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Trustee Establishes the Avoidability of Properties Under §548 Based on Multiple Badge of Fraud

Osherow v. Charles (In re Wolf), Nos. 15-31477-HCM, 16-03002-HCM, 16-03005-HCM, 2016 Bankr. LEXIS 3397 (U.S. Bankr. W.D. Tex. Sep. 15, 2016)

The Chapter 7 Trustee for the bankruptcy estate of Debtor Abie Wolf was allowed under §548 and Tex. Bus. & Com. Code Ann. §24.005 to avoid transfers of real property, that the Debtor made to his ex-wife and Defendant Rema Charles, because the transfers were made with intent to hinder, delay, or defraud creditors. The Court found that the badges of fraud were established at trial – the alleged transfers were made by Abie to its relatives and family members; Rema was still Abie’s spouse at the time of alleged transfers; Rema had been Abie’s spouse for over 20 years; with transfer of the alleged properties, Abie became financially destitute, had few remaining assets, had little income, had no way to make a living, and became insolvent; the alleged transfer to Rema was a transfer of substantially all of Abie’s valuable assets; Abie received nothing from Rema in exchange for the properties transferred. The Court concluded that these multiple “badges of fraud” clearly demonstrated that Abie had the “actual intent” to hinder, delay, and defraud creditors within the scope of §548(a)(1)(A) of the Bankruptcy Code, as well as §24.005(a)(1) of TUFTA. The Court also ruled that the alleged transfers were also constructively fraudulent under §548(a)(1)(B) and Tex. Bus. & Com. Code Ann. §24.006 because the Debtor did not receive reasonably equivalent value in exchange from Rema for the alleged properties and the Debtor was insolvent at the time of the alleged transfer.


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