Kurtz v. Kalamata Capital Group, LLC

MEMORANDUM OF DECISION - 1
UNITED STATES BANKRUPTCY COURT
DISTRICT OF IDAHO
MEMORANDUM OF DECISION
Timothy Kurtz, the chapter 7 trustee (“Trustee”), initiated this adversary
proceeding against Kalamata Capital Group, LLC (“Kalamata”), in April of 2025. Doc.
No. 1 (the “Complaint”). Kalamata filed a motion to dismiss the Complaint pursuant to
Civil Rule 12(b)(6)1 for failure to state a claim upon which relief may be granted (the
“Motion”). Doc. No. 19. Kalamata filed a brief in support and a declaration. Doc. Nos.
1 Unless otherwise indicated, all chapter and section references are to the Bankruptcy Code, 11
U.S.C. §§ 101–1532, all “Rule” references are to the Federal Rules of Bankruptcy Procedure, Rules
1001–9038, and all “Civil Rule” references are to the Federal Rules of Civil Procedure.
IN RE:
HMH CONSTRUCTION, LLC,
Debtor.
Case No. 23-00191-NGH
TIMOTHY R. KURTZ
Plaintiff,
v.
KALAMATA CAPITAL GROUP,
LLC,
Defendant.
Adv. No. 25-06027-NGH
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20 & 21. Trustee filed a response. Doc. No. 24. The Court held a hearing on the Motion
on December 8, 2025, and took the matter under advisement. After considering the
record, arguments, and applicable law, the following constitutes the Court’s findings,
conclusions, and disposition of the issues.
BACKGROUND
In 2019, Kalamata and HMH Construction, LLC, the debtor in this case, entered
into a “Revenue Purchase Agreement” for the purchase and sale of HMH’s future
receivables (the “Agreement”). Under the Agreement, HMH agreed to sell $158,500 of
its accounts receivable to Kalamata in exchange for $120,000. The Agreement
authorized Kalamata to withdraw 15% of HMH’s revenue weekly, which resulted in a
weekly remittance of $5,658. According to the Agreement, this amount was a good faith
estimate of the purchased percentage based on HMH’s revenues. Section 1.4 allowed
HMH to request a retroactive reconciliation, whereby Kalamata would debit or credit the
difference “so that the total amount debited by [Kalamata] shall equal the Specific
Percentage of the Future Receipts that [HMH] Collected from the date of this Agreement
up to and including the date of the Reconciliation request.” If applicable, such
reconciliation “shall be performed” by Kalamata within five business days following the
request. Additionally, section 1.5 provided that “should [HMH] experience a decrease in
its Future Receipts, [HMH] may give notice to [Kalamata] to request a decrease in the
Remittance,” which remittance “shall be modified to more closely reflect [HMH’s] actual
receipts.”
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As part of the Agreement, HMH granted Kalamata a security interest in its
accounts receivable effective immediately and a security interest in other collateral
effective upon default. Performance of the Agreement was guaranteed by HMH’s
principal, who could be held jointly and severally liable for all amounts owed to
Kalamata in the event of HMH’s default. If one of the enumerated “Events of Default”
occurred, the full uncollected purchased amount would become due and owing
immediately and Kalamata could enforce its security interest in the collateral and against
the guarantor.
The parties performed under the Agreement without incident. Kalamata
transferred $120,000 to HMH and between August 2019 and February 2020, Kalamata
collected the weekly remittance from HMH’s accounts receivable until it collected the
full purchased amount of $158,400. Three years later in April 2023, HMH filed its
bankruptcy petition, and two years later, Trustee initiated this adversary proceeding.
Count I of the Complaint seeks declaratory relief that the Agreement is void ab
initio under New York law. Count II seeks to avoid the transfers to Kalamata pursuant to
§ 544 and Idaho Code sections 55-913 and 55-914. Finally, to the extent Kalamata
“holds or will file an otherwise valid and enforceable claim,” Count III seeks
disallowance of said claim pursuant to § 502(d) unless and until Kalamata complies with
the requirements therein. Kalamata asserts the Complaint fails to state a claim upon
which relief may be granted.
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ANALYSIS
A. 	Rule 12(b)(6) Standard
Two seminal Supreme Court cases guide the Court’s analysis of motions to
dismiss under Civil Rule 12(b)(6)—Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007)
and Ashcroft v. Iqbal, 556 U.S. 662 (2009). Twombly held that to survive a motion to
dismiss under 12(b)(6), a complaint must sufficiently allege facts “to raise a right to relief
above the speculative level, on the assumption that all the allegations in the complaint are
true (even if doubtful in fact).” 550 U.S. at 556. In Iqbal, the Supreme Court elaborated:
To survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to state a claim to
relief 	that 	is 	plausible 	on 	its 	face. 	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. The plausibility
standard is not akin to a probability requirement, but it asks for
more than a sheer possibility that a defendant has acted
unlawfully. 	Where a complaint pleads facts that are merely
consistent with a defendant’s liability, it stops short of the line
between possibility and plausibility of entitlement to relief.
556 U.S. at 678 (internal quotation marks and citations omitted).
In Hillen v. Specialized Loan Servicing, LLC (In re Leatham) this Court
summarized the standard for dismissal under Civil Rule 12(b)(6) as follows:
In 	determining 	whether 	a 	plaintiff 	has 	advanced
potentially viable claims, the complaint is to be construed in a
light most favorable to the plaintiff and its allegations taken as
true. 	When reviewing the allegations of a complaint, legal
conclusions, 	deductions 	or 	opinions 	couched 	as 	factual
allegations are not given a presumption of truthfulness. 	The
complaint should not be dismissed for a failure to state a claim
unless it appears that the plaintiff can prove no set of facts in
support of the claim which would entitle plaintiff to relief.
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Thus, a court may properly grant a Rule 12(b)(6) motion if it is
clear from the face of the complaint and judicially-noticed
documents that the plaintiff cannot prevail as a matter of law.
. . . [T]he issue is not whether a plaintiff will ultimately prevail
but whether he is entitled to offer evidence in support of the
claims. It may appear on the face of the pleadings that recovery
is very remote and unlikely, but that is not the test. The key is
whether or not it appears beyond doubt that the plaintiff can
prove no set of facts in support of his claim which would entitle
him to relief.
2017 WL 3704512, at *1 (Bankr. D. Idaho Aug. 24, 2017).
Dismissal under Civil Rule 12(b)(6) may “be based on either the lack of a
cognizable legal theory or on the absence of sufficient facts alleged under a cognizable
legal theory.” Tracht Gut, LLC v. Los Angeles Cnty. Treasurer & Tax Collector (In re
Tracht Gut, LLC), 836 F.3d 1146, 1151 (9th Cir. 2016). If there is merit to a 12(b)(6)
motion, Ninth Circuit authority restricts a court’s ability to dismiss a case and instead
requires the court to provide a complainant leave to amend the complaint “unless it is
clear that the complaint could not be saved by any amendment.” Harris v. Amgen, Inc.,
573 F.3d 728, 736 (9th Cir. 2009) (internal quotation marks omitted).
B. 	Claims for Relief
1. 	Count I: Declaratory Relief
As noted, Trustee seeks declaratory relief that the Agreement is void ab initio
under New York’s usury statute. The Agreement contains a New York choice-of-law
provision, which the parties do not dispute. Under New York General Obligation Law
§ 5-512, a corporation may not assert a defense of usury in any action except “criminal
usury as described in section 190.40 of the penal law.” The Complaint alleges that
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although the Agreement does not carry an interest rate on its face, its terms effectively
result in an interest rate that exceeds the criminal usury rate of 25%. And, as such, the
Agreement is void ab initio. Kalamata argues dismissal is appropriate because Trustee
cannot bring an affirmative claim for relief under New York’s usury statute and, even if
Trustee were able to bring such a claim, usury does not apply because the Agreement
represents a sale, not a loan.
a. 	Existence of a Loan
Before a court can assess whether a contract is usurious, there must be a “loan or
forbearance of money and where there is no loan there can be no usury.” Guttman v.
EBF Holdings, LLC (In re Glob. Energy Sevrs., LLC), 2025 WL 1012721, at *3 (Bankr.
D. Md. Mar. 31, 2025) (quoting IBIS Cap. Grp., LLC v. Four Paws Orlando LLC, 2017
WL 1065071, at *1 (N.Y. Sup. Ct. Mar. 10, 2017)). See Streamlined Consultants, Inc. v.
EBF Holdings LLC, 2022 WL 4368114, at *4 (S.D.N.Y. Sept. 20, 2022) (noting
“rudimentary element of usury is existence of loan or forbearance”) (citing Colonial
Funding Network, Inc. v. Epazz, Inc., 252 F. Supp. 3d 274, 280 (S.D.N.Y. 2017)).
“When determining whether a transaction is a usurious loan it must be considered in its
totality and judged by its real character, rather than by the name, color, or form which the
parties have seen fit to give it.” Streamlined Consultants, Inc., 2022 WL 4368114, at *4
(citation omitted). The key consideration is the transfer of risk, with the hallmark being
that an alleged lender is “absolutely entitled to repayment under all circumstances.” Id.
(quoting Principis Cap., LLC v. I Do, Inc., 160 N.Y.S.3d 325, 326-27 (N.Y. App. Div.
2022)). Unless repayment is absolute, the transaction is not a loan. Id.
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Three factors generally inform whether repayment is absolute or contingent,
namely: “(1) whether there is a reconciliation provision in the agreement; (2) whether the
agreement has a finite term; and (3) whether there is any recourse should the merchant
declare bankruptcy.” Fleetwood Servs., LLC v. Ram Cap. Funding, LLC, 2022 WL
1997207, at *9 (S.D.N.Y. June 6, 2022) (quoting LG Funding, LLC v. United Senior
Props. of Olathe, LLC, 122 N.Y.S.3d 309, 312 (N.Y. App. Div. 2020)). See also
Guttman v. EBF Holdings, LLC (In re Glob. Energy Sevrs., LLC), 2025 WL 1012721, at
*4 (Bankr. D. Md. Mar. 31, 2025) (discussing role of factors in assessing absolute
repayment noting “by an overwhelming majority, courts apply the LG Funding non-
exhaustive three-factor test” to cases involving merchant cash advance agreements).
These factors serve as a guide and do not “dictate the conclusion, and a court need not
find the presence of all three factors in concluding that a transaction is a loan.”
Fleetwood Servs., LLC, 2022 WL 1997207, at *9 (collecting cases). Additionally, the
factors are non-exhaustive and other factors may bear on the true nature of a transaction.
i. 	Presence of Reconciliation Provision
“A reconciliation provision is relevant because it can shift the risk of nonpayment
away from the merchant by ‘allow[ing] the merchant to seek an adjustment of the
amounts being taken out of its account based on its cash flow (or lack thereof).’”
Fleetwood Servs., LLC, 2022 WL 1997207, at *9 (citing K9 Bytes, Inc. v. Arch Cap.
Funding, LLC, 57 N.Y.S.3d 625, 632 (N.Y. Sup. Ct. 2017)) (alteration in original).
However, the mere presence of a reconciliation provision is not dispositive.
Reconciliation that is illusory or effectively impracticable weighs in favor of the
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MEMORANDUM OF DECISION - 8
transaction being a loan. For example, reconciliation may be illusory if the sum to be
withdrawn is not a percentage but a specific amount regardless of whether any accounts
receivables are collected, and reconciliation or adjustment of the amount to be withdrawn
is left to the sole discretion of the alleged purchaser. Id. at *10 (citing Am. Water
Restoration, Inc. v. AKF Inc., 157 N.Y.S.3d 919 (N.Y. Sup. Ct. 2002)). See also US Info.
Grp. LLC v. EBF Holdings, LLC, 2023 WL 6198803, at *7 (S.D.N.Y. Sept. 22, 2023)
(collecting cases in which reconciliation was unduly onerous or had a “sham quality”).
“By contrast, an enforceable reconciliation provision, pursuant to which payment is to be
adjusted according to the seller’s actual receipts, is generally inconsistent with
classification as a loan subject to the usury laws.” Id. at *8.
Here, the Agreement contained a reconciliation provision and an avenue by which
HMH could reduce the remittance amount to reflect its actual receipts. Unlike the
provision in Fleetwood Services, reconciliation and remittance adjustments are
mandatory upon HMH’s request and not left to Kalamata’s discretion. In other words,
the Agreement’s reconciliation and remittance provisions state that Kalamata “shall”
reconcile or adjust the remittance. Nonetheless, Trustee alleges that reconciliation is
illusory because Kalamata withdrew remittances without regard to HMH’s actual receipts
and at times when HMH had no receipts, and section 1.4 does not require Kalamata to
modify the weekly remittance to reflect HMH’s actual receipts. However, the remittance
adjustment provision in section 1.5 allows for modification of the weekly withdrawal,
and Trustee does not allege these provisions did not function as agreed. See Streamlined
Consultants, Inc. v. EBF Holdings LLC, 2022 WL 4368114, at *4 (S.D.N.Y. Sept. 20,
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2022) (noting merchant did not allege reconciliation did not function as agreed “or,
indeed, that [merchant] ever even requested reconciliation”).
Trustee also alleges HMH had committed events constituting default at the time it
executed the Agreement and Kalamata could therefore have invoked its rights against
HMH and the guarantor at any time. The Court observes that reconciliation and
remittance adjustment are available to HMH only so “long as an Event of Default, or
breach of this Agreement, has not occurred.” Trustee cites section 2.10 of the Agreement
as one example of default. Under section 2.10, HMH represented, warranted, and
covenanted that, “as of the date and during the term of this Agreement”:
[HMH] has good, complete, unencumbered and marketable
title to all Receipts, free and clear of any and all liabilities,
liens, claims, changes, restrictions, conditions, options, rights,
mortgages, 	security 	interests, 	equities, 	pledges 	and
encumbrances of any kind or nature whatsoever or any other
rights or interests that may be inconsistent with the transactions
contemplated with, or adverse to the interests of [Kalamata].
Section 3.1 outlines events constituting default, including a “violation of any term of
covenant of the Agreement” and “[a]ny representation or warranty by [HMH] in this
Agreement shall prove to have been incorrect, false or misleading in any material respect
when made.” The Complaint alleges other entities filed financing statements with the
Idaho Secretary of State against HMH and certain assets of HMH prior to the execution
of the Agreement. And “[w]hen Kalamata provided the funds . . . it was either aware of,
or could have readily ascertained, the existence of multiple liens, including the previous
lien rights of other creditors, that were outstanding at the time and superior to Kalamata’s
alleged lien claim.” See Doc. No. 1 ¶ 14. Kalamata’s failure to exercise its rights in the
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face of HMH’s default does not constitute a waiver and section 4.1 would require any
waiver to be in writing. Id. ¶ 46. Therefore, despite appearing enforceable and
mandatory, HMH may have been prevented from utilizing the reconciliation and
remittance adjustment provisions as written.
ii. 	Indefinite or Finite Term
The second factor is whether the transaction contains a finite term by which the
alleged seller must transmit the purchased receivables to the buyer, which would suggest
the transaction was not a true sale but a loan. “This factor goes hand-in-glove with the
reconciliation provision factor.” Guttman v. EBF Holdings, LLC (In re Glob. Energy
Servs., LLC), 2025 WL 1012721, at *5 (Bankr. D. Md. Mar. 31, 2025). If the amount
due is subject to change via reconciliation or adjusted remittances, the “term of the
agreement is necessarily not finite.” Fleetwood Servs., LLC, 2022 WL 1997207, at *9
(citing Principis Cap., LLC v. I Do, Inc., 160 N.Y.S.3d 325, 327 (N.Y. App. Div. 2022)).
Here, the Agreement provides there is no “payment schedule and no time period during
which the Purchased Amount must be collected by [Kalamata].” And in theory, had
HMH requested an adjustment to the remittance or reconciliation, Kalamata’s collection
would have varied according to HMH’s receipts, thereby potentially extending the term
of the Agreement indefinitely. Nonetheless, Trustee alleges the Agreement carried a de
facto term for repayment that was fixed by the weekly remittance amount because there
was no true right to reconciliation.
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iii. 	Recourse in the Event of Bankruptcy
The third factor considers whether Kalamata had any recourse in the event HMH
filed a bankruptcy petition. “In determining whether the merchant retains the risk of
nonpayment, it is significant that ‘the agreement provides that [defendant’s] written
admission of its inability to pay its debt or its bankruptcy constitute events of default
under the agreement, which entitle the plaintiff to the immediate full repayment of any of
the unpaid purchased amount.’” Fleetwood Servs., LLC, 2022 WL 1997207, at *9
(quoting LG Funding, LLC v. United Senior Props. of Olathe, LLC, 122 N.Y.S.3d 309,
313 (N.Y. App. Div. 2020)). Recourse in the event of bankruptcy suggests the seller’s
obligation to the purchaser is “absolute and not contingent on its actual accounts
receivable,” and is thus a loan. Id.
The Agreement does not list filing a bankruptcy petition as an event of default.
Additionally, the Agreement provides: “[HMH] going bankrupt or going out of business,
or experiencing a slowdown in business, or a delay in collecting its receivables, in and of
itself, does not constitute a breach of this Agreement.” Courts considering similar terms
have determined they weigh in favor of finding the risk lies with the purchaser, not the
seller, and the contract is truly a sale. See Guttman v. EBF Holdings, LLC (In re Glob.
Energy Servs., LLC), 2025 WL 1012721, at *6 (Bankr. D. Md. Mar. 31, 2025) and
Streamlined Consultants, Inc. v. EBF Holdings LLC, 2022 WL 4368114, at *5 (S.D.N.Y.
Sept. 20, 2022). However, in the event of HMH’s default, the uncollected purchased
amount plus fees would become due and payable immediately and Kalamata could
enforce its rights under the Agreement against HMH and the guarantor, which is more
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indicative of a loan. Moreover, Trustee asserts filing a petition for relief constitutes
HMH’s transfer of all or substantially all of its assets, which does constitute an event of
default, thereby entitling Kalamata to immediate full repayment of any unpaid amounts
and securing Kalamata’s right to repayment in the event HMH filed a bankruptcy
petition.
iv. 	Other Factors
The LG Funding factors are not dispositive, and other factors may inform whether
the transaction represents a genuine transfer of risk “or if the agreement is structured to
ensure an absolute repayment obligation.” Reserve Funding Grp. LLC v. California
Organic Fertilizers, Inc., 2024 WL 1604195, at *2 (E.D.N.Y. Apr. 12, 2024) (citing
Haymount Urgent Care PC v. GoFund Advance, LLC, 609 F. Supp. 3d 237, 247
(S.D.N.Y. 2022)). For example, an agreement that allocates risk to the seller while
affording the purchaser a “panoply of rights, remedies, and potential control is highly
unusual in the context of an assets sale,” and “[s]uch an overall arrangement is consistent
with a debtor-creditor relationship, not a seller-buyer relationship.” Cap Call, LLC v.
Foster (In re Shoot the Moon, LLC), 635 B.R. 797, 817 (Bankr. D. Mont. 2021).
In certain respects, the Agreement appears to allocate risk to Kalamata. It states
Kalamata entered into the transaction “knowing the risks that [HMH’s] business may
slow down or fail,” and all payments to Kalamata “shall be conditioned upon [HMH’s]
sale of products and services, and the payment therefore by [HMH’s] customers.”
However, section 1.2 provides the Agreement “shall remain in full force and effect until
the entire Purchased Amount and any other amounts due are received by [Kalamata],”
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and the security agreement granted Kalamata a security interest in all of HMH’s assets,
beyond the accounts receivable, “if at any time there are insufficient funds in [HMH’s]
Account to cover Kalamata’s entitlements under this Agreement.” Additionally,
Kalamata maintained extensive rights and remedies in the event of HMH’s breach or
default, including appointment as power of attorney, a security interest in all HMH’s
assets, the right to enter a confession judgment against HMH for the purchased amount,
automatic assignment of HMH’s business leases, and the right to immediately enforce its
security interests and collect the sums due under the Agreement from HMH and/or the
guarantor.
Trustee alleges the Agreement functioned as a loan because it provided Kalamata
with recourse to sources beyond the receivables and as discussed above, HMH was in
default upon execution and Kalamata knew of such default. Therefore, there was no true
transfer of risk to Kalamata that HMH’s business would slow down, fail, or HMH’s
customers would not pay.
Construing the Complaint in a light most favorable to Trustee and accepting all
factual allegations as true, the Complaint adequately pleads that the Agreement may in
actuality function as a loan, not a sale.
b. 	Availability of Affirmative Relief
Kalamata asserts that even if Trustee could prove the Agreement was a loan,
Trustee cannot seek affirmative relief under New York’s usury laws. “Under New
York’s usury statute, where the interest rate on a debt exceeds the criminal usury rate of
25% per annum, ‘a corporation may interpose an affirmative defense of usury and, if
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successful, obtain a declaration that invalidates the debt instrument ab initio.’”
Streamlined Consultants, Inc. v. EBF Holdings LLC, 2022 WL 4368114, at *3 (S.D.N.Y.
Sept. 20, 2022) (citing Haymount Urgent Care PC v. GoFund Advance, LLC, 609 F.
Supp. 3d 237, 254 (S.D.N.Y. 2022)). However, this statute is limited to an affirmative
defense, and corporations may not raise affirmative claims or counterclaims alleging
criminal usury in order to invalidate an agreement. Id. See also Intima-Eighteen, Inc. v.
A.H. Schreiber Co., Inc., 568 N.Y.S.2d 802, 804 (N.Y. App. Div. 1991) (“The statutory
exception for interest exceeding 25 percent per annum is strictly an affirmative defense to
an action seeking repayment of a loan and may not, as attempted here, be employed as a
means to effect recovery by the corporate borrower.”); Paycation Travel, Inc. v. Global
Merch. Cash, Inc., 141 N.Y.S.3d 319, 320 (N.Y. App. Div. 2021) (exception for criminal
usury is “only as a defense to an action to recover repayment of a loan, and not as the
basis for a cause of action asserted by the corporation for affirmative relief”).
Therefore, to the extent Trustee seeks to use the New York usury statute as a
sword to void the Agreement or as a means to effect recovery, the Complaint fails to state
a claim upon which relief may be granted and Count I will be dismissed without leave to
amend. However, insofar as Trustee seeks a judicial determination that the Agreement is
a usurious loan as it may concern Trustee’s other claims, the Court will grant Trustee
leave to amend the Complaint to clarify the relief sought.2
2 Seeking to distinguish the present case at the hearing, Trustee noted he is standing in the shoes
of a creditor, not those of the corporate borrower. To the extent it is relevant to the relief sought, the
Court questions whether a creditor who is not party to the contract may claim the protections of New
York’s usury laws. See Seidel v. 18 East 17th Street Owners, Inc., 586 N.Y.S.2d 240, 243 (N.Y. App.
(Continued)
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2. 	Count II: Transfer Avoidance
The Complaint seeks avoidance of the transfers to Kalamata under § 544(b) and
Idaho law. Section 544(b) provides “the trustee may avoid any transfer of an interest of
the debtor in property or any obligation incurred by the debtor that is voidable under
applicable law by a creditor holding an unsecured claim.” Trustee seeks to avoid the
transfer of the receivables under the Idaho Uniform Voidable Transfers Act (“UVTA”).
In particular, Trustee cites Idaho Code sections 55-913 and 55-914.
“A prerequisite to both I.C. § 55-913 and § 55-914 is the presence of creditors
who had antecedent debts at the time of the transfer.” Geile v. Wickersham (In re Gray),
2023 WL 4163465, at *2 (Bankr. D. Idaho June 23, 2023) (citing Parkinson Seed Farm,
Inc. v. Arlo Weeks & Brookside, LLC (In re Parkinson Seed Farm, Inc.), 640 B.R. 218,
250 (Bankr. D. Idaho 2022)). The Complaint alleges HMH had multiple unsecured
creditors at the time the obligation was incurred and the transfers made, including the
IRS, who “would have been able to pursue recovery of the transfers under relevant non-
bankruptcy law.” Additionally, the Complaint alleges that at all times, the assets of
HMH, including the accounts receivable, were property of HMH and subject to valid
security interests of other parties. While claims under these sections are normally subject
to a four-year limitations period, Trustee contends the IRS is among the unsecured
creditors who could have pursued recovery, and this Court has held that a trustee standing
in the shoes of the IRS is not restricted by the state-law transfer limitations periods. See
Div. 1992) (collecting cases and observing “under certain circumstances, a stranger to the loan has no
standing to claim that it was usurious”).
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Hillen v. City of Many Trees, LLC (In re CVAH, Inc.), 570 B.R. 816, 835-36 (Bankr. D.
Idaho 2017).
Idaho Code section 55-914(1) provides:
A transfer made or obligation incurred by a debtor is voidable
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.
And, under Idaho Code section 55-913(1),
a transfer made or obligation incurred by a debtor is voidable
as to a creditor, whether the creditor’s claim arose before or
after the transfer was made or the obligation was incurred, if
the debtor made the transfer or incurred the obligation: (a)
[w]ith actual intent to hinder, delay, or defraud any creditor of
the debtor.
Idaho Code section 55-913(2) enumerates several factors to consider in determining
whether a party acted with actual intent, including whether the “value of consideration
received by the debtor was reasonably equivalent to the value of the asset transferred or
amount of obligation incurred” and the “debtor was insolvent or became insolvent shortly
after the transfer was made or the obligation as incurred.”
Here, the Complaint alleges HMH incurred the obligation and made transfers to
Kalamata in the amount of $158,400 without receiving fair consideration because the
Agreement allegedly carried a usurious interest rate. Additionally, at the time the
obligations were incurred and transfers made, “the present fair market value of [HMH’s]
assets were less than the amount required to pay its probable liability on its existing debts
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as they became absolute and matured,” i.e., HMH was insolvent “as that term is defined
in 11 U.S.C. § 101(32) and applied in 11 U.S.C. §§ 547 and 548, as well as defined in
Idaho Code § 55-911 and applied in 11 U.S.C. § 544.”
Accepting all factual allegations as true, the Complaint states a claim for relief that
the transaction is avoidable under state law and § 544(b).
3. 	Claim III: Disallowance of Claim Under § 502(d)
Finally, Trustee seeks claim disallowance under § 502(d). Section 502(d)
provides: “Notwithstanding subsections (a) and (b) of this section, the court shall
disallow any claim of any entity . . . that is a transferee of a transfer avoidable under
section . . . 544 . . . of this title, unless such entity or transferee has paid the amount, or
turned over any such property, for which such entity or transferee is liable under section
522(i), 542, 543, 550, or 553 of this title.” Kalamata argues the claim should be
dismissed as moot because the Agreement was not a loan, and, as such, Trustee cannot
avoid the transfers, and Kalamata has no need to file a proof of claim. However, the
Complaint adequately pleads the potential existence of a loan and avoidance.
Accordingly, it remains possible Kalamata files a claim pursuant to Rule 3002.
Therefore, Claim III is not moot.
CONCLUSION
For the reasons set forth above, the Court will grant Kalamata’s motion to dismiss
Count I to the extent it seeks to assert New York’s usury statute as a sword, but it will
grant Trustee leave to amend Count I to clarify the relief sought. The Court will deny
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MEMORANDUM OF DECISION - 18
Kalamata’s motion to dismiss with respect to Counts II and III. The Court will enter its
own order.
DATED: January 21, 2026
_________________________
NOAH G. HILLEN
Chief U.S. Bankruptcy Judge
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