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Home / Case News / A California Bankruptcy Court Determines Whether Transfer of A Debtors’ Ownership Interests to His Son is Fraudulent

A California Bankruptcy Court Determines Whether Transfer of A Debtors’ Ownership Interests to His Son is Fraudulent

October 15, 2019, California – The Plaintiff Douglas Whatley for the Debtors Rajpal Singh Chatha (“Rajpal”) and Taranjit Kaur Chatha (“Taranjit”) (collectively, “Debtors”) filed two motions for partial summary judgment, asserting that the transfer of the Debtors’ ownership interests in the alleged properties by the Debtors to their son Simranjit and/or his entities were intentional or constructive fraudulent transfers.

Defendants Simranjit and Thrive Management, LLC (“Thrive”), filed an opposition to both motions. The Defendants denied that the transfer of the Debtors’ ownership interests in the properties were fraudulent transfers, alleging that the Plaintiff lacked a basis to recover the properties. The Defendant also claimed that the applicable statute of limitations barred the action.

In the first motion, the Court found that the Plaintiff relied on nine badges of fraud to establish an intentional fraudulent transfer of the alleged property under the California UFTA. Thus, the Plaintiff should have established the absence of a genuine factual dispute as to each badge. However, the Plaintiff failed to meet that burden. Accordingly, the Court held that there remained a genuine dispute over whether the Debtors received reasonably equivalent value from the Defendants in exchange for the ownership interest transferred.

On the second motion, the Court held that the Debtors’ transfer of an interest in their ownership of the alleged real property was an intentional fraudulent transfer. The Court found that the Debtor made the alleged transfer to their son while they were insolvent. Therefore, the transfer was made to place the alleged property outside the reach of the creditors. Further, the Court held that the properties were transferred under a threat of litigation resulting from loan default and were made for no consideration. Hence, the Court held that the Debtor made the alleged transfer for less than reasonably equivalent value.

As regards the Plaintiff’s complaint, the Court held that the claim was timely under Cal. Civ. Code § 3439.09(a) because it was filed within one year of the petition date.