The Schaefers also argued that they were in "good faith" in regard to the transfers to G.R.D. were a fraudulent arrangement between Schaefers and their sons to shield non-exempt assets from the parents’ creditors by converting them to “exempt wages.” The court concludes that the transfers to G.R.D. However, if it was not economically equivalent, the transfer was structured by Schaefers to put their non-exempt property out of the reach of their creditors, and in the hands of their sons, while Schaefers were financially distressed. was economically equivalent to the compensation to be paid them, the compensation should not be attributed to the real estate transfer in determining whether they received reasonably equivalent value for their property. If the value of their promise to provide labor to G.R.D. The term of the contract was based on Schaefers’ desire to have regular, substantial income and guaranteed health insurance coverage until they received Social Security benefits. The agreement guaranteed health care coverage without regard to cost. would continue to own the properties transferred to it in 2001. The agreement guaranteed Schaefers’ wage income at a higher level than they had ever had before, regardless of whether G.R.D. Larry said that if he and his wife were unable to perform the physical work of managing the properties, they could hire someone else to do it. Larry and Elaine received identical salaries, without regard to whether they performed different tasks or worked different numbers of hours. The qualitative terms of the employment agreement were not based on the value of Larry and Elaine’s services in the marketplace. Notwithstanding Schaefers’ failure to prove that any portion of the stream of benefits is not truly wages, there are aspects of the arrangement which support an inference that the intent of the agreement was to defraud creditors. The Court also noted the absence of anything like an arm's-length sale of the property to G.R.D., and that the couple (the Schaefers) would earn equal salaries even if they put in unequal labor plus, the healthcare benefits would be provided to them regardless of cost. The Court noted that since the couple managed G.R.D., it was a statutory insider under the Iowa UFTA. The Bankruptcy Trustee then filed an adversary action to avoid the transfers under both Iowa's Uniform Fraudulent Transfers Act and Bankruptcy Code § 548. Investments LLC, and transfer all their non-homestead real property to the company in exchange for a fifteen-year "employment agreement" that paid them a small wage each year and guaranteed health care benefits. Wife filed for bankruptcy, but it was dismissed, and thereafter the couple sought the services of an Iowa attorney who helped them form G.R.D. 401 (Bk.N.D.Iowa, 2005), an Iowa farming couple were sued in Oklahoma for breach of a grain contract, and lost that case to the tune of $127,125. Bankruptcy Code, which is bankruptcy's fraudulent transfer provision. The Interpool result has been the same with cases arising under Section 548 of the U.S. In the end, the Court entered a Turnover Order for the property that the debtor and his wife transferred to RMC Holdings LP. The debtor argued that Florida law, not New York law, should apply, but the Court held that it didn't make any difference since the transfers would have been voidable under Florida fraudulent transfer law as well. Viewing the transfer from the standpoint of Cuneo's creditors and their legal rights vis-a-vis Cuneo's partnership interests, the conveyance was not an exchange for equivalent value. Creditors can reach only Cuneo's right to the receipt of whatever distributions that the partnership-consisting only of Cuneo and his wife-chooses to makes, but cannot reach his rights in specific partnership property or, far more important, his right to participate in management. Cuneo exchanged $1.4 million in cash and securities for general and limited partnership interests in RMC in which he received essentially three rights-the right to receive income and capital distributions from the partnership, the rights in the specific partnership property, and the right to participate in management. Noting that "reasonably equivalent value" is always measured from the perspective of creditors, the Court held that the debtor (Cuneo) and his wife had committed a fraudulent transfer and thus rendered themselves judgment proof:Ĭuneo has done just that by rendering his $1.4 million in property virtually unreachable by the judgment creditor. The debtor lost his trial, and a judgment against him for over $4.8 million was entered, and shortly thereafter the creditor moved to void the transfers in violation of New York's fraudulent conveyances laws.
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