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Knoll v. Uku

Superior Court of Pennsylvania

January 12, 2017

CHARLES A. KNOLL Appellant
v.
EUSTACE O. UKU, YALE DEVELOPMENT & CONTRACTING, INC. AND EXICO, INC. Appellee

         Appeal from the Order Entered July 2, 2015 In the Court of Common Pleas of Allegheny County Civil Division at No(s): G.D. 12-007435

          BEFORE: BOWES, STABILE AND MUSMANNO, JJ.

          OPINION

          BOWES, J.

         Charles A. Knoll, Jr. appeals from the July 2, 2015 order denying his petition for supplementary relief in aid of execution. We reverse.

         The following pertinent facts were contained in this Court's memorandum addressing the direct appeal in this litigation:

In 2004, Uku and Knoll created Yale, a construction company, which worked on various projects, including The Meadows Racetrack and Casino ("Meadows"), the Carpenter's Training Facility, and the Consol Energy Center. Uku was the president of Yale, and Knoll was the vice president of Yale. Pursuant to an agreement, Knoll and Uku split the profits of Yale, with Knoll receiving 49% and Uku receiving 51%. The agreement also stated that Uku and Knoll could only receive funds from Yale as a distribution of profit. Between 2008 and 2012, Uku withdrew or received $59, 983.00 from Yale's various accounts. Between 2008 and 2012, Exico, a corporation of which Uku is the president and sole shareholder, withdrew $228, 565.35 from Yale's various accounts. Knoll received no payments during this period.
On April 27, 2012, Knoll filed a Complaint against Yale and Uku, alleging that Knoll was due his share of profits from Yale. Yale and Uku filed an Answer, denying Knoll's allegations. On June 10, 2013, Knoll filed an Amended Complaint against the Appellants, alleging that profits from Yale were improperly diverted to Uku and Exico. [Yale and Uku] filed an Answer and New Matter to the Amended Complaint. Following a non-jury trial and the filing of proposed findings of fact and conclusions of law by both parties, the trial court issued a verdict in favor of Knoll. [Yale and Uku] filed a Motion for Post-Trial Relief, which the trial court denied. Subsequently, a Judgment in the amount of $175, 882.09 was entered in favor of Knoll and against [Yale and Uku].

Knoll v. Uku, 136 A.3d 1033 (Pa.Super. 2016) (unpublished memorandum at 1-2). This Court affirmed the judgment in Knoll's favor.

         Knoll thereafter instituted garnishment proceedings in order to collect his judgment, and Shelley Fant, Uku's wife, was named as a garnishee. On December 18, 2014, Knoll filed a petition for supplementary relief in aid of execution under Pa.R.C.P. 3118.[1] Therein, Knoll sought to void under the Pennsylvania Uniform Fraudulent Transfer Act, 12 Pa.C.S. §§ 5101-5110 ("PUFTA"), Uku's transfer of three parcels of real estate that he owned individually into the names of himself and Fant.

         The transfers in question occurred on February 9, 2010, and concerned these properties then owned by Uku: 1) 241 Fourth Avenue, Pittsburgh; 2) a one-story rental home located at 8260 Chaske Street, Verona; and 3) 214 Farmington Road, Pittsburgh, a residential dwelling. During discovery, it was established that the Fourth Avenue property had been sold. Simultaneously with those transfers by Uku, Fant placed three properties, which she solely owned, in her and Uku's names as tenancies by the entireties. The properties that Fant transferred from her name and into joint names included a residence on 821 Old Mill Road, Pittsburgh, and two rental homes located on Third Street and Ninth Street, respectively, in Clairton. Each of the six parcels of real estate was transferred without consideration.

         Uku and Fant filed answers to Knoll's petition in aid of execution, and both were subsequently deposed. During her deposition, Fant testified that the property transfers were for the purpose of estate planning. She also reported that she remained in complete charge of the three properties that previously belonged to her while Uku remained in total control of the Chaske Street and Farmingham Road real estate. Fant acknowledged that she had not executed and thus was not financially responsible under the mortgages for the Chaske Street and Farmington Road properties.

         Uku refused to answer any probative questions during his deposition and instead exercised his right against self-incrimination under the Fifth Amendment. At the time, Uku was facing criminal charges related to his businesses. Not only did Uku refuse to answer questions regarding the three property transfers, but he declined to respond to any inquiries about his finances.

         On July 2, 2015, the trial court denied Knoll's petition for supplementary relief in aid of execution. Thereafter, Knoll filed this timely appeal, wherein he raises the following issues for our review:

A. Did Uku conduct fraudulent transfers when, after stealing $137, 010.35, Uku then transferred all of his individually owned real property into his wife's name for no consideration, rendering himself insolvent and unable to repay the amounts he stole, while Uku continued to control those properties after the transfers and then continued stealing an additional $151, 538.00?
B. Did the lower court abuse its discretion when it refused to render an adverse inference against Appellees despite the fact that Uku refused to provide any testimony or produce any documents regarding the property transfers at issue?

Appellant's Brief at 3.

         Knoll first claims that the trial court abused its discretion and erroneously applied PUFTA when it decided that the transfers in question were not fraudulent. The following standard of review applies:

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 [judge] will not be reversed unless it appears the [judge] 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 [judge's] conclusion can reasonably be drawn from the evidence.

Fell v. 340 Assocs., LLC, 125 A.3d 75, 81 (Pa.Super. 2015) (citation omitted).

         Herein, Knoll argues that the transfers are invalid under PUFTA on three bases: they were made with actual fraud, as outlined in 12 Pa.C.S. § 5104(a)(1); they were constructively fraudulent, as set forth in 12 Pa.C.S. § 5104(2); and they must automatically be set aside since the language of 12 Pa.C.S. § 5105 applies to the transfers. We first examine § 5104, which states:

(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 ...

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