NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-3247-20
MAJEK INVESTMENTS LLC,
Plaintiff-Appellant,
v.
CONVENTUS, LLC,
Defendant,
and
PASSAIC MAIN NORSE LLC, ELIZABETH CATHERINE VENTURES LLC, LL REO VENTURES LLC, ELIZABETH LOUISA VENTURES LLC, PLAINFIELD PA VENTURES LLC, NEXUS CAPTIAL INVESTMENTS, LLC, and PRIVCAP FUNDING, LLC,
Defendants-Respondents. _______________________________
Argued October 23, 2023 – Decided November 28, 2023
Before Judges Sabatino, Mawla and Vinci. On appeal from the Superior Court of New Jersey, Chancery Division, Union County, Docket No. C- 000138-19.
Haralampo Kasolas argued the cause for appellant (Brach Eichler LLC, attorneys; Haralampo Kasolas, of counsel and on the briefs).
Abraham S. Beinhorn argued the cause for respondent Nexus Capital Investments, LLC (Jacobowitz, Newman, Tversky LLP, attorneys; Abraham S. Beinhorn and Evan M. Newman, on the brief).
Timothy Patrick Duggan argued the cause for respondent Privcap Funding, LLC (Stark & Stark PC, attorneys; Timothy Patrick Duggan, of counsel and on the brief).
PER CURIAM
Plaintiff Majek Investments, LLC ("Majek") appeals from the trial court's
order denying its motion for summary judgment and granting summary
judgment to defendants Nexus Capital Investments, LLC ("Nexus") and Privcap
Funding, LLC ("Privcap"), and an order denying its motion for reconsideration.
Based on our review of the record and the applicable principles of law, we
affirm.
I.
A-3247-20 2 We summarize the facts developed in the record on the parties' cross-
motions for summary judgment. 1
A.
Majek alleged the following facts. On March 19, 2019, Majek entered
into a commercial loan agreement with Norse Holdings, LLC ("Norse"), in the
principal amount of $750,000 (the "Majek Loan"). The Majek Loan was secured
by a promissory note executed by Norse. Norse is one of many companies
affiliated with Seth Levine ("Levine"). The Majek Loan was also secured by a
guaranty of payment and performance executed by Levine and his wife, Shira
Levine. The Majek Loan was further secured by a pledge and security
agreement executed by Levine and his wife granting Majek a security interest in
Hillside Norse, LLC ("Hillside"), another company affiliated with Levine. At
Levine's direction, Majek wired the proceeds of the Majek Loan to an account
owned by Hillside.
Majek contended, following receipt of the Majek Loan proceeds, its
borrower, Norse, made several fraudulent transfers to respondents Nexus and
Privcap. Majek alleges Norse made three outgoing wire transfers to Nexus on
1 The record indicates certain documents were filed under seal. At oral argument on appeal, counsel stipulated the court can refer to any documents in the record. A-3247-20 3 April 19, May 8, and May 15, 2019, in the total amount of $1,503,000 to satisfy
loans Nexus made to Levine individually. Majek alleges Norse made five
outgoing wire transfers to Privcap as follows: (1) March 19, 2019, in the amount
of $14,000; (2) March 25, 2019, in the amount of $177,345; (3) April 19, 2019,
in the amount of $34,000; and (4) two on May 22, 2019, in the total amount of
$700,000.
Majek contended that on May 1, 2019, Norse had balances in its TD Bank
accounts of $48,318.61 and $29,055.31, and on May 31, 2019, those accounts
had negative balances.
On August 16, 2019, Norse defaulted on the Majek Loan and, on
September 16, 2019, Majek filed suit in the Law Division against Norse,
Hillside, and the guarantors, captioned Majek Investments LLC v. Hillside
Norse LLC, Docket No. L-6525-19 (the "Bergen County Action"). On March
31, 2020, Majek obtained final judgment by default against Levine, Hillside,
and Norse in the amount of $1,105,195.60.
On or about March 18, 2021, Levine pleaded guilty to conspiracy to
commit bank fraud in the matter United States v. Seth Levine, 2:21-CR-00234-
SDW-1. Majek contended, based on the Information filed in that case by the
A-3247-20 4 United States Attorney, that Levine admitted Norse was insolvent when it made
the alleged fraudulent payments to Nexus and Privcap.
The government alleged in the Information that Levine "did knowingly
and intentionally conspire and agree with others, the co-conspirators, to execute
and attempt to execute a scheme and artifice to defraud financial institutions."
It alleged Levine was the owner and managing member of Norse and Norse "was
the parent company of more than [seventy] other limited liability companies (the
'Subsidiary Companies'), of which L[evine] was also the founding partner,
owner, and managing member." The government continued, "through Norse
Holdings, and the Subsidiary Companies, L[evine] controlled at least [seventy]
multifamily properties, comprising [of] approximately 2,500 apartments (the
'Multifamily Properties')."
The government also alleged it "was the goal of the conspiracy for
L[evine] and [his] co-conspirators to enrich themselves by inducing financial
institutions to issue mortgage loans based on false pretenses, representations,
and promises." It contended that "[f]rom at least in or about 2009 and through
in or about August 2019, L[evine] directed a scheme to refinance the
Multifamily Properties held in the names of the Subsidiary Companies using
fraudulent information about the true value of, and the income generated by, the
A-3247-20 5 Multifamily Properties." The government also asserted that "[a]s a result of
each fraudulent refinance, the Subsidiary Company that owned the multifamily
property received a cash payout, which L[evine] and his co-conspirators used
for their own enrichment, to repay investors, and continue the conspiracy."
Majek contended Privcap had actual or constructive knowledge that
Levine and his entities were insolvent at the time of the alleged fraudulent
transfers to Privcap because Levine was in default on or was late in paying
certain loans extended by Privcap. In support of this claim, Majek asserted that
on March 12, 2019, Privcap and Levine entered into a loan agreement in the
total amount of $490,000 payable no later than March 20, 2019 (the "March 12,
2019 Loan"). On March 13, 2019, Privcap wired $484,950 to Levine's personal
TD Bank account. On March 25, 2019, $325,000 of this amount was applied to
fund a loan by Privcap to another entity affiliated with Levine, Perth LP
Ventures, LLC (the "Perth LP Loan"). The same day, Norse wired the remaining
$177,345 to Privcap in satisfaction of the March 12, 2019 Loan. Majek
contended Levine was already in default by March 25, 2019, because the March
12, 2019 Loan was payable no later than March 20, 2019.
Majek also argued that, at the time Privcap entered into these loan
agreements with Levine and his affiliated entities, two other entities affiliated
A-3247-20 6 with Levine, Red Clay Norse, LLC ("Red Clay"), and Riverside Norse, LLC
("Riverside Norse"), were in default on loans made by Privcap to those entities
in 2018. Majek alleged that on March 19, and April 19, 2019, Norse wired
Privcap payments of $14,000 in connection with these loans.
Majek next argued that on March 28, 2019, Privcap entered into a loan
agreement with Levine individually in the amount of $720,000 (the "March 28,
2019 Loan"). The same day, Privcap wired $700,000 to Norse in two payments
of $499,000 and $201,000. The March 28, 2019 Loan was payable on April 2,
2019. On April 19, 2019, Norse wired $20,000 to Privcap representing a fee for
the March 28, 2019 Loan. On May 22, 2019, Norse made two wire transfers to
Privcap in the amounts of $450,000 and $250,000 to repay the March 28, 2019
Loan. Again, Majek contended Levine was in default because the loan was
payable on April 2, 2019, but was not paid on time.
Majek contended Nexus had constructive knowledge of Levine's
insolvency based on similar arguments. On January 25, 2018, Nexus loaned
Levine $850,000 (the "January 25, 2018 Loan"). On February 6, 2018, Nexus
loaned Levine $1,075,000 (the "February 6, 2018 Loan"). On February 22,
2018, Nexus loaned Levine $520,000 (the "February 22, 2018 Loan"). Majek
A-3247-20 7 contended these loans were repaid late and Levine was in default when they
were paid.
Majek also argued that on or around August 7, 2018, Nexus facilitated a
loan by Powercap Partners, LLP ("Powercap") to Levine in the amount of
$1,200,000 (the "Powercap Loan"). It argued Nexus arranged for this loan to
Levine while Levine was in default on its own January 25, February 6, and
February 22, 2018 loans. After the Powercap Loan funds were disbursed,
Levine paid Nexus $1,075,000 in satisfaction of Nexus's February 6, 2018 Loan.
On August 13, 2018, Levine paid the remaining $433,500 due under Nexus's
January 25, 2018 Loan.
The Powercap Loan was initially payable by December 7, 2018, but was
subsequently extended. On January 7, 2019, Powercap's interest in the loan was
bought out by new investors. On April 7, 2019, a new investor, SN Funding,
bought out the Powercap Loan, and Nexus continued to service the loan. On
May 8, and 15, 2019, Norse made wire transfers to Nexus in the amount of
$700,000 and $428,000, which Nexus forwarded to SN Funding to pay off the
Powercap Loan in full. According to Majek, the Powercap Loan demonstrates
Nexus knew Levine was insolvent and engaged in a "Ponzi scheme."
A-3247-20 8 Finally, Majek alleged Nexus loaned $375,000 to Levine in April 2018.
The loan was initially due on October 17, 2018, but was repaid late by Norse on
April 17, 2019.
B.
Privcap asserted the following facts in response to Majek's allegations.
According to Daniel Cohen, the managing member of Privcap, Privcap made
eighteen to twenty loans to numerous entities controlled by Levine beginning in
2016.
On November 13, 2018, an entity affiliated with Levine, Red Clay, entered
into a commercial loan agreement with Privcap (the "Red Clay Loan"). The Red
Clay Loan had an original maturity date of February 11, 2019. Red Clay and
Privcap agreed to extend the loan due date provided Red Clay made monthly
payments until the loan was repaid.
On November 14, 2018, Riverside Norse, another entity affiliated with
Levine, entered into a commercial loan agreement with Privcap (the "Riverside
Norse Loan"). The Riverside Norse Loan had an original maturity date of May
14, 2019. As with the Red Clay Loan, Riverside Norse and Privcap agreed to
extend the loan due date provided Riverside Norse made monthly payment s.
A-3247-20 9 On March 19, 2019, Norse wired $14,000 to satisfy the extension
payments owed by Red Clay and Riverside Norse under their respective loans.
On April 19, 2019, Norse again wired $14,000 to satisfy the extension payments
owed by Red Clay and Riverside Norse in connection with those loans. As a
result, Privcap did not consider Red Clay or Riverside Norse to be in default as
alleged by Majek.
On March 12, 2019, Levine and Privcap entered into a short-term loan in
the amount of $490,000 with an initial maturity date of March 20, 2019. On
March 13, 2019, Privcap wired $484,950 to Levine's personal bank account. On
March 25, 2019, $325,000 of that loan was used to fund the Perth LP Loan. The
remaining $177,345, which represented the balance of the principal plus interest,
was returned to Privcap on March 25, 2019. The Perth LP Loan remains unpaid.
On March 28, 2019, Privcap made another personal loan to Levine in the
amount of $720,000. The March 28 Loan was due on April 2, 2019. On March
28, 2019, at Levine's direction, Privcap wired $700,000 to Norse in two separate
transfers of $201,000 and $499,000. After transferring the funds to Norse,
Levine no longer required the March 28, 2019 Loan because a certain deal was
not completed and the funds were returned to Privcap. On April 19, 2019, Norse
paid a $20,000 fee for the March 28, 2019 Loan. On May 22, 2019, Norse paid
A-3247-20 10 the remaining $700,000 due under the March 28 Loan in two payments of
$450,000 and $250,000.
C.
Nexus added the following facts in response to Majek's claims. On
January 25, 2018, Nexus loaned Levine $850,000. The January 25, 2018 Loan
was "due and payable on the earlier of April 25, 2018 . . . or the sale or refinance"
of certain properties. Nexus agreed to extend the loan maturity date to August
13, 2018, subject to Levine making extension payments. Nexus did not consider
the borrower in default because Nexus received the required extension
payments. On or about August 13, 2018, the January 25, 2018 Loan was paid
off in full.
Nexus made two other loans to Levine on February 6, and 22, 2018. Under
the term of the February 6, 2018 Loan, Levine was required to repay $1,075,000
to Nexus no later than May 6, 2018. Again, the loan documents gave Levine the
contractual right to extend the maturity date. Although the loan technically
matured on July 6, 2018, Nexus agreed to extend the maturity date to August 6,
2018, in exchange for payment of an extension fee. The February 6, 2018 Loan
was never deemed to be in default by Nexus and it was timely paid in full on
August 6, 2018, in connection with the Powercap Loan.
A-3247-20 11 Under the terms of February 22, 2018 Loan, Levine was required to repay
$520,000 to Nexus no later than May 22, 2018. Again, Levine had the
contractual right to extend that maturity date. According to Nexus, on or about
July 22, 2018, the parties agreed to refinance the loan, and, thereafter, entered
into several extension agreements. As a result, the new maturity date was
January 22, 2019. On or about January 17, 2019, the loan was repaid in full.
Nexus did not consider the February 22, 2018 Loan to have ever been in default.
On August 7, 2018, Nexus participated in and serviced the Powercap
Loan. Powercap disbursed a total of $1,122,500 after deducting fees and
expenses. Of the $1,122,500 disbursed under Powercap Loan, $47,500 was
wired to the Levine's personal bank account, and the remaining $1,075,00 0 was
transferred to Nexus to pay off the February 6, 2018 Loan. The Powercap Loan
was essentially a refinance of the February 6, 2018 Loan.
Although the original maturity date of the Powercap Loan was October 7,
2018, Levine exercised his contractual right to extend the loan through
December 7, 2018, and, thereafter, Nexus agreed to extend the loan for another
month through January 7, 2019. Levine paid and Nexus received fees for each
extension, which Nexus distributed to the investors.
A-3247-20 12 On January 7, 2019, Powercap's interest in the loan was bought out by
new investors and the loan was refinanced. Powercap was paid off after
collecting interest, Nexus received its fees for refinancing and extending the
loan, and the new investors found a new business opportunity.
On April 7, 2019, a new investor, SN Funding, bought out Nexus's
investors and bought the Powercap Loan. Nexus continued to service the
Powercap Loan. On May 8, and 15, 2019, Nexus received wire transfers for
$700,000 and $428,000 from Norse to pay off the Powercap Loan, which Nexus
forwarded to SN Funding.
On April 17, 2018, Nexus loaned $375,000 to Levine (the "April 17, 2018
Loan"). The original maturity date was October 17, 2018. Levine had the right
to extend the maturity date until April 17, 2019, which he did. Levine repaid
the April 17, 2018 Loan on April 17, 2019.
Nexus also contended Norse continued to conduct business after the last
alleged fraudulent transfer to Nexus on May 15, 2019. This included payments
by Norse to Majek. The Majek Loan was initially payable on April 17, 2019.
Norse paid three monthly extension fees of $7,500 per month to Majek and
extended the maturity date to July 17, 2019. On July 30, 2019, Norse paid Majek
A-3247-20 13 an additional $37,500 forbearance fee to extend the payment date of the Majek
Loan to August 2, 2019.
Nexus argued that Majek's own allegations demonstrate Norse continued
to conduct business after May 15, 2019. For example, Majek alleged Norse paid
$700,000 to Privcap on May 22, 2019. Majek also contended Norse received
funds as a result of a loan by Coventus, LLC, from June 4, 2019 through July 3,
2019 (the "Coventus Loan").2
III.
On May 19, 2021, the trial court issued a written opinion granting
summary judgment to Nexus and Privcap and denying summary judgment to
Majek. The court explained:
The court finds no evidence of the badges of fraud being demonstrated.
....
Further, the court finds that the transfers from Norse to Nexus and Privcap did not render Norse insolvent. As Nexus points out, Norse engaged in other lending/receiving business after it . . . [paid] off its debts to Nexus and Privcap. While Norse did not have money in its account after paying off Nexus and Privcap, Norse subsequently had money in its account not too long after and used it to engage in other business schemes.
2 While this appeal was pending, Majek reached a settlement with Coventus. A-3247-20 14 The court noted "Majek ha[d] already obtained a judgment in [the] Bergen
County [Action] against Seth and Shira Levine, Norse, and Hillside, [and] the
present action . . . appears to be a way in which to satisfy same."
On June 25, 2021, the trial court issued a written opinion denying Majek's
motion for reconsideration. The court reaffirmed its finding that Majek failed
to demonstrate any of the "badges of fraud" and failed to establish Norse was
insolvent. Additionally, the court observed:
Majek has been unable to collect on its judgment against Levine and Norse from the Bergen County [A]ction, and is going down the line trying to collect from entities that did business with Levine (as did Majek) but are not owned or controlled by Levine. While the [c]ourt is sympathetic to those who obtain judgments and are unable to collect them, the [c]ourt cannot enforce said judgment as to parties for which the judgment was not obtained.
This appeal followed. Majek argues the trial court erred in determining
Norse was not insolvent, failed to consider whether the transfers were made for
reasonably equivalent value, erred in applying the "badges of fraud" analysis to
its actual fraud claim, and failed to consider whether the alleged fraudulent
payments were made to "insiders."
IV.
A-3247-20 15 We review the trial court's denial of a summary judgment motion de novo.
Branch v. Cream-O-Land Dairy, 244 N.J. 567, 582 (2021). No special deference
is accorded to a trial judge's assessment, as the decision to grant or withhold
summary judgment amounts to a ruling on a question of law. See Manalapan
Realty, LP v. Manalapan Twp. Comm., 140 N.J. 366, 378 (1995). We must
"consider whether the competent evidential materials presented, when viewed
in the light most favorable to the non-moving party, are sufficient to permit a
rational factfinder to resolve the alleged disputed issue in favor of the non-
moving party." Statewide Ins. Fund v. Star Ins. Co., 253 N.J. 119, 125 (2023)
(internal quotation marks omitted) (quoting Brill v. Guardian Life Ins. Co. of
Am., 142 N.J. 520, 540 (1995)).
We affirm substantially for the reasons set forth in the court's May 19, and
June 25, 2021 written opinions. We add the following comments.
The purpose of the Uniform Fraudulent Transfer Act ("UFTA")3 "is to
prevent a debtor from placing his or her property beyond a creditor's reach" and
from "deliberately cheat[ing] a creditor by removing his property from 'the jaws
of execution.'" Gilchinsky v. Nat'l Westminster Bank, 159 N.J. 463, 475 (1999)
3 The UFTA was amended effective August 10, 2021. We will apply the law in effect at the time of the decisions below. A-3247-20 16 (quoting Klein v. Rossi, 251 F.Supp. 1,2 (E.D.N.Y. 1966)). The UFTA allows
a creditor to undo a wrongful transaction so as to bring the property within the
ambit of collection. Id. at 475. If a fraudulent transfer is proven, a creditor may
obtain "[a]voidance of the transfer or obligation to the extent necessary to satisfy
the creditor's claim." N.J.S.A. 25:2-29(a)(1). Where the transfer cannot be
undone, a creditor may obtain a judgment for the value of the asset fraudulently
transferred against "[t]he first transferee of the asset or the person for whose
benefit the transfer was made." N.J.S.A. 25:2-30(b)(1)(A).
The UFTA contains two subsections that provide relief to plaintiffs for
fraudulent transfers. N.J.S.A. 25:2-25 governs fraudulent transfers as to present
and future creditors. It provides:
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
A-3247-20 17 unreasonably small in relation to the business or transaction; or
(b) Intended to incur, or believed or reasonably should have believed that the debtor would incur, debts beyond the debtor's ability to pay as they become due.
[N.J.S.A. 25:2-25(a).]
N.J.S.A. 25:2-27 governs fraudulent transfers as to present creditors. It
states:
a. A transfer made or obligation incurred by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made or the obligation was incurred if the debtor made the transfer or incurred the obligation without receiving a reasonably equivalent value in exchange for the transfer or obligation and the debtor was insolvent at that time or the debtor became insolvent as a result of the transfer or obligation.
b. A transfer made by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made if the transfer was made to an insider for an antecedent debt, the debtor was insolvent at that time, and the insider had reasonable cause to believe that the debtor was insolvent.
A court applying the UFTA must undertake a fact-sensitive inquiry,
analyzing the circumstances and the terms of the transfer at issue. Motorworld,
Inc. v. Benkendorf, 228 N.J. 311, 326 (2017). The plaintiff bears the burden of
A-3247-20 18 establishing a claim under the UFTA by clear and convincing evidence. 4 Jecker
v. Hidden Valley, Inc., 422 N.J. Super. 155, 164 (App. Div. 2011); Barsotti v.
Merced, 346 N.J. Super. 504, 520 (App. Div. 2002).
Majek contends the trial court erred by granting summary judgment on its
claims under N.J.S.A. 25:2-25(b) and N.J.S.A. 25:2-27(a) because Norse was
insolvent, and it did not receive reasonably equivalent value for the payments to
Nexus and Privcap. We are not persuaded.
Under the UFTA, "[a] debtor is insolvent if the sum of the debtor's debts
is greater than all of the debtor's assets, at a fair valuation." N.J.S.A. 25:2-23(a).
Further, "[a] debtor who is generally not paying his debts as they become due is
presumed to be insolvent." N.J.S.A. 25:2-23(b).
The trial court determined correctly that Majek failed to produce
competent proof that Norse was insolvent at the relevant time. In support of this
claim, Majek relies almost exclusively on the Information filed by the
government against Levine. The Information, however, is a charging document
that set forth the government's allegations. The Information is not evidence of
4 The 2021 amendment changed the burden of proof to a preponderance of the evidence effective August 10, 2021. N.J.S.A. 25:2-25; N.J.S.A. 25:2-37. Again, we will apply the burden of proof applicable at the time of the decisions below. Majek's claims, however, fail under either standard. A-3247-20 19 any statements allegedly made by Levine. The fact that Levine pleaded guilty
to the charges does not prove he admitted all of the allegations included in the
Information.
Even if Majek proved Levine made such admissions, Levine's alleged
statements are not admissible against Nexus and Privcap. Majek improperly
conflates the concepts of judicial notice pursuant to N.J.R.E. 201(b) and self-
authentication under N.J.R.E. 902 with the admissibility of Levine's alleged
hearsay statements against Nexus and Privcap under N.J.R.E. 802. Under
N.J.R.E. 801, hearsay means an out-of-court statement offered to prove the truth
of the matter asserted. Hearsay is not admissible absent an applicable exception.
N.J.R.E. 802. Levine's alleged statements are plainly hearsay. Majek does not
identify any applicable hearsay exception. Levine's alleged statements are not
admissible against Nexus and Privcap to prove the truth of the matters asserted.
The allegations set forth in the Information are insufficient to prove Norse
was insolvent at the relevant time. They refer generally to Levine and the more
than seventy Subsidiary Companies that owned at the Multifamily Properties
over a period of ten years beginning in 2009. Majek's contention that the
government's allegations prove Norse was insolvent when the alleged fraudulent
transfers were made in 2019 is without merit.
A-3247-20 20 The trial court also concluded correctly that Majek failed to offer any
competent evidence to establish Norse was in default of its obligations to Nexus
and Privcap or was not paying its debts as they became due. Majek's claims that
Norse was in default in connection with loans made by Nexus and Privcap are
based on nothing more than Majek's unsupported supposition and conjecture. In
response to Majek's allegations, Nexus and Privcap established Norse was not
in default on any of their loans. In fact, at least two of the allegedly fraudulent
transfers to Privcap were for extension fees paid in connection with the Red Clay
Loan and the Riverside Norse Loan so those loans would not be in default.
In addition, as the trial court correctly noted, Norse continued to do
business after the last allegedly fraudulent transfer to Privcap on May 22, 2019.
This included receiving proceeds from the Coventus Loan in June and July 2019 ,
and making substantial payments to Majek in connection with the Majek Loan
through July 30, 2019.
Majek also failed to offer any competent evidence to establish Norse's
debts were greater than its assets at fair valuation. Majek did not proffer any
evidence of Norse's total debts or the fair value of its assets. The trial court
concluded correctly that Majek failed to produce evidence sufficient for a
A-3247-20 21 reasonable fact finder to conclude either, by clear and convincing evidence or
by a preponderance of the evidence, that Norse was insolvent.
We are also unpersuaded by Majek's claim that Norse did not receive
reasonably equivalent value for the subject payments to Nexus and Privcap.
Generally, "a 'transfer made in satisfaction of the debt of another is not made for
reasonably equivalent value.'" Motorworld, 228 N.J. at 328 (quoting Nat'l
Westminster Bank N.J. v. Anders Eng'g, Inc., 289 N.J. Super. 602, 606 (App.
Div. 1996)).
However, exceptions to the general rule can be found where the debtor receives the benefit of the original consideration, . . . or where the debtor and third party "are so related or situated that they share an identity of interests because what benefits one will, in such case benefit the other to some degree."
[In re R.M.L., 195 B.R. 602, 618 (Bankr. M.D. Pa. 1996) (internal citation omitted) (quoting In re Pembroke Dev. Corp., 124 B.R. 398, 400 (Bankr. S.D. Fla. 1991)).]
"When we apply a uniform act, we may consider the law of other
jurisdictions that have enacted similar provisions." Motorworld, 228 N.J. at 325
n.4. In determining whether reasonably equivalent value has been given to the
debtor in exchange for a transfer, courts consider whether the debtor received
any "indirect benefit" from other parties. See Mellon Bank, N.A. v. Metro
A-3247-20 22 Comms., Inc., 945 F.2d 635, 646 (3d Cir. 1991) ("[I]n evaluating whether
reasonably equivalent value has been given the debtor under section 548 [of the
bankruptcy code], indirect benefits may also be evaluated. If the consideration
[debtor] received from the transaction, even though indirect, approximates t he
value it gave [to the transferee], this can satisfy the terms of the statute."); Rubin
v. Mfrs. Hanover Tr. Co., 661 F.2d 979, 991 (2d Cir. 1981) (although transfers
solely for the benefit of third parties do not furnish fair consideration, the
transaction's benefit to the debtor need not be direct and may come through a
third party); Image Masters, Inc. v. Chase Home Fin., 489 B.R. 375, 387 (E.D.
Pa. 2013) (courts may consider both direct and indirect benefits conferred by the
transfer in its evaluation of reasonable equivalent value).
As Majek alleges, the subject transfers were made by Norse to satisfy
obligations of Levine, who was the owner and managing member of Norse, and
other entities affiliated with Levine and Norse. The transfers to Nexus paid off
loans extended by Nexus to Levine. The transfers to Privcap were made in
connection with the Red Clay Loan, the Riverside Norse Loan, the March 12,
2019 Loan, and the March 28, 2019 Loan.
As Majek contends, Levine, Norse and the other Levine entities comingled
funds, shared obligations, and were essentially indistinct from each other. The
A-3247-20 23 Majek Loan, for example was secured by a promissory note executed by Norse,
but the funds were deposited, at Levine's direction, into an account owned by
Levine's affiliated entity, Hillside. Moreover, the Majek Loan was secured by
a personal guaranty executed by Levine and a pledge of his interest in Hillside.
Under the specific facts of this case as alleged by Majek, by satisfying debts and
obligations of Levine and entities affiliated with Levine and Norse, Norse
indirectly received reasonably equivalent value for the transfers.
Majek's claim that the transfers to Nexus and Privcap were made to
statutory "insiders" in violation of N.J.S.A. 25:2-27(b) is baseless. N.J.S.A.
25:2-22(b) defines an insider to include:
(1) [a] director of the debtor; (2) [a]n officer of the debtor; (3) [a] person in control of the debtor; (4) [a] partnership in which the debtor is a general partner; (5) [a] general partner in a partnership [in which the debtor is a general partner]; or (6) [a] relative of a general partner, director, officer, or person in control of the debtor[.]
"The unifying theme among the enumerated persons is that they stand in
such close relation to the debtor as to give rise to the inference that they have
the ability to influence or control the debtor's actions." Gilchinsky, 159 N.J. at
478. Majek does not offer any evidence to support a finding that Nexus and
Privcap were "insiders" of Norse or any other entity affiliated with Levine.
A-3247-20 24 Nexus and Privcap, like Majek, were creditors as a result of loans extended to
Levine and his affiliated entities. They were not insiders.
The trial court also concluded correctly that Majek did not establish any
of the "badges of fraud" and properly granted summary judgment on its "actual
fraud" claim under N.J.S.A. 25:2-25(a). Under N.J.S.A. 25:2-25(a), a transfer
from a debtor is fraudulent when it is made "[w]ith actual intent to hinder, delay,
or defraud any creditor of the debtor." N.J.S.A. 25:2-26 lists the "badges of
fraud" that courts should consider in determining whether a debtor conveyed
property with the actual intent to place it beyond the reach of creditors.
Gilchinsky, 159 N.J. at 476. It provides:
In determining actual intent under subsection (a) of [N.J.S.A.] 25:2-25 consideration may be given, among other factors, to whether:
a. The transfer or obligation was to an insider;
b. The debtor retained possession or control of the property transferred after the transfer;
c. The transfer or obligation was disclosed or concealed;
d. Before the transfer was made or obligation was incurred, the debtor had been sued or threatened with suit;
e. The transfer was of substantially all the debtor's assets;
A-3247-20 25 f. The debtor absconded;
g. The debtor removed or concealed assets;
h. 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;
i. The debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred;
j. The transfer occurred shortly before or shortly after a substantial debt was incurred; and
k. The debtor transferred the essential assets of the business to a lienor who transferred the assets to an insider of the debtor.
[N.J.S.A. 25:2-26.]
As to the badges of fraud, the Gilchinsky Court instructed:
In determining actual intent to defraud, courts should balance the factors enumerated in N.J.S.A. 25:2-26, as well as any other factors relevant to the transaction . . . . The proper inquiry is whether the badges of fraud are present, not whether some factors are absent. Although the presence of a single factor, i.e. badge of fraud, may cast suspicion on the transferor's intent, the confluence of several in one transaction generally provides conclusive evidence of an actual intent to defraud.
[Gilchinsky, 159 N.J. at 477.]
A-3247-20 26 We have already considered and rejected Majek's claims that Norse was
insolvent, Nexus and Privcap were insiders of Norse, and Norse did not receive
reasonably equivalent value for the transfers. Those "badges of fraud" do not
apply.
Majek's claim that Levine "absconded" because he was arrested is entirely
without merit. Levine did not abscond. Being arrested is not the equivalent of
absconding. Majek's claim that Nexus and Privcap were engaged in or aided
Levine's "Ponzi scheme" is also baseless. Nexus and Privcap, like Majek, were
creditors of Levine and his affiliated entities. There is no evidence they
participated in any type of fraudulent conduct and there is absolutely no
evidence they participated in or aided a "Ponzi scheme."
Majek failed to offer evidence sufficient for a reasonable fact finder to
determine either, by clear and convincing evidence or by a preponderance of the
evidence, that the payments to Nexus and Privcap were made with actual intent
to hinder, delay, or defraud Majek.
To the extent we have not addressed any remaining arguments, it is
because they lack sufficient merit to warrant discussion in a written opinion. R.
2:11-3(e)(1)(E).
Affirmed.
A-3247-20 27