J-A10027-17
`
`NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
`
`BROOKWORTH PARTNERS, L.P.
`
`
`
`
`Appellant
`
`v.
`
`
`FRANKFORD MACHINERY, INC.,
`NICHOLAS KASHKASHIAN, JR., AND
`RONALD KASHKASHIAN
`
`
`
`Appellees
`
` IN THE SUPERIOR COURT OF
`
`PENNSYLVANIA
`
`
`
`
`
`
`
`
`
`
`
`No. 2967 EDA 2016
`
`Appeal from the Order Dated August 23, 2016
`In the Court of Common Pleas of Delaware County
`Civil Division at No(s): 2013-08010
`
`BEFORE: DUBOW, J., SOLANO, J., and FORD ELLIOTT, P.J.E.
`
`MEMORANDUM BY SOLANO, J.:
`
`FILED SEPTEMBER 26, 2017
`
`Appellant Brookworth Partners, L.P., appeals from the judgment
`
`entered
`
`in
`
`favor of Appellees Frankford Machinery, Inc., Nicholas
`
`Kashkashian, Jr., and Ronald Kashkashian in Appellant’s action claiming a
`
`fraudulent transfer in violation of the Pennsylvania Uniform Fraudulent
`
`Transfer Act (“PUFTA”), 12 Pa.C.S. §§ 5101-5110. After careful review, we
`
`affirm.
`
`Frankford Associates, Inc., though no longer an entity and not a party
`
`to this litigation, is central to Brookworth’s claim. Frankford Associates was a
`
`Pennsylvania corporation which began operating in 1966. Trial Ct. Op.,
`
`11/29/16, at 4. It was a family business founded by Arson Kashkashian, who
`
`was the sole shareholder until his death. N.T., 4/14/16, at 59. Arson had two
`
`
`
`NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
`
`BROOKWORTH PARTNERS, L.P.
`
`
`
`
`Appellant
`
`v.
`
`
`FRANKFORD MACHINERY, INC.,
`NICHOLAS KASHKASHIAN, JR., AND
`RONALD KASHKASHIAN
`
`
`
`Appellees
`
` IN THE SUPERIOR COURT OF
`
`PENNSYLVANIA
`
`
`
`
`
`
`
`
`
`
`
`No. 2967 EDA 2016
`
`Appeal from the Order Dated August 23, 2016
`In the Court of Common Pleas of Delaware County
`Civil Division at No(s): 2013-08010
`
`BEFORE: DUBOW, J., SOLANO, J., and FORD ELLIOTT, P.J.E.
`
`MEMORANDUM BY SOLANO, J.:
`
`FILED SEPTEMBER 26, 2017
`
`Appellant Brookworth Partners, L.P., appeals from the judgment
`
`entered
`
`in
`
`favor of Appellees Frankford Machinery, Inc., Nicholas
`
`Kashkashian, Jr., and Ronald Kashkashian in Appellant’s action claiming a
`
`fraudulent transfer in violation of the Pennsylvania Uniform Fraudulent
`
`Transfer Act (“PUFTA”), 12 Pa.C.S. §§ 5101-5110. After careful review, we
`
`affirm.
`
`Frankford Associates, Inc., though no longer an entity and not a party
`
`to this litigation, is central to Brookworth’s claim. Frankford Associates was a
`
`Pennsylvania corporation which began operating in 1966. Trial Ct. Op.,
`
`11/29/16, at 4. It was a family business founded by Arson Kashkashian, who
`
`was the sole shareholder until his death. N.T., 4/14/16, at 59. Arson had two
`
`
`
`J-A10027-17
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`sons who became involved in the business, Ronald Kashkashian and Nicholas
`
`Kashkashian, Sr. Id. Ronald was initially a salesman for Frankford
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`Associates; after Arson’s death in 2006, he became a shareholder, director,
`
`and officer; and after Nicholas Sr.’s death in 2009, he became president. Id.
`
`at 22, 59-60. Nicholas Sr. had two sons, Nicholas Kashkashian, Jr. and Eric
`
`Kashkashian, who succeeded to his ownership interest in the company. Id.
`
`at 60. By 2011, Nicholas Jr. was an employee, shareholder, director, and
`
`officer of Frankford Associates. Id. at 60, 63-64.1
`
`Frankford Associates’ main business was servicing commercial dry-
`
`cleaning equipment and selling replacement parts for such equipment. Trial
`
`Ct. Op. at 5. It had four employees, including a parts manager, two service
`
`technicians, and a receptionist. N.T. at 23, 63. By the 1990’s, Frankford
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`Associates had also begun selling turn-key dry-cleaning operations, for
`
`which it would guarantee leases of rental properties. Id. at 23, 25, 62.2 This
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`aspect of its business accumulated significant debts. Id. at 43-45;
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`Brookworth’s Ex. 11 (bankruptcy schedules showing $938,068.31 of debt
`
`was primarily comprised of commerical real estate leases).
`
`____________________________________________
`1 Ronald testified that Nicholas Jr. was a 25% shareholder of Frankford
`Associates at the time of trial. N.T. at 23. However, the 2011 federal income
`tax return for Frankford Associates (covering the period July 1, 2011 through
`June 30, 2012) shows that Ronald and Nicholas Jr. were both 50% owners of
`Frankford Associates the year it went out of business. Brookworth’s Ex. 5.
`
`2 Ronald Kashkashian described this portion of the business as “industry
`package plants where they would take a lease on a particular property, build
`out the facilities, find a buyer.” N.T. at 23.
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`- 2 -
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`J-A10027-17
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`In 2002, Ronald and Nicholas Sr. opened defendant-Appellee Frankford
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`Machinery, Inc., another Pennsylvania corporation. N.T. at 24.3 Its main
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`area of business was selling commercial dry cleaning and laundry
`
`equipment, for which Ronald would solicit customers “door to door.” Id. at
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`24-25, 59, 78. Both Ronald and Nicholas Jr. are now employees, directors,
`
`and officers of Frankford Machinery. Id. at 58, 82-83, 148. Ronald owns
`
`50% of the company, and Nicholas Jr. owns 25%. Id. at 58.4 Ronald is
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`president. Id.
`
`Both businesses maintained their respective corporate offices and
`
`warehouses at 4500 Torresdale Avenue in Philadelphia, where they shared
`
`such common business resources as a telephone number, receptionist,
`
`stationary, and computers. Trial Ct. Op. at 4-5; N.T. at 30. Both businesses
`
`were insured by a single common property and casualty commercial
`
`insurance policy. Trial Ct. Op. at 5. They filed separate tax returns, used
`
`separate billing systems, and used separate letterheads. N.T. at 80-81. The
`
`businesses served many of the same customers, Trial Ct. Op. at 5, and the
`
`two companies would often refer customers to each other — for example,
`
`____________________________________________
`3 At the time that it opened, Ronald and his brother were the only two
`employees of Frankford Machinery. N.T. at 24. It is unclear how many
`employees Frankford Machinery has subsequently employed.
`
`4 Eric Kashkashian, Nicholas Jr.’s brother, owns the remaining 25% of
`Frankford Machinery, but is not active in the business. N.T. at 58.
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`- 3 -
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`J-A10027-17
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`Frankford Machinery would refer customers who needed their equipment
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`repaired to Frankford Associates. N.T. at 79-80, 155-56.
`
`Brookworth is a landlord (or a successor in interest to a landlord)
`
`under a commercial lease agreement for which Frankford Associates was
`
`guarantor. Trial Ct. Op. at 2. After Brookworth’s tenant (Frankford
`
`Associates’ customer) defaulted on the lease, Brookworth sued Frankford
`
`Associates and obtained a judgment in the amount of $249,100 on June 5,
`
`2011. Id.
`
`In mid-August 2011, Brookworth executed on a bank account
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`belonging to Frankford Associates and collected $117,422.60 against its
`
`judgment. Trial Ct. Op. at 2. Frankford Associates then began borrowing
`
`money from Frankford Machinery in order to continue operating. Id.
`
`On December 31, 2011, Frankford Associates closed. Trial Ct. Op. at 3
`
`At that point, it owed Frankford Machinery $133,000. Id. Frankford
`
`Associates transferred its remaining physical property, including office
`
`furniture and fixtures, a van, a truck, office computers, and old or used dry
`
`cleaning or laundry equipment, to Frankford Machinery for a loan reduction
`
`of $83,000. Id.; N.T. at 65-69. After December 31, 2011, Frankford
`
`Machinery began to service commercial laundry and dry-cleaning equipment
`
`and sell replacement parts (the business in which Frankford Associates had
`
`engaged). Id. at 81.
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`- 4 -
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`J-A10027-17
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`On February 25, 2013, Frankford Associates filed for bankruptcy. Trial
`
`Ct. Op. at 3. Brookworth was listed in the proceeding as one of Frankford
`
`Associates’ unsecured creditors, as was Frankford Machinery. Id. The
`
`bankruptcy schedules listed one asset: receivables due from “Premier
`
`Cleaners” in the amount of $13,207.33, which was indicated to be in
`
`litigation; they listed liabilities of $938,068.31. Brookworth’s Ex. 11. On
`
`May 21, 2013, the appointed bankruptcy trustee filed his final report with
`
`the bankruptcy court. Trial Ct. Op. at 4. The report confirmed that there was
`
`no property available for distribution to creditors, id.; the amount due from
`
`Premier Cleaners was described as an abandoned asset. Defendants’ Ex. 2.
`
`The trustee’s report was adopted by the court, and on June 3, 2013, the
`
`bankruptcy proceedings were concluded. Trial Ct. Op. at 4.
`
`On July 15, 2014, Brookworth filed the complaint in the instant case.5
`
`In the complaint, Brookworth claimed that Frankford Associates violated the
`
`PUFTA when it transferred “assets” to Frankford Machinery after Frankford
`
`Associates was insolvent (or was rendered insolvent by the transfer), at a
`
`time when Brookworth was a creditor of Frankford Associates, and without
`
`receiving reasonably equivalent value from Frankford Machinery. Compl.,
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`7/15/14, at ¶¶ 25-28. Brookworth alleged that the assets were transferred
`
`“to insulate Franklin [sic] Associates from the claims of creditors such as
`
`____________________________________________
`5 Brookworth initiated the case on August 14, 2013, and conducted pre-
`complaint discovery.
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`- 5 -
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`J-A10027-17
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`Brookworth” and “to give Franklin [sic] Machinery the control and benefit of
`
`the assets, property and business of Franklin [sic] Associates.” Id. at ¶¶ 29,
`
`33. The complaint did not specifically describe what assets were transferred,
`
`except to specify that Frankford Machinery succeeded in the use of the
`
`website “frankfordonline.com.” Id. at ¶ 20.6 The complaint also did not give
`
`a specific timeframe for the alleged transfer of assets. The complaint claimed
`
`that Ronald and Nicholas Jr., as shareholders, officers, and directors of both
`
`companies, acted “with intent to hinder, delay and defraud Brookworth and
`
`other creditors.” Id. at ¶ 38.
`
`Frankford Machinery and the Kashkashians responded on July 31,
`
`2014. They denied that any assets had been transferred from Frankford
`
`Associates to Frankford Machinery except those tangible assets listed on the
`
`bill of sale from December 31, 2011. Response, 7/31/14, at ¶ 28. They also
`
`asserted that the website frankfordonline.com had always served both
`
`companies, although the companies are separate and distinct. Id. at ¶ 20.
`
`A non-jury trial was held on April 14, 2016. In Brookworth’s opening
`
`statement, its counsel stated that Brookworth intended to prove that on
`
`December 31, 2011, Frankford Associates possessed intangible assets which
`
`“stayed in the room” after its business closed, and were thus fraudulently
`
`transferred to Frankford Machinery in violation of the PUFTA. N.T. at 9, 13-
`
`____________________________________________
`6 Other allegations included in the complaint which were abandoned at the
`time of trial or appeal have not been included here.
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`- 6 -
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`J-A10027-17
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`14. In his opening statement, counsel for Frankford Machinery and the
`
`Kashkashians argued that the evidence would show that no intangible assets
`
`changed hands on December 31, 2011, or at any other time; that the two
`
`companies were separate and distinct; and that neither Frankford Machinery
`
`nor Ronald or Nicholas Jr., as principals of Frankford Machinery, are liable for
`
`the debts of Frankford Associates. Id. at 16-19.
`
`At trial, Ronald Kashkashian testified that after Brookworth executed
`
`on the Frankford Associates bank account on August 15, 2011, that
`
`company was financially depleted and forced to borrow money from
`
`Frankford Machinery in order to keep operating. N.T. at 61. He agreed that
`
`by December 31, 2011, Frankford Associates was no longer able to pay its
`
`financial obligations and owed more than the company “had available to use
`
`to make payments.” Id. at 32. When asked whether Frankford Associates
`
`was insolvent as of December 31, 2011, Ronald responded “yes.” Id. at 31.
`
`Ronald was not asked on what date Frankford Associates first became
`
`insolvent.7
`
`Ronald denied that Frankford Associates transferred any intangible
`
`assets to Frankford Machinery, including good will8 or a customer list, and
`
`____________________________________________
`7 Ronald testified that Frankford Associates never received the money it was
`owed from Premier Cleaners (the sole asset listed on its bankruptcy
`schedules), as that company also went into bankruptcy. N.T. at 71.
`
`8 Brookworth’s expert later defined “good will” as “time in business,
`reputation in the marketplace and so forth.” N.T. at 104.
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`- 7 -
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`J-A10027-17
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`stated that because the customer lists for the two companies had been
`
`virtually identical, the Frankford Associates customer list had no value for
`
`Frankford Machinery. N.T. at 76, 80, 84-87. Ronald testified that after
`
`December 31, 2011, Frankford Machinery did begin to sell replacement parts
`
`for commercial dry-cleaning equipment, as Frankford Associates had done.
`
`Id. at 81. He said that it was a small component of Frankford Machinery’s
`
`business, and that “because Frankford Associates was no longer in business,
`
`it almost became something that we had to do because Frankford Associates
`
`was no longer there.” Id. When asked whether Frankford Machinery was
`
`selling parts to the same customers that had been Frankford Associates’
`
`customers before it went out of business, Ronald testified, “Well that would
`
`be speculation, but there might be some cross over, correct. Most of these
`
`clients were outside of the area so there [is] no way of determining, very
`
`few.” Id. at 50.
`
`Brookworth
`
`introduced a
`
`screenshot of a page on
`
`the
`
`frankfordonline.com website from 2013. N.T. at 47-49; Brookworth’s Ex. 12.
`
`The top of that page listed the contact details for Frankford Machinery. Id.
`
`After a list of links for various services, the bottom of the page stated, “Also
`
`. . . be sure to check out our parts website at . . . frankfordparts.com,” and
`
`it included links to that website. Id.
`
`Ronald testified that Frankford Machinery had used its own website,
`
`frankfordparts.com, for many years. N.T. at 48. Frankford Machinery did not
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`- 8 -
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`J-A10027-17
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`begin using
`
`frankfordonline.com, the website created
`
`for Frankford
`
`Associates, until 2012, after Frankford Associates had gone out of business.
`
`Id. at 50, 53. Ronald believed any income since generated from that website
`
`to be nominal. Id. at 77, 85. Ronald was unsure who owned either website.
`
`Id. at 50.
`
`Nicholas Jr. testified that he created frankfordonline.com in 1999. N.T.
`
`at 149-50. He was listed as the registered owner, but the website was
`
`created for the promotion of Frankford Associates, who employed him at the
`
`time. Id. at 150. In 2007, after Frankford Machinery was in existence,
`
`Nicholas Jr. created the website frankfordparts.com; he did so in his own
`
`name “and then maybe Frankford Associates at that time.” Id. at 150.
`
`Frankford Machinery has used the frankfordparts.com website since 2009,
`
`when Nicholas Jr. became a partial owner of that company. Id. at 151.9
`
`Nicholas Jr. stated that only the frankfordparts.com website generates sales.
`
`Id. at 151-52.10 Nicholas was not asked at what point Frankford Machinery
`
`began to use frankfordonline.com, or whether the ownership and registration
`
`of that website ever changed. He also was not asked if Frankford Associates
`
`had ever used frankfordparts.com to generate sales, or whether the
`
`ownership and registration of that website ever changed.
`
`____________________________________________
`9 It is unclear if Frankford Machinery used the website prior to 2009.
`
`10 In 2011, the site generated around $10,000 of sales for Frankford
`Machinery, and that number has consistently increased by roughly 20% a
`year. N.T. at 152.
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`- 9 -
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`J-A10027-17
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`Robert Gerber, the accountant for both Frankford Associates and
`
`Frankford Machinery, testified that in mid-July 2011, Frankford Associates
`
`stopped its revenue-generating activities. N.T. at 133-34, 139-40. After that
`
`time, Frankford Associates continued with the “collection of receivables,
`
`payment of payables, sales taxes, payroll taxes.” Id. at 139. Mr. Gerber was
`
`not asked why the company stopped its traditional business-generating
`
`operations in mid-July, prior to the depletion of its cash account.
`
`Mr. Gerber stated that if Frankford Associates or Frankford Machinery
`
`owned any intangible assets, they were not listed on the companies’ balance
`
`sheets or tax returns. N.T. at 139-40, 146. Frankford Associates did not
`
`keep a perpetual inventory,11 and the assets listed on its internal documents
`
`and tax returns were inaccurate and were often carried over from numbers
`
`given to Mr. Gerber by Nicholas Kashkashian, Sr. Id. at 134-35. Regarding
`
`good will, Mr. Gerber testified that the name “Frankford Associates” might
`
`have had some value, but also “the name Frankford was attached to a lot of
`
`businesses during the 12 years. There was Frankford Dry Cleaners that were
`
`licensed under the name Frankford. There was Frankford Machinery, so
`
`people knew the name Frankford.” Id. at 140.
`
`____________________________________________
`11 Mr. Gerber did not explain the concept of a perpetual inventory. One court
`has explained that such a system offers a running summary of inventory
`items on hand by maintenance of individual accounts for each class of
`goods. See Alexandre of London, Washington, D.C. Corp. v. Indemnity
`Ins Co. of N. Am., 182 F. Supp. 748, 752 n.3 (D.D.C. 1960). We provide
`this explanation solely to clarify our narrative; it is not part of the evidence
`in the record.
`
`- 10 -
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`J-A10027-17
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`Brookworth introduced Frankford Machinery’s customer lists from 2010
`
`(4 pages), 2011 (9 pages), and 2012 (18 pages). N.T. at 38-39;
`
`Brookworth’s Ex. 9.12 Brookworth introduced a “schedule of gross receipts
`
`and gross profit,” which showed Frankford Machinery’s 2009 and 2010 gross
`
`receipts were $1,807,688 and $1,636,627, respectively, while its 2011 and
`
`2012 gross receipts were $1,319,693 and $2,402,062, respectively.
`
`Brookworth’s Ex. 8. Frankford Machinery’s 2009 and 2010 gross profits were
`
`$8,300 and $20,627, while the 2011 and 2012 gross profits jumped to
`
`$85,986 and $633,290. Id.
`
`Brookworth offered the testimony of P. Dermot O’Neill, CPA, an expert
`
`on the topic of business valuation and financial forensics. N.T. at 89-92. Mr.
`
`O’Neill was asked to testify as to the value of the intangible assets which
`
`may have been transferred by Frankford Associates.
`
`Mr. O’Neill testified that there are three different approaches to
`
`evaluating a company’s intangible assets, but that two of them — the “asset
`
`approach” (based on appraisals) and the “income approach” (based on
`
`forecasts generated from accounting documents) were not available here.
`
`N.T. at 95-96.13 Mr. O’Neill therefore utilized the “market approach,” which
`
`____________________________________________
`12 Each full page listed approximately 25 customers. N.T. at 38-39.
`
`13 Mr. O’Neill believed the “income approach” was unavailable because the
`underlying accounting documents needed to generate the forecasts were
`unreliable and because he needed to depend on management to make the
`projections. N.T. at 95-96, 108.
`
`- 11 -
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`J-A10027-17
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`is typically used in bankruptcy situations. Id. at 96. This approach uses a
`
`guideline developed from other, similar companies — in this case
`
`wholesalers of equipment sold in service industries — which suggested that
`
`the approximate “market value of invested capital” of such companies was
`
`the product of .45 multiplied by the company’s annual revenue. Id. at 96.14
`
`In this case, using data from Frankford Associates’ income statement
`
`for the period from July 1, 2010 through June 30, 2011,15 the “market value
`
`____________________________________________
`14 The market value of invested capital is considered the “value of the
`company as a whole.” N.T. at 104.
`
`15 Regarding the source of this data, Mr. O’Neill testified:
`
`Q: And sir what is the source of that financial information?
`
`A: The source of that financial information is shown back in the
`income statements.
`
`Q: Or was it the tax return?
`
`A: Oh it would be the tax returns.
`
`Q: So you looked at the tax return for the period ending – for
`2011 you would have to have looked at the 2010 tax return for
`Frankford Associates?
`
`A: Correct, that is illustrated on Exhibit B.
`
`
`N.T. at 101. However, “Exhibit B” to the expert’s report is not the 2010
`federal income tax return for Frankford Associates (which was not entered
`into evidence), but a compilation of historic income statements for the years
`ending on December 31 of 2010, 2011, and 2012. Brookworth’s Ex. 13 at 9.
`The numbers used in the expert’s calculations appear to be drawn from
`exhibits “C” and “D” of his report, which reflect the historic income
`statements for the years ending on June 30 of 2010 and 2011. Brookworth’s
`Ex. 13 at 10-11
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`- 12 -
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`J-A10027-17
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`of invested capital for Frankford Associates was $868,785. N.T. at 101, 104;
`
`Brookworth’s Ex. 13 at 4.16 To that total, Mr. O’Neill added $53,791 of
`
`liabilities to find the “estimated fair market asset value” for the company;17
`
`in this case that value was $922,576. N.T. at 104; Brookworth’s Ex. 13 at 4.
`
`From that number, Mr. O’Neill subtracted $72,976 in operating cash and
`
`$192,743 of accounts receivable, which left approximately $657,000. N.T. at
`
`104; Brookworth’s Ex. 13 at 4.18 Mr. O’Neill testified (and his report reflects)
`
`that this figure represents the estimated fair market value for the
`
`combination of Frankford Associates’ inventory, fixed assets, and intangible
`
`assets. N.T. at 104, 106; Brookworth’s Ex. 13 at 4. Inconsistently, however,
`
`Mr. O’Neill also testified, and his report elsewhere suggests, that this figure
`
`represents the fair market value of the intangible assets alone. N.T. at 98,
`
`99; Brookworth’s Ex. 13 at 5.
`
`Mr. O’Neill stated that the market approach does not give a breakdown
`
`of what comprised the $657,000. N.T. at 97.19 He stated that a breakdown
`
`____________________________________________
`16 This number represents .45 times $1,930,634, the amount of gross sales
`in 2010. The market value of invested capital is the same as the equity in
`this case, as Frankford Associates had no
`interest bearing debt.
`Brookworth’s Ex. 13 at 4.
`
`17 “In other words it is the old accounting equation[:] the assets equal
`liabilities plus equity.” N.T. at 109.
`
`18 The exact number was $656,857; Mr. O’Neill referred both to this number
`and to $657,000.
`
`19 Nevertheless, his report broke down the sum of $657,000 into estimated
`intangible assets of (a) $341,000 for “customer-related intangibles,” (b)
`(Footnote Continued Next Page)
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`- 13 -
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`J-A10027-17
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`of the intangible assets would require a forecast or projection that could not
`
`be done in this case from the data available to him. Id.
`
`Mr. O’Neill testified that the loss of Frankford Associates’ cash as a
`
`result of the execution on its bank account on August 15, 2011, would not
`
`have reduced the enterprise value of the company under the market
`
`approach. N.T. at 102-03, 107-09.20 However, he stated that if the amount
`
`of cash and accounts receivable had changed in July or August, it would
`
`have impacted the estimated fair market value of the tangible and intangible
`(Footnote Continued) _______________________
`$250,000 for workforce in place, the website, and goodwill, and (c) cash
`deposits totaling $66,000. Brookworth’s Ex. 13 at 5. The report did not
`explain the basis for this estimated breakdown.
`
`20 Mr. O’Neill testified as follows:
`
`Q. If $117,000 or the total amount of money available to the
`company was taken out of the company a month after the date
`6/30/11 would this have a substantial impact on the valuation of
`the company going forward?
`. . .
`A. Cash on hand no . . .
`
`N.T. at 102 (emphasis added). When asked whether the change in operating
`cash in August 2011 would “affect the method evaluation you selected as
`among the asset approach, income approach, or market approach,” Mr.
`O’Neill responded,
`
`Whether or not a thousand dollars of cash or ten thousand
`dollars of cash or a million dollars of cash went in or out would
`not impact that million dollars, it is still going to be a million
`dollars because that is the value of the business if you will,
`what we call that enterprise value.
`
`Id. at 107-09 (emphasis added). Mr. O’Neill repeated that he would still
`have applied the market approach, rather than the asset or income
`approach, to estimate the value of the company’s assets, despite the
`reduction in cash. Id. at 109.
`
`- 14 -
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`
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`J-A10027-17
`
`assets. Id. at 110.21 When asked whether his opinion would change “if the
`
`opinion was provided as of June 30, 2012,” or after the company
`
`discontinued all activity, Mr. O’Neill responded that a valuation after
`
`discontinuance of business activity would not be done under the market
`
`approach (which contemplates an on-going business), but under the
`
`“liquidation premise of value.” Id. at 101, 104-05, 114-15.
`
`On June 16, 2016, the court found in favor of Frankford Machinery,
`
`Nicholas Kashkashian, and Ronald Kashkashian. The court concluded: (1)
`
`Frankford Machinery was not liable for any alleged transfer made by
`
`Frankford Associates, because the two entities are separate and distinct,
`
`____________________________________________
`21 His testimony was:
`
`The Court: Knowing that this event took place[,] the execution
`on substantially all the cash assets of Frankford Associates took
`place in [August] of 2011, would that have impacted either
`negatively or positively the valuation you have calculated at
`page four of your report?
`
`Mr. [O’Neill]: Well as you see on page four of the report I did
`subtract cash and accounts receivable that existed as of June
`30th [(to find the combined value of tangible assets, intangible
`assets, and inventory)]. Now under normal business operations
`your accounts receivable would go down, your cash would go up
`in collecting receivables and so forth. So there was some
`consideration. Now any variance would be a reduction from the
`[$922,576], the total estimated fair market value assets. So if
`there was a variance between the [$265,719 (the amount of
`cash and accounts receivable as of June 30, 2011)] and what
`happened in July or August then that would impact that
`estimated fair market value [of the combination of tangible
`assets, intangible assets, and inventory].
`
`
`N.T. at 110 (emphasis added).
`
`- 15 -
`
`
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`J-A10027-17
`
`“[n]on-transferees cannot be liable for alleged fraudulent conveyances”
`
`under the PUFTA, and a “purchasing or receiving company is not responsible
`
`for the debts and liabilities of the selling company”; (2) no claim could lie
`
`against Nicholas Kashkashian and Ronald Kashkashian because the
`
`complaint did not allege and no evidence established that any assets were
`
`transferred to them as individuals; (3) Brookworth failed to carry its burden
`
`of proving that Frankford Associates was insolvent on December 31, 2011;
`
`and (4) Brookworth failed to carry its burden of proving the (a) existence or
`
`(b) value of any intangible assets on December 31, 2011. See Trial Ct. Op.,
`
`at 17-20 (citations omitted).
`
`Brookworth filed a timely appeal, and presents the following question:
`
`Did the lower court commit legal error and/or abuse its
`discretion, by rendering a Decision in favor of [Frankford
`Machinery, Nicholas Kashkashian and Ronald Kashkashian] and
`against Brookworth, when the Decision was contrary to the
`weight of the trial evidence and/or trial admissions by [Frankford
`Machinery, Nicholas Kashkashian and Ronald Kashkashian], and
`Brookworth had proffered, at the non-jury trial, clear and
`unrebutted evidence which proved both liability and damages in
`this statutory fraudulent transfer claim?
`
`Brookworth’s Brief at 3.22
`
`
`
`We have held:
`
`The general rule for a grant of a new trial on the basis that it is
`against the weight of the evidence allows the granting of a new
`trial only when the jury’s verdict is contrary to the evidence as to
`shock one’s sense of justice and a new trial is necessary to
`
`____________________________________________
`22 Brookworth preserved this claim in a motion for post-trial relief filed on
`June 29, 2016, and denied on August 22, 2016.
`
`- 16 -
`
`
`
`J-A10027-17
`
`rectify this situation. . . . [T]he appellate court, in reviewing the
`refusal to grant a new trial, ordinarily considers all of the
`evidence. The court is not required to consider the evidence in
`the light most favorable to the verdict winner when passing on
`the question of whether a verdict is against the weight of the
`evidence. Rather, the court is to view all of the evidence.
`
`Lanning v. West, 803 A.2d 753, 765-66 (Pa. Super. 2002). In addition:
`
`fraudulent
`involving review of alleged
`In prior matters
`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), appeal denied, 140 A.3d 13 (Pa. 2016).
`
`Brookworth claims that the weight of the evidence produced at trial
`
`established that Frankford Associates transferred intangible assets to
`
`Frankford Machinery, and repeatedly describes these assets as “workforce in
`
`place, customer lists, internet presence and goodwill.” Brookworth’s Brief at
`
`5-6, 12, 15.
`
`Brookworth contends that the lower court erred in focusing on
`
`December 31, 2011, as the date of the transfer of intangible assets.23
`
`Brookworth claims that “by December 31, 2011, Frankford Associates no
`
`____________________________________________
`23 Brookworth claims “Brookworth did not contend that the transfer date was
`December 31, 2011,” Brookworth’s Brief at 22.
`
`- 17 -
`
`
`
`J-A10027-17
`
`longer had any intangible assets to be valued, because it had transferred
`
`them to Frankford Machinery.” Brookworth’s Brief at 19. Brookworth states
`
`that it was “unable to pinpoint the exact date when the Frankford Associates
`
`intangible assets were transferred to Frankford Machinery.” Id. at 17. It
`
`asserts that the transfer happened “sometime between July 14, 2011 and
`
`December 31, 2011,” id. at 7, 12-13, 22, but “most likely by July 14, 2011,”
`
`when Frankford Associates ceased generating revenue and Frankford
`
`Machinery began to generate income from the business activities that
`
`historically were done by Frankford Associates. Id. at 15-17, 20.24
`
`Brookworth relies on Mr. O’Neill’s testimony that the value for the
`
`intangible assets was $657,000 on June 30, 2011, and that this value had
`
`not changed by, or following, the date of transfer. Brookworth’s Brief at 6.
`
`Brookworth points to Mr. O’Neill’s testimony that the reduction of cash in
`
`mid-August would not have affected the valuation of intangible assets, id. at
`
`6-7, and that the intangible assets “continued to hold the same value
`
`through December 31, 2011, even after transfer to Frankford Machinery.”
`
`Id. at 22. Brookworth claims that although Mr. O’Neill testified that the
`
`value of intangible assets owned by Frankford Associates on December 31,
`
`____________________________________________
`24 Brookworth posits: “[i]t was reasonable to conclude that the intangible
`assets were transferred sometime between July 14, 2011 (the more likely
`date, that Mr. Gerber testified was the date when Frankford Associates
`stopped generating income) and December 2011 (the date when Frankford
`Associates transferred the tangible assets to Frankford Machinery and totally
`ceased operations).” Brookworth’s Brief at 17-18.
`
`- 18 -
`
`
`
`J-A10027-17
`
`2011, would have been done by a liquidation analysis rather than a market
`
`approach, such an analysis “would have been totally irrelevant. By
`
`December 31, 2011, the subject intangible assets were no longer owned by
`
`Frankford Associates and had already been transferred to Frankford
`
`Machinery.” Brookworth’s Brief at 23.
`
`Brookworth also argues that the trial court erred in concluding that the
`
`evidence did not establish that Frankford Associates was insolvent.
`
`Brookworth argues that the evidence establishes that “as of mid-August,
`
`2011, Frankford Associates became impecunious, unable to have sufficient
`
`cash to pay its obligations,” Brookworth’s Brief 16, but was “insolvent likely
`
`from as early as July 14, 2011 when it stopped generating sales income.”
`
`Id. at 18, 19.25 Brookworth claims that the company was definitely insolvent
`
`at the latest by December 31, 2011, as Ronald had testified. Brookworth’s
`
`Brief at 24.
`
`Finally, Brookworth asserts that Ronald and Nicholas Jr. “stood to
`
`profit from Frankford Machinery’s significantly enhanced business revenues
`
`(freed from Frankford Associates’ significant debts) which resulted from their
`
`direct effectuation of the 2011 fraudulent transfer of intangible assets from
`
`Frankford Associates to Frankford Machinery.” Brookworth’s Brief at 28.
`
`____________________________________________
`25 In a footnote, Brookworth contradicts itself by stating that Frankford
`Associates was likely not insolvent in mid-July, but chose to stop operating
`because of the debt incurred by its lease guarantees. Brookworth’s Brief at
`19 n.4.
`
`- 19 -
`
`
`
`J-A10027-17
`
`Brookworth claims that Frankford Machinery, with Nicholas Jr. and Ronald as
`
`princ
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