Opinion
Case No. 4D02-2082.
Opinion filed July 23, 2003.
Appeal from the Circuit Court for the Seventeenth Judicial Circuit, Broward County; John A. Miller, Judge; L.T. Case No. 98-12250(07).
Henry B. Handler and Bruce A. Harris of Weiss Handler, P.A., Boca Raton, for appellants.
Steve J. Gutter of Kahn Gutter, Plantation, for Appellee-Gruppo Ceramiche Ricchetti, S.P.A.
Balsamo and Sahagian ("Appellants") appeal a summary judgment entered in favor of Gruppo Ceramiche Richhetti, S.P.A. ("Appellee") under Florida's Uniform Fraudulent Transfers Act. We reverse.
Appellee, a judgment creditor of Building Materials, Inc. ("Building"), brought proceedings supplementary against Appellants and BMI Tile, Inc., seeking to recover the judgment amount of $35,694, plus interest. The complaint alleged that Appellants were officers, directors, and/or shareholders of Building, the judgment debtor, and that Building transferred its assets to BMI Tile in a fraudulent transfer while Building was insolvent.
The summary judgment is based on an accountant's affidavit stating that Building had a "liquidity problem" in that its "quick ratio" (cash plus receivables divided by payables) was 55%, whereas a solvent company's "quick ratio" should not be less that 80%.
Appellants filed the affidavits of two accountants in opposition to the motion for summary judgment, disagreeing with Building's accountant and stating that Building was solvent based on the measurement of stockholder's equity plus loans from stockholders and considering inventory, current assets, and the fact that Building was paying its debts as they became due.
By its summary judgment order, the trial court found that Building was insolvent at the time of the transfer of its assets and liabilities to BMI Tile, despite the fact that it also found that Building's assets exceeded its liabilities by $326,749.00, because it was not paying its debts, specifically the Gruppo debt, as they became due. The court held that Building could not, as a matter of law, rebut the insolvency presumption of section 726.106, Florida Statutes, by presenting evidence of balance sheet solvency.
Appellants were, thus, ordered to pay the amount of the original Gruppo debt, $35,694.94, plus interest, plus attorney's fees and costs. We note that the corporation, BMI Tile, Inc., is not a party to this appeal.
We conclude, however, that summary judgment was improperly entered against Appellants as individuals, in the absence of an order piercing the corporate veil, as the judgment debtor, Building, transferred its assets to BMI Tile and not to Appellants.
We recognize the broad scope allowed in an action under sections 59.29 and 726.102, Florida Statutes. Section 726.102(12) defines "transfer" as, "[e]very mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an asset or an interest in an asset. . . ." Here, no matter how broadly the term is defined, no transfer was made to Appellants, individually.
Appellee seeks to impose liability on the ground that the individuals were "insiders" under section 726.106(2). However, the trial court did not determine liability on this basis. Furthermore, there was no evidence that a transfer was ever made to Appellants. Appellants' status as insiders, taken alone, does not expose them to liability absent proof that the transfer was made to them or that the corporate veil should otherwise be pierced.
As it will impact the case on remand, in the event the trial court subsequently determines that Appellee is entitled to pierce the corporate veil to reach Appellants, we also consider whether the trial court erred in entering summary judgment under sections 726.106 and 726.103, Florida Statutes.
Here, the court found that non-payment of the judgment creditor's debt, alone, triggered the insolvency presumption under 726.103(2) and that the presumption was never rebutted by proof of receipt of reasonably equivalent value for the transfer to BMI Tile.
Section 726.106(1) provides that a transfer is fraudulent as to a creditor whose claim arose before the transfer was made "if the debtor made the transfer . . . without receiving reasonably equivalent value in exchange for the transfer . . . and the debtor was insolvent at the time. . . ." Section 726.103 provides two relevant definitions of insolvency. Section 726.103(1) provides a definition the trial court labels the "balance sheet test." Under the test, "[a] debtor is insolvent if the sum of the debtor's debts is greater than all of the debtor's assets at a fair valuation." Section 726.103(2) provides that "[a] debtor who is generally not paying his or her debts as they become due is presumed to be insolvent." Here, issues of fact exist on the issue of Building's solvency. The record before us includes evidence that the debtor could pass the balance sheet test. There is also a lack of evidence as to failure to pay debts other than that owed the judgment creditor. Where the record demonstrates possibility of an issue of fact or if different inferences can be reasonably drawn from the uncontroverted facts, then summary judgment is improper as a matter of law. Albelo v. S. Bell, 682 So.2d 1126, 1129 (Fla. 4th DCA 1996).
Even if the evidence was undisputed that Building was not paying its debts as they became due, nothing in the statute suggests that an otherwise solvent debtor is deemed insolvent simply by not paying the judgment. The court held that under section 726.106, only the receipt of reasonably equivalent value could rebut the presumption and that balance sheet solvency was only relevant under section 726.105(1)(a) as to future creditors since balance sheet solvency could only bear on the issue of the debtor's intent. The trial court, here, reasoned that if balance sheet solvency could rebut the presumption of subsection (2) (failure to pay debts), then subsection (2) would be meaningless.
There is no authority, however, to suggest that balance sheet solvency cannot be used to rebut the presumption of insolvency under section 726.103(2). Section 726.103(2) is not framed as an alternative to the balance sheet test under subsection (1), but as a tool to aid in determining solvency. What subsection (2) does do is create a rebuttable presumption of insolvency, but where failure to pay debts as they are due creates a presumption, such presumption is logically rebutted by proof that the debtor is not insolvent. In other words, if there is proof that the sum of the debtor's debts is not greater than all of the debtor's assets, then a debtor does not meet the definition of insolvency. See Levin v. Ethan Allen, Inc., 823 So.2d 132 (Fla. 4th DCA 2002) (recognizing that balance sheet test available to rebut insolvency presumption).
Therefore, as the record reflects that issues of fact remain as to the solvency of Building, it was error to enter the summary judgment. All other issues raised are moot. We remand for further proceedings.
STEVENSON and MAY, JJ., concur.
NOT FINAL UNTIL DISPOSITION OF ANY TIMELY FILED MOTION FOR REHEARING.