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N.C. Ct. of App.: Anhui Omi Vinyl v. USA Opel Flooring- Fraudulent Conveyance under State Law

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By Ed Boltz, 1 October, 2024

Summary:

This case involves Anhui Omi Vinyl Co., Ltd. (Omi) suing USA Opel Flooring, Inc. (Opel), previously known as USA Flooring Importers, Inc., for a fraudulent transfer of real property. Omi claimed that Opel transferred assets from Surface Source USA NC, Inc. (Surface Source), a company that owed Omi over $1,000,000, with the intent to defraud creditors, violating the Uniform Voidable Transactions Act. Surface Source transferred its building to Opel while being sued by Omi, hindering Omi’s ability to collect on a judgment.

The trial court ruled in favor of Omi, determining that the transfer was voidable as a fraudulent transfer because it was intended to hinder, delay, or defraud Omi. The court found multiple badges of fraud, such as Surface Source’s insolvency and the concealment of the transfer. Opel’s claim of good faith was rejected because the transfer was made with fraudulent intent, and Omi was awarded a judgment of $1,139,971.21.

Opel appealed, but the North Carolina Court of Appeals upheld the trial court’s decision, finding no error in its conclusion that the transfer was voidable and that Opel’s good faith defense did not apply. The court also affirmed that the trial court had the authority to enter a judgment against Opel for the same amount as Omi’s judgment against Surface Source, effectively restoring Omi to its position as a judgment creditor.

The court’s ruling affirmed the fraudulent transfer decision without addressing Opel’s alternative claim of successor liability.

Commentary:

While a fraudulent conveyance is almost certainly non-dischargeable in bankruptcy as fraud,  this case does,  relying on Hafner v. Irwin, 23 N.C. 490, 498 (1841),  remind that "[e]very contrivance to the intent to hinder creditors—directed to that end—is “malicious” that is to say, wicked..."  and meets the harder half of the requirement for nondischargeability under 11 U.S.C. 523(a)(6).

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To read a copy of the transcript, please see:

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anhui_omi_vinyl_v._usa_opel_flooring.pdf (170.58 KB)
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NC Court of Appeals

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