New York Bankruptcy Court Rules in Favor of Trustee of Three Automobile Dealerships to Recover “Fraudulent Transfers” From the Owners
August 5, 2021, Southern District of New York – Craig R. Jalbert was a Trustee for three affiliated automobile dealerships (1) BICOM NY, LLC, which did business under the name Jaguar Land Rover Manhattan (“BICOM”)(2) ISCOM NY, LLC, which did business under the name Maserati of Manhattan (“ISCOM”)(3) Bay Ridge Automotive Company, LLC, which did business under the name Bay Ridge Ford (“BRAC”). BICOM, ISCOM and BRAC ) (“Debtors”) were wholly owned by an entity known at BNF Partners NY LLC (“BNF”), owned by Alexander Boyko (“Boyko”), Veniamin Nilva (“Nilva”) and Gary Flom (“Flom”) respectively.
The Trustee filed an adversary proceeding against BNF, Flom and Boyko as Defendants. The Trustee’s complaint asserted “fraudulent transfer” claims under 548 of the Code, “fraudulent conveyance” claims under certain provisions of the New York Debtor and Creditor Law, and other claims under other theories of liability. The Trustee contended that the Debtors made transfers to Boyko and Flom at times when the Debtors were insolvent or had inadequate capital or believed that they were incurring debts that they would be unable to pay. The Trustee also contended that the transfers were made without adequate consideration and that they were recoverable from Boyko pursuant to sections 544 and 550 of the Bankruptcy Code.
The Court found that although Boyko disclaimed knowledge as to the Debtors’ financial condition, it offered no evidence on that issue. Boyko contended that he made loans to the Debtors and that any transfers to Boyko were just repayments of debts owed to Boyko. He, therefore, argued that “fair consideration” was provided for the transfers in the form of the satisfaction of antecedent debts owed to Boyko.
Since Flom did not participate in pretrial proceedings, the Court held that Flom’s (and his counsel’s) failure to appear at trial constituted a default. The Court held that the Debtors were insolvent at the times when they made transfers to Boyko and thus, those transfers were subject to avoidance and recovery under 11 U.S.C.S. §§ 544 and 550. Next, the Court found that the transfers to Boyko by the Debtors were without consideration, except the final $100,000 of payments made by BICOM that constituted repayments of an antecedent debt. The Court also ruled that the evidence showed that Boyko was an actual and intended transferee in the case of the challenged transfers, and was not a mere conduit. The Court rejected Boyko’s loan repayment defense as irrelevant.
The Court entered judgment in favor of the Trustee and against the owners.
Jalbert v. Flom (In re Bicomny, LLC), 2021 Bankr. LEXIS 2096