SHELLEY D. RUCKER, Bankruptcy Judge.
On October 13, 2017, the Chapter 7 Trustee, Jerrold D. Farinash ("Trustee" or "Plaintiff") filed a complaint in this adversary proceeding against Robert and Abbey Ellis ("Defendants") seeking to set aside an alleged fraudulent transfer of real property pursuant to 11 U.S.C. § 548. [Doc. No. 1, Complaint].
The Defendants filed an answer on December 6, 2017. [Doc. No. 6]. On February 22, 2018, the Trustee filed a motion for summary judgment. [Doc. No. 12]. In his accompanying memorandum, the Trustee contends that he served requests for admissions on both Defendants on January 3, 2018, and that both Defendants failed to respond. [Doc. No. 13, at 1-2]. The Trustee argues that by failing to respond, the Defendants have admitted the essential elements of his cause of action and that he is entitled to summary judgment as a matter of law. [Id. at 2].
On March 28, 2018, the Defendants filed a response to the Trustee's motion for summary judgment and statement of undisputed facts along with a memorandum brief. [Doc. Nos. 19-21]. The Defendants acknowledge that their failure to respond to the Trustee's requests for admissions constitutes an admission that those requests are accurate. [Doc. No. 20, at 1]. However, the Defendants contend that the Trustee's requests did not ask the Defendants to admit that $43,108.38 in equity was "gifted" to the Defendants or that the property in question was worth the purchase price of $216,500. [Id.]. The Defendants have attached documents, including two appraisals, to support their position that the true value of the property was not in fact $216,500, but was appraised by one appraiser at a lower value, negating the equity "gift" reflected on the settlement statement. The Defendants also offer an alternative explanation for the "gift of equity" reference on the closing statement. The Plaintiff has not filed an objection to any of the statements made in the Defendants' response or to the court's consideration of the appraisals attached to the Defendants' response.
The court has reviewed the motion for summary judgment, the pleadings and briefing filed by the parties, the record, and the applicable law. For the reasons explained below, the court will DENY the Trustee's motion for summary judgment.
Federal Rule of Civil Procedure 36, incorporated into this adversary proceeding by Federal Rule of Bankruptcy Procedure 7036, permits one party to request admissions from another party pertaining to a broad range of matters, including ultimate facts and the application of law to fact. Goodson v. Brennan, 688 F. App'x 372, 375 (6th Cir. 2017). Rule 36 provides that "[a] matter is admitted unless, within 30 days after being served, the party to whom the request is directed serves on the requesting party a written answer or objection addressed to the matter and signed by the party or its attorney." Fed. R. Civ. P. 36(a)(3) (emphasis added). Further, "[a] matter admitted under this rule is conclusively established unless the court, on motion, permits the admission to be withdrawn or amended." Fed. R. Civ. P. 36(b). Accordingly, as the Defendants acknowledge, because they failed to respond or file an objection to the Trustee's request for admissions, the following facts have been admitted and conclusively established for purposes of this motion for summary judgment.
The Debtors filed their Chapter 7 voluntary bankruptcy petition on August 14, 2017. [Statement of Undisputed Facts, Doc. No. 14, at 1; Bankr. Case No. 1:17-bk-13695-SDR, Doc. No. 1]. Defendant Robert Ellis is the Debtors' son, and Defendant Abbey Ellis is their daughter-in-law. [Doc. No. 14, at 2, Doc. No. 15, at 5, 10].
On or about October 25, 2016, the Debtors conveyed real property located at 7040 Sims Road, Harrison, Hamilton County, Tennessee, to the Defendants. [Doc. No. 14, at 1; Doc. No. 15, at 5, 10]. The deed, which is attached as an Exhibit A to the Trustee's Statement of Undisputed Facts, indicates that the consideration paid was $216,500. [Doc. No. 14, at 4]. The parties agree that the Defendants obtained a loan to purchase the Debtors' house. There is no dispute that the Defendants did not pay the stated purchase price of $216,500 with cash or loan proceeds.
The closing statement for the sale of the property, which is attached as Exhibit B to the Complaint, indicates that after paying off three mortgages on the property, property taxes, closing costs, and various fees, the Debtors made a "Gift of Equity" in the amount of $43,108.38 to the Defendants. [Doc. No. 1, Ex. B; Doc. No. 15, at 5, 10]. This gift of equity equals the difference between the available loan proceeds and the stated purchase price. [Doc. No. 1, at 9].
Although the Defendants have admitted that the closing statement shows a gift of equity, they do not admit that the value of the real property was $216,500. [Doc. No. 20, at 1]. They have provided one appraisal that shows the property was worth only $180,000. [Doc. No. 19-2, Ex. B, at 4]. They have also provided a second, later appraisal that shows a value of $233,000. [Doc. No. 19-3, Ex. C, at 2]. Both were prepared within two months prior to the closing.
On their bankruptcy schedules, the Debtors listed $10,900 in assets and $86,479.62 in liabilities as of the date of filing their petition. [Doc. No. 1, at 15; Doc. No. 15, at 5-6, 10-11]. The Defendants admitted that between the date of the transfer and the date of filing bankruptcy, the Debtors did not own any assets worth more than $10,000 or incur any debt in excess of $10,000 and that there was no material change in their solvency during this time period. [Doc. No. 15, at 6-7, 11-12]. They also admitted that they were insolvent on the date of filing the petition. [Id. at 7, 12].
28 U.S.C. §§ 157 and 1334, as well as the general order of reference entered in this district, provide this court with jurisdiction to hear and decide this adversary proceeding. The Plaintiff's action regarding a fraudulent transfer is a core proceeding. See 28 U.S.C. § 157(b)(2)(H).
Federal Rule of Bankruptcy Procedure 7056 makes Federal Rule of Civil Procedure 56 applicable to bankruptcy adversary proceedings. See Fed. R. Bank. P. 7056. Summary judgment is appropriate if there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). The burden is on the moving party to show conclusively that no genuine issue of material fact exists, and the Court must view the facts and all inferences to be drawn therefrom in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Morris v. Crete Carrier Corp., 105 F.3d 279, 280-81 (6th Cir. 1997); 60 Ivy Street Corp. v. Alexander, 822 F.2d 1432, 1435 (6th Cir. 1987); Kava v. Peters, No. 09-2327, 2011 WL 6091350, at *3 (6th Cir. Dec. 7, 2011).
Once the moving party presents evidence sufficient to support a motion under Fed. R. Civ. P. 56, the nonmoving party is not entitled to a trial merely on the basis of allegations. The nonmoving party is required to come forward with some significant probative evidence which makes it necessary to resolve the factual dispute at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); 60 Ivy Street, 822 F.2d at 1435. The moving party is entitled to summary judgment if the nonmoving party fails to make a sufficient showing on an essential element of the nonmoving party's case with respect to which the nonmoving party has the burden of proof. Celotex, 477 U.S. at 323; Collyer v. Darling, 98 F.3d 211, 220 (6th Cir. 1996).
The Trustee's motion for summary judgment seeks judgment as a matter of law pursuant to 11 U.S.C. § 548, which allows a trustee to:
11 U.S.C. § 548(a)(1). The Trustee bears the burden of proving each requisite element by a preponderance of the evidence. See Lisle v. John Wiley & Sons (In re Wilkinson), 2006 WL 2380887, 196 F. App'x 337, 341 (6th Cir. Aug. 17, 2006).
In reviewing the undisputed facts and the Defendants' proffered evidence, the court sees no genuine dispute related to: (1) whether there was a transfer of the Debtors' property; (2) whether the transfer was made within two years before the filing of bankruptcy; or (3) whether the Debtors were insolvent on the date of the transfer or were made insolvent as a result.
The statute defines "value" as "property, or satisfaction or securing of a present or antecedent debt of the debtor, but does not include an unperformed promise to furnish support to the debtor or to a relative of the debtor . . . ." 11 U.S.C. § 548(d)(2)(A). 11 U.S.C. § 550 allows a trustee to recover property for the benefit of the estate where a court has avoided transfer of the property pursuant to 11 U.S.C. § 548. 11 U.S.C. § 550.
The Sixth Circuit Bankruptcy Appellate Panel has addressed the meaning of "reasonably equivalent," which is undefined in the Bankruptcy Code. See Congrove v. McDonald's Corp. (In re Congrove), No. 04-8049, 330 B.R. 880, 2005 WL 2089856, at *3 (B.A.P. 6th Cir. 2005) aff'd, 222 F. App'x 450 (6th Cir. 2007). In In re Congrove, the Sixth Circuit Bankruptcy Appellate Panel noted that:
Id. (quoting Harman v. First Am. Bank (In re Jeffrey Bigelow Design Group, Inc.), 956 F.2d 479, 484 (4th Cir. 1992) and Butler Aviation Int'l, Inc. v. Whyte (In re Fairchild Aircraft Corp.), 6 F.3d 1119, 1125-26 (5th Cir. 1993)).
In general, where the central issue in dispute is whether a debtor received reasonably equivalent value in exchange for a transfer, the question is one of fact. See In re Wilkinson, 196 F. App'x at 341 (citing In re Humble, 19 F. App'x 198, 200 (6th Cir. 2001)); Webb Mtn, LLC v. Executive Realty Partnership, L.P. (In re Webb Mtn, LLC), 420 B.R. 418, 432-33 (Bankr. E.D. Tenn. 2009). In In re Wilkinson the Sixth Circuit further instructed that "[a] court considering this question should first determine whether the debtor received any value in the exchange. If so, the court should determine if the value received was reasonably equivalent." 196 F. App'x at 341 (citation omitted) (emphasis in original). Further, "`[i]n assessing whether a challenged transfer is supported by reasonably equivalent value, courts generally compare the value of the property transferred with the value of that received in exchange for the transfer.'" In re Webb Mtn, LLC, 420 B.R. at 433 (quoting Corzin v. Fordu (In re Fordu), 201 F.3d 693, 707 (6th Cir. 1999)). Courts may consider fair market value or the elimination of an antecedent debt as factors in this assessment. Id. The concept of "reasonably equivalent value" need not be "esoteric," but instead "a party receives reasonably equivalent value for what it gives up if it gets `roughly the value it gave.'" Id. (quoting VFB, LLC v. Campbell Soup Co., 482 F.3d 624, 631 (3d Cir. 2007)).
Applying these holdings to the case at hand, the court has before it the closing statement, which states that the value of the property was $216,500 of which the Debtors received approximately $173,000 in the form of proceeds and satisfaction of the existing mortgages. The Defendants have presented an appraisal which values the property at $180,000. If that appraisal is accurate, then the value of the property is roughly equivalent to the consideration the Debtors received, and the transfer did not have any detrimental effect on their estate. If the Debtors still owned the property, there would be little or no equity for the unsecured creditors after the expenses of the sale. The court finds that the Defendants have come forward with evidence that creates a genuine issue of fact as to whether the property was worth $216,500 or $180,000. Depending on what value the court determines is correct, the court will have to consider whether that value is reasonably equivalent to the $173,000 the Debtors did receive as consideration. Because there is a question of fact for the court to consider, summary judgment is not appropriate at this time.
The court finds that there is a genuine issue of fact as to whether the Debtors received reasonably equivalent value for the real property transfer to the Defendants. Accordingly, the court hereby DENIES the Trustee's motion for summary judgment.
A separate order will enter.
