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United Central Bank v. Sindhu

United States District Court, N.D. Illinois, Eastern Division

July 29, 2014

UNITED CENTRAL BANK, as assignee of Mutual Bank, Plaintiff,
v.
SAAD SINDHU, Defendant, UNITED CENTRAL BANK, as assignee of Mutual Bank, Judgment-Creditor-Plaintiff,
v.
SAAD SINDHU, Judgment-Debtor, SADIA SINDHU, Third-Party Defendant, HOLDINGS, INC., Third-Party Defendant, and EURO-AMERICAN REALTY INVESTORS, INC., a Third-Party Defendant.

MEMORANDUM OPINION AND ORDER

JAMES B. ZAGEL, District Judge.

Plaintiff United Central Bank ("UCB"), as assignee of Mutual Bank, filed a Second Amended Complaint against Saad Sindhu and third-party Defendants Sadia Sindhu, Noor Holdings, Inc., and Euro-American Realty Investors, Inc., alleging violations of the Illinois Uniform Fraudulent Transfer Act ("UFTA"), 740 ILCS §§ 160/5(a)(1), 160/5(a)(2), and 160/6(a). Defendants have moved to dismiss Plaintiff's claim pursuant to Fed.R.Civ.P. 12(b)(6). For the following reasons, Defendants' motion is denied in part and granted in part.

I. BACKGROUND

Plaintiff UCB, a Texas banking corporation and successor in interest to Mutual Bank, obtained a $4, 362, 230.27 judgment against Defendant Saad Sindhu on August 25, 2010. On two separate occasions, October 6, 2010 and August 27, 2012, UCB issued a Citation to Discover Assets to Saad Sindhu, requesting that he produce documents relating to the ownership or transfer of his property and prohibiting him from making or allowing any transfer of non-exempt property. UCB also served a Citation to Discover Assets on Devon Bank on March 30, 2011, prohibiting it from making or allowing any transfer or other disposition of any property belonging to UCB. Some of the documents produced by Devon Bank related to a Land Trust held by Devon Bank in real estate located at 24575 North Highway 59, Barrington, Illinois ("Barrington property"). UCB additionally served a Citation to Discover Assets on Sadia Sindhu on October 12, 2012, requiring production of documents pertaining to all accounts in which Saad Sindhu had an interest in the previous ten years.

In connection with the Citations to Discover Assets, UCB obtained testimony from Saad Sindhu on November 14, 2012 and February 27, 2014. During the 2012 questioning, Saad Sindhu testified that he no longer owned the Barrington property, and that it had been foreclosed. Prior to 2010, the beneficial interest in the Barrington property was divided equally between Saad Sindhu and Saad Sindhu's mother. Saad Sindhu's mother transferred her fifty percent interest to Saad Sindhu, who then transferred the entire beneficial interest in the property to Sadia Sindhu. The document transferring Saad Sindhu's interest to Sadia Sindhu was executed on January 1, 2010 and received by the land trustee on January 3, 2011. Plaintiff alleges that the Barrington property was worth $3 million in 2011, and that Saad Sindhu received insufficient consideration for the transfer of the property. Plaintiff alleges that, at most, Sadia Sindhu relaxed all previously existing mortgage loans on the property, particularly, the existing $1.56 million of encumbrances on the Barrington property at the time of the transfer. Further, Plaintiff alleges that Saad Sindhu owed significant debts and was insolvent at the time he transferred the Barrington property to Sadia Sindhu.

During the February 2014 questioning, Plaintiff learned of two additional properties allegedly owned by Saad Sindhu, collectively described as the "Markham property" and the "Euro-American property, " which Plaintiff claims were improperly transferred to Sadia Sindhu in an attempt to conceal their existence.

Plaintiff alleges that Saad Sindhu owned and received rent and revenue checks generated from the Markham property, referring to a large gas station, a related lube and car wash facility, and a related residence located near Interstate-57 and Crawford Avenue. Plaintiff alleges that Saad Sindhu, while insolvent, transferred the Markham property to Noor Holdings, Inc. for less than the value of the property and, potentially, for no consideration at all.

Plaintiff additionally alleges that Sadia Sindhu is now the owner of the Euro-American property, referring to a Hardee's restaurant and related commercial facilities in Mount Vernon, Illinois, and that she did not pay a reasonable value for the asset and may have paid nothing at all. Plaintiff alleges that Saad Sindhu owned all stock in the Euro-American property, received all rent checks from the property, and enjoyed ownership benefits prior to the August 2010 judgment. Plaintiff alleges that Saad Sindhu, after judgment was entered against him, endorsed rent checks generated by Euro American Property over to Sadia Sindhu, who then had these checks deposited into her account, and that ownership was transferred to Sadia Sindhu.

II. PROCEDURAL HISTORY

On March 20, 2014, Plaintiff filed a Second Amended Complaint against Defendants under the UFTA seeking to attach the properties at issue and judgment of fraudulent transfer, amongst other relief. In Counts I, III, and V, Plaintiff alleges that Defendants acted with actual intent to hinder and/or defraud, or constructively defrauded their creditors in violation of 740 ILCS §§ 160/5(a)(1) and (a)(2) by transferring the respective properties from Saad Sindhu to Sadia Sindhu for insufficient consideration while insolvent, thus preventing Saad Sindhu's creditor from recourse to an asset. In Counts II, IV, and VI, Plaintiff alleges that the transfer of the respective properties in exchange for less than a reasonably equivalent value is fraudulent to a creditor, in violation of 740 ILCS § 160/6(a), because their claim arose before the transfer occurred.

Defendants seek to dismiss the Second Amended Complaint in its entirety, arguing that Plaintiff fails to state a claim upon which relief can be granted pursuant to Rule 12(b)(6) and that Plaintiffs have not pled fraud with the required particularity.

III. STANDARD OF REVIEW

When considering a motion to dismiss for failure to state a claim, the court treats all well-pleaded allegations as true, and draws all reasonable inferences in the plaintiff's favor. Justice v. Town of Cicero, 577 F.3d 768, 771 (7th Cir. 2009). "While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). A complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Id.

Rule 9(b) requires that a plaintiff must "state with particularity the circumstances constituting fraud, or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally." "The rule requires the plaintiff to state the identity of the person who made the misrepresentation, the time, place, and context of the misrepresentation, and the method by which the misrepresentation was communicated to the plaintiff." Vicom, Inc. v. Harbridge Merch. Servs., Inc., 20 F.3d 771, 777 (7th Cir. 1994) (internal quotations omitted). In other words, alleging fraud with particularity "means, the who, what, when, where, and how: the first paragraph of any ...


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