Commercial Law World - Issue 4, 2017 - 26

due other than as a result of a bona fide dispute is
presumed to be insolvent. ..."

Elements of Deceit and/or
Concealment of Insolvency
The essential elements are also present in a cause
of action for the common law tort of "Deceit."
Cummings v. HPG Int'l Inc., 244 F.3d 16 (1st Cir.
2001) ("In an action for deceit under Massachusetts
law, a plaintiff must show that the defendant: made a
false representation of material fact; for the purpose
of inducing reliance; and that plaintiff relied upon the
representation to his or her detriment."). The wrongdoer,
Mr. Jones, fraudulently produces a False Impression
on the mind of the victim, ABC (of solvency) and if
such result is accomplished, it is unimportant whether
the means of accomplishing it are words or acts of the
defendant, as Jones's silence regarding the insolvency
of XYZ is his act of concealment or suppression of
material facts which are not equally within reach or
knowledge of the credit grantor.
Consider this scenario: had Jones call ABC and said:
"we're having cash flow problems" or "We're not sure
when or if you are going to get paid", do you think a
prudent credit grantor would extend any credit?
Under the UCC there is a duty to act in Good Faith
i.e., ("honesty in fact") and Engage in Fair Dealing; i.e.
not act in a manner nor omit to act in a manner that
would frustrate plaintiff's anticipated benefit(s) under
their contract"
Thus, presentment by the wrongdoer creates a False
Impression of Solvency and the Ability to Pay. (The act
of Deceit) Jones is an "insider" and "person in control"
of debtor XYZ Inc., as defined by UVTA 1(8)(ii)(C)
and, 11 U.S.C. 101(31)(B)(iii).
Example 2: A person enters into a restaurant. Without
speaking a word motions for a menu and wine list, and
proceeds to order by pointing, no word is spoken. At
the end of the meal, he is unable to pay for the meal by
cash or credit card. Historically this was considered
a Larceny. Note: it is also an act of Deceit and also
Constructive Fraud.
Example 3: A wrongdoer on behalf of a formation
entity (collectively "Buyer") orders merchandise and
services from a Vendor. The wrongdoer knows or should

26 COMMERCIAL LAW WORLD

have known the formation entity was grossly undercapitalized and/or hopelessly insolvent and will be
unable to pay for the merchandise and services when the
bill becomes due. Alternatively, the wrongdoer intends
to use the proceeds from its sale of that merchandise
to pay-off a secured party who holds a mortgage and/
or personal guaranty, knowing it has no intention to pay
the credit grantor.
Thus, at the time the Order(s) was placed:
(i) the wrongdoer concealed formation entity's
insolvency, i.e., a material fact that was not equally
within reach or knowledge of Vendor, and;
(ii) wantonly produced a False Impression upon
the mind of the Vendor, victim, to wit: that the
formation entity
(a) was solvent and;
(b) was able to pay for the merchandise and
services it ordered, and;
[c] was acting in Good Faith, and;
(iii) the wrongdoer actually intended that the
Vendor victim would believe and rely on its false
impressions, and;
(iv) knowingly ordered merchandise and services,
with the knowledge and intent that the Vendor,
victim, would not be paid.

Conspiracy Theory Against
the Principals of the Debtor
NOTE: if there are two or more principals of XYZ,
you will have a Conspiracy cause of action along with a
claim for Conversion, Preference and a violation of the
Uniform Voidable Transactions Act.
Finally, if the bank or Secured Party seeks to retain
the goods and/or funds paid by Jones and XYZ, its lien
may not attach as XYZ's title to those goods and/or
funds may be voidable.
Hopefully, this article will stimulate some thought
into pursuing fraud causes of action in commercial
collection cases.
Remember: Focus on Excellence and the Rest
Will Follow. 

OCT /NOV /DEC 2017



Table of Contents for the Digital Edition of Commercial Law World - Issue 4, 2017

Contents
Commercial Law World - Issue 4, 2017 - Cover1
Commercial Law World - Issue 4, 2017 - Cover2
Commercial Law World - Issue 4, 2017 - Contents
Commercial Law World - Issue 4, 2017 - 2
Commercial Law World - Issue 4, 2017 - 3
Commercial Law World - Issue 4, 2017 - 4
Commercial Law World - Issue 4, 2017 - 5
Commercial Law World - Issue 4, 2017 - 6
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Commercial Law World - Issue 4, 2017 - 13
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Commercial Law World - Issue 4, 2017 - 19
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Commercial Law World - Issue 4, 2017 - 25
Commercial Law World - Issue 4, 2017 - 26
Commercial Law World - Issue 4, 2017 - 27
Commercial Law World - Issue 4, 2017 - 28
Commercial Law World - Issue 4, 2017 - Cover3
Commercial Law World - Issue 4, 2017 - Cover4
http://www.nxtbook.com/nxtbooks/clla/clw_2019issue1
http://www.nxtbook.com/nxtbooks/clla/clw_2018issue4
http://www.nxtbook.com/nxtbooks/clla/clw_2018issue3
http://www.nxtbook.com/nxtbooks/clla/clw_2018issue2
http://www.nxtbook.com/nxtbooks/clla/clw_2018issue1
http://www.nxtbook.com/nxtbooks/clla/clw_2017issue4
http://www.nxtbook.com/nxtbooks/clla/clw_2017issue3
http://www.nxtbook.com/nxtbooks/clla/clw_2017issue2
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http://www.nxtbook.com/nxtbooks/clla/clw_2016issue4
http://www.nxtbook.com/nxtbooks/clla/clw_2016issue3
http://www.nxtbook.com/nxtbooks/clla/clw_2016issue2
http://www.nxtbook.com/nxtbooks/clla/clw_2016issue1
http://www.nxtbook.com/nxtbooks/clla/clw_2015issue4
http://www.nxtbook.com/nxtbooks/clla/clw_2014issue3
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http://www.nxtbook.com/nxtbooks/clla/clw_2012101112
http://www.nxtbook.com/nxtbooks/clla/clw_2012070809
http://www.nxtbook.com/nxtbooks/clla/clw_20120506
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http://www.nxtbook.com/nxtbooks/clla/debt3_20110304
http://www.nxtbook.com/nxtbooks/clla/debt3_20110102
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