without any assets after the transfer and that the transfer would defraud plaintiff ... as a creditor." (Cpt P 4) This assertion, of course, rests on the premise that USLIFE "transferred the assets and stock of" Title-Dallas. (Id.) (Emphasis added) The premise, however, is incorrect As the Purchase Agreement shows, USLIFE sold only the stock. (Hohn Aff. Ex. A) There is no evidence or, for that matter, claim that the assets of Title-Dallas were depleted in connection with the sale. Put in the language of the statute, there was no conveyance by Title-Dallas of anything. See N.Y. DEBTOR & CRED. L. §§ 270, 276 (McKinney 1990). Hence, the sale necessarily left Title-Dallas in exactly the same position vis-a-vis its ability to respond to the claims of creditors as it occupied before the transfer, and there was no fraudulent conveyance.
Nor did the sale of the stock constitute a fraudulent conveyance of which plaintiff may complain. To begin with, even if a transfer is made with actual intent to defraud creditors, one must be a creditor in order to complain. Id. § 276. A "creditor" is one who has a "claim, whether matured or unmatured, liquidated or unliquidated, absolute, fixed or contingent." Id. § 270. The only entity that transferred anything here was USLIFE. But plaintiff was not a creditor of USLIFE; he was a creditor only of Title-Dallas. Hence, he lacks standing to complain of any fraud in the sale of USLIFE of its shares in Title-Dallas.
Even if plaintiff did have standing, he has failed to allege facts sufficient to state a claim for relief or to adduce evidence sufficient to raise a genuine issue of fact material to the question whether the sale of stock in Title-Dallas was fraudulent as to USLIFE's creditors. Because actual fraudulent intent cannot often be proved by direct evidence, the party seeking to upset a transfer generally is given the benefit of an inference of fraud if the circumstances of the transaction bear certain indicia, generally referred to as badges of fraud. E.g., In re Fill, 82 Bankr. 200, 220 (Bankr. S.D.N.Y. 1987); Marine Midland Bank v. Murkoff, 120 A.D.2d 122, 128, 508 N.Y.S.2d 17, 21 (2d Dept. 1986), appeal dismissed, 69 N.Y.2d 875, 514 N.Y.S.2d 1029, 507 N.E.2d 322 (1987) (table). These include:
"(1) a close relationship among the parties to the transaction; (2) secrecy and haste of the sale; (3) inadequacy of consideration; and (4) the transferor's knowledge of the creditor's claim and his own inability to pay it." ACLI Government Securities, Inc. v. Rhoades, 653 F. Supp. 1388, 1394 (S.D.N.Y. 1987).