2019 Orchard Kentucky Opinion Voidable Transactions And Fraudulent Transfers

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Orchard v. Western Energy Production, LP, 2019 WL 5293489 (Ky.App., Unpublished, Oct. 18, 2019).



Unpublished opinion. See KY ST RCP Rule 76.28(4) before citing.




Court of Appeals of Kentucky.








NO. 2019-CA-000066-MR








ACTION NO. 17-CI-00201


Attorneys and Law Firms


BRIEFS FOR APPELLANT: Gregory P. Parsons Marshall R. Hixson Megan K. George Lexington, Kentucky


BRIEF FOR APPELLEES: Thomas D. Bullock Lexington, Kentucky










*1 Derek E. Orchard, Successor Trustee of the Orchard Family Trust Dated November 19, 1979, Trust A of the Orchard Family Trust, Trust B of the Orchard Family Trust, and Trust C of the Orchard Family Trust (“Orchard”) appeals from a judgment of the Woodford Circuit Court denying his motion for summary judgment and granting the motion to dismiss of Western Energy Production, LP, a California Limited Liability Partnership, formerly known as Western Energy Production, LLC, a Nevada Limited Liability Company; Black Rock Farms, LLLP; Black Rock Thoroughbreds, LLLP; Steven Marshall; and SM Capital Ventures, LLC (collectively “Western Energy”). After careful review, we reverse and remand.


Before filing the underlying action, Orchard obtained judgments against Western Energy Production, LP (“WEP”) in two separate but related cases. First, Orchard filed a complaint on May 27, 2014 in the Superior Court of California seeking a judgment against WEP for an outstanding debt. During the pendency of that action, on August 25, 2015, Steven Marshall (“Marshall”), the president of Western Energy Companies (“WEC”), a general partner of WEP, signed documents purporting to transfer WEC’s interest in Black Rock Farms, LLLP and Black Rock Thoroughbreds, LLLP (collectively “Black Rock Entities”) to himself and then transferred his interest in the Black Rock Entities to SM Capital Ventures, LLC. The transfers were governed by identical agreements of limited partnership, which required any transfer of a limited partnership interest be “duly executed and acknowledged.” Marshall signed each of the transfers, but none of them were notarized.


On February 9, 2016, the Superior Court of California entered a judgment of $607,604.77 against WEP. Orchard then filed an action to enforce the foreign judgment in the Fayette Circuit Court. “On October 10, 2016, the Fayette Circuit Court issued a charging order under KRS1 362.2-703 in favor of [Orchard] and against [WEP’s] interest in Black Rock Entities.” R. at 134.


FN1 Kentucky Revised Statutes.


On July 19, 2017, Orchard filed the underlying action, requesting a judgment declaring “the transfer of Black Rock Entities void for not complying with the requisite requirements for transfer” and “asserting a fraudulent transfer of Black Rock Entities.” Id. In his complaint, Orchard argued the purported transfers of the Black Rock Entities were void because they were not acknowledged as required by the relevant partnership agreements and because they were made with the intent to delay, hinder or defraud Orchard as a creditor of WEP.


Western Energy filed a motion to dismiss, arguing Orchard’s claims were governed by the Kentucky Uniform Voidable Transactions Act (“UVTA”), codified in KRS Chapter 378A, and KRS 378A.080(6)(b) provides a “transfer is not voidable ... [i]f made in the ordinary course of business or financial affairs of the debtor and the insider[.]” Western Energy argued the transfers were valid as they were made in the ordinary course of business.


*2 In Orchard’s response to Western Energy’s motion to dismiss and motion for summary judgment, Orchard asserted the purported transfers were void because they did not conform to the “restriction on transfer contained in the partnership agreement” under KRS 362.2-702(6). The partnership agreements required the transfer documents to be signed and acknowledged. Marshall signed the purported transfers, but Orchard argued they were not acknowledged. Although the partnership agreements did not define “acknowledged,” Orchard argued a document is “acknowledged” when executed in the presence of a notary. The transfer documents were not notarized, so Orchard argued the purported transfers were ineffective. Orchard also argued he had a right to a judgment under KRS 378.0102 because the purported transfers were “made with the intent to delay, hinder or defraud creditors” as the transfers would leave Western Energy with essentially no assets to satisfy the California judgment. He further argued KRS 378.010 applied instead of KRS Chapter 378A because KRS 378.010 was in effect when the purported transfers were made.


FN2 Repealed on January 1, 2016.


On May 30, 2018, the trial court entered an order granting Western Energy’s motion to dismiss and denying Orchard’s motion for summary judgment. The trial court found the transfer documents had not been acknowledged because they were not notarized. However, the trial court did not rule that the transfers were void. Instead, the trial court held Orchard lacked standing to bring the action because KRS 378.010 was repealed before Orchard filed the action and was no longer good law.


Orchard filed a motion to alter, amend, or vacate the trial court’s order, arguing KRS Chapter 378A did not apply to the purported transfers because the statute does not expressly declare it applies retroactively under KRS 446.080(3). He also argued he had standing under KRS 426.381, KRS 418.040, and KRS 362.2-702(6). Finally, Orchard argued he was entitled to summary judgment on his claim that the transfers were void because they were not acknowledged. The trial court denied Orchard’s motion on December 12, 2018. This appeal followed.


On appeal, Orchard primarily argues the trial court mistakenly held he lacked statutory standing to bring the underlying claims against Western Energy. He asserts he had statutory standing under KRS 378.010, which was repealed on January 1, 2016, because the purported transfers occurred on August 25, 2015. The trial court held Orchard lacked standing because KRS 378.010 “was repealed prior to the filing of this action.” R. at 146. The question at issue involves application of a statute, which “is a matter of law and may be reviewed de novo.” Bob Hook Chevrolet Isuzu, Inc. v. Commonwealth, Transp. Cabinet, 983 S.W.2d 488, 490 (Ky. 1998).


On January 1, 2016, the UVTA, codified in KRS Chapter 378A, replaced KRS Chapter 378. However, the UVTA does not contain retroactivity language. KRS 446.080(3) provides: “No statute shall be construed to be retroactive, unless expressly so declared.” “Kentucky law prohibits the amended version of a statute from being applied retroactively to events which occurred prior to the effective date of the amendment unless the amendment expressly provides for retroactive application.” Commonwealth, Dept. of Agriculture v. Vinson, 30 S.W.3d 162, 168 (Ky. 2000) (citing KRS 446.080(3); Kentucky Industrial Utility Customers, Inc. v. Kentucky Utilities Company, 983 S.W.2d 493 (Ky. 1998)). Furthermore, the United States Bankruptcy Court for the Eastern District of Kentucky held the “UVTA does not state that it is retroactive. Therefore, any transfer occurring prior to its enactment ... must be considered under the repealed chapter 378, which was in effect at the time of the pertinent transfers.” In re Licking River Mining, LLC v. Monday Coal, LLC, 571 B.R. 241, 245 n.3 (Bankr. E.D. Ky. 2017). The transfers at issue occurred on August 25, 2015. We hold the trial court erred in finding Orchard lacked statutory standing under KRS 378.010 and direct the trial court to apply KRS 378.010 on remand.


*3 Orchard also argues he had standing to bring the underlying action under KRS 426.381, KRS 418.040, and KRS 362.2-702(6). The trial court’s order only addresses standing under KRS 378.010, and it is unclear whether Orchard raised these arguments before the motion to alter, amend, or vacate. “A party cannot invoke CR 59.05 to raise arguments and to introduce evidence that should have been presented during the proceedings before the entry of the judgment.” Gullion v. Gullion, 163 S.W.3d 888, 893 (Ky. 2005). “[W]ithout a ruling of the lower court on the record regarding a matter, appellate review of that matter is virtually impossible.” Jewell v. City of Bardstown, 260 S.W.3d 348, 351 (Ky. App. 2008). Because the trial court did not rule on these additional statutory standing arguments, we cannot address them on appeal.


Finally, Orchard argues he was entitled to summary judgment on Count I of his complaint, which seeks a judgment declaring the purported transfers were void because the trial court found the purported transfers were not acknowledged by notarization as required by the relevant partnership agreements. Although the trial court found the transfer documents failed to adhere to the partnership agreements’ requirements, it did not expressly find the purported transfers were void. Instead, the trial court’s opinion abruptly shifts to a brief discussion of Orchard’s lack of standing because KRS 378.010 had been repealed. As such, because the trial court did not rule directly on this issue, we cannot address it on appeal.




For the foregoing reasons, we reverse the judgment of the Woodford Circuit Court and remand for further proceedings consistent with this opinion.






2020.06.30 ... Attorney Fees Held Awardable Under Nevada Fraudulent Transfer Law In Morgan Stanley Opinion

2020.06.11 ... Bank That Was Financially Involved With Debtor Gets Caught Up In Fraudulent Transfer Case In Wilson

2020.05.21 ... Utah Supreme Court Rejects Mixed Motive Test For Intentional Fraudulent Transfers In Jones Case

2020.01.06 ... Twyne’s Case And The Most Infamous Flock Of Sheep In Anglo-American Law

2019.12.07 ... New York Finally Modernizes Its Fraudulent Transfer Laws By Adopting The Uniform Voidable Transactions Act

2019.10.29 ... Repeal Of Kentucky’s Fraudulent Transfer Law In Favor Of UVTA Causes Headaches In Orchard

2019.10.19 ... Texas Homestead Gets Constitutional Protection From Fraudulent Transfer Claim In Lapides



Many more articles on voidable transactions law found here



(Designed For Litigators)


Click here to go to the Voidable Transactions Decision Chart


Overview of UVTA -- The process and result


Learn The Vocabulary Of The Act (Main Page)


Has A Voidable Transaction Occurred? (Main Page)


Does The Transferee Have A Defense? (Main Page)


What Remedies Are Available? (Main Page)


Other Helpful Provisions (Main Page)



(Confusing & Difficult To Use)


The Uniform Law Commission's complete copy of the UVTA with comments in PDF format is available here. The webpage for the UVTA, showing states that have enacted and much other information regarding the Act is found here.


1 - Definitions

(1) Affiliate -- (2) Asset -- (3) Claim -- (4) Creditor -- (5) Debt -- (6) Debtor -- (7) Electronic -- (8) Insider -- (9) Lien -- (10) Organization -- (11) Person -- (12) Property -- (13) Record -- (14) Relative -- (15) Sign -- (16) Transfer -- (17) Valid Lien

2 - Insolvency - How insolvency is calculated

3 - Value - Issues relating to calculating value

4 - Transfer Or Obligation Voidable As To Present Or Future Creditor

(a)(1) {Intent Test} - To hinder, delay or defraud any creditor

(a)(2)(i) {Overextending Insolvency Test} - The debtor engages in a transaction for which it does not have the financial strength

(a)(2)(ii) {Sinking Insolvency Test} - The debtor is not technically insolvent but headed for insolvency

(b) {Badges of Fraud} - Circumstances available to prove the debtor's intent

5 - Transfer or Obligation Voidable As To Present Creditor

(a) {Insolvency Test} - The test preferred by creditors

(b) {Insider Preference Test} - Not really a fraudulent transfer test at all

6 - When Transfer Is Made Or Obligation Is Incurred - Determines the time of the transfer

7 - Remedies Of Creditor

      {Non-Money Judgment Remedies} - Avoidance, attachment, etc.

8 - Defenses, Liability, And Protection Of Transferee Or Obligee

{Main Provisions} -The transferee's good faith for-value defense

(b) and (c) {Money Judgment Remedy} - Alternative remedy for creditors when avoidance is not good enough

9 - Extinguishment Of Claim For Relief - Similar to Statutes of Limitation

10 - Governing Law - Conflicts of Laws provisions

11 - Application To Series Organization - Applies to intra-series transfers

12 - Supplementary Provisions - Allows application of other law to issues unresolved by the UVTA

13 - Uniformity Of Application And Construction - Court opinions from other states may be looked to for guidance

14 - Relation To Electronic Signatures In Global And National Commerce - Waste of statutory space

15 - Short Title - From fraudulent transfers to voidable transactions

16 - Repeals; Conforming Amendment - Information for enacting legislatures





Fraudulent Transfers In Bankruptcy - Main Page


28 U.S.C. § 3301, et seq. - Where United States is the creditor


Common Law Fraudulent Transfer - Still exists in most states


Fraudulent Conveyances Act of 1571 a/k/a Statute of 13 Elizabeth - The medieval statute to which the modern American UVTA traces some of its roots.


Statutes Of The U.S. Jurisdictions -- State and Territorial Voidable Transaction and Fraudulent Transfer Laws





     Creditor Definition - Court opinions on the definition of creditor

     Debtor Insider Affiliate Relative Organization Person Definitions   - Court opinions on the definitions of debtor, insider, etc.

     Claim And Debt Definitions  - Court opinions on the definitions of claim and debt

     Asset And Property Definitions  - Court opinions on the definitions of assets and property

     Lien And Valid Lien Definitions  - Court opinions on the definitions of lien and valid lien

     Transfer Definition  - Court opinions on the definition of transfer

     Value And Reasonably Equivalent Value (REV) Definition  - Court opinions on the definitions of value and reasonably equivalent value

     Insolvency Definition  - Court opinions on the definition of insolvency


     Insolvency Test  - Court opinions relating to the Insolvency Test

     Insider Preference Test  - Court opinions relating to the Insider Preference Test

     Overextending Insolvency Test  - Court opinions relating to the Overextending Insolvency Test

     Sinking Insolvency Test  - Court opinions relating to the Sinking Insolvency Test

     Intent Test  - Court opinions relating to the Intent Test

           Badges Of Fraud  - Court opinions relating to the Badges of Fraud


     Extinguishment Periods a/k/a (incorrectly) Statute Of Limitations  - Court opinions relating to the extinguishment periods

     Transferee Good Faith  - Court opinions relating to the transferee good faith for-value defense


     Non-Money Remedies  - Court opinions relating to avoidance and other non-money remedies

     Money Judgment Remedies  - Court opinions relating to money judgments

     Attorney Fees -- Court opinions relating to awards of attorney fees


     Burdens of Proof  - Court opinions relating to the burdens of proof

     Conflict Of Laws  - Court opinions relating to conflict of laws

     Uniformity  - Court opinions relating to uniformity with the laws of other jurisdictions

     Supplementary Law  - Court opinions relating to the interplay of the UVTA with other law

     Jurisdictional Issues - Court opinions relating to jurisdiction of UVTA actions.


     Section 548  - Court opinions relating to 11 USC 548






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Fraudulent Transfers In American Law


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