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BLAGUSS TRAVEL INTL. v. MUSICAL HERITAGE INTL.

September 22, 1993

BLAGUSS TRAVEL INTERNATIONAL, an Austrian corporation; and INTERNATIONAL TRAVEL MARKETING SERVICES, an Austrian corporation, Plaintiffs,
v.
MUSICAL HERITAGE INTERNATIONAL, an Illinois corporation; JOHN W. GIBBS and JAMES M. GIBBS, individuals; TRANS WORLD TRAVEL, an Illinois corporation; and GIBBS PARTNERSHIP, an Illinois partnership, Defendants.


HOLDERMAN


The opinion of the court was delivered by: JAMES F. HOLDERMAN

JAMES F. HOLDERMAN, District Judge:

 Defendants Musical Heritage International ("MHI"), John & James Gibbs ("Gibbs"), Trans World Travel ("TWT"), and Gibbs Partnership ("GP") move for summary judgment on Counts I-IV, VI and VII of plaintiffs' complaint. Plaintiffs Blaguss Travel International ("Blaguss") and International Travel Marketing ("International") move for summary judgment on Count V and partial summary judgment on Counts I-IV. Defendants' motion is denied. Plaintiffs' motion is denied.

 BACKGROUND

 The case pertains to the business relationship between MHI and the plaintiffs, which consisted of providing music related tours in Europe. The relationship ran from approximately 1986 or early 1987 to June 21, 1991, when MHI, which had stopped paying its bills and became "insolvent," ceased operations. (Complaint, PP 11, 17, 18, 19). When MHI ceased operating, it owed Blaguss approximately $ 190,000 and International $ 43,600. (Complaint, PP 14, 16).

 Plaintiffs filed a seven count complaint:

 Count I - seeks an injunction, pursuant to the Illinois Fraudulent Transfer Act ("Act"), against further transfers of MHI property to defendants; *fn1"

 Count II - seeks an accounting for the property transferred;

 Count III - seeks an avoidance of the transfers to the extent necessary to satisfy the plaintiffs' claims;

 Count V - seeks judgment on the basis of an account stated against MHI;

 Count VI - alleges intentional interference with existing contracts against Gibbs, TWT and GP;

 Count VII - alleges interference with prospective business relationships against Gibbs, TWT and GP. (Complaint, Counts I-VII.)

 In essence, plaintiffs maintain there was a fraudulent transfer of property from the allegedly insolvent debtor, MHI, to Gibbs, TWT and GP, which was fraudulent as to creditors Blaguss and International. Plaintiffs maintain no consideration was paid for the property, which included executory contracts, customer lists, office furniture, and office equipment. (Complaint, PP 22-29).

 Plaintiffs also maintain that defendants induced MHI to break its contracts with plaintiffs, and to transfer its existing business to TWT. TWT then allegedly contracted with other tour operators to provide the services to MHI customers that Blaguss and International had contracted to provide to MHI's customers. The Gibbs brothers are officers and shareholders in both MHI and TWT.

 Defendants initially filed a motion to dismiss Counts I-IV, VI and VII of the complaint. Because the defendants submitted significant materials beyond the pleadings, this court ordered the motion be deemed a motion for summary judgment. (Minute Order of Feb. 5, 1993). Supplementary materials were submitted by the parties, including plaintiffs' cross-motion for summary judgment.

 ANALYSIS

 Under Rule 56(c), summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). In ruling on a motion for summary judgment the evidence of the non-movant must be believed, and all justifiable inferences must be drawn in the non-movant's favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S. Ct. 2505, 2513, 91 L. Ed. 2d 202 (1986). This court's function is not to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial.

 A. Counts I-IV: Illinois Fraudulent Transfer Act

 Plaintiffs maintains that the transfers from MHI to the other defendants were wrongful under the Illinois Fraudulent Transfer Act, particularly under 740 ILCS 160/5 and 740 ILCS 160/6.

 
160/5. Transfer or obligation fraudulent as to creditor-Claim arising before or after transfer
 
ยง 5. (a) 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:
 
(1) with actual intent to hinder, delay, or defraud any creditor of the debtor; or
 
(2) without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor:
 
(A) 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
 
(B) intended to incur, or believed or reasonably should have believed that he would incur, debts beyond his ability to pay as they became due.
 
(b) In determining actual intent under paragraph (1) of subsection (a), consideration may be given, among other factors, to whether:
 
(1) the transfer or obligation was to an insider;
 
(2) the debtor retained possession or control of the property transferred ...

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