Summary:
Ms. Novara deposited a check from her mother for $10,000 into her child's custodial account twenty-seven (27) days prior to filing Chapter 7 bankruptcy. The Trustee sought to set this aside as a fraudulent conveyance and sought summary judgment.
To prevail on a motion for summary judgment premised on a fraudulent transfer, pursuant to 11 U.S.C. § 548(a)(1)(B)(I), the Trustee must be able to meet four elements:
(1) the debtor must have an interest in the property;
(2) the transfer must have been made within two years before the date of filing the petition;
(3) the debtor must have received less than a "reasonably equivalent value" in exchange for the transfer; and
(4) the debtor must have been insolvent on the date that the transfer was made.
It was not contest that Ms. Novara deposited the check only twenty seven days prior to filing, that she received no value and was insolvent. The only issue in dispute was whether Ms. Novara had held and interest in the check, which here would be determined under the Uniform Transfers to Minors Act ("UTMA) at N.C.G.S. § 33A-9, which provides in pertinent part:
(a) Custodial property is created and a transfer is made whenever:
. . .
(2) Money is paid or delivered . . . to . . . an adult other than the transferor . . . followed in substance by the words: "as custodian for __________________ (name of minor) under the North Carolina Uniform Transfers to Minors Act"
As the check was payable to Ms. Novara alone, with no notations or memorandum showing an intent to transfer a custodial interest, it failed to satisfy the requirements of the UTMA.
Ms. Novara argued that since cash transfers can qualify under the UTMA, despite the inability to indicate on bills custodial intent. The court dispensed with this argument by recognizing that the notation of custodial intent was not required to be on cash or checks themselves, but could be on separate forms or other documents. A note from Ms. Novara's mother did indicate this was a gift, but did not direct that its was intended for Ms. Novara as a custodian.
This did not end the question, however, as N.C.G.S. § 33A-2(d) allows fro alternative transfers, including as an inter vivos gift or as a transfer under the Uniform Commercial Code. Under either of these theories, the donative intent predominates and is a question of fact, sufficient to avoid summary judgment in favor of the Trustee.
For a copy of the opinion, please see:
Novara- Uniform Transfer to Minors and Fraudulent Conveyances
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