Southern New England Telephone Company v. Sahara and Arden, Inc. et al, No. 2:2009cv00534 - Document 61 (D. Nev. 2010)
Court Description: ORDER Granting 46 and 47 Plaintiff's Motions for Summary Judgment. IT IS FURTHER ORDERED that the transfer of property from Global NAPs Realty, Inc. to Sahara & Arden, Inc. via quitclaim deed is set aside as a fraudulent conveyance. IT IS FURTHER ORDERED that this order shall serve as a writ of execution against the above-named parcels in favor of Plaintiff. Signed by Judge Robert C. Jones on 5/18/10. (Copies have been distributed pursuant to the NEF - EDS)
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. F .----.- 1 .- .. ' ' ' ' '> rn kt:(:, ----------.;# . yy c (;(r, -1.,C,. y' -)' .' .. ': 6 . Llt' ; ''ç j (r l .....-.. 2 l ' ) : s ) ! 3 $ .i . :. -w t p g yl F vut k. r . ( )j .. -f. .. f . .. . ... 4 . ... i ' ' :j$ ! é F l 5 6 UN ITED STA TES D ISTR ICT CO UR T 7 D ISTRICT O F N EVA DA 8 THE SOUTHERN NEW ENGLAND TELEPHONE CO., 9 Plaintifll 10 vs. l1 SAHARA & ARDEN,INC.etal., l2 Defendants. 13 14 ) ) ) ) ) ) ) ) ) ) ) 2:09-cv-00534-RCJ-PAL ORDER ThiscasearisesoutofamoneyjudgmentinfavorofPlaintifl-intheU.S.DistrictCourtfor 15 the D istrictofConnecticutand the allegedly fraudulenttransferofa piece ofrealproperty between 16 Defendantsin Nevada.BeforetheCourtisPlaintiffsM otion forSurnmaryJudgment(//46,//47).1 17 Forthe reasonsgiven herein the Courtgrants them otion. Southern New England Telephone Company v. Sahara and Arden, Inc. et al Doc. 61 18 1. FAC TS AN D PRO CED UM L H ISTO RY 19 In2004,Plaintifrl-heSouthernNew EnglandTelephoneCompany($'SNET'')suedGlobal 20 NAPS,lnc.itltheU.S.DistrictCourtfortheDistrictofConnecticut(thettdistrictcourt'')overunpaid 21 chargesforservicespursuanttoSNET'SfederaltariE (Compl.!12);seeTheS..VEzi4zEngland Tel. 22 Co.v.GlobalNAPS,Inc,No.3:04-cv-2075-JCH (D.Colm.l(Hall,J.). InM ay2006,thedistrict 23 courtgrantedSNET aprejudgmentremedyof$5.25million.(Compl.!(13).RichardGangitestificd 24 25 lplaintifrpresentsthe motion in both redacted and unredacted form . Dockets.Justia.com I 1 thatGlobalNA. P8 did nothave the assets to satisfy the rem edy and thathe owned severalother 2 companiesthatshared assetsand ftmctioned foracommon purpose.(f#.!!14). SNET therefore 3 amendeditscomplainttoaddGlobalNApsRealty(çtRealty''),GlobalNApsNetworks(tt Networks''), 4 GlobalNAPSNew Hampshire(tçNew Hampshire''),andFerrousM inerasdefendants,allegingthat 5 theseentitieswerea1lalteregosofGlobalNAPS.(f#.!j15).Thedistrictcourteventuallysanctioned 6 G lobalNA PS under Rule 37 for failing to comply with the Court's discovery ordersto turn over 7 fmancialdocumentstoPlaintis (f#.!(16).Later,thedistrictcourtenteredpartialsurnmaryjudgment 8 in favorofPlaintifrfor$5,247,781.45 in unpaidcharges(1d.! 17). Afterfmding GlobalNAP in 9 contemptforviolatingtheprejudgmentremedyorders,thedistrictcourtorderedGlobalNAPtopay l0 $645,761.41 in costsand fees.(1d.!(18). The districtcourtlater found thatalldefendantshad ll willfullyviolatedthecourt'sdiscoveryorders,anditenteredadefaultjudgmentagainstal1defendants 12 as a sanction,including on Plaintiff's claim that Realty,N etw orks,New H ampshire,and Ferrous l3 M inerarealteregosofoneanotherliableforthedebtsofGlobalNAps.(Id.! 19).2Thedistrictcourt 14 entered 5naljudgmentagainstalldefendantson July9,2008 and on October 17,2008 granted 15 Plaintiffsmotiontoregisterthejudgmentitlotherstates.(f#.IJ !20,22).Thejudgmentremains 16 almostentirelyunsatisfed.(Id.!23). 17 PlaintiffsuedSaharaandArden,Inc.(içsahara'')and RealtyinthisCourtonasinglecauseof 18 actionforFraudulentTransferandhasnow movedforsummaryjudgment.Plaintifrseekstosetaside 19 a conveyance from Realty to Sahara ofa piece ofrealproperty (the dsproperty'') located at the 20 intersection of Sahara Ave.and Arden St.in Las Vegas,N evada. PlaintiF alleges that Sahara is 2 1 wholly ow nedby Frarlk G angi,thc sam eperson w ho ow nsevery defendantcompany involvtd in the 22 Connecticutlitigation,whichcompanieshavealreadybeenruledtobealteregosofoncanother.(Id. 23 24 2Itis im portantin thcpresentcase thatthe issue ofalttrego isprecluded from relitigation wïth respectto theseentities. 25 Page 2 of 20 I 1 !3).PlaintitrallegesthatSaharaandRealtyareownedandcontrolledbythesamepersonorpersons; 2 thatSahara hasno assetsorm eansofincom e and existsonly asa shellto hide theassetsofthealter 3 ego judgmentdebtors,including Realty;thatRealty transfcrred the Property to Sahara forno 4 considcration;thatRealty wasins/lvent,ornearly so,w hen ittransferred tlle Property;thatRealty 5 wassubjecttoseverallawsuits,includingtheConnecticutlitigation,whenittransferredtheProperty' , 6 and thatthere are many m ore tçbadges offraud,''as identifed in the case law ,surrounding the 7 transfer. Plaintiff requests that the court setaside the transfer as actually ancl/or constructively 8 fraudulentand issue a writofexecution so thatPlaintiffm ay execute upon the Property to partially 9 satisfyDefendant'sjudgmentdebttoPlaintifrfrom theConnecticutlitigation. 10 Il. SUM M A RY JU DG M EN T STAN DA RD 11 TheFederalRulesofCivilProcedureprovideforsummaryadjudicationwhen'Gthepleadings, 12 depositions,answ ersto interrogatories,and admissions on file,togetherwith the am davits,if any, 13 show thatthereisnogenuineissueastoanymaterialfactandthatthepartyisentitledtoajudgment 14 asamatteroflaw.''Fed.R.Civ.P.56(c).Materialfactsarethosewhichmayaflkcttheoutcomeof 15 thecase.SeeAnderson v.Liberty Lobby lnc.,477U,S.242,248 (1986).A disputeasto amaterial 16 factis genuine ifthere issuflicientcvidence fora reasonable jury to return a verdictforthe 17 nonmoving party.Seeid. Eçsummal'yjudgmentisinappropriate ifreasonablejurors,drawing a11 18 inferencesin favorofthe nonmoving party,could return a verdictin the nomnoving party'sfavor.'' 19 Diazv.EagleProduceLtd.P ' ship,52lF.3d 1201,1207(9thCir.2008)(citing UnitedStatesv. 20 Shumway,199 F.3d 1093,1103-04 (9thCir.1999)).A principalpurposeofsummaryjudgmentis 21 çito isolate and disposeoffactuallyunsupported clairas.''Celotex Com .v.Catrett,477 U.S.317, 22 323-24 (1986). 23 Indderminingsummaryjudgment,acourtappliesaburden-shittinganalysis.ççWhcntheparty 24 moving forsummaryjudgmentwouldbeartheburdenofproofattrial,itmustcomeforwardwith 25 Page 3 of 20 t 1 evidencewhich w ould entitleitto a directed verdictiftheevidence wentuncontroverted attrial. In 2 such acase,them oving party hasthe initialburden ofestablishing the absence ofa genuine issue of 3 facton each issue m aterialto itscase.''C.A.R.Transp.Brokerage Co.v.D arden Rests.,lnc ,213 4 F.3d474,480(9thCir.2000)(citationsomitted).lncontrast,whenthenonmovingpartybearsthe 5 burdenofprovingtheclaim ordefcnse,the moving party can meetitsburden in two ways:(1)by 6 presenting evidence to negate an cssentialelementof the nonmoving party's case;or (2) by 7 dem onstrating thatthenonm oving party failed to m ake a showing suflicientto establish an elem ent 8 essentialto thatparty'scase on which thatparty willbear the burden ofproofattrial.See Celotex 9 Corp.,477U.S.at323-24.lfthemovingpartyfailstomeetitsinitialburden,sulnmaryjudgment 10 m ustbe denied and thecourtneed noteonsiderthenomnovingparty'sevidence.SeeAdickes v.S.H . 11 Kress (j:Co.,398U.S.144,159-60(1970). 12 lfthem oving party satistiesitsinitialburden,theburden then shiftsto the opposing party to 13 establishthatagenuine issue ofm aterialfactexists.SeeM atsushita Elec.Indus.Co.v.Zenith Radio 14 Corp.,475U.S.574,586(1986),Toestablishtheexistenceofafactualdispute,theopposingparty 15 need notestablish a nuterialissue offactconclusively in itsfavor. Itissum cientthatStthe claimed l6 factualdisputebeshowntorequireajuryorjudgetoresolvetheparties'difreringversionsofthe 17 truth attrial.''71r, lrElec.s' crv.,Inc.v.Pac.Elec.ContractorsAss' n,809 F.2d 626,631(9th Cir. 18 1987).lnotherwords,thenonmovingpartycannotavoidsummaryjudgmentbyrelyingsolelyon 19 conclusoly allegationsthatareunsupported by factualdata.See Taylorv.List,880 F.2d 1040,1045 20 (9th Cir.1989). lnstcad,the opposition mustgobeyond the assertionsand allegationsofthe 21 pleadingsand setforth specific factsbyproducing competentevidencethatshewsa genuineissuefor 22 trial.SeeFed.R.Civ.P.56(e);CelotexCorp.,477U,S.at324. 23 Atsummaryjudgment,acourt'sfunctionisnottoweighthcevidenceanddeterminethetruth 24 but to determine w hether thcre is a genuine issue for trial.See Anderson,477 U .S.at249. The 25 page4 of 20 I evidenceofthe nonmovantis$çto bebelieved,and al1justifiable inferencesareto bedrawn in his 2 favor.''1d. at 255. But if the evidence of the nonmoving party is m erely colorable or is not 3 signifkantlyprobative,summaryjudgmentmaybegranted.Seeid.at249-50. 4 III 5 6 7 8 9 l0 11 12 13 14 15 AxAt-v sls UnderNevadalaw ,atransferby adebtorttisfraudulentasto acreditor,whetherthecreditor's claim arosebeforeorafterthetransferw asm ade,''ifthedebtorm adethc transferltwith actualintent to hinder,delayordefraud anycreditorofthedebtor.''Nev.Rev.Stat.j 112.180(l)(a)(Nevada UnifonnFraudulentTransferAct,orEiuniform Act'').3Thus,whereactualintenttodcfraudcreditors isproven,theconveyance willbe setaside regardless ofthe adequacy ofconsideration exchanged. M oreover,even w here no actualfraud exists,a courtw illoverturn a conveyance ifthere hasbeen 'çconstructive fraudy''w hich occursw hen the debtordid notreceive içreasonably equivalentvalue in exchangeforthetransfer,''and thedebtortd(1)wasengaged orwasaboutto engageinabusinessor transaction for which the rem aiaing assets ofthe debtor were unrcasonably smallin relation tta the businessortransaction' ,or(2)intendedtoincur,orbelievcdorreasonablyshouldhavebelievedthat hewouldincur,debtsbeyondhisabilitytopayastheybecamedue.''Nev.Rev.Stat.j 112.180(1)(b). 16 /// 17 18 /// 19 20 3hlevada'sversion ofthe U niform A ctdoes notdifrerin any m aterialrespectsfrom the 2! standard U niform Act. Forty-three statesand the DistrictofColum bia have enacted versions of theUniform Act.Casesfrom otherjurisdictionsinterpretinguniform actsaredeemedpersuasive 22 byNevadacourts.SeeWaldmanv.M aini,195P.3d850,860(Ncv.2008)(applyingUniform SimultaneousDeath Act)(dtBecausetheActisauniform actapplied in many states,the 23 jurisprudenceofsisterjurisdictionsapplyingtheUniform Actishighlypersuasivc.''l;seealso SportscoEnters.v.Morris,917P.2d934,938(Nev.1996)(citingopinionsfrom California, 24 colorado, andM ontanastatecottrts). 25 Page 5 of 20 1 2 3 4 5 6 7 8 9 10 l1 l2 13 A. A ctualFraud 1. BadgesofFraud Realty's conveyance of the Property- w ith no docum entation retlecting the purported consideration and doneata time when law suitsagainstRealty and theotherGlobalNAPScom panies w ere m ounting- is actually fraudulent. çûTraditionally,the intent required for actualfraudulent transfers isestablished by circulnstantialcvidence,since itwillbc thcrare case in which the debtor testifiesunderoaththatheorsheintendedtodefraudcreditors.''InreNat,1AuditDefenseA' crwtlrk, 367B.R.207,219-20tBankr.D.Nev.2007). ln thisregard,courtshavedevelopedStbadgesof fraud''- thatis,circum stancesthatso gequently accompany gaudulenttransfersthattheirpresence gives rise to an inference of intent. f#. at 220. The N evada U nifonn A ct identifes eleven non-exhaustive badgesoffraud asfollows: (1)thetransferorobligationwasto aninsider; (2)thedebtorretained possession orcontroloftheproperty transferred afterthe 14 transfer; j5 (3)the transferorobligation wasdisclosed orconcealed' , I6 (4)beforethetransferwasmadeorobligationwasincurred,thedebtorhadbeensued orthreatened with suit; l7 (5)thetransferwasofsubstantiallyal1thedebtor' sassets; 18 (6)thedebtorabsconded' , 19 20 (7)thedebtorremoved orconcealed assets; (8)thevalueoftheconsiderationreceived by thedebtorwasreasonably equivalent 21 to the value ofthe assettransferred orthe amountofthe obligation incurred; : 2, : 2, (9)thedebtorwasinsolventorbecameinsolventshortlyaerthetransferwasmade orthe obligation w asincurred; 23 24 25 (10)the transferoccurred shortly bcfore orshortly aftera substantialdebtwas incurred' ,and page 6 of 20 1 (11)the debtortransferred the essentialassets ofthe businessto a lienorwho 2 trausferred the assetsto an insiderofthe debtor. 3 Nev.Rev.Stat.j112.180(2)(a)Vk).Althoughtheçdpresenceofasinglefactor,i.e.abadgeoffraud, 4 m ay castsuspicion on the transferor'sintent,the coniuence ofscveralin one transaction generally 5 providesconclusiveevidence ofan actualintentto defraud.''Gilchinsky v.Nat1 WestminsterBank, 6 732A.2d482,490(N .J.1999);seealsoIn reNat'lAuditDef,367B.R.at220(çiAlthoughnoneof 7 the badges standing alone w ill establish aud, the existence of several of them will raise a 8 presumptionoffraud.''(internalquotation marksand citationonzittedl). 9 Oncethe creditorproducesevidenceofçscertain indicia orbadgesoffraud,theburden shifts 10 to the defendantto com e forward w ith rebuttalevidencethata transferw asnotm adeto deaud the l1 creditor.''PatClarkSports,Inc.v.Champion Frtzj/cns,Inc,487 F.Supp.2d 1172,1177-78(D. 12 Nev.2007);seealso Sportsco,917 P.2d at938 (same).AstheSeventh Circuithasobserved: 13 14 15 W here a1lcircum stantialevidencepointsto fraudulentintent,atlcastsom eofithas tobeexplainedaway.Neithersununaryjudgmentnordirectedverdictcanbeavoided by simplysaying,6ûnevertheless,itisnotso.''..,Becausethegdefendants)çûfailg)to indicateanymotiveorintenttosupport(their)position''ofinnocentconveyance,the judgment(againstdefendantsqisafflrmed. l6 U.S.v.Denlinger,982F.2d233,237(7thCir.1992)(citationsomittedl;seealsoInreProsser,No. 17 08-03002,2009W L3270765at*13tBanltr.D.V. I.Oct.9,2009)(lçMrherethedefendantshavenot 18 established sumcientfactstorebutthepresumptionofafraudulenttransfer,summaryjudgmentis 19 appropriate.''). 20 21 a. Realty Transferred the Property to an Insider Here,the transfer was made to an insider. The transfer was from one Ferrous M iner- 22 controlled(andthusFrankGangi-controlled)companytoanother,andrelationshipsofthissortare 23 deem ed insiderrelationshipsfor purposesofthe Uniform Act. 24 The U niform A ct expressly desnes d6insider'' to include ttan am liate.'' N ev. Rev. Stat. 25 j 112.l50(7)(d). içAmliate,''in turn,isdcfined asa: Page 7 of 20 1 2 corporation 20 percentorm oreofwhoseoutstanding voting securitiesaredirectlyor indirectly owned,controlled or held with pow erto vote,by the debtorora person who directlyorirldirectlyowns,controlsorheldsw ith powerto vgte,20 percent(?r more ofthe outstanding voting securities ofthe debtor. 3 j112.150(l)(b).Undcrthisdefmition,SaharaisanafliliateofRealty(andallGlobalNAPSentities) 4 and therefore an insider. Both Realty and Sahara are wholly ow ncd by Ferrous M iner,which is 5 6 7 wholly owned by Frank Gangi. Realty and Sahara share the sam epresident:G angi. They sharethe sam e directorand oflicer;G angiisthc sole officerand directorofSahara and one oftw o ofRealty, along w ith Gangi'sbrother-in-law . They share the sam e decision-m akcr:Gangi. In short,because 8 bothdefendantssharetheidenticalownership structure(andnear-identicalmanagementstructure), 9 Saharaisan insider,SeelnreNat'1AuditDef,367B.R.at221(tinding thatcorporationswere 10 içatliliates''and thus dçinsiders''ofthe debtor w here corporations were controlled and ow ned by 11 offkersofthedebtorl;Tel.Equi p.Network,Inc.v.Tvq/WestchasePlace,Ltd.,80S.W .3d60l,609 12 l3 (Tex.Ct.App.2002)(fmding thata corporation wasan6sinsider''ofanothercorporationbasedon 'tcornm on ow nership and m anagement''w here the two companiesw ere wholly owned by the same 14 individual). 15 ThecaseofsouthSideNationalBankv.(nnfeldFinancials' crpl' céwCom.,783S.W .2d140 16 (M o.Ct.App.1989),decidedunderMissouri'sUniform Act,isparticularlyinstructive.There,the 17 same individual,M r.RobertScott,w as the president,sole shareholder,and lone director ofboth l8 W intieldInvestmentCo.tttWintieldlnvestment'')andW infeldFinancialSenicesCorp.t'tWinfeld 19 20 21 22 23 24 Financial'').f#.at141-. 42.TheplaintifffiledsuitagainstScottandW infieldlnvestment.Ontheeve oftrial,W infeld lnvestm enttransferred fourteen vacantlotsto W irifield Financial. Thc lotswcre allegedly transferredbetween thecompaniesinpartialsatisfaction ofa$145,650 pre-existing debt, and thetransfersleftboth W infield lnvestm entand RobertScottw ithoutany assets.1d.at142.The courtheld thattheproperty transfersatissueconstitutcd actualfraud andremandedto thetrialcourt to setaside the conveyancc asvoid. The courtobserved thatthe buyerand sellerwere 'çcontrolled 25 Page 8 of 20 1 by the same person''and thatthe itlegalfiction ofthe independentexistence ofthe corporate entity 2 w illbe disregarded wheretwo corporationsarebeing manipulated through theirinterrelationship to 3 causeillegality,fraudorinjustice.''/#.at144.Thetransferswereç'equivalenttoScott'sjugglingthe 4 propertiesfrom him selfto acorporation and from one corporation to anothercorporation m erely to 5 avoid obligations to a third party.''1d. ln the court's view , i'Scott w as the alter ego of the 6 corporations and the corporationsw erea subterfuge.'' Because Scottw asthe içalterego ofthetwo 7 corporations,hew aseflectively transferring the propertiesin question to him self.''1d. 8 Thatisexactly whathappened here.Frank Gangiessentially hastransferred theproperty in 9 question to him seltr Indccd,at his deposition,Gangihim selfrelied upon the close relationship 10 betw een Realty and Sahara to explain w hy Sahara did not feelit necessary to conduct its own l1 independentreview ofthevalue ofthe property itw asacquiring: 12 13 14 (Tlhesearerelated partiesthatknow oneanother. They trustone another. Am Igoing to stealfrom myselo 1'm the ultim ateownerofRealty.I'm theultim ate ow nerofSahara. So am I going to stealoutofone pocketand putitin the other? 1m ean,it'sanonsensicalquestion ifyou understandthestructureofthecom pany,the ow nership. 15 (//46,Ex.B,at184:12-18).Bytheendofthepassage,GangidoesnotevenbothertorefertoRealty 16 and Sahara in thepluralnumber,referring ratherto both entitiescollcctively asçtthecom pany.''Just 17 w hen the readerthinksa clearer adm ission thatSahara wasan insider with respectto Realty could 18 notbeimagined,Gangijustisesthelackofanydocumentationregardingthcpurportedconsideration 19 forthe transferby stating: 20 21 l'm notsurethereisadocument....ljustknow thatthereisl,blecause1'm thesoleshareholderultimately ofSahara and Arden.I'm thesoleom cerand dircctor, and Iknow whatw e did....l'm in a unique position to know exactly whatm y understanding isofthe agreem ent1m ade w ith m yself 22 (f#.,Ex.B,at191:1-192:16).Furthermore,inconnectionwiththeconveyance,Defendantsought 23 anexcm ptionfrom the StateofN evadafrom the realpropertytransfertax thatotherw isew ould have 24 been dueonthebasisthattheçdproperty (isqbeing transferredbetweencompanieswithidentical 25 Page 9 of 20 1 ownership.''(f#.,Ex.I).Thisbadgeoffraudisestablished. 2 b. T he Transferor, R ealty, R etained Possession and Control ofthe Property After the Transfer 3 The documentsestablish thatthepurported transferhad no eflkctw hatsoeveron theidentity 4 oftheproperty'sowner. Putdifrerently,the ttonly difrerencesin the propertiesw hich existed after 5 the transferswere the namesin which theparcelsw ere titled.''S.Side,783 S.W .2d at144. ,see also 6 Gabaigv.Gabaig,717P.2d835,839(Alaska1986)(tinding 7 thata transferorretained prem isesand ltacted as ifhe were the true owner''w herehe continued to 8 paytaxesonproperty). 9 10 c. Before the Transfer W as M ade,Realty H ad Been Sued or Threatened with Suit 11 Anotherbadgeoffraud existswhen,beforetransferofthe property,thedebtorhasbeen sued l2 orthreatened with suit. Thelaw suitsdo notneed to bebroughtby the sam e creditorseeking to set 13 asidethefraudulentconveyance' ,anylaw suitwilldo,becauseitservesto putthedebtoron noticethat 14 itmaybecalledupontosatisfyajudgment.Sportsco,9l7P.2dat938(notingthatthtdebtorwas 15 tta defendant orpotentialdefendantin a number ofpending or threatened law suits regarding his l6 debts''). Similarly,a lawsuitt'counts''forpurposesofthe Unifonn Actregardlessofwhetheritis 17 broughtagainstthe debtorora companycloselycozmectedw itb thedebtor.E.g.,In reProsser,2009 18 W L 3270765 at*10-11(tmding fraud wherelitigation waspending againstdebtor'spredecessor 19 corporation asw ellasitsparent,although the debtoritselfw asnota defendantto those suits atthe 20 timeofthechallengedtransfer). 21 Atthe time ofthe November2005 transferofthe Property,both Realty specifically and 22 the GlobalN APS fam ily generally,ofwhich Realty isan alterego,had been sued severaltimes. 23 Realty itselfw asadefcndantin atleastone case asofNovember 15,2005. In addition,one orm ore 24 of the related tr lobal NA PS''entities had been nam ed in at least six cases or adm inistrative 25 proceedings as ofNovember 15,2005 (and Realty was later added as a defendantor counterPage 10 of 20 1 defendantinfourofthem).(Seeid.,Ex.S).M ostimportantly,GlobalNAPS,analterego ofRealty, 2 had been sued in 2004 by Plaintiffitselfin the Connecticutlitigation. Thisbadge ofaud issatistied. 3 4 d. DefendantDid NotConcealthe Transfer Quitclaim deedsarenotoriousindicatorsoffraudulentconveyances.See,e.g.,United States 5 v.Fincher,593F.3d702,705(8thCir.2010).TheBankruptcyReportsarcflledwithcasesavoiding 6 suchtransfers. Recently,thisCourthasseen thismaneuvereven in garden-variety foreclosure cases 7 where a person attemptsto quitclaim a property to hisorherspouse to avoid creditorsw here the 8 m ortgageisonly in the transferor'sname.The quitclaim deed conveying the Property in thiscase is 9 attached and wasrecorded.(See1146,Ex.G). 10 Courtshave deem ed a transferto beconcealed forpurposesofa fraudulenttransferanalysis 11 w here the fonnaldocumentation did notretlectthe actualcircum stances surrounding the transfer. 12 Forexam ple,in In re Prosser,2009 W L 3270765,the defendanthad duly recorded thc 13 deed evïdencing the conveyance ofthe property.f#.at*9. H ow ever,the courtdetcrmined that 14 the transfernevertheless wasconcealed,because the defendanthad notrevealed ttsuflicient 15 inform ation thatw ould putcreditors on notice ofthe fraudulentnature ofthe transaction.''1d.at 16 *8-9(noting,amongotherdeceptivepractices,thatthcdebtor'sboardwasnotapprisedofthe 17 transfer' ,the defendants'audited f' m ancialstatem entsw ere tt m isleading,''delayed,and 18 tv accurately desclibed thc transfer'';and the prom issory notc signed by thc insidertransferce 19 wasnotavailableto thepublic). 20 Plaintiffargues the true circum stanccs ofthe transferarc notrevealed by the publicly filed 21 quitclaim deed and declaration ofvalue because the documents contain no m ention ofa loan thatis 22 being transferred from one insiderto another. Butthisis notthe case. The Declaration ofValue 23 makesitclearthatthebuyerandsellerarethesameperson(FrankGangi),withthesamebusiness 24 address.Lub'ee#46,Ex.G,at4).Thisisenoughtoputthepubliconnoticeofaninsidetransaction. 25 The transfcrw asnotconcealed. Page 11 of 20 l 2 e. There W asNo Consideration There was no consideration for the transferofthe property to Sahara. As Plaintiffnotes, 3 Defendantscannotpointto asinglcdocum entthatestablishesthatthe transaction w asanything other 4 than one Frank G angi-controllcd company moving a property to another Frank G angi-controlled 5 com pany in orderto insulate thatproperty from creditors. 6 U nderN evada law ,satisfaction ofan antecedentdebtcan constitute fairconsideration, 7 butonly ifthe antecedentdebtisvalid and existing.PatClark Sports,487 F.Supp.2t1at 1179. , 8 Nev.Rev.Stat.j 112.170. Properdocumcntation ofthedebtisnecessary.SeeIn reNat1Audit 9 Def,367 B.R.at225-26(rejecting debtors'argumentsthattransferwasmadein paymentofa 10 prc-existingloanbynotingthatdebtorscouldnot'tconneetgjthesenotestoanyparticulartransfer'' ll andthattçgtlhisfailureto linlcspecifictransferswithallegtdloanrepaymentsisfatal''), 'Swinfordv. 12 Teegarden,60S.W .1089,1091(M o.1901)(holdingthattherewasinadequateconsiderationbased 13 onthepartialsatisfaction ofan antecedentdebtbecausea l'carefulexam ination ofthc testimony fails 14 to show sum cientdata to state an indebtedness ...and the testim ony ofrered by the defcndantson 15 thissubjectissovague,generalandwanting indetailsthatitisimpossibletostateanyaccount 16 betweenthem ortoJ/-/brJareasonablebasisofcalculation'')(emphasisadded).Morcover,when 17 pallies are alteregosofeach other,courtshave found no valid consideration forthe satisfaction of 18 antecedentdebts.S.Side,783 S.W .2d at l44 (fmding actualgaud where a debtor conveyed 19 properties om one corporation to another;he was the ttalter ego ofboth corporations and his 20 conveyingthepropertiestorepayanindebtednesswastantamounttosatisfyingadebttohirnself'). 21 Again,this isexactly whathappened here. Realty pum ortedly transferred the Property to 22 SaharainexchangeforSaharaagreeingtoassumeadebtthatRealtyowedtoFrankGangi.(#46,Ex. 23 B,at189:9-12(çsRealty'sdebttomewasextinguishedandthenanew debtwascreatedwithSahara 24 and - Sahara and Arden from them to m e. So Realty no longerhad thatdebt,you know ,and that 25 wastheconsideration.''l).Asamatteroflaw thisisnotvalidconsiderationbecausethedebttoGangi Page 12 of 20 l w assim ply passed from onc ofhisalter-ego com panies to another. 2 Furtherm ore,there are no loan agreem ents evidencing the transaction; nor has Sahara 3 recorded an interestexpensein connection with theconveyance.(1d.,Ex.B,at189-91). No 4 promissorynotesexist.(Id.,Ex.B,at191:7-9). lndeed,Saharaadmitsithasno bank account, 5 income,revenues,orassetsotherthantheproperty,(id.,Ex.D,Resps.to RFA l1,12,24-28),so 6 ithasno plausible w ay to repay the çiloan''from Realty.In otherw ords,Realty gained nothing and 7 Sahara gave nothing forthistransaction.G angisim ply rean-anged debtow ed to hirnselfby hisown 8 wholly-owned and -controlled com panies. NeitherSahara norRealty perform ed an appraisalofthe 9 propcrty inconnectionwiththetransfer.(f#.,Ex.D,Resp.to RFA 40* ,j#.,Ex.C,Resp.to RFA 1). 10 Saharadidnotconductatitlesearchpriortotheconveyance.(/#.,Ex.D,Resp.toRFA 39).lnstead, 11 brothersRichard and Frank G angiunilaterally determined to transferthc property and atwhatvalue, 12 withoutconductinganyindependentreview.(Seeid.,Ex.B,at181(ttgM lybrotherwasthesellerand 13 Iwasthebuyerandthat'sthenumberwecameup andagreedupon....'');seealso id.at184:12-13 14 (ttl-l-lhesearerelatedpartiesthatknow oneanother(andqtl-ustoneanother.''l).Thatisnotenough. 15 See Textron Fin.Com.v.Kruger,545N.W .2d 880,884 (IowaCt.App.1996)(holding thata 16 transfer was fraudulentw here,inter alia,the transferor did not take d'any steps to independently 17 determ ine''theland'svalue,and thetransfereerelied only upon theopinion ofhisattorney,i'who was l8 unabletoexplainorjustifyhisopinion'').Therewasnoconsiderationhere. 19 f. Realty W as lnstllventor Becam e lnsolvent Shortly A fter the Transfer W asM ade 20 UnderNevada law,aparty isdeemed insolventitlinteralia,dtthesum ofthedebtor'sdebts 21 isgreaterthan al1ofthe debtor'sassetsatafairvaluation.''Nev.Rev.Stat.# 112.160. Athis 22 deposition,G angitestitied thatRealty was prolkable atthe tim e ofthe conveyance,based on his 23 ilknowledgerunningaroundthebuilding.''(f#.,Ex.B,at77:17).Thistestimonyisatoddswiththe 24 docum entation establishing thatRealty wasoperating at a loss in 2005. Realty's failure to keep 25 Page 13 of 20 1 separate recordsin 2005 raises an inference ofinsolvency,one m ade cven strongerby Realty'sand 2 G lobalNAPS'substquentdestruction offmancialdatadocum ents.How ever,thefew docum entsthat 3 do exist- produced by Realty'saccountants--conGrm thatRealty w asinsolventin 2005. 4 lnaJuly2006email,theCFO oftheGlobalNAPSentitiesadmittedthattlfGlobaljlnc.and 5 Realty are the smallercompaniesand currently show losses.''(f#.,Ex.V (7/7/06 emailfrom Amn 6 Hartmanl).AndshortlyaftertheCormecticutcourtgrantedSNET the$5.25millionprejudgment 7 rem edy in April2006,Frank G angisentan cmailto GlobalN ztps'CFO,stating thattIGNA PS inc. 8 (sicqdoesnothave5.2gmillionlworthofassetsanm here.''(1d.,Ex.S(5/27/06emailfrom Frank 9 Gangil).Thisfactorissatisfied. 10 ll g. The TransferW asofSubstantially A llofRealty'sA ssets Atthe tim e ofthe transfer,Realty had few assets. W hen asked athisdeposition to identify l2 the assets that Realty had as of the date ofthe conveyance in N ovem ber 2005, Frank G angi's 13 responscwasthat$'Ican'ttellyou with specificity.''(1d.,Ex.B,at80:14).W hen asked to identify I4 the docum entsthatwould reflectRealty'sassets,Frank referenced eV voicesorcancelled checkss'in 15 relation to Realty'spersonalproperty- none ofw hich w ere produced and,according to defensc 16 counsel,no longcr exist- and tsdeeds''in relation to Realty's realproperty- none ofwhich were 17 produced.(1d.,Ex.B,at81:3-5).4 18 The evidence show s that Realty only ow ned three pieces ofproperty atthe end of2004. 19 H owever,in D ecember2004,Realty quitclaim ed a building in M assachusettsto açicorporate shell'' 20 entity named aftertheproperty,1120 Hancock,in exchangeforthe entity assuming adebtowed to 21 GangibyRealty- thesamepatternasinthepresentcase.(f#.,Ex.T;l' d.,Ex.B,at84* ,l 'd.,Ex.E,at 22 1-75:14-16)). ln April 2005, Realty transferred a building in Atlanta to another Ferrous 23 M iner-owned shellentity nam ed afterthe property,1003 Donnelly Avenue,lnc.,again in exchange 24 4The supposed realproperty assetsm ightnotbe assetsatall. AsG angitestitied,the real 25 estatc iç cam e w ith a liability. Idon'tthinkRealtyhadanyequi tyinthem.''(Id.,Ex.B,at80:7-9). Page 14 of 20 1 forareductionofdebtowed byRealtytoGangi.(fJ.,Ex.U;l 'd.,Ex.B,at89:2-19). Thus,in 2 November2005,when Realty conveyed the Property to Sahara,itw astransferring its lastpiece of 3 realproperty.(f#.,Ex.B,at84,89). ,seeS.Side,783 S.W .2d atl44(tindingthatdebtorsdidnot 4 havepropertyofanydsmonetaryvaluc''aftertransferofal1realestate).Gangifurtherspeculatedthat 5 Realty had anp vherebetw een 0-100 ttcustomers''in 2005,but,again,could notsay forcertain and 6 did notproduce any written recordsverifying the num ber of,or proceeds from ,these custom ers. 7 (//46,Ex.B,at84,89).RealtywasmadeinsolventbythctransferoftheProperty. 8 h. The Transfer O ccurred Shortly Before or A fter R ealty Incurred a SubstantialD ebt 9 Thetransferoccurred inNovember2005.ln April2006,SNET obtained aprejudgment 10 rem edy of$5.25 m illion againstG lobalNAPS,Inc.in the Connecticutcase. Severalotherlawsuits 11 w ere pending. l2 ln sum mal' y,thereare easilysum cientbadgesoffraud fortheCourtto fm d thetransferofthe 13 Property to have been actually fraudulent. Coupled w ith the factthattheConnecticutdistrictcourt 14 found that Realty and the other GlobalN APS entities w ithheld and destroyed docum ents that 15 undoubtedly would be relevant,SNET hascarried its initialburden underRule 56. 16 2. DefendantFailsto M eetitsShifted Burden 17 A snoted,supra,w hen thepresumption offraud arises,asithashere,theburden shiftsto the 18 defendantto(çcxplaing)away''thebadgesofbaud.Denlinger,982F.2dat237.Defendantshavenot l9 produced a single docum entthatretlectsconsideration being paid forthe Property. They have not 20 explained aw aythe factsthatthe transferw asfrom one Gangi-ow ned company to another,and that 2l tw o brothers,one purportedly represcnting each party,agreed on the value ofthe property being 22 transferred w ithout having an appraisalconducted. They have not explained aw ay the fact that 23 severallaw suitsw ere pending againstRealty and the largerG lobalNAPS farnily atthc tim e ofthe 24 transferofthe Property,orthatRealtyand the Globalcntitleshad incun' ed liabilitiesaroundthetim e 25 Page 15 of 20 1 ofthetransfer.Theyhavenotexplained awaythefactthatRealty had little,ifany,assetsatthetime 2 ofthe transfer,or thatRealty had transferred away its three picces of realproperty over eleven 3 m onths.Theyhave notestablished tlmtRealty w assolventinN ovem ber2005. Indeed,defendants' 4 30(b)(6)representativeandowneroftheentireGlobalNAPSempirerepeatedlyrefusedtoprovide 5 virtually any infonnation,testifying,forexample,thathe did notknow Realty'srevenuesfor2005. 6 (f#.,Ex.B,at81:20-21).Hedid notknow whetherandwhen Realtyhad abank account.He did 7 not knew how many custom ers Realty had in 2005 or today. However,lle did testify that tbe 8 propertywastransferred forûtliability''purposes- ttltealtydecided itno longerwanted tobeanowner 9 ofthe property,and 1 didn'tw ant to have m y property ow ned by Realty. lw anted them to be 10 separateentities.Ididn'twantallmyeggsinonebasket.''(f#.,Ex.B,at175:20-23. ,seealsoid.,Ex. 11 B,at176(t6(Y)ouknow,ifsomebodytripsandfallsinonefacility,theycan'tsuethem overanother 12 facility.'l). 13 D efendants argue thatPlaintiffs evidence isnotauthenticated. Butthere is no reason to 14 doubtthe authenticity ofthetranscriptsofGangi'sdeposition. Even ifconsidered ashearsay,itfalls 15 w ithin theresidualexception.SeeFed.R .Evid.807.M oreover,G angi'sentiredeposition,asaparty 16 admission,isnon-hearsay.SeeFed.R.Evid.801(d)(2).AndDefendantshaveauthenticatedacopy l7 ofthe deposition,in any case.(See #51-1at214). Defendantsmake severalargumentsagainsta 18 fmding offraud. 19 First,in supportoftheircontention thatadequate consideration w asgiven forthe Propertyj 20 D efcndantsadduce a ttBuyerEstim ated Closing Statement''from Fidelky N ationalTitle Agency of 21 N evada,lnc.representing a balanee ofcharges and fees relating to an escrow accountforçlv acant 22 Land,NV.''(//51 Ex.2,at3).Thisdocumentdoesnothingttlshow considerationfrom Saharato 23 Realty.Saharaisnotevenmentioned onthedocument,whichismerelyaninformationaldocument 24 between Realty and a title agency. In fact,the docum entseems to rclate to a transferofland 9om 25 The1980JarrettFamilyTrusttoRealty.(Seeid.).Theonlyevidenceofsalefrom RealtytoSahara Page 16 of 20 1 produced are excerpts from Gangi's deposition,which have alrcady been addressed. D efcndants 2 claim thatSaharaiswhollyownedbyFerrousM inerbutfailtonotethatitisresjudicatathatFerrous 3 M inerand Realty areowned by Gangiand altercgosofoneanother.Sahara isclearly an insiderwith 4 respectto Realty.Gangiadm itted in hisdeposition thatwhcn hetransferredtheproperty from Realty 5 to Sahara,itconstituted an ttagreement1madewithmyseitl''(. /#.,Ex.B,at192:16). 6 Second,D efendants argue there is no evidence that Realty retained possession of the 7 Property,a vacantlot. Butin thiscase,itisequally diflicultto say thatSahara took possession of 8 it. Perhaps this factor isunimportanthere,because physically speaking,neither party everreally 9 occupied the Iot, so it perhaps m akes no serise in such a situation to ask whether a party has 10 transferred physicalpossession. 11 Third,Defendantscorrectly note thatthe recording ofthe deed show sthatthe conveyance 12 wasnotconcealed. l3 Fourth,D efendantsarguethere isno com petentevidenceofpending orthreatened litigation 14 atthe time ofthe transfer,because Plaintifrdid notam end itscom plaintirlthe Connecticutlitigation 15 until2006. Butthis does not m ean that Realty w as notunder the threat of litigation. Plaintiff l6 am ended itscomplaintin the Connecticutlitigation only atterGangiadm ittcd the various defendant 17 entitiesexisted fora com m on pup ose. Realty had already perceived the threatofIkigation against 18 itupon the fling ofthe casc,how ever. Indeed,itw asthe failure ofRealty and otheralteregosof l9 GlobalNA PS,Inc.to providefmancialdocum entsthatwould Iikely revealthealterego relationship 20 that1ed theConnecticutdistrictcourtto m akc thealterego ruling asacontem ptsanction.Realtyw as 21 notjoinedearliersimplybecausePlaintifrdidnotyetknow ofitspotentialalteregoliability. 22 Fitth,Defendants argue thatthe transfer was nota transfer ofsubstantially allofRealty's 23 assets.Realty ildid notown the Property outrightbutinstead wasindebted by an am ountofatleast 24 $215,000.''(//51at13:13-14).Nevadaisalien-theorystate.Thatmeansthatadebtor/mortgagor 25 holdslegaltitleteaproperty,subjecttothecreditor/mortgagee'srighttoforecloscupondefaultof Page 17 of 20 1 an obligation secured by theproperty. Owing an obligation secured by realpropel'ty doesnotafrect 2 thedebtor'stitlebeforedefault.And D cfendantsprovideno evidenceofa deed oftrtlstfrom Sahara 3 to Realty,anp vay. Defendants also argue thatthere w as little equity in the Property because the 4 am ountofthe lien againstitapproxim ated the value ofthe Property. ButDefendantsultim ately do 5 notidentify any ofRealty'sotherassetsatthetime ofsale. 6 Sixth,Defendantsargue thatRealty did nottçabscond''with any assets. ltisnotclearwhich 7 factorDefendants attemptto argueunder here. 8 SeventhsDefendants argue again that Realty did not concealassets,which is already 9 discussed supra. 10 Eighth,Defendantsargue thatSaharagaveRealty adequate consideration via itsassum ption 11 ofRealty'sdebtto Gangi.D efendantsadm itthereisno w riting evidencing such an arrangem ent.As 12 already discussed thiswasnotconsideration becauseG angisimply transform ed on paper- no,not 13 even on paper,butapparently only in hism ind- a debtowed to him by one ofhis wholly-ow ned 14 companies into a debt ow ed to him by another of his wholly-owned companies. This is not 15 consideration. Defendants also argue that Realty never owned the Property because there is no 16 evidencc Realty paid forit. ButGangiadmitted Realty ow ned the Property in hisdeposition when 17 he discussed itstransferto Sahara. 18 Ninth,Defendants argue there isno competentevidencethatRealty wasinsolventwhcn it l9 madethetransfer. Thebestpieceofevidenceagainstthisdenialisthe over$5million lawsuitthat 20 Realtywasfachlgatthetimeoftransfer,andthatjustafew monthsafterthetransfer,thedistrict 21 courtentered aprejudgmentremedy againstRealty and otherdefendantsin thatamount. Even 22 disregarding thc em ailsprovided asevidence,asD efendantsargue theCourtshould do,Defendants 23 havefailed to producerelevantlinancialdocumentsand w eresanctioned forthîsfailureby thedistrict 24 court. The Courtm ay inferinsolvency from these circum stances. 25 /// Page 18 of 20 1 Tcnth,Defendants argue that there is no evidence that Realty incurred a substantialdebt 2 beforeoratterthetransfer,becausethe2006prejudgmentremedywasdirectedatGlobalNAps,not 3 Realty.Again,thedistrictcourthasadjudicatedthattheseentitiesarcalteregosofoneanother. 4 Defendantsfailto carrytheirshiftedburdenofprootlD efendants'failuretoprovideevidence, 5 coupledwiththefactthattheunderlyingjudgmentoutofwhichthiscaseariseswasenteredagainst 6 Realty and theotherG lobalNA PSdefendantsforthevery reason thatthey destroyed documentsand 7 refusedtoprovidethecourtwiththerequestedinformation,makessununaryjudgmentappropriate. 8 Asthe Seventh Circuithasobserved,'ignjeithersurnmatyjudgmentnordirected verdictcan be 9 avoided by simply saying,'nevertheless,itisnotso.'''D enlinger,982 F.2d at237. 10 B. C onstructiveFraud ll A lthough the Courtneed notftnd the transferto be constructively fraudulentin addition to 12 being actually fraudulent,Realty's conveyance ofthe property to Sahara w as also constnlctively l3 fraudulent. UnderN evadalaw ,even ifthereisno proofofactualintentto deaud- which there is 14 here- a conveyance nonethelesscan be setaside as fraudulentasa matteroflaw . l5 A transfer willbe set aside ifthe debtor did not receive çi reasonably equivalent value in 16 exchangeforthetransfer''andthedebtor(1)ttwasengagedorwasabouttoengageinabusinessor 17 transaction forw hich the rem aining assets ofthe debtorw ere unreasonably sm allin relation to the 18 businessortransaction;or(2)intendedtoincur,orbcscvedorreasonablyshouldhavcbelievedthat 19 hewouldincur,dcbtsbeyondhisabilitytopayastheybecamedue.''Nev.Rev.Stat.j112.180(1)(b). 20 H ere, SN ET has established each of the required elem ents. First,Realty did notreceive 2l reasonably equivalentvalue in exchange forthe transferofthe Property. Rather,Realty transferred 22 theproperty to an insiderin exchangenotformoneybutforthe assumption ofadebtpreviously held 23 by Realty,even though the insiderhad no incom eand no revenueand no w ay everto repaythedebt 24 thatitassumed,and notw ithstanding the factthatthere are no w ritten docum ents concerning this 25 purported arrangement.M oreover,Realty did notconduetan appraisal()rothenvise satisfy itselfas Page 19 of 20 l to the value of the property it was transferring; instead,Richard and Frank G angiunilaterally 2 detenninedtotransferthepropertyandatwhatvalue.(#46,Ex.B,atl8l:11-14). 3 Second,atthetim eoftheconveyance in November2005,Realtyw asengaged in businessfor 4 w hich itsrem aining assetsw ereunreasonably smallin relation to thebusincss,ancl/oritintended to 5 incur,orbelieved orreasonably should havebelieved thatitwould incur,debtsbeyond itsability to 6 pay astheybecamedue.Nev.Rev.Stat.j 112.180(1)(b).Realtyhad little,ifanyremainingassets in N ovem ber 2005. lt had transferred allof fts realestate to other Frank Gangi-owned and - 8 controlled entities. As setforth above,Realty'sexpensesand liabilities outweighed any purported 9 revenuesorassets.Ithadbeennamedasthedefendantinseverallawsuits,andatleastonejudgment 10 wassoon entered againstitsalterego. Forthesereasons,the transferw asconstructively fraudulent 11 asamatteroflaw.Summaryjudgmentisproperonthisbasis,aswell. 12 13 CON CL USION IT IS HEREBY ORDERED that the M otion for Surrlmary Judgment (//46, //47) is 14 GRANTED . 15 IT IS FU RTHER ORDERED thatthe transferofthe property located attht intersection of 16 SaharaAve.andArden St.in LasV egas,N evada,A PNS 161-05-810-229,161-05-810-230,161-0517 810-231,161-05-810-232,and 161-05-810-233 from GlobalN APSRealty,lnc.to Sahara & Arden, 18 Inc.via quitclaim deed issetaside asa audulentconveyance. 19 IT IS FU RTHER ORDERED that this order shallserve asa w ritofexecution againstthe 20 above-nam ed parcelsin favorofPlaintifr-rhe Southern New England Telephone Co. 21 D ated:This 18th day ofM ay,2010. 22 23 24 25 United States i rictJudgc Page 20 of 20
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