Opinion
DOCKET NO. A-4354-13T1
08-12-2015
AVRAAM ANASTASI, Plaintiff-Respondent, v. LOUKAS BARMBATSIS, aka LOUKAS BARBATSIS, and THEODORA BARBATSIS, aka THEODORA ARMONIS, aka THEODORA ARMONI, Defendants-Appellants.
Borrus, Goldin, Foley, Vignuolo, Hyman & Stahl, P.C., attorneys for appellants (Alexander J. Kemeny, on the brief). Andrew Tealer, attorney for respondent.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Yannotti and Lihotz. On appeal from Superior Court of New Jersey, Law Division, Middlesex County, Docket No. L-6603-12. Borrus, Goldin, Foley, Vignuolo, Hyman & Stahl, P.C., attorneys for appellants (Alexander J. Kemeny, on the brief). Andrew Tealer, attorney for respondent. PER CURIAM
Defendants Loukas Barmbatsis ("Mr. Barmbatsis") and his wife Theodora Barmbatsis ("Mrs. Barmbatsis") appeal from an order entered by the Law Division on February 14, 2014, following a bench trial, which determined that Mr. Barmbatsis's transfers of his interests in two business entities to Mrs. Barmbatsis were fraudulent transfers under the Uniform Fraudulent Transfer Act ("UFTA"), N.J.S.A. 25:2-20 to -34. Defendants also appeal from an order entered by the court on April 9, 2014, denying their motion for reconsideration. We affirm.
I.
This appeal arises from the following facts. Mr. Barmbatsis and Mrs. Barmbatsis owned shares of Stewart's Root Beer, Inc. of Franklin Park ("SRBFP"), which operated a restaurant in Franklin Park. Sometime in 2008, Mr. Barmbatsis transferred his shares in SRBFP to Mrs. Barmbatsis, after which she held all of the outstanding shares in that corporation. At the same time, Mr. Barmbatsis transferred his forty-eight percent membership interest in Arkadia, L.L.C. ("Arkadia") to his wife. She thereafter held a ninety-eight percent membership interest in Arkadia, while Mr. Barmbatsis retained a two percent interest.
In the latter part of 2008, Mr. Barmbatsis approached plaintiff and sought a loan of $50,000, which he needed to purchase another Stewart's restaurant in Ringoes with Vasilios Giannakaris ("Giannakaris"). In January 2009, plaintiff loaned Mr. Barmbatsis $50,000, pursuant to a verbal agreement, apparently sealed with a handshake. Mr. Barmbatsis agreed to repay the loan in five to seven months. He deposited the money in a joint bank account he held with his wife.
Mrs. Barmbatsis later withdrew $100,000 from the account in the form of a cashier's check, which was made payable to a corporation that she had formed with Giannakaris to purchase the Ringoes restaurant. At trial, Mrs. Barmbatsis conceded that the $100,000 she withdrew from the account included the $50,000 that her husband borrowed from plaintiff.
The time for repayment of the $50,000 loan was extended to September, but Mr. Barmbatsis never repaid the loan. Plaintiff brought suit against him and secured a default judgment in the amount of $50,000, plus costs of $240. In March 2012, the court issued a writ of execution directing the Sheriff of Somerset County to satisfy the judgment out of Mr. Barmbatsis's personal property in that county. In post-judgment discovery, plaintiff learned that, before he made the loan, Mr. Barmbatsis had transferred his interests in SRBFP and Arkadia to his wife.
In September 2012, plaintiff filed his complaint in this action against defendants, alleging among other claims, that Mr. Barmbatsis's transfers of his interests in SRBFP and Arkadia constituted fraudulent transfers under the UFTA. Judge Phillip Lewis Paley conducted a trial in the matter, sitting without a jury, and thereafter filed a written opinion dated February 14, 2014. The judge found that plaintiff had not proven common law fraud or unjust enrichment.
The judge determined, however, that the transfers were fraudulent transfers under the UFTA. The judge entered an order dated February 14, 2014, permitting plaintiff to apply the transferred interests, which were then held by Mrs. Barmbatsis, to satisfy the $50,000 judgment against Mr. Barmbatsis.
Thereafter, plaintiff and defendants filed motions for reconsideration. Judge Paley addressed the motions in a written opinion dated April 9, 2014. The judge refused to declare Mrs. Barmbatsis liable for the $50,000 loan, but determined that her status as a defendant in this action allowed plaintiff to satisfy his judgment with the interests in SRBFP and Arkadia that Mr. Barmbatsis had transferred to her.
In addition, Judge Paley indicated that the order of February 14, 2014, should be modified to reflect that Arkadia was a limited liability company. The judge also found no basis to reconsider his finding that Mr. Barmbatsis's transfers of his interests in SRBFP and Arkadia were fraudulent transfers under the UFTA. The judge memorialized his decision in an order dated April 9, 2014. This appeal followed.
II.
On appeal, defendants argue the trial judge erred by finding that Mr. Barmbatsis's transfers of his interests in SRBFP and Arkadia were fraudulent under the UFTA because they were not made with the intent to hinder, delay or defraud.
The scope of our review of findings of fact made by a trial court in a non-jury case is limited. We will not set aside the court's findings "unless we are convinced that they are so manifestly unsupported by or inconsistent with the competent, relevant and reasonably credible evidence as to offend the interests of justice[.]" Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 484 (1974) (citation omitted).
The UFTA provides, in relevant part, that
[a] transfer made or obligation incurred by a debtor is fraudulent as to a creditor, whether the creditor's claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation:
a. With actual intent to hinder, delay, or defraud any creditor of the debtor; or
b. Without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor:
(1) Was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction; or
(2) Intended to incur, or believed or reasonably should have believed that the debtor would incur, debts beyond the debtor's ability to pay as they become due.
[N. J.S.A. 25:2-25.]
The purpose of the UFTA "is to prevent a debtor from placing his or her property beyond a creditor's reach." Gilchinsky v. Nat'l Westminster Bank N.J., 159 N.J. 463, 475 (1999) (citation omitted). Claims brought pursuant to the UFTA "allow the creditor to undo the wrongful transaction so as to bring the property within the ambit of collection." Ibid. (citation omitted). Whether a given transaction constitutes a fraudulent transfer under the statute is governed by a two-step inquiry. Ibid.
The court first must determine "'whether the debtor [or person making the conveyance] has put some asset beyond the reach of creditors which would have been available to them' at some point in time 'but for the conveyance.'" Ibid. (quoting In re Wolensky's Ltd. P'ship, 163 B.R. 615, 626-27 (Bankr. D.C. 1993)). The court also must determine "whether the debtor transferred property with an intent to defraud, delay, or hinder the creditor." Id. at 476. These factual determinations must be made on a case-by-case basis. Ibid.
N.J.S.A. 25:2-26 enumerates factors, known as the "badges of fraud," that the court is to consider in determining "actual intent" under N.J.S.A. 25:2-25(a). The factors are whether
a. [t]he transfer or obligation was to an insider;
b. [t]he debtor retained possession or control of the property transferred after the transfer;
c. [t]he transfer or obligation was disclosed or concealed;
d. [b]efore the transfer was made or obligation was incurred, the debtor had been sued or threatened with suit;
e. [t]he transfer was of substantially all the debtor's assets;
f. [t]he debtor absconded;
g. [t]he debtor removed or concealed assets;
h. [t]he value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred;
i. [t]he debtor was insolvent or became insolvent[] shortly after the transfer was made or the obligation was incurred;
j. [t]he transfer occurred shortly before or shortly after a substantial debt was incurred; and
k. [t]he debtor transferred the essential assets of the business to a lienor who transferred the assets to an insider of the debtor.
[N. J.S.A. 25:2-26]
We note that N.J.S.A. 25:2-23(b) provides, "A debtor who is generally not paying his debts as they become due is presumed to be insolvent." --------
The badges of fraud "represent circumstances that so frequently accompany fraudulent transfers that their presence gives rise to an inference of intent." Gilchinsky, supra, 159 N.J. at 476. Although each factor should be considered, not all need to be present in order for an inference of fraud to arise. See Firmani v. Firmani, 332 N.J. Super. 118, 122 (App. Div. 2000) (finding demonstration of five of the eleven "badges of fraud" sufficient to find violation of UFTA).
Defendants argue that the evidence presented at trial shows that the intended purpose of the transfers could not have been to defraud plaintiff because the parties did not anticipate that plaintiff would loan Mr. Barmbatsis $50,000 when the transfers took place. Defendants contend there was no evidence indicating that they were aware that Mr. Barmbatsis would be seeking a loan at the time he transferred his interests in SRBFP and Arkadia to his wife.
Defendants maintain they were not aware that, when the transfers occurred, additional funds would be required for the Ringoes venture. According to defendants, the need for additional financing arose after the transactions, when it became apparent that Giannakaris would not be coming up with his share of the initial equity contribution.
We are not persuaded by these arguments. In his February 14, 2014 opinion, Judge Paley found that, "[w]hen Mr. Barmbatsis borrowed the $50,000 from [plaintiff], he knew that he had, a short time earlier, transferred assets to his wife for no consideration, leaving him insolvent." The judge determined that Mr. Barmbatsis's actual intent to defraud could be inferred from various facts, as established at trial.
Those facts included the following: Mr. Barmbatsis transferred the interests to his wife; after the transfers, Mr. Barmbatsis's role in the operation and management of the Franklin Park restaurant did not change in any substantial way; Mr. Barmbatsis concealed the transfers from plaintiff when the loan was made; the transfers consisted of substantially all of Mr. Barmbatsis's assets; and the transfers effectively rendered Mr. Barmbatsis insolvent.
Thus, the judge determined that the evidence established many of the badges of fraud in N.J.S.A. 25:2-26, thereby supporting the inference that Mr. Barmbatsis transferred his interests in SRBFP and Arkadia to his wife with the intent to defraud plaintiff. We must defer to the court's findings on this issue because they are supported by sufficient credible evidence in the record. Rova Farms, supra, 65 N.J. at 484.
Furthermore, our deference to the trial court's factual findings in this case "is especially appropriate 'when the evidence is largely testimonial and involves questions of credibility.'" Cesare v. Cesare, 154 N.J. 394, 412 (1998) (quoting In re Return of Weapons to J.W.D., 149 N.J. 108, 117 (1997)). Here, the judge specifically found that Mr. Barmbatsis's credibility was "sorely lacking."
III.
Defendants further argue that the trial judge erred by denying their motion for reconsideration. They contend that the court failed to appreciate the significance of the fact that Mr. Barmbatsis transferred his interests in SRBFP and Arkadia to his wife before he or anyone else ever contemplated that he would be seeking a loan from plaintiff. They argue that the trial judge erred by finding that the transfers were fraudulent under the UFTA.
A motion for reconsideration pursuant to Rule 4:49-2 is committed to "'the sound discretion of the [c]ourt, to be exercised in the interest of justice.'" Cummings v. Bahr, 295 N.J. Super. 374, 384 (App. Div. 1996) (quoting D'Atria v. D'Atria, 242 N.J. Super. 392, 401 (Ch. Div. 1990)). Reconsideration is warranted only in cases in which the court "'has expressed its decision based upon a palpably incorrect or irrational basis,'" or "'did not consider, or failed to appreciate the significance of probative, competent evidence[.]'" Ibid. (quoting D'Atria, supra, 242 N.J. Super. at 401-02).
We are convinced that Judge Paley did not err by determining that there was no basis for reconsideration of the February 14, 2014 order. As we have explained, there is sufficient credible evidence in the record to support the judge's finding that Mr. Barmbatsis's transfers of his interests in SRBFP and Arkadia were fraudulent transfers under the UFTA. Defendants' arguments to the contrary are without sufficient merit to warrant further comment. R. 2:11-3(e)(1)(E).
Affirmed. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION