In Re: Franzese
ORDER. Defendant's 25 Motion to Dismiss is DENIED for the reasons stated in the attached. The parties shall confer and file their Rule 26(f) report within 21 days of the date of this order.Signed by Judge Michael P. Shea on 7/13/2018. (Barclay, Michael)
UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
RONALD I. CHORCHES, TRUSTEE,
No. 3:16-cv-1964 (MPS)
THE CATHOLIC UNIVERSITY OF AMERICA
RULING ON MOTION TO DISMISS
Catholic University (“Catholic”) moves to dismiss claims by a Chapter 7 bankruptcy
trustee seeking to avoid transfers made by the debtors for their adult daughter’s college tuition.
The trustee, Ronald I. Chorches, alleges that the transfers violated both 11 U.S.C. § 548(a)(1)(B)
(Count One of the Amended Complaint) and Conn. Gen. Stat. §§ 52-552e(a)(2) and 52-552f(a)
(Count Two of the Amended Complaint), both of which allow creditors to recover property that
an insolvent debtor transfers without receiving “reasonably equivalent value” in return. Catholic
argues among other things that the funds the debtors paid for their adult daughter’s college tuition
should be considered expenses of the family as a single economic unit and were, therefore,
exchanged for reasonably equivalent value within the meaning of these statutes. For the reasons
below, I DENY the motion to dismiss.
At all relevant times, Julia Franzese, James and Kristin Franzese’s daughter, was more than
18 years old. (ECF No. 24 at ¶ 5.) She was a student at Catholic University from August 2011 to
August 2014. (Id. at ¶ 6.) Chorches, the trustee for the Franzeses’ bankruptcy estate, alleges that,
for this entire period, James and Kristin were insolvent (Id. at ¶ 7.) He includes specific information
regarding the Franzeses’ debts, as detailed in their bankruptcy petition. (Id. at ¶ 8.) He alleges that
the Franzeses were “unable to pay their debts as they became due, as evidenced by their large tax
debt and the foreclosure on their home in 2011.” (Id. at ¶ 12.)
The Franzeses paid Catholic University $64,845.50 for Julia’s tuition between September
2011 and June 2014. (Id. at 7, ¶ 19.) They paid $30,659.50 of this amount between September
2013 and June 2014. (Id. at 5, ¶ 19.) Chorches alleges that, at the time of these payments, the
debtors “were engaged in a business or transaction, or were about to engage in a business or
transaction, for which any property remaining with [them would have been] an unreasonably small
amount of capital” and that they “intended to incur, or believed that they would incur, debts that
would be beyond their ability to pay as such debts matured.” (Id. at 6, ¶ 23, 9, ¶ 22.)
On August 24, 2015, James and Kristin Franzese filed a voluntary petition for relief under
Chapter 7 of the Bankruptcy Code. (Id. at ¶ 3.) Chorches brought this lawsuit against Catholic
University for the amount the debtors paid in tuition during the two years before filing for
bankruptcy under 11 U.S.C. § 548(a)(1)(B), which creates a two-year look-back period for
fraudulent transfers, and during the four years before filing for bankruptcy under Conn. Gen. Stat.
§§ 52-552e(a)(2) and 52-552f(a), which, together with § 52-552j, creates a four-year look-back
period for such transfers. (ECF No. 24 at 10); 11 U.S.C. § 548(a)(1)(B); Conn. Gen. Stat. §§ 52552e(a)(2), 52-552f(a), 52-552j.1 He alleged that these tuition payments were constructively
fraudulent transfers and that the Franzeses’ estate can avoid them. (ECF No. 24 at 10.) Catholic
moved to dismiss. (ECF No. 7.) I granted that motion to dismiss, with leave to replead, finding
The two years in the bankruptcy code provision are measured from the time of the filing of the
petition; but the four years in the Connecticut statute are in most circumstances measured from
the time of the transfer. Compare 11 U.S.C. § 548(a)(1)(B) with Conn. Gen. Stat. § 52-552j.
Chorches nonetheless seeks in Count Two to recover transfers occurring during the four years
before the bankruptcy filing. (ECF No. 24 at 7–8.)
that Chorches had failed to allege specific facts supporting the allegation that the Franzeses were
insolvent at the time they made the transfers to Catholic. (ECF No. 23.) Chorches then filed an
amended complaint, correcting that deficiency. (ECF No. 24.) Catholic has now moved to dismiss
the amended complaint. (ECF No. 25.)
Rule 12(b)(6) Standard
Under Fed. R. Civ. P. 12(b)(6), I must determine whether Chorches has alleged “enough
facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S.
544, 570 (2007). “A claim has facial plausibility when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the defendant is liable for the misconduct
alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Under Twombly, the Court accepts as true
all of the complaint’s factual allegations when evaluating a motion to dismiss. Twombly, 550 U.S.
at 572. The Court must “draw all reasonable inferences in favor of the non-moving party.” Vietnam
Ass’n for Victims of Agent Orange v. Dow Chem. Co., 517 F.3d 104, 115 (2d Cir. 2008) (internal
quotations and citations omitted). For a complaint to survive a motion to dismiss, “[a]fter the court
strips away conclusory allegations, there must remain sufficient well-pleaded factual allegations
to nudge plaintiff’s claims across the line from conceivable to plausible.” In re Fosamax Products
Liab. Litig., No. 09-cv-1412 (JFK), 2010 WL 1654156, at *1 (S.D.N.Y. Apr. 9, 2010) (internal
quotations and citations omitted).
A claim of constructive fraudulent transfer (i.e., one not relying on fraudulent intent) must
be pled in accordance with Rule 8(a), rather than the heightened Rule 9(b) standard for fraud
claims. In re Bernard L. Madoff Inv. Sec. LLC, 454 B.R. 317, 332 (Bankr. S.D.N.Y. 2011).
In Count One of the Amended Complaint, Chorches seeks to avoid the $30,659.50 of
payments made to Catholic University within two years of the debtors’ petition under 11 U.S.C. §
548(a)(1)(B). To allege adequately his claim of constructive fraudulent transfer under 11 U.S.C. §
548(a)(1)(B), Chorches must plead facts showing that: (1) the debtors had an interest in the
property; (2) a transfer of that interest occurred within two years of the filing of the bankruptcy
petition; (3) the debtors received less than reasonably equivalent value in exchange for the transfer;
and (4) the debtors either were insolvent at the time of the transfer or became insolvent as a result
of the transfer, were engaged in a business or transaction or were about to engage in a business or
transaction for which any property remaining with them represented unreasonably small capital,
or intended to incur, or believed they would incur, debts beyond their ability to pay.
In Count Two of the Amended Complaint, Chorches seeks to avoid the $64,845.50 of
payments made to Catholic University within four years of the debtors’ petition under Conn. Gen.
Stat. §§ 52-552e and 52-552f(a). § 52-552e(a)(2) states:
A transfer made or obligation incurred by a debtor is fraudulent as to a creditor, if
the creditor’s claim arose before the transfer was made or the obligation was
incurred and 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 (A) was engaged or was about to engage in a business or a transaction
for which the remaining assess of the debtor were unreasonably small in relation to
the business or transaction, or (B) intended to incur, or believed or reasonably
should have believed that he would incur, debts beyond his ability to pay as they
Conn. Gen. Stat. § 52-552e(a)(2) (emphasis added). § 52-552f(a) states:
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.
Conn. Gen. Stat. § 52-552f(a) (emphasis added). Connecticut courts analyze these two provisions
together, as a single claim. Gen. Landscaping, LLC v. JPA2, Inc., No. HHD-CV-12-6035889-S,
2015 WL 1244572, at *8 (Conn. Super. Ct. Feb. 25, 2015). The only element of Counts One and
Two at issue in Catholic’s motion is whether the Franzeses received “reasonably equivalent value”
in exchange for the tuition they paid for their adult daughter. Catholic does not contest that
Chorches has adequately alleged the other elements of these claims. Furthermore, neither Catholic
nor Chorches suggests that “reasonably equivalent value” should be construed differently in the
Bankruptcy Code than in the Connecticut fraudulent transfer statutes (except as to a recent
amendment to the Connecticut statutes, which is discussed below). Therefore, I will analyze
“reasonably equivalent value” as if it has the same meaning in both the federal and state statutes.
A. Reasonably Equivalent Value
Catholic argues that the amended complaint fails to allege that the Franzeses did not receive
“reasonably equivalent value” for the tuition payments they made on behalf of their adult daughter.
Catholic argues that parents derive value from the college education of an adult child, because (1)
“[i]t is  commonplace among untold millions of American families, and deeply ingrained in our
culture, to treat college tuition payments as a family obligation, no less so than mortgage and
grocery payments,” and (2) “[c]reditors know that, as surely as borrowers will use available funds
to pay for the mortgage and groceries, borrowers will pay their children’s college expenses to the
extent they are willing and able to.” (ECF No. 26 at 9–10, 12.)
Catholic’s arguments are inconsistent with the text of the bankruptcy statute. Though
“reasonably equivalent value” is not specifically defined, the statute defines “value” in purely
economic terms, i.e., “property, or satisfaction or securing of a present or antecedent debt of the
debtor, but . . . not . . . an unperformed promise to furnish support to the debtor or to a relative of
the debtor.” 11 U.S.C. § 548(d)(2)(A). Under this definition, the Franzeses did not receive any
“value” in exchange for their tuition payments: they did not receive “property” of any kind, and
their tuition payments did not satisfy or secure a “present or antecedent debt” that they (as the
debtors) owed, as the Franzeses had no legal obligation to pay college tuition for Julia. See Barbour
v. Barbour, 156 Conn. App. 383, 400–01 (2015) (observing that “in the absence of [a court support
order,] statute or agreement providing for postmajority assistance . . . a parent ordinarily is under
no legal obligation to support an adult child.”) (quoting Crews v. Crews, 107 Conn. App. 279, 301
(2008), aff’d, 295 Conn. 153 (2010)).
Contrary to Catholic’s implication, discharging a “moral obligation” or meeting a “societal
expectation” is not “value” within the meaning of the statute. (Cf. ECF No. 28 at 2.) Congress’
treatment of donations to religious organizations in the bankruptcy statute illustrates this. In
response to judicial decisions holding that tithes and other donations to religious organizations
were not exchanged for “value,” Congress enacted the Religious Liberty and Charitable Donation
Protection Act. See, e.g., In re Bloch, 207 B.R. 944, 948 (D. Colo. 1997) (granting summary
judgment to trustee because the debtor received nothing of “economic, as opposed to religious or
spiritual, value” in exchange for tithes donated to church); Pub. L. No. 105–183, 112 Stat. 517
(1998) (the “Donation Protection Act”). The Donation Protection Act created a specific exemption
for donations to qualified religious organizations, provided that the donations did not exceed
fifteen percent of the debtor’s income or were otherwise consistent with the debtor’s past practice,
from the types of transfers voidable under 11 U.S.C. § 548(a)(1)(B), including those made in return
for less than “reasonably equivalent value.” Pub. L. No. 105–183, § 3(a)(7). Notably, however,
Congress did not amend the definition of “value,” leaving intact its purely economic meaning and
thereby confirming that discharging moral obligations or meeting societal expectations is not
“value,” whether received in exchange for religious tithes or, as here, tuition payments for an adult
child. Instead, Congress chose to provide an express exemption from the bankruptcy trustee’s
avoidance power for a narrow category of transfers—certain religious tithes. Congress can
likewise provide a specific statutory carve-out for tuition payments for adult children, if it deems
appropriate, but it has not done so to date.
Catholic also suggests that the Franzeses received value in the form of the anticipated
economic benefit they will gain in having a financially self-sufficient adult daughter due to her
college education. (Cf. ECF No. 26 at 10–11; ECF No. 28 at 2 (citing DeGiacomo v. Sacred Heart
University (In re Palladino), 556 B.R. 10 (Bankr. D. Mass. 2016).) I find this rationale
unpersuasive, because the prospect that an adult child will fare better financially, require less
financial support, or even later repay the Franzeses is speculative. Further, the notion that paying
for an adult child’s college education will diminish the need for future parental support payments
is itself based on a moral obligation rather than a legal one: parents are generally not required to
support adult children whether or not they attend college and regardless of their financial condition.
See Barbour, 156 Conn. App. at 400–01.
Other courts addressing this issue have similarly concluded that parents do not receive any
“value” in exchange for tuition payments on behalf of an adult child. In In re Knight, No. 15-21646
(JJT), 2017 WL 4410455 (Bankr. D. Conn. Sept. 29, 2017), Judge Tancredi likewise reasoned that
the Bankruptcy Code’s definition of value in Section 548 is “limited to economic benefits that
preserve the net worth of the debtor’s estate for the benefit of creditors,” meaning that “[m]oral or
familial obligations cannot be considered in the value analysis for the obvious reason that the
depletion of resources available to creditors cannot be offset by the satisfaction of moral
obligations.” Id. at *3 (internal quotation marks and citation omitted). “As cold and unsentimental
as that rule might seem,” he explained, “it is easier to understand from the perspective of creditors,
most of whom would probably be unwilling to volunteer to provide a financial subsidy to enhance
the insolvent debtor’s family relationships by allowing the debtor to put valuable property beyond
their reach.” Id. (internal quotation marks omitted) (quoting Zeddun v. Grisworld (In re
Wierzbicki), 830 F.3d 683, 689–90 (7th Cir. 2016)). Judge Tancredi similarly found that
interpreting the Bankruptcy Code otherwise would “violate [its] plain language.” Id.
Judge Tancredi also noted the widespread disagreement on this issue among the bankruptcy
courts. Id. at *6–7. He specifically took issue with the discussion of the economic benefit to parents
in In re Palladino, 556 B.R. at 16. In holding that the parents there received reasonably equivalent
value for paying their adult child’s college tuition, the Palladino court reasoned that “paying for a
child to obtain an undergraduate degree will enhance the financial well-being of the child which
in turn will confer an economic benefit on the parent” and that this benefit “constitutes a quid pro
quo that is reasonable and reasonable equivalence is all that is required.” Id. As noted, I find this
notion to be speculative, as Judge Tancredi did:
It may be reasonable for parents to believe that investment in their child's college
education will enhance the financial well-being of the child. It may also be
reasonable for parents to assume that their child will someday reimburse them for
the cost of tuition or otherwise confer an economic benefit in return. Piling one
plausible inference upon another, however, is little more than wishful thinking.
Moreover, such speculation about another’s ability to repay in the future and their
willingness to do so, however reasonable, does not amount to a quid pro quo and
certainly does not provide economic value to current creditors.
2017 WL 4410455, at *6. I agree with this reasoning and reject Catholic’s arguments based on
“societal expectations” and possible future benefits regarding Julia’s financial self-sufficiency.
B. Single Economic Unit
Catholic also asserts that the Franzeses should be considered a “single economic unit” on
the ground that Julia was under the age of 24 and, under certain federal laws, still could be
considered part of her parents’ family. (ECF No. 26 at 13–17.) Accordingly, Catholic argues, her
college tuition was a household expense like any other, and therefore not avoidable. (ECF No. 26
at 11–12, 15 n.1; ECF No. 28 at 4–5.)
Catholic first points to the “Expected Family Contribution” (“EFC”) under Title IV’s
formula for need-based student aid. Specifically, Catholic argues that because parents are generally
expected to contribute to the cost of college education for their 18 to 24-year-old children under
the EFC formula, the age of majority does not cut off the parental obligation to provide financial
support. (ECF No. 26 at 11–12; ECF No. 28 at 4–5.) However, the EFC is simply used to calculate
the amount of need-based federal financial aid for which each student is eligible. See 20 U.S.C. §
1087kk (“[T]he amount of need of any student for financial assistance under this subchapter
[providing for federal student assistance in the form of grants, loans, and work-study] . . . is equal
to--(1) the cost of attendance of such student, minus (2) the [EFC] for such student, minus (3)
estimated financial assistance not received under this subchapter [i.e. other scholarships, grants,
loans] . . . .”); 20 U.S.C. § 1087mm (“[T]he term ‘family contribution’ with respect to any student
means the amount which the student and the student’s family may be reasonably expected to
contribute toward the student’s postsecondary education . . . .”) (emphasis added); 34 C.F.R. §
668.2 (defining EFC as the “amount . . . an applicant and his or her spouse and family are expected
to contribute toward the applicant’s cost of attendance.”). Many families either cannot or choose
not to cover the EFC and, contrary to Catholic’s implication, there is no legal requirement that
parents contribute to college tuition at all. In addition, the EFC calculation is itself dependent on
each family’s ability to pay. See 20 U.S.C. § 1087oo (computing EFC for dependent student from
student and parent’s “available income” and assets). For parents like the Franzeses who are about
to enter bankruptcy, the EFC would presumably anticipate little, if any, contribution to Julia’s
education. In sum, the EFC, which Catholic describes as “the parental obligation to provide
financial support for a child’s education” after age 18, is not an obligation at all and is contingent
on each family’s financial ability. (Cf. ECF No. 26 at 12.) It thus ultimately adds nothing to
Catholic’s argument, as it essentially restates the notion that parental tuition payments on behalf
of adult children are a “societal” or “moral” expectation.
Catholic also points to certain federal health insurance and tax laws that take into account
adult children. (See ECF No. 26 at 15 n.1 (citing 42 U.S.C. § 300gg-14); ECF No. 28 at 5 (citing
Grove v. Educ. Credit Mgmt. Corp. (In re Grove), 323 B.R. 216 (Bankr. N.D. Ohio 2005)).) But
these provisions do not expand parents’ legal obligations to their adult children either. The cited
provision of the Affordable Care Act imposes an obligation on insurers, permitting adult children
under the age of 26 to remain covered by their parents’ healthcare plan; but it does not require
parents to provide such coverage. See 42 U.S.C. § 300gg-14 (“[An insurer] that provides dependent
coverage of children shall continue to make such coverage available for an adult child until the
child turns 26 years of age.”). The cited tax code provision allows a taxpayer to claim exemptions
for qualifying dependent children, including students under the age of 24 who do not provide more
than half of their own support and meet other specified requirements—but the taxpayer is not
required to provide that support. See 26 U.S.C. § 151(c) (allowing deductions for dependents); id.
§ 152(c)(3)(A)(ii) (defining qualifying dependents to include students under age 24) (cited in In re
Grove, 323 B.R. at 229). In any event, both statutes show that Congress knew how to create
exceptions to the background, state-law rule that dependency ends at the age of majority, which it
has not done in the fraudulent transfer statute. These narrow carve-outs in other areas of law have
no bearing on whether parents and their adult children should be treated as a “single economic
unit” for the purposes of whether the Franzeses received “reasonably equivalent value” under the
Bankruptcy Code (or Connecticut law) for tuition payments on behalf of their adult daughter.
Catholic relies on In re Akanmu, 502 B.R. 124 (Bankr. E.D.N.Y. 2013), noting that the
debtors in that case were held to derive benefits for paying for their child’s education. But in
Akanmu, the court held that “the education provided by the defendants to [their] minor children
constitutes both a direct and indirect benefit to their parents, who with their children must be
considered a single economic unit.” Id. at 127–28 (emphasis added); see also id. at 135–36
(distinguishing cases involving parental payments of college tuition for adult children). Julia was
not a minor child when the Franzeses made tuition payments. Payment for the education of minor
children is distinguishable from payment for adult children’s college tuition. Parents are legally
responsible for ensuring that their minor children receive an education, as they are held legally
responsible for their children’s other needs. See Conn. Gen. Stat. § 10-184 (requiring parents to
cause children between the ages of 5 and 18 to attend school); In re Akanmu, 502 B.R. at 132 (“The
Debtors, by paying tuition to the Defendants and enrolling their [minor] children as students,
satisfied their legal obligation to provide for their education.”). But the same is not true for children
18 or older, who are legally considered adults. See Barbour, 156 Conn. App. at 400–01; Conn.
Gen. Stat. § 1-1d (making 18 the age of majority). Akanmu’s “single economic unit” theory is
inapplicable to adult children.
Finally, Catholic points to several other cases where debtors made payments for expenses
of other family members, but those cases are easily distinguishable from the facts here. In In re
Tarin, 454 B.R. 179 (Bankr. D.N.M. 2011), debtors paid for various services for their daughter’s
wedding, and the court held that the parents had directly “received value equal to what they
surrendered” because they attended the wedding and enjoyed those same services. Id. at 184.
Similarly, in In re Burry, 309 B.R. 130 (Bankr. E.D. Pa. 2004), the court found that, even though
a debtor paid half the loan payments on a boat that was actually delivered to a third party, the
debtor used the boat himself and so received reasonably equivalent value for his monthly loan
payments. Id. at 139. Both of those cases differ from this one because the Franzeses personally did
not receive anything of value from Catholic. Catholic also cites In re Gonzalez, 342 B.R. 165
(Bankr. S.D.N.Y. 2006), in which the court held that a debtor, who had long held himself out to
be a child’s father even without a paternity test, received reasonably equivalent value for the
mortgage payments he made on a house for his minor son and his son’s mother, id. at 172–74, and
In re Vansteinberg, No. 01-15474, 2003 WL 23838125, at *1 (Bankr. D. Kan. Nov. 26, 2003), in
which the court held that it did “not see the distinction between those bills paid by the debtor on
behalf of his wife [for horse riding expenses] and the myriad other household expenses that are
routinely paid by a Debtor for the benefit of a non-debtor spouse when the Debtor is the sole wage
earner in the family.” Id. at *5. These cases are distinguishable as well. Both involved expenses
paid on behalf of the debtors’ spouses or minor children whom the debtor had obligations to
support, not their adult children. Both debtors also received economic value in exchange: in
Gonzalez, the ability to use the house, 342 B.R. at 172; and in Vansteinberg, the child care the
debtor’s wife otherwise would not have provided if she had needed to work to pay horse-related
expenses. 2003 WL 23838125, at *2 (observing that the cost of horse care was less than child care
for their minor children). Because the Franzeses received no direct economic value for tuition
payments they made on behalf of their adult child, none of these cases support Catholic’s “single
economic unit” theory.
Therefore, I do not find Catholic’s “single economic unit” theory persuasive as applied to
tuition payments for adult children.
C. The UFTA Amendment is Not Retroactive
After this suit was filed, the Connecticut General Assembly amended § 52–552i of the
Connecticut Uniform Fraudulent Transfer Act (“UFTA”), which is entitled “Defenses, liability
and protection of transferee,” to add a provision shielding undergraduate tuition payments from
recovery as constructive fraudulent transfers:
A transfer or obligation is not voidable under subdivision (2) of subsection (a) of
section 52–552e or section 52–552f against an institution of higher education, as
defined in 20 U.S.C 1001, if the transfer was made or obligation incurred by a
parent or guardian on behalf of a minor or adult child in furtherance of the child's
2017 Conn. Acts 17–50 (Reg. Sess.) (codified at Conn. Gen. Stat. § 52–552i) (the “2017
Amendment”). Although not in effect when the Franzeses filed their bankruptcy petition or when
Catholic filed this action, Catholic argues that the 2017 Amendment applies retroactively to the
Franzeses’ tuition payments because it “clarifies rather than changes prior law.” (ECF No. 26 at
“In determining the intended effect of a later enactment on earlier legislation, two questions
must be asked. ‘First, was the act intended to clarify existing law or to change it? Second, if the
act was intended to make a change, was the change intended to operate retroactively?’” State v.
Magnano, 204 Conn. 259, 277 (1987) (quoting Circle Lanes of Fairfield, Inc. v. Fay, 195 Conn.
534, 540 (1985)). For the first question, Connecticut employs a presumption that “in enacting a
statute, the legislature intended a change in the existing law,” however, “[t]his presumption . . .
may be rebutted by contrary evidence of legislative intent.” Town of Middlebury v. Dep’t of Envtl.
Prot., 283 Conn. 156, 172–73 (2007) (quoting Bhinder v. Sun Co., 263 Conn. 358, 369 (2003)).
“An amendment which in effect construes and clarifies a prior statute must be accepted as the
legislative declaration of the meaning of the original act,” and “necessarily has retroactive effect.”
Id. at 173. Connecticut courts look to several factors to determine whether the legislature intended
to clarify existing legislation, including: “(1) the amendatory language; (2) the declaration of
intent, if any, contained in the public act; (3) the legislative history; and (4) the circumstances
surrounding the enactment of the amendment, such as, whether it was ‘enacted in direct response
to a judicial decision that the legislature deemed incorrect’ or ‘passed to resolve a controversy
engendered by statutory ambiguity.’” Id. (citations omitted) (quoting Oxford Tire Supply, Inc. v.
Comm’r of Revenue Servs., 253 Conn. 683, 693 (2000), and Toise v. Rowe, 243 Conn. 623, 629
(1998))). In cases where courts found that a statutory amendment was intended to be clarifying,
the pertinent legislative history provided “uncontroverted support . . . for the conclusion that the
legislature considered the amendatory language to be a declaration of the legislature’s original
intent rather than a change in the existing statute.” Id. (emphasis in original) (quoting In re Michael
S., 258 Conn. 621, 629 (2001)).
The language of the amendment makes plain that the legislature intended to provide a new
substantive defense, not to clarify existing fraudulent transfer law. The 2017 Amendment provides
that a “transfer or obligation is not voidable under subdivision (2) of subsection (a) of section 52–
552e or section 52–552f against an institution of higher education” if the transfer was made by a
parent for an adult child’s undergraduate education, and adds this as a new subsection to the section
entitled “Defenses, liability and protection of transferee.” Conn. Gen. Stat. § 52–552i. The
amendment does not purport to clarify the definition of “value” or “reasonably equivalent value,”
and it does not amend either section 52–552e or section 52–552f, which sets forth the fraudulent
transfer causes of actions that rely on those terms. Rather, the amendment adds a new legal
“[d]efense” for actions “against an institution of higher education” by providing that transfers by
parents are not voidable. This is a substantive change to the law, not a clarification.
In addition,2 the legislative history is ambiguous and thus does not provide “uncontroverted
support” that the legislature intended the 2017 Amendment as a clarification. Catholic relies
heavily on a statement of Senator Doyle that the amendment “clarifies basically that when
primarily parents are paying for their children’s college education that if bankruptcy is later filed
by the parents and the bankruptcy court doesn’t have the authority to reach back and take the
tuition payments to the college and universities. . . . [I]t’s a technical piece of legislation but it
makes sense and it basically preserves tuition paid by parents or others to students in college.”
(ECF No. 26 at 7–8, 27–28 (60 S. Proc., Pt. 3, 2017 Sess., pp. 801–02 (Conn. 2017) (remarks of
Senator Paul R. Doyle)).) Although Senator Doyle uses the verb “clarify,” his statement is
equivocal as to whether the act clarifies the existing state of the law. Contrast Conn. Nat’l Bank v.
Giacomi, 242 Conn. 17, 40–41 (1997) (affording substantial weight to a legislator’s unequivocal
remark that the purpose of a statutory amendment was “not to change the law, but to clarify what
I would consider the law [to be] . . . . It’s not saying something different.”). Moreover, other
legislators contradict Senator Doyle on this very point. See Town of Middlebury, 283 Conn. at 177
(“[W]e . . . only [ascribe substantial weight to a legislator’s description of the clarifying purpose
of a statute] if the description is direct and unequivocal and there is no indication of a contrary
legislative intent.”). Immediately after Senator Doyle, Senator Kissel took the floor and stated:
“[I]f a state wants a particular carveout, it can put that into statute and that’s what this would do .
. . . [A]s a public policy, we have decided with this legislation that an individual’s desire to send
their loved one, their child to college is an important public policy and we should encourage it and
not allow the bankruptcy courts to go in and claw that money back.” (ECF No. 27, Ex. B at 2–3
Under the second factor, no legislative declarations of intent appear in the act. See 2017 Conn.
Acts 17–50 (Reg. Sess.).
(60 S. Proc., Pt. 3, 2017 Sess. (Conn. 2017) (remarks of Senator John A. Kissel).) Senator Kissel
describes the amendment as a policy carveout for college tuition payments, rather than as a
clarification of a previously ambiguous statute. The legislative history is ambiguous at best, and
thus does not support Catholic’s argument that the 2017 Amendment was a clarification of the
Catholic also cites a written statement of Connecticut Attorney General, George Jepsen, in
support of the bill to buttress its argument that the 2017 Amendment was intended as a
clarification. (ECF No. 26 at 8.) Attorney General Jepsen wrote that “[t]his bill would revise
Connecticut’s fraudulent transfer law to make clear that payments made by a parent or guardian to
a college or university in furtherance of an adult child’s college education are not voidable.” (ECF
No. 26 at 29 (An Act Revising the Uniform Fraudulent Transfer Act: Hearing on S.B. 1021 Before
the Jud. Comm., 2017 Reg. Sess. (Conn. 2017) (statement of Attorney General George Jepsen).)
He further stated, “I believe that, as a matter of policy, the state should exempt from our state
fraudulent transfer laws payments made and obligations incurred by a parent or guardian to a
college or university in furtherance of a child’s undergraduate education.” (Id. at 30.) Attorney
General Jepsen’s statement refers to the 2017 Amendment as a “revis[ion]” of the law and an
exemption “as a matter of policy,” which also do not unequivocally demonstrate that the legislature
intended to clarify existing law.
Finally, although the circumstances surrounding the enactment of the amendment are
relevant, such as whether it was passed to resolve a controversy engendered by statutory
ambiguity, Catholic provides no support for its claim that the 2017 Amendment was passed to
address ambiguity in the UFTA, simply noting that the UFTA did “not address this particular fact
pattern.” (ECF No. 26 at 7.) But simply because the UFTA did not envision these precise facts
does not mean that the 2017 Amendment was aimed at clarifying an ambiguity in the statute’s
application, as opposed to restricting its reach. Even if Catholic were correct, however, this factor
is outweighed by the text’s strong indication that the 2017 Amendment was a substantive change
and not a clarification. See Estate of Brooks v. Comm’r of Revenue Servs., 325 Conn. 705, 721
(2017), cert. denied, 138 S. Ct. 1181 (2018) (“Not each factor is given equal weight.”).
I conclude that the 2017 Amendment was intended to operate as a substantive change in,
rather than a clarification to, Connecticut’s fraudulent transfer law based on a new legislative
policy judgment. Even so, I must briefly address the second question—whether that “change [was]
intended to operate retroactively.” Magnano, 204 Conn. at 277. Like its federal analog,
Connecticut law presumes that laws that affect substantive rights3 apply prospectively only unless
the “legislature clearly and unequivocally expresses its intent that the legislation shall apply
retrospectively.” Andersen Consulting, LLP v. Gavin, 255 Conn. 498, 517 (2001). Notably,
Catholic has not argued that the 2017 Amendment would overcome this presumption if the 2017
Amendment were not a clarification of the UFTA. (ECF No. 26 at 6–8.) But in any event, the
legislature did not express any intent that the 2017 Amendment would apply retrospectively—in
fact, the statute was explicitly made “[e]ffective October 1, 2017,” and not before. 2017 Conn.
Acts No. 17–50 (Reg. Sess.). I thus find that the 2017 Amendment applies only prospectively.
Because the 2017 Amendment did not clarify the UFTA and is not otherwise retroactive, I reject
The 2017 Amendment is clearly a substantive law, as opposed to a procedural law ordinarily
subject to an inverse presumption. “[A] substantive law creates, defines and regulates rights
while a procedural law prescribes the methods of enforcing such rights or obtaining redress.”
Town of Middlebury, 283 Conn. at 183–84 (citation and quotation marks omitted). As discussed
above, the 2017 Amendment creates new rights because it provides a defense to fraudulent
transfer suits against institutions of higher education to recover tuition paid by parents. See
Weber v. U.S. Sterling Sec., Inc., 282 Conn. 722, 739 (2007) (holding that statute which
“abridge[d] the rights of individuals” to bring certain class action claims was substantive).
Catholic’s argument that the 2017 Amendment shields the Franzeses’ transfers from avoidance
under Connecticut law.
Because Chorches has alleged plausible claims that the Franzeses did not receive
reasonably equivalent value for their college tuition payments on behalf of their adult daughter
and because the UFTA amendment does not apply retroactively, I DENY the defendant’s motion
to dismiss. The parties shall confer and file their Rule 26(f) report within 21 days of the date of
IT IS SO ORDERED.
Michael P. Shea, U.S.D.J.
July 13, 2018
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