Articles Posted in Supreme Court of New Jersey

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At issue in this case was whether a corporation's release of a debt constituted a constructively fraudulent transfer under the Uniform Fraudulent Transfer Act (UFTA). The debt that was released had previously been owed to the corporation by a landscaping business that was a creditor of two other corporations owned by the same shareholder. The other corporations debts to the landscaping business were extinguished in exchange for the release. The trial court concluded that the transfer was constructively fraudulent under N.J.S.A.25:2-27(a) because the corporation relinquished its sole asset without receiving reasonably equivalent value in return. An Appellate Division panel reversed that determination. The panel held that the transfer benefited the debtor corporation's sole shareholder because it extinguished the debts of two other corporations that she owned. The Appellate Division determined that the transfer was therefore made for reasonably equivalent value and that it was not constructively fraudulent under N.J.S.A.25:2-27(a). The New Jersey Supreme Court held that the Appellate Division panel improperly ignored the distinction between the corporation that was the debtor for purposes of N.J.S.A.25:2-27(a) and its shareholder, as well as the distinction between the debtor corporation and the other corporate entities that the shareholder owned. The Court concluded the evidence fully supported the trial court's determination the corporation did not receive reasonably equivalent value in exchange for the disputed transfer. Accordingly, the Appellate Division's judgment was reversed and the case remanded to the panel for its consideration of issues that it did not reach. View "Motorworld, Inc. v. Benkendorf" on Justia Law

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This appeal as of right arose from defendants' alleged breach of a settlement agreement executed by defendants and one of the plaintiffs in this action, Globe Motor Company (Globe), to resolve prior litigation between the parties. Shortly after defendants sent two checks totaling $75,000 to plaintiffs to settle the earlier action, a Trustee appointed to represent the estate of an insolvent Minnesota entity brought an adversary proceeding against plaintiffs. The Trustee demanded that plaintiffs disgorge the settlement funds, on the ground that those funds had belonged to the bankrupt entity, not to defendants, and that the transactions were therefore voidable under provisions of the United States Bankruptcy Code, 11 U.S.C.A. 544 and 548. Plaintiffs paid $22,500 to resolve the bankruptcy Trustee's claim. Plaintiffs filed this action against defendants, seeking to recover the money that they paid to settle the bankruptcy proceeding as well as attorneys' fees and costs. The motion judge entered summary judgment for plaintiffs on their breach of contract claim. An Appellate Division panel affirmed that determination, with one judge dissenting. After its review, the New Jersey Supreme Court held that the motion judge improperly granted summary judgment in plaintiffs' favor. The Court concluded that the record did not establish plaintiffs' right to judgment as a matter of law. The case was remanded for further proceedings. View "GlobeMotor Company v. Igdalev" on Justia Law