2013 Commercial Law Developments -- IV. Fraudulent Transfers
IV. Fraudulent Transfers

March 24, 2014

  • Wachovia Sec., LLC v. Banco Panamericano, Inc., 674 F.3d 743 (7th Cir. 2012) -- A corporation's grant of a blanket lien to a lender controlled by the corporation's subsidiaries was an intentionally fraudulent transfer designed to shield the corporation from its financial obligations because: (1) the debtor entered into the transaction shortly before or after incurring substantial debt to its stock broker; (2) the loan was between insiders; (3) the debtor retained possession or control of the property; (4) the transfer was of most of the debtor's assets; and (5) the debtor was insolvent or became insolvent shortly after the transfer.
  • In re Northlake Foods, Inc., 715 F.3d 1251 (11th Cir. 2013) -- Debtor S corporation filed for Chapter 11 bankruptcy protection. The debtor had made a transfer dividend paid to its member as reimbursement for paying the debtor's taxes. The transfer was not fraudulent because the transfer did not make debtor or its creditors worse off, as the debtor would have had to pay the taxes itself had it not been an S corporation.
  • Paloian v LaSalle Bank Nat'l Ass'n (In re Doctors Hospital of Hyde Park), 2013 Bankr. LEXIS 4244 (Bkrtcy. N.D.Ill. 2013) -- The latest edition in a series of cases analyzing fraudulent transfers, bankruptcy remoteness, and security interest issues, on remand from the Seventh Circuit. The decision involves findings of fact that the challenged sale of assets was made at a time the seller was solvent, was made to a stand-alone bankruptcy remote entity, and was a true sale.

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