MARC T. TREADWELL, UNITED STATES DISTRICT JUDGE.
In this appeal from the United States Bankruptcy Court for the Middle District of Georgia, USAA Federal Savings Bank contends the Bankruptcy Court, Judge Austin E. Carter presiding, erroneously granted summary judgment to the Trustee
The Court has jurisdiction to hear this appeal pursuant to 28 U.S.C. § 158(a). In reviewing the decision of a bankruptcy court, a district court functions as an appellate court. Williams v. EMC Mortg. Corp. (In re Williams), 216 F.3d 1295, 1296 (11th Cir. 2000) (per curiam). Here, the Bankruptcy Court made no findings of fact, nor could it on a summary judgment motion, and the Bankruptcy Court's grant of summary judgment, including its interpretation and application of the Bankruptcy Code, is reviewed de novo. See In re Optical Technologies, Inc., 246 F.3d 1332, 1335 (11th Cir. 2001); Nordberg v. Arab Banking Corp. (In re Chase & Sanborn Corp.), 904 F.2d 588, 593 (11th Cir. 1990). This Court, therefore, owes no deference to the Bankruptcy Court's interpretation of the law or its application of the law to the facts. Goerg v. Parungao (In re Goerg), 930 F.2d 1563, 1566 (11th Cir. 1991).
A movant is entitled to summary judgment upon showing "that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a).
"A factual dispute is genuine only if `a reasonable jury could return a verdict for the nonmoving party.'" Info. Sys. & Networks Corp. v. City of Atlanta, 281 F.3d 1220, 1224 (11th Cir. 2002) (quotation marks omitted). Therefore, when deciding if summary judgment is appropriate, the court must not "weigh the evidence and determine the truth of the matter" on its own but should determine only whether a reasonable jury could find in favor of the non-movant. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ("[C]redibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge."). In doing so, the court should draw all justifiable inferences, and resolve any reasonable doubts concerning the facts, in favor of the non-movant. Id. at 255, 106 S.Ct. 2505; Info. Sys. & Networks Corp., 281 F.3d at 1224. If, after reviewing the entirety of the record in the light most favorable to the [non-movant], the court determines a reasonable jury could not find in favor of the non-movant, then summary judgment is appropriate. Strickland v. Norfolk S. Ry. Co., 692 F.3d 1151, 1154 (11th Cir. 2012) ("[T]he District Court [must] consider all evidence in the record
The undisputed facts are as follows. In 2016, Robert and Alice Brashear refinanced their mortgage on their residence and 7.75 acres of adjoining property located at 84 Brown Hill Road, Elko, Georgia. Doc. 4-1 at 153. Specifically, on August 26, 2016, USAA agreed to loan $264,964 to the Brashears and to pay off the Brashears' existing mortgagee, CB & T, which held its own security deed to the property. Id. at 106, 153. In exchange, the Brashears executed a Security Instrument, granting USAA a security deed to their property. Id. at 153. USAA paid $250,005.73 to CB & T on August 31, 2016. Id. For reasons not explained, however, CB & T did not cancel its security deed until October 6, 2016. Id. For reasons also not explained, USAA did not file its security deed until October 17, 2016, 52 days after the execution of the Security Instrument. Id. On January 13, 2017, 88 days after the security deed was filed, the Brashears filed their Chapter 7 bankruptcy petition in the United States Bankruptcy Court for the Middle District of Georgia. Id.
After the Brashears filed their bankruptcy petition, the Trustee filed this adversary proceeding pursuant to 11 U.S.C. § 547(b) to avoid the transfer of the security deed to USAA. Id. The Trustee argued that, under the Bankruptcy Code, the transfer was deemed to have occurred on October 17, 2016, when the security deed was filed, and, thus, the transfer occurred within 90 days of the Brashears filing a bankruptcy petition, making it an avoidable preference under § 547(b). Id. USAA did not then dispute, and never disputed before the Bankruptcy Court, that the transfer occurred on October 17, 2016.
On appeal, USAA presents two challenges to the Bankruptcy Court's grant of summary judgment. First, USAA argues, for the first time, that the transfer did not occur when USAA filed its security deed on October 17, 2016. Doc. 4 at 12. Second, USAA argues, as it did before the Bankruptcy Court, that the transfer was a substantially contemporaneous exchange under § 547(c)(1). Id.
USAA argues the Bankruptcy Court erred in finding the Trustee met its burden to establish the security deed was an avoidable preference under § 547(b). Specifically, USAA argues the transfer did not occur within the 90-day preference period.
Under 11 U.S.C. § 547(b), the trustee may avoid a transfer of an interest by the debtor if the trustee establishes that the transfer was:
11 U.S.C.A. § 547(b). Critical to this action, 11 U.S.C. § 547(e)(2) provides that a transfer occurs "at the time such transfer takes effect between the transferor and the transferee, if such transfer is perfected... within 30 days after" the transfer. But if the transfer is not perfected within 30 days, the transfer is deemed to have occurred "at the time such transfer is perfected." Id. The Bankruptcy Court ruled that the undisputed facts established that the transfer occurred on October 17, 2016, when USAA filed the security deed. Because that was within 90 days of the January 13, 2017 filing of the Brashears' bankruptcy petition, the Bankruptcy Court concluded that the transfer was an avoidable preference.
The Court agrees. The Security Instrument granting USAA an interest in the Brashears' property was executed on August 26, 2016. Doc. 4-1 at 36. Because USAA did not file the security deed until October 17, 2016, which is well beyond the 30-day period following the transfer, the transfer occurred on that date.
This argument, based as it is on the intention of the parties, is essentially a contract-interpretation argument.
Holcim, Inc. v. ABDG, Inc., 265 Ga.App. 818, 596 S.E.2d 197, 200 (2004), citing Early v. Kent, 215 Ga. 49, 50, 108 S.E.2d 708 (1959).
Here, there are no ambiguities in the Security Instrument. The agreement clearly states that it
Doc. 4-1 at 66. Nothing in the contract states that the transfer of rights was contingent on any actions between USAA and a third party, which is what would be required to support USAA's argument — the contract would have to be contingent on a third party's interest being extinguished. While the Security Instrument recognized that existing third-party interests in the property with priority over USAA's interest would be extinguished, such as CB & T's security deed, the Security Instrument was in no way contingent upon that happening. Indeed, the point of any refinancing agreement, including this one, is to allow the new lender to take its own security interest and, having gained that security, the new lender can then pay the existing debt. Far from advancing the parties' intent, the argument that debtors have not immediately conveyed any interest to secure debt completely undercuts a new lender's intent in a refinancing agreement — if the new lender is not gaining any interest in the property, it would not advance money to pay the existing debt. In short, the idea that these parties or any parties to a financing agreement do not intend to convey any interest in the secured property until the existing security interest has been cancelled has no basis in law or fact.
Moreover, as USAA admitted at oral argument, the Brashears did have some interest in the property when the Security
Accordingly, the Court affirms the Bankruptcy Court's determination that there is no genuine dispute that the transfer occurred on October 17, 2016, within the 90-day preference period, and thus that there was no genuine dispute that the Trustee met its burden under § 547(b).
In response to the Trustee's summary judgment motion, USAA argued that the transfer between it and the Brashears was intended to be a substantially contemporaneous exchange and thus not avoidable under § 547(b). The Bankruptcy Court, however, found that there was no genuine dispute that the transfer was not in fact a substantially contemporaneous exchange.
Generally, if a trustee has established that a transfer meets the requirements of § 547(b), that transfer may be avoided. But § 547(c)(1) provides an exception to that general rule. Hedrick v. Novastar Mortgage, Inc. (In re Hedrick), 524 F.3d 1175, 1188 (11th Cir.), amended on reh'g in part, 529 F.3d 1026 (11th Cir. 2008). Essentially, § 547(c)(1), or the "substantially-contemporaneous-exchange exception," grants creditors an affirmative defense to prevent a transfer that was intended to be a contemporaneous exchange for new value from being avoided by the trustee. Official Unsecured Creditors' Comm. v. Airport Aviation Servs. Inc. (In re Arrow Air, Inc.), 940 F.2d 1463, 1465-66 (11th Cir. 1991); see also Jet Florida, Inc. v. American Airlines, Inc. (In re Jet Florida Systems, Inc.), 861 F.2d 1555, 1558 (11th Cir. 1988). To avail itself of this exception, a creditor holds the burden to establish that the transfer was "intended by the debtor and the creditor to or for whose benefit such transfer was made to be a contemporaneous exchange for new value given to the debtor" and that it was "in fact a substantially contemporaneous exchange." 11 U.S.C. § 547(c)(1)(A), (B); In re Arrow Air, Inc., 940 F.2d at 1465-66; In re Jet Florida Systems, Inc., 861 F.2d at 1558.
Here, the Trustee has established that there is no genuine dispute that the elements of § 547(b) have been met. Thus, the Trustee is entitled to summary judgment unless, in response, USAA has produced "significant, probative evidence demonstrating the existence of a triable issue of fact" concerning whether it can meet the elements of the substantially contemporaneous exchange exception. See Four Parcels Real Prop., 941 F.2d at 1438. It is undisputed that the transfer was intended to be substantially contemporaneous.
When considering whether the transfer was in fact substantially contemporaneous, "courts should take into account the objective reasonableness of the time taken to perfect the interest, the cause of any delay, and the motivations for it." Hedrick v. Novastar Mortgage, Inc., (In re Hedrick), 524 F.3d 1175, 1190 (11th Cir. 2008), amended on reh'g in part on other grounds, 529 F.3d 1026 (11th Cir. 2008). Courts should consider the "length of the delay between the transfer and perfection," "the nature of the transaction and how long a creditor in that type of transaction usually takes to perfect its interest in the normal course of affairs." Id. In In re Hendrick, the Eleventh Circuit stated "[t]he most important fact may be whether the delay in perfecting the interest was intended by the creditor or resulted from its negligence." Id. at 1191. And to meet its burden under 547(c)(1), a creditor must adduce evidence both that the delay was not intentional and that the cause was not negligence. See In re Hedrick, 524 F.3d at 1190-91 (citing Arnett v. Sec. Mutual Fin. Corp. (In re Arnett), 731 F.2d 358,360 (6th Cir. 1984) ("Thus, where delayed perfection of a security interest may be satisfactorily explained, and in the absence of dilatoriness or negligence on the part of a transferee, the transfer may still be found `substantially contemporaneous' with the exchange of new value to the debtor, regardless of the lapse of time." (emphasis added))); see also Dye v. Rivera (In re Marino), 193 B.R. 907, 916 (9th Cir. B.A.P. 1996) ("[T]hat Rivera was neither dilatory nor negligent in his actions is significant.").
In short, there must be some evidence of the cause of the delay.
USAA has proffered testimony from A.J. Loll, the custodian of records for USAA's servicer, Nationstar Mortgage LLC, who stated "the delay in perfecting the security interest was not intended by USAA and was not improperly motivated."
From this evidence, the Court cannot conclude that USAA has produced "significant, probative evidence demonstrating the existence of a triable issue of fact" as to whether it can establish the transfer was a substantially contemporaneous exchange under § 547(c)(1). See Four Parcels of Real Prop., 941 F.2d at 1438. Therefore, because the Trustee has established there is no genuine dispute that the elements of § 547(b) have been met and USAA has not established a genuine dispute regarding whether the transfer meets the § 547(c)(1) exception, the Trustee is entitled to judgment as a matter of law.
For the reasons stated herein, the Court
In addition to the suspect argument that its equitable subrogation argument somehow trumped its admission, USAA argues that, even if it had not raised the issue in the Bankruptcy Court, the Court must consider this argument because it is a pure question of law and failure to consider the argument would result in a miscarriage of justice. Doc. 13 at 5-6 (citing Access Now, Inc. v. SW. Airlines Co., 385 F.3d 1324, 1332 (11th Cir. 2004)); Wright v. Hanna Steel Corp., 270 F.3d 1336, 1342 n.8 (11th Cir. 2001). Regarding its admission of the transfer date, USAA argues that the date of a transfer, under bankruptcy law, is a legal conclusion that cannot be admitted. Id. at 7-8.
Those arguments are not convincing. Nevertheless, the Court will address the argument that the transfer did not occur on October 17.
But even so, viewed in the light most favorable to USAA, the Court agrees with the Bankruptcy Court that Loll's affidavit is evidence that the delay was not improperly motivated or intentional. The Bankruptcy Court, based on this evidence, found that USAA had established the delay was not improperly motivated or intentional. Relying on Hedrick, USAA argues that the Bankruptcy Court gave too little weight to this determination because, according to USAA, whether the delay was intentional is the "most important fact" in the analysis. Doc. 4 at 17. However, as the Bankruptcy Court pointed out, USAA's interpretation of Hedrick is too narrow. Doc. 4-1 at 161-62. Hedrick actually states "the most important fact may be whether the delay in perfecting the interest was intended by the creditor or resulted from its negligence." 524 F.3d at 1190-91 (emphasis added). Contrary to USAA's interpretation, Hedrick states only that these facts may be the "most important" depending on the circumstances but does not demand it be given greater weight than other factors. Id. Moreover, Hedrick gives equal weight to whether the delay resulted from the creditor's negligence. Id.
