J-A08006-23
2023 PA Super 249
TRIZECHAHN GATEWAY LLC, A : IN THE SUPERIOR COURT OF DELAWARE LIMITED LIABILITY : PENNSYLVANIA COMPANY : : Appellant : : : v. : : No. 1043 WDA 2022 : SCHNADER HARRISON SEGAL & : LEWIS, LLP, PAUL H. TITUS, AND : THOMAS D. ARBOGAST :
Appellees
Appeal from the Judgment Entered September 12, 2022 In the Court of Common Pleas of Allegheny County Civil Division at No: GD-07-008527
BEFORE: STABILE, J., SULLIVAN, J., and PELLEGRINI, J.*
OPINION BY STABILE, J.: FILED: NOVEMBER 30, 2023
Appellant, TrizecHahn Gateway, appeals from the September 12, 2022
judgment entered in favor of Appellees, Schnader Harrison Segal & Lewis, LLP
(“Schnader”), Paul H. Titus (“Titus”), and Thomas D. Arbogast (“Arbogast”)
(together with Titus, the “Debtors”), under the Pennsylvania Uniform
Fraudulent Transfer Act (“PUFTA”), 12 Pa.C.S.A. § 5101, et. seq.1 We affirm.
____________________________________________
* Retired Senior Judge assigned to the Superior Court.
1 After the commencement of this litigation, the legislation was renamed the Pennsylvania Uniform Voidable Transactions Act. 12 Pa.C.S.A. § 5101(a), as amended. 2017 Pa. Laws 1249, No. 78, § 2. The parties agree that PUFTA applies to this action. Throughout this opinion, we will cite to and quote PUFTA rather than the present version of the statute. J-A08006-23
The Debtors were partners of the Pittsburgh law firm Titus & McConomy
LLP when that firm entered a commercial lease agreement with Appellant. In
July of 2000, Appellant filed suit in Allegheny County (the “Underlying
Lawsuit”) against Titus & McConomy LLP and its partners, including the
Debtors, for breach of the lease agreement. On May 31, 2006, the trial court
entered a judgment (the “Judgment”) in the Underlying Lawsuit in favor of
Appellant and against the Debtors and other remaining defendants of more
than $3 million.
By this time, Titus and McConomy LLP had dissolved and the Debtors
had become partners of Schnader. The complaint in the instant matter, filed
on April 24, 2007, alleged that the Debtors transferred their rights (the
“Transfers”) to the money in their Schnader capital accounts (the “Accounts”)
to Schnader in exchange for Schnader’s representation of them in the appeal
from the Judgment in the Underlying Litigation. Schnader filed financing
statements referencing the Transfers on April 25, 2005, shortly after the trial
court entered its verdict in the Underlying Litigation. Schnader claims to be a
secured creditor with a priority interest in the Accounts, a claim that has
prevented Appellant from accessing those funds in execution of the Judgment.
For these reasons, Appellant argues the Transfers were actionable under
PUFTA.
After a trial on May 2, 2018, the trial court found in favor of Appellees.
By memorandum of November 8, 2019, this Court vacated and remanded,
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directing the trial court to provide a more thorough analysis of Appellant’s
claims. In response, the trial court filed an opinion dated October 5, 2020 and
a supplemental opinion dated December 16, 2020. On review, this Court once
again vacated and remanded, instructing the trial court to prepare an opinion
compliant with the previous remand order. On August 25, 2022, the trial court
issued an opinion in response to our second remand order authored by Judge
Michael A. Della Vecchia, as Judge Judith L. A. Friedman, the author of the
first two opinions, had retired from the bench. This matter is now ripe for our
review.
Appellant argues that the Transfers were actionable under PUFTA, and
that the trial court erred in finding otherwise. Appellant presents five
questions:
1. Whether the trial court erred by making mistakes of law and fact when considering the factors set forth in 12 Pa.C.S.A. § 5104(b)(8) and (9) in determining that [Appellant] has failed to show that [the Debtors] provided reasonably equivalent value in exchange for the [T]ransfers and that they were insolvent shortly after the [T]ransfers were made.
2. Whether the trial court erred by simply comparing the number of factors of 12 Pa.C.S.A. § 5104(b) present versus not present when determining that enough badges of fraud were not present for purposes of 12 Pa.C.S.A. § 5104(a)(1).
3. Whether the trial court made mistakes of law and fact in determining that [the Debtors] did not make [the T]ransfers ‘with actual intent to hinder, delay or defraud any creditor of the debtor.’ See 12 Pa.C.S.A. § 5104(a)(1).
4. Whether, contrary to the Superior Court’s instructions, the trial court failed to determine whether reasonably equivalent value
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was provided in exchange for the [T]ransfers from the point of view of [Appellant].
5. Whether, contrary to the Superior Court’s instructions, the trial court erred by failing to address the claims set forth in [Appellant’s] complaint pursuant to § 5104(a)(2) and § 5105, including, but not limited to, whether reasonably equivalent value was received in exchange for the [T]ransfers based upon, among other things, the fact that the [T]ransfers were made in exchange for an unperformed promise that the trial court mistakenly stated were made in exchange for legal services already provided.
Appellant’s Brief, at 3-5 (underscoring in original).
Avoidance of a transfer under PUFTA is an equitable remedy. Our
standard of review is as follows:
In prior matters involving review of alleged fraudulent conveyances, we have stated that our standard of review of a decree in equity is particularly limited and that such a decree will not be disturbed unless it is unsupported by the evidence or demonstrably capricious. The findings of the chancellor will not be reversed unless it appears the chancellor clearly abused the court's discretion or committed an error of law. The test is not whether we would have reached the same result on the evidence presented, but whether the chancellor's conclusion can reasonably be drawn from the evidence.
Mid Penn Bank v. Farhat, 74 A.3d 149, 153 (Pa. Super. 2013).
PUFTA permits avoidance of transfers under the following
circumstances:
(a) General rule.--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
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(2) without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor:
[…]
(ii) 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 became due.
12 Pa.C.S.A. § 5104(a). Appellant alleged causes of action against Appellees
under § 5104(a)(1) and (2)(ii), as well as under § 5105:
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.
12 Pa.C.S.A. § 5105.
In its first assertion of error, Appellant claims the trial court erred in
assessing whether the Debtors received reasonably equivalent value in
exchange for the transfers, and whether they became insolvent shortly
thereafter. Appellant references § 5104(b)(8) and (9), which are among the
factors relevant in determining the transferor’s intent for purposes of
§ 5104(a):
(b) Certain factors.--In determining actual intent under subsection (a)(1), consideration may be given, among other factors, to whether:
(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;
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(9) the debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred[.]
12 Pa.C.S.A. § 5104(a)(8), (9).2
2 For reference, § 5104(b) reads in its entirety as follows:
b) Certain factors.--In determining actual intent under subsection (a)(1), consideration may be given, among other factors, to 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.
12 Pa.C.S.A.§ 5104(b).
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Appellant cites Farhat, in which the appellee debtor transferred a real
estate parcel to his parents for one dollar (his parents had transferred the
property to him for one dollar several years earlier) after the appellant bank
threatened to execute judgment against him pursuant to a loan agreement.
Farhat, 74 A.3d at 151. The parents subsequently sold the property for
$275,000.00. The trial court found in favor of the debtor and his parents,
reasoning that the conveyance was done without actual intent to defraud the
bank. Id. at 154. This Court reversed. While accepting the trial court’s
findings that the conveyance took place between insiders (parents and son),
after a lawsuit was threatened, and shortly before the son incurred a
substantial debt (§ 5104(b)(1), (4), and (10), respectively), the Farhat court
found error in other respects. In particular, the Farhat Court concluded that
the trial court erred in finding that the debtor lacked a sufficient financial stake
in or control of the property. Id. at 155. Further, the transfer for one dollar
of a property that sold for $275,000.00 shortly thereafter clearly was not a
transfer for reasonably equivalent value under 5104(b)(8). Id. Finally, we
disagreed with the trial court’s finding that the debtor was solvent because he
was making timely payment of his bills. Id. at 156. The record reflected that
the debtor’s assets were worth less that the debt he owed to the bank. Id.
Therefore, the Farhat Court concluded that the debtor was insolvent under
§§ 5102(a) and 5104(b)(9). Id. at 156.
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Appellant also relies on Fell v. 340 Assocs., LLC, 125 A.3d 75 (Pa.
Super. 2015), appeal denied, 140 A.3d 13 (Pa. 2016), wherein the creditor,
winner of a $6.8 million judgment against the debtor and others in a dram
shop action, sought to set aside the debtor’s transfer of its liquor license. The
debtor offered the license for sale in January of 2006, the creditor was injured
in March of 2007 and filed suit against the debtor and others in November of
2007. In June of 2009, the debtor finally sold the license for $75,000.00, well
below the original $375,000.00 asking price. Id. at 77-80. The purchaser
was to make payments pursuant to a loan agreement and judgment note, and
the purchaser was required to sell the license to a company controlled by the
debtor at the expiration of the purchaser’s lease of the debtor’s restaurant
premises. Id.
The trial court, reasoning that the license was for sale well before the
creditor’s injury and the ensuing dram shop litigation, declined to set the
transfer aside, despite the presence of several indicators of fraud under
§ 5104(b).3 This Court reversed because the debtor failed to procure
sufficient value for the license. In effect, the debtor loaned the purchaser the
money for the purchase price of the license. Id. at 84. The debtor therefore
3 The trial court found that the transfer occurred after the debtor had been sued, that it was substantially all of the debtor’s assets, that the debtor was insolvent as of the time of transfer, and that the transfer occurred after the debtor incurred a substantial debt. See, 12 Pa.C.S.A. § 5104(b)(4), (5), (9), (10).
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transferred its only asset in exchange for nothing of immediate value, thereby
leaving itself incapable of paying its outstanding debts. This, in addition to
the other § 5104(b) factors the trial court found present, led the Fell Court to
vacate and remand for entry of judgment in favor of the creditor. Id. at 84.
In analyzing § 5104(b)(8) in the instant case, the trial court noted that
the amount of the Transfers (a combined total of roughly $118,000 in Titus’
and Arbogast’s capital accounts) was considerably lower than the value of the
services it ultimately received from Schnader ($400,000). Trial Court Opinion,
8/25/22, at 21. Based on those numbers, which Appellant does not dispute,
the trial court found that the Debtors received reasonably equivalent value in
exchange for the Transfers. In this regard, the present case is easily
distinguishable from Farhat (where in a property worth $275,000 was
transferred for $1) or Fell (wherein the debtor lent the purchaser the money
to buy the asset at well below asking price).
Appellant argues, however, that an unperformed promise does not
constitute value under § 5103:
(a) General rule.--Value is given for a transfer or an obligation if, in exchange for the transfer or obligation, property is transferred or an antecedent debt is secured or satisfied, but value does not include an unperformed promise made otherwise than in the ordinary course of the promisor’s business to furnish support to the debtor or another person.
(b) Reasonably equivalent value.--For the purposes of sections 5104(a)(2) (relating to transfers fraudulent as to present and future creditors) and 5105 (relating to transfers fraudulent as to present creditors), a person gives reasonably equivalent value
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if the person acquires an interest of the debtor in an asset pursuant to a regularly conducted, noncollusive foreclosure sale or the exercise of a power of sale for the acquisition or disposition of the interest of the debtor upon default under a mortgage, deed of trust or security agreement or pursuant to a regularly conducted, noncollusive execution sale.
12 Pa.C.S.A. § 5103 (emphasis added).
The trial court rejected Appellant’s argument under § 5103, concluding
that “[Appellant’s] assertion that Schnader’s engagement to provide
prospective legal services to the Debtors constitutes an ‘unperformed promise’
is of no moment because at the time, Schnader had already begun to perform
legal services for them.” Trial Court Opinion, 8/5/22, at 20. Appellant
disputes this, noting that the Transfers occurred on April 19, 2005, whereas
the Debtors did not receive their first invoices from Appellant until May of
2005. Appellant is wrong about the facts, as the parties’ joint stipulation
states that Schnader commenced work on behalf of the Debtors on April 1,
2005, several weeks before the Transfers. Joint Statement of Undisputed
Facts, 5/2/18, at ¶ 11. Given this stipulation, the record supports the trial
court's finding that the Debtors did not receive a mere unperformed promise
in exchange for the Transfers.
We must also take account of the remainder of the portion of § 5103(a)
bolded above: “[…] an unperformed promise otherwise than in the ordinary
course of the promisor’s business to furnish support to the debtor or another
person.” In other words, the text of § 5103(a) permits the debtor to give
consideration in exchange for a promise—made within the ordinary course of
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the promisor’s business—to provide support to the debtor.4 Schnader, the
promisor, made a promise in the ordinary course of its business—the practice
of law—to represent the Debtors in their appeal from the Underlying
Judgment. The Transfers served as a retainer fee for Schnader’s services.5
Our reading of the text of § 5103(a) is consistent with its attendant Bar
Association Comment.6 Of particular import is Comment (2), which states
that “Consideration having no utility from the creditor’s viewpoint does not
satisfy the statutory definition [of value].” 12 Pa.C.S.A. § 5103, cmt. 2. In
one of our prior remand memoranda we directed the trial court to analyze the
Transfers from the creditor’s point of view, as per Comment 2. TrizecHahn
v. Schnader Harrison Segal & Lewis, LLP, 2019 WL 5858227 at *7 (Pa.
Super. filed Feb. 8, 2019). Appellant argues Schnader’s representation of the
Debtors was hostile to Appellant and therefore had no utility from Appellant’s
standpoint. This argument, based on Comment 2 considered in isolation,
would seem to provide Appellant a meritorious argument. But to read
4 We interpret § 5103(a) according to its plain meaning. 1 Pa.C.S.A. § 1921(b).
5 We note that Rule 1.16 of the Pennsylvania Rules of Professional Conduct limits the circumstances under which Schnader could have withdrawn its representation after the Debtors engaged it to represent them. Pa.R.P.C. 1.16.
6 Again, we note that we are citing to the version of PUFTA extant at the time this lawsuit was filed. The comment to present version of § 5103 is titled “Uniform Law Comment.”
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Comment 2 in isolation would not comport with the language of § 5103(a),
nor would it comport with the remainder of the comments. As we explained
just above, § 5103(a) expressly permits the debtor to procure support
services from entities in the business of providing it. The fourth Bar
Association Comment provides that such support includes “housing, feeding,
clothing, medical care, recreation, education, travel, burial and similar
services and expenses provided to an individual.” 12 Pa.C.S.A. § 5103, cmt.
4. In other words, § 5103(a) and Comment 4 indicate that a debtor may
spend money to procure necessary services. Even though these services
come at the expense of the debtor, and are of no monetary value to the
creditor, the utility of these services, even from the standpoint of the creditor,
is obvious. Comment 2 directs an analysis of the utility of the consideration
from the standpoint of the creditor, not its monetary value to the creditor. We
believe that the procurement of legal representation in exchange for a retainer
is an example of a transaction that is of obvious utility but no monetary value
from the standpoint of the creditor.7 For the foregoing reasons, we reject
Appellant’s challenge to the trial court’s analysis under § 5104(b)(8).
Regarding § 5104(b)(9), the court reasoned that the Debtors did not
become insolvent shortly after the Transfers, as they did not file for
7 Appellant does not argue to this Court that the dollar amount of Transfers was excessive for a retainer.
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bankruptcy protection until several years later. Trial Court Opinion, 8/25/22,
at 22-23. Appellant counters that the filing of a bankruptcy petition is not
determinative under the statute, as a party may become insolvent well before
filing for bankruptcy. Appellant relies on Farhat, wherein this Court concluded
that the debtor was insolvent at the time of the disputed transfer, even though
he was still paying bills on time, because there was clear evidence that the
debtor’s assets were worth less than the outstanding debts. Appellant argues
the same is true in this case.
Turning to the facts, Titus and Arbogast each stipulated that their assets
were worth less than the amount of the Judgment. But they note that the
amount of the non-jury verdict was $2.961 million, and that the $3.274 million
Judgment was entered after the Transfers (the Transfers occurred after the
verdict but before entry of the Judgment). Thus, according to the Debtors,
their stipulations that their assets were worth less than $3.274 million as of
the entry of Judgment is not sufficient evidence of their insolvency at the time
of or shortly after the Transfers. That is, each of the Debtors could have had
assets worth more than $2.961 million but less than $3.274 million at the time
of the Transfers.
Given the analysis in Farhat, the trial court was incorrect in relying on
the timing of the Debtors’ bankruptcy petitions. Farhat establishes that a
finding of insolvency is appropriate if a debtor’s assets are less than its
liabilities, even if the debtor has yet to file for bankruptcy or otherwise
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acknowledge its insolvency. To this extent, we agree with Appellant. On the
other hand, the Debtors’ argument—that the Debtors’ assets8 near the time
of the Transfers could have been more than the amount of the verdict but less
than the amount of the Judgment—strains credulity but is not foreclosed by
the record. We are not a factfinding court, and in any event, there appears
to be no precise evidence of the Debtors’ assets at or near the time of the
Transfers. Despite the trial court’s errant legal analysis, Appellant has not
established any basis upon which we can overturn the trial court’s conclusion
under § 5104(b)(9).9
Appellant’s second argument is that the trial court erred in simply
counting the number of § 5104(b) factors present versus those not present:
“The undersigned concludes that because a majority of the eleven factors
under § 5104(b) weigh in favor of Schnader, [the Debtors] did not act with
actual intent to hinder, delay or defraud [Appellant] by allowing Schnader to
place a lien on the Accounts.” Trial Court Opinion, 8/25/22, at 24. Appellant
8 The Debtors note that Titus and Arbogast were jointly liable with each other as well as other former partners of Titus and McConomy, but they do not address several liability.
9 As we explain below, the outcome of this case rested on a judgment call, in light of the applicable law and the remand instructions from our prior panels, as to whether the Debtors were shielding assets in a hopeless case or retaining counsel to appeal from a judgment they believed to be entered in error. In our view, the ultimate outcome is not dictated by any single subsection of § 5104(b). Even were we to conclude that the Debtors were insolvent at the time of the Transfers, our disposition of this appeal would not change.
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argues that the foregoing sentence is legal error under Fell, wherein this Court
explained that the § 5104(b) factors are to be measured “qualitatively, and
not quantitatively.” Fell, 125 A.3d at 82. Appellant’s statement of the law is
correct. The sentence quoted above is in tension with Fell. Indeed, it may
be possible in some cases to find a transfer to be in violation of PUFTA even if
a majority of the § 5104(b) factors are not present. But it may be possible in
other cases for a quantitative and qualitative analysis of § 5104(b) to lead to
the same conclusion. Thus, the above-quoted sentence from the trial court’s
opinion does not, by itself, establish that the trial court reached the wrong
conclusion here. Likewise, Appellant’s second argument does not, by itself,
establish grounds for relief. For reasons we explain throughout this opinion,
we discern no reversible error in the trial court’s decision.
Appellant next argues that the trial court made errors of law and fact in
deciding that the Debtors did not act with fraudulent intent. The trial court
found that their intent was to pay for legal representation in their appeal from
the Judgment. Trial Court Opinion, 8/25/22, at 25. Appellant criticizes the
trial court for demonstrating pity toward and bias in favor of the Debtors based
on their involvement in more than two decades of litigation in this matter and
the Underlying Lawsuit. Appellant’s Brief at 30-31. Appellant argues the
Transfers were “distinct attempts, and obviously so, by each of [the Debtors]
to place these assets outside of the reach of [Appellant] and its attempts to
enforce the [Judgment] it had obtained against each of them.” Appellant’s
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Brief at 33. Appellant notes that Schnader’s witnesses and its counsel
acknowledged at trial that the reason for the Transfers was to ensure that
Schnader would receive compensation for its services:
Q. For clients that do face substantial judgments and seek legal advice, does Schnader typically require a retainer?
A. Yes.
Q. Why is that?
A. To secure payment for legal services that Schnader provides to the client.
N.T. Trial, 5/2/18, at 78. In this case, Schnader elected to demand a retainer
in the form of a security interest in the Accounts rather than cash. Id. at 80,
84, 94.
The record reflects that an equity partner’s capital account, such as the
Accounts that were the subject of the Transfers, operate as follows:
Q. What is a capital account?
A. Capital accounts are individual contributions made by each of the equity partners in the firm that essentially forms the good will or capital underpinnings for the firm.
Q. Is there actually money sitting in an account somewhere for each equity partner?
A. No. It’s really an accounting entry as much as anything else.
Id. at 76. The funds accountable to each partner are redistributed to that
partner beginning at retirement, resignation, or death, less any money the
partner owes to the firm in accordance with the partnership agreement. Id.
at 77, 85. The amount of money in the Debtor’s Accounts was frozen in 2006
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when they resigned as equity partners of Schnader. Id. at 82. Schnader
never pursued the Debtors for any outstanding balance over the amount in
the Accounts because the Debtors filed for bankruptcy. Id. at 83. Appellant
argues, based on the foregoing, that the “facts of this case weigh heavily in
favor of a finding that [the Debtors] made [the Transfers] with the intent to
hinder, delay or defraud [Appellant] as the judgment creditor.” Appellant’s
Brief at 35.
In its opinion, the trial court examined the foregoing facts considering
each subsection of §5104(b). Trial Court Opinion, 8/25/22, at 10-24. In
addition to its findings under subsections 5104(b)(8) and (9), discussed
above, the court found that the Transfers were to an insider, under
§ 5104(b)(1), because the Debtors were partners of Schnader at the time.
Id. at 10-11. Also, the Debtors knew they had been sued at the time of the
Transfers (§ 5104(b)(4)), and they released the funds to Schnader shortly
after a substantial verdict was entered against them (§ 5104(b)(10)).
Weighing against a finding of fraud was that the Debtors did not retain
control over the funds after the Transfers (§ 5401(b)(2)), that the Debtors did
not conceal the Transfers (§ 5104(b)(3)), that there was no evidence that the
amount of the Transfers represented all or substantially all of the Debtors’
assets (§ 5104(b)(5)), that the Debtors did not abscond (§ 5104(b)(6)), that
they did not conceal any assets (§ 5104(b)(7)), and that Schnader did not
subsequently transfer the money to an insider of the Debtors (§ 5104(b)(11)).
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After conducting its § 5104(b) analysis, the trial court concluded that the
Debtors did not act with intent to hinder, delay, or defraud Appellant, but
rather to procure legal representation to appeal from the Underlying
Judgment. Trial Court Opinion, 8/25/22, at 25.
The record supports the trial court’s findings. There is no dispute that
the Debtors retained Schnader to represent them in their appeal from the
Judgment, and that Schnader did so. The Debtors’ appeal resulted in a
published opinion from this Court and another from the Pennsylvania Supreme
Court. TrizecHahn Gateway LLC v. Titus, 930 A.2d 524 (Pa. Super. 2007),
reversed in part, 976 A.2d 474 (Pa. 2009). Given all the foregoing, we
conclude the record supports the trial courts’ findings as to the lack of intent
to delay, hinder, or defraud Appellant. Appellant’s third argument does not
merit relief.
Appellant’s fourth argument is that the trial court erred in failing to
follow this Court’s previous instructions to analyze whether the Debtors
received reasonably equivalent value, from the standpoint of Appellant, in
exchange for the Transfers. We have already addressed the substance of this
argument above. Here we note only that the trial court’s opinion contained
sufficient findings of fact to facilitate appellate review of this issue. While our
analysis of the meaning of utility from the creditor’s point of view differs from
that of the trial court, we discern no reversible error in the trial court’s decision
and no need for further remand. It is well established that this Court may
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affirm the trial court on any valid basis. Dockery v. Thomas Jefferson Univ.
Hosps., Inc., 253 A.3d 716, 721 (Pa. Super. 2021).
Appellant’s fifth and final argument is that the trial court erred in failing
to address its claims under §§ 5104(a)(2)(ii) and 5105. These subsections
are distinct from § 5104(a)(1) in that they do not require a finding of intent
to hinder, delay, or defraud a creditor as per § 5104(a)(1) and (b). Section
5104(a)(2)(ii) provides:
(a) General rule.--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:
(2) without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor:
(ii) 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 became due.
12 Pa.C.S.A. § 5104(b)(2)(ii). And § 5105, titled “Transfers fraudulent as to
present creditors,” provides that,
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.
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Each of these sections requires, as a predicate, that the debtor made a
transfer without receiving reasonably equivalent value. The findings of fact in
the trial court’s August 25, 2022 opinion are sufficient to facilitate our review
of these issues. For the reasons we have explained above, we believe that a
judgment debtor’s payment of a retainer fee to appellate counsel to handle an
appeal from the judgment is permissible under PUFTA, and we believe the
judgment creditor can be expected to understand the utility of that
transaction. Because we affirm the trial court’s decision that Appellant has
failed to establish the lack of reasonable equivalent value, we have no basis
for overturning the trial court's decision as to these subsections. Finally,
because we affirm the trial court’s decisions under §§ 5104 and 5105, we have
no occasion to analyze a defense under § 5108.
Ultimately, we believe this matter required the finder of fact to make a
judgment call between one of two scenarios. The benign scenario is that the
Debtors used the Transfers to retain Schnader to represent them in an appeal
from a judgment they believed was entered against them in error. Appellees
posit that a ruling against them would preclude any judgment debtor from
ever appealing from a judgment large enough to render the debtor insolvent.
The malign scenario is that the Debtors intended to place an asset beyond
Appellant’s reach in anticipation of the Judgment the Debtors knew would be
entered against them. In the words of Judge Friedman, who presided over
the trial:
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As we stated [prior to trial], the unavoidable suggestion prior to the instant trial testimony was that, at the time [of the Transfers], [the Debtors] had acted to defeat [Appellant’s] right to collect the [J]udgment that would surely be entered against the former Titus & McConomy partners. This would have been in keeping with Mr. Titus’s blithe handling of the winding up of that partnership’s rental obligations, and it is not surprising that [Appellant] was highly skeptical of the legitimacy of the [Transfers]. The subsequent discharges in bankruptcy of [the Debtors’] substantial obligations to Schnader would only have confirmed [Appellant’s] view of the [Transfers].
Trial Court Opinion, 5/24/18, at 3.
We believe the record contains some evidence to support either
scenario. Our decision is guided by our limited standard of review, pursuant
to which we will not reverse a trial court’s decision unless it is “unsupported
by the evidence or demonstrably capricious.” Farhat, 74 A.3d at 153. The
question is not whether this Court would have reached the same result, but
whether the trial court’s conclusion “can reasonably be drawn from the
evidence.” Id. Based on all the foregoing, we conclude the trial court’s
conclusion can reasonably be drawn from the evidence, and that it was not
demonstrably motivated by capriciousness. Understandably, Appellant
disagrees with much of the trial court’s analysis and argues that it reached
the wrong conclusion under the applicable law and our prior remand
instructions. But our prior remands directed the trial court to engage in a
more thorough analysis; they did not direct a result. Mindful of our applicable
standard of review, we discern no reversible error.
Judgment affirmed.
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FILED: 11/30/2023
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