Sherman R. Solaas - Page 8

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               was insolvent at that time or the debtor became                        
               insolvent as a result of the transfer or obligation.                   
          Section 3439.04(a) relates to actual fraud, whereas sections                
          3439.04(b) and 3439.05 relate to constructive fraud.                        
          Mr. Solaas' Salary                                                          
               1.  Actual Fraud                                                       
               Respondent contends that the amount of the increase in Mr.             
          Solaas' salary from 1987 to 1988 was actual fraud on KBI's                  
          creditors.  Respondent points out that (1) KBI increased Mr.                
          Solaas' salary by 30 percent while during that same time it                 
          increased other officers' salaries by only 6 percent, and (2) Mr.           
          Solaas determined the salary KBI paid him.  Mr. Solaas argues               
          that the salary KBI paid him in 1988 was reasonable.                        
               For the Court to find actual fraud, Mr. Solaas must have               
          actually intended to hinder, delay, or defraud any of KBI's                 
          creditors.  Cal. Civ. Code sec. 3439.04(a).  Respondent concedes            
          that the increased salary by itself does not indicate that Mr.              
          Solaas had the intent to hinder, delay, or defraud KBI's                    
          creditors.  Respondent, however, argues that the "unwarranted               
          increase in salary", when considered along with the other                   
          transfers KBI made to Mr. Solaas, somehow amounts to actual                 
          fraud.                                                                      
               In 1988, KBI paid Mr. Solaas a salary that was comparable to           
          similarly positioned officers and executives at similar                     






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