and most likely RAF actually lost money on the arrangement.
Fitzner confirmed that assumption. He testified that RAF lost about $ 400,000 in 1989 due in part to the expenses and cost related to its involvement with the liquidation of Power. He testified that RAF incurred far more expenses than the $ 1.1 million balance in the Power account when it closed business.
BURDEN OF PROOF
In a proceeding under § 5225, "the creditor has the burden of establishing that his rights are superior to those of the transferee. ... The burden of proof is on the creditor seeking to set aside a conveyance as fraudulent to establish that the debtor's conveyance was made without fair consideration." Gelbard, 96 A.D.2d at 576.
Petitioners contend that RAF has the burden of justifying the nature and value of the services it performed as consideration for Power's conveyance of its securities. In support of this contention, petitioners rely upon the statement in Gelbard that where the evidence concerning the nature and value of the consideration is within the transferee's control, the burden shifts to the transferee to "come forward with evidence disclosing the nature and value" of the consideration, as well as the fairness of the consideration. Id. Petitioners are incorrect, however, in asserting that defendants in such a situation have the burden to "justify" the consideration; see Plaintiffs' Memorandum of Law at 3. It is only the burden of production, not the burden of persuasion, that shifts to the transferee. MFS/SUN Life Trust-High Yield Series v. Van Dusen Airport Serv. Co., 910 F. Supp. 913, 937 (S.D.N.Y. 1995) (citing United States v. McCombs, 30 F.3d 310 (2d Cir. 1994)).
In addition, I am not convinced that this rule is applicable in the case at bar in any event. In McCombs, the Second Circuit held that the burden-shifting described in Gelbard will occur only where there is an intrafamily conveyance and either an absence of any tangible consideration, or a clandestine transfer of property designed to conceal the nature and value of the consideration. 30 F.3d at 325. The court held that the district court had erred in shifting the burden to the intrafamily transferee in McCombs where neither of those two factors was present.
The instant case involves neither an intrafamily transfer, nor a total absence of consideration, nor a clandestine transfer of property. Furthermore, I am not persuaded that the evidence concerning RAF's services that formed the consideration for Power's conveyance is solely within RAF's control at this point, given the vast amount of material that has been produced in this case through discovery.
Even if the burden of production were on RAF, however, I find that RAF has come forward with evidence showing what services it performed, and the value of those services. After hearing the testimony at trial, I am also convinced that those services constituted fair consideration for the conveyance by Power.
"In general, repayment of an antecedent debt constitutes fair consideration ..." Atlantic Shipping, 818 F.2d at 249. In the instant case, the transfer by Power was a payment of a debt that RAF had charged against Power's account on February 17, 1989.
SUMMARY OF FINDINGS AND CONCLUSIONS
After hearing the testimony at trial, and reviewing the evidence submitted by both sides, I find that the conveyance of securities by Power to RAF was supported by adequate consideration, and that plaintiffs are therefore not entitled to recover against RAF. The evidence showed that the charge imposed by RAF for its services in closing out Power's accounts was entirely reasonable. There is no evidence to the contrary.
I find as a fact and conclude that RAF undertook a substantial task in liquidating Power's business and distributing stock and concluding transactions for 35,000 customers. Certainly RAF was entitled to some compensation for its labors which took place over several years. Although the arrangement was for approximately $ 1.5 million in fact RAF only received approximately $ 1.1 million. There has been no proof submitted by testimony or other evidence that fees in that amount for RAF's efforts in this type of proceeding were unreasonable. The testimony of Fitzner and Keller stands unrebutted that the fee arrangement for such a task was reasonable.
In sum, this turnover proceeding must be decided against petitioners. There simply is no property or money still existing that belongs to Power for petitioners to attach. All of the money was justly earned by RAF for its extensive labors in dealing with Power's liquidation as the final clearing broker. Petitioners, therefore, have no "interest" in any assets of RAF. RAF has no money or assets belonging to or owed to Power. On this record, with no proof that the fee was excessive or the work negligible there is no basis to conclude that RAF expropriated moneys justly due to Power or its creditors.
The petition against RAF Financial Corporation to enforce petitioners' judgment against Power Securities Corporation from money and assets in the possession of RAF Financial Corporation is dismissed.
IT IS SO ORDERED.
DAVID G. LARIMER
UNITED STATES DISTRICT COURT
Dated: Rochester, New York
December 11, 1996