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Hong Kong Electro-Chemical Works, Ltd. v. Less

March 29, 2007

HONG KONG ELECTRO-CHEMICAL WORKS, LTD., PLAINTIFF,
v.
GARY LESS ET AL., DEFENDANTS.



The opinion of the court was delivered by: Samuel Der-yeghiayan, District Judge

MEMORANDUM OPINION

This matter is before the court on Judgment Creditor Hong Kong Electro-Chemical Works Ltd.'s ("HKEW") motion to void two allegedly fraudulent conveyances of title of a property, and HKEW's motion to compel compliance with a subpoena. For the reasons stated below, we deny both motions.

BACKGROUND

HKEW is a Hong Kong corporation that is engaged in the manufacturing and selling of household goods. HKEW alleged in its complaint in this action that Defendant Todd Industries, Inc. ("Todd Industries") was incorporated in 1999, and was involuntarily dissolved by the Illinois Secretary of State in July 2000. According to HKEW, Defendants Michelle Less, Garry Less, Jeffrey Less, and Bernice Less allegedly "used the dissolved Todd Industries as a front for a family scheme to obtain goods from HKEW without paying for goods after they were delivered by HKEW." (Compl. Par. 3). HKEW brought the instant action, and in its complaint included breach of contract claims against Garry Less (Count I), Jeffrey Less (Count II), Bernice Less (Count III), Michelle Less (Count IV), and Todd Industries (Count V).

The parties filed motions for summary judgment and on April 25, 2006, we granted in part and denied in part the motions for summary judgment. Specifically, we denied HKEW's motion for summary judgment on Counts II and III and granted HKEW's motion for summary judgment on Counts I, IV, and V. We also denied Michelle Less' motion for summary judgment on Count IV and denied Garry Less' motion for summary judgment on Count I. Finally, we granted Jeffrey Less' motion for summary judgment on Count II and granted Bernice Less' motion for summary judgment on Count III. On June 12, 2006, we granted HKEW's motion for summary judgment on the issue of damages and stated that Defendants Michelle Less, Garry Less, and Todd Industries owed $166,252.88 jointly and severally. HKEW has now brought the instant motions as part of its efforts to collect money owed to HKEW by Michelle Less and Garry Less (collectively referred to as "Less Defendants").

HKEW contends that in 2006, Michelle Less' mother, Charlene Werner ("Werner"), purchased a house in Riverwoods, Illinois ("House") from Scott Warren ("Warren") ("2002 Conveyance"). Werner then allegedly allowed the Less Defendants to live in the House. In early 2006, Werner allegedly decided to sell the house because she was delinquent in paying some of the real estate tax payments and the Less Defendants were behind on rent payments, which Werner used to pay the mortgage. Werner sold the House to Roth Holdings, LLC ("RHL") ("2006 Conveyance"). HKEW contends that the Less Defendants have lived at the House since it was purchased by Werner and that the Less Defendants are the true owners of the House. HKEW moves for a finding that the 2002 Conveyance and 2006 Conveyance were fraudulent and are void under the Illinois Uniform Fraudulent Transfer Act ("IUFTA"), 740 ILCS 160/1 et seq. HKEW also moves for an order requiring RHL to comply with the subpoena sent by HKEW and produce the requested information.

DISCUSSION

I. Motion To Void Fraudulent Transfers

HKEW argues that the 2002 Conveyance and 2006 Conveyance are fraudulent and thus void. Pursuant to 740 ILCS 160/5, "[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 . . . with actual intent to hinder, delay, or defraud any creditor of the debtor. . . ." 740 ILCS 160/5(a). In assessing whether the debtor had "actual intent," the court should consider factors such as whether:

(1) the transfer or obligation was to an insider; (2) the debtor retained possession or control of the property transferred after the transfer; (3) the transfer or obligation was disclosed or concealed; (4) before the transfer was made or obligation was incurred, the debtor had been sued or threatened with suit; (5) the transfer was of substantially all the debtor's assets; (6) the debtor absconded; (7) the debtor removed or concealed assets; (8) the value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred; (9) the debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred; (10) the transfer occurred shortly before or shortly after a substantial debt was incurred; and (11) the debtor transferred the essential assets of the business to a lienor who transferred the assets to an insider of the debtor.

740 ILCS 160/5(b).

A. 2002 Conveyance

HKEW argues that the 2002 Conveyance was fraudulent and is thus void. HKEW points out that the 2002 Conveyance was made to Werner, Michelle Less' mother, who is an insider and that after the 2002 Conveyance, the Less Defendants retained possession of the House. HKEW also argues that the Less Defendants provided HKEW with an inaccurate address during discovery in this case. HKEW contends that such misinformation shows that the Less Defendants were attempting to conceal the fact that they lived in the House. Finally, HKEW contends that the Less Defendants were already in substantial debt at the time of the 2002 Conveyance, which shows that the conveyance was part of an attempt to hide their true ownership of the House.

HKEW has not pointed to any evidence that indicates that the Less Defendants ever had any legal or equitable interest in the House, either in whole or in part. The parties agree that Werner purchased the House from Warren. However, HKEW has not pointed to any connection between the Less Defendants and Warren. Nor has HKEW shown that the Less Defendants gave any money to Werner for the purchase of the House. Thus, the undisputed facts show that the 2002 Conveyance did not involve a transfer of any interest to or from the Less Defendants. As is indicated above, the UFTA applies to a " transfer made . . . by a debtor. . . ." 740 ILCS 160/5(a). Since there is no evidence that the Less Defendants held any interest in the House at any point, HKEW is precluded from a finding in HKEW's favor in regard to the 2002 Conveyance. See 740 ILCS 160/2(l) (defining "transfer" as "every mode . . . of disposing of or parting with an asset or an ...


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