How WA State Voids Conveyances/Transfers of Assets

Posted on April 11, 2021 by admin

RECOVERY UNDER UNIFORM FRAUDULENT TRANSFER ACT FOR CONSTRUCTIVE FRAUD

Posted by Aric S. Bomsztyk | Apr 29, 2020 

For over thirty (30) years, Washington has had a statutory schema which allows creditors to recover “fraudulent” transfers of money and other types of property directly from the persons or entities who received the “fraudulent” transfer. The statutory schema is called Uniform Fraudulent Transfer Act  and/or Uniform Voidable Transactions Act.  RCW 19.40.900

Any transfer of an asset to a third party or incurring of an obligation to a third party may be considered “fraudulent” under the Uniform Voidable Transfers Act.  This generates a considerable amount of litigation, when a struggling or indebted business transfers assets to its owners, owners’ close relatives, or other businesses.   A creditor seeking to enforce a debt against a business or company can challenge any transfer on the basis that the transfer was done with intent to hinder, delay, or defraud creditors.

It is important to note that the Uniform Voidable Transfers Act recognizes that the “fraudulent” transfer by a business to its owners or to another business may not be intentionally “fraudulent.”  In other words, the Uniform Fraudulent Transaction Act will recognize that a transaction can be “constructively” fraudulent even if there was no actual fraudulent intent.   In cases of a constructive fraudulent transfer, a creditor need only establish that a transfer was made to a insider of the business or that the business did not receive reasonably equivalent value in exchange and that one or more of the following three factors was present:

  • The debtor was insolvent at the time of the transfer or insolvent as a result of the transfer or obligation (voidable only as to present creditors). RCW 19.40.051(1) 
  • The debtor was engaged in or about to engage in a business or a transaction for which the debtor’s remaining assets were unreasonably small in relation to the business or transaction (fraudulent as to both present and future creditors). RCW 19.40.041(a)(2)(i)
  • The debtor intended to incur, or believed or reasonably should have believed that he or she would incur, debts beyond his or her ability to pay as they became due (fraudulent as to both present and future creditors).  RCW 19.40.041(a)(2)(i)

If a creditor can prove constructive fraud, then the creditor can try to recover the property (which can include money) from the actual person who received the property or money—the “transferee” RCW 19.40.071  The Uniform Fraudulent Transfer Act refers to this as “Avoidance of the transfer or obligation to the extent necessary to satisfy the creditor’s claim.”  RCW 19.40.071(1)(a).  A creditor also may be able to obtain an injunction, or court order, preventing further transfer of the property until their lawsuit is resolved against the business.  RCW 19.40.071(1)(b) and RCW 19.40.071(1)(c)(i)

Our firm represents companies and business owners prosecuting claims or defending claims under the Uniform Fraudulent Transfer Act.  We can provide advice to businesses regarding potential transfers and whether they could implicate the provisions of the Uniform Fraudulent Transfer Act.  If necessary, our firm will litigate in Washington Courts and Federal Courts—including defending against claims brought by the Internal Revenue Service, Washington Department of Revenue or other governmental authorities.  Please contact our firm with any questions, we will provide a free consultation.    

PARTNER

Mr. Bomsztyk’s practice encompasses all aspects of small business representation including incorporation, financing, contract/lease review, negotiations, dispute resolution, and litigation. Mr. Bomsztyk represents a wide variety of business including internet startups, general contractors and specialty subcontractors, real estate developers, renowned artists, retailers, mining operations, and providers of professional services.

In addition to commercial matters, Mr. Bomsztyk maintains an active practice representing injured individuals in their personal injury claims as well as advocating for criminal defendants in appellate, post-conviction and immigration proceedings.

PRACTICE AREAS

Business, Corporate and Transactions, Commercial and Civil Litigation, Administrative Law, Personal Injury, Criminal Defense, Franchise Law 

BAR ADMISSIONS

  • Washington
  • U.S. District Court, Western District of Washington

EDUCATION

  • Fordham University School of Law, J.D.
  • University of Wisconsin-Madison, B.A.

RECENT NOTABLE RESULTS

TRIAL ACCOMPLISHMENTS:

  • After a month-long jury trial, obtained a complete defense verdict for franchisor being sued by multiple franchisees and successor franchisor for violations of Washington’s Franchise Investment Protection Act and other breach of contract claims.
  • After trial, obtained complete reversal of industrial insurance premiums assessed against trucking company by Washington’s Department of Labor & Industries.
  • Obtained a hung jury for a Defendant with a blood alcohol limit above .11 and charged with driving under the influence.  After the trial, successfully renegotiated the charge with the prosecutor so that the Defendant could plead to a significantly lesser charge and receive no jail time or other conditions associated with a conviction for driving under the influence.

PERSONAL INJURY LITIGATION:

  • Settled a personal injury claim by an inmate of county correctional facility for $250,000.
  • Settled a personal injury claim by a pedestrian struck by a bus for $150,000.
  • Settled the claim of a homeowner injured by a contractor during a remodel for $125,000.
  • Millions of dollars obtained for injured individuals for their medical malpractice, hospital malpractice, and nursing home malpractice claims subject to confidentiality provisions.

COMMERCIAL TRANSACTIONS:

  • Corporate counsel for scores of Washington small businesses advising, negotiating and drafting: joint venture agreements, commercial leases, purchase and sale agreements, licensing/franchise agreements, noncompetition and other employment agreements.
  • Negotiated and drafted a multi-million dollar construction contract on behalf of the general contractor for a condominium conversion of a historic building in Seattle, Washington.
  • Negotiated and drafted the terms of a stock purchase buy out whereby one shareholder bought out the remaining shareholder and acquired full ownership of a well known retail brand.

AUDIT/REGULATORY DEFENSE: 

  • Successful defense of dermatologist’s medical license accused of violating Washington Department of Health regulations governing medical spas.
  • Successful defense of mortgage brokers’ license accused of violating Washington Department of Financial Institution regulations governing the mortgage industry.
  • Successful savings of hundreds of thousands of dollars representing small businesses in Department of Revenue, Labor & Industries, and Employment Security Department audits, charges and hearings.  Scores of successful representations in various governmental administrative hearings and before the board of industrial insurance appeals.

COMMERCIAL LITIGATION:

  • Litigation on behalf of commercial landlords and commercial tenants settling millions of dollars of disputed lease provisions.
  • Litigation on behalf of both creditors and debtors settling millions of dollars in disputed debts.
  • Litigation on behalf of business partners negotiating and settling disputed relationships and allowing businesses to remove partners and/or partners to be released. 

APPELLATE/POST-CONVICTION CRIMINAL DEFENSE:

  • Filed a motion for new trial, after Defendant was convicted by a jury after a three-day trial. Through thorough investigation and persuasive argument, convinced the trial judge to reverse the jury’s verdict and dismiss the case against the Defendant. The defendant was saved from imminent deportation to Somalia.
  • Filed a motion to withdraw guilty pleas on the basis Defendant was incompetent to enter the pleas due to extreme schizophrenia. Through thorough investigation and persuasive argument, convinced the judge to allow the Defendant to withdraw guilty pleas and dismiss the charges. The defendant was saved from imminent deportation to Cambodia.
  • After being sentenced by a King County Superior Court judge for two separate felonies causing an increase in client’s offender score and sentence, appealed to the Washington State Court of Appeals, Division I arguing that the two felonies were part of the same criminal conduct and should not be sentenced separately. The Court of Appeals agreed and remanded the case back to King County Superior Court to resentence client.

PUBLIC PRESENTATIONS:

  • “Litigating For Small Business Clients. Realities & Strategies”  Presented to the King County Bar Association
  • “Structuring Creative Collaborations. Simple Legal Steps To  Protect Your Ideas, Friendships & Sanity” Presented to the City of Seattle-Office of Film + Music
  • “Your Business’ First Steps. A Primer On Partnerships, Incorporation/LLC, Joint Ventures
    Traditional Funding & Crowdfunding    ”  Presented to William Factory Small Business Incubator

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