PAUL BAISIER, Bankruptcy Judge.
The above-referenced matter (the "
In the Motion for Partial Summary Judgment, Plaintiff asserts that no material facts remain at issue regarding his constructive fraudulent transfer claim, and that he is entitled to partial summary judgment as to that claim. Upon consideration of all pleadings, briefs, and affidavits submitted in this matter, it appears that genuine issues of material fact remain, thereby precluding partial summary judgment. Accordingly, the Motion for Partial Summary Judgment is denied.
Doris Sanders ("
Subsequently, the Debtor executed a document dated June 15, 2015 (the "
The Debtor filed a voluntary petition under Chapter 7 of title 11, United States Code (the "
On January 19, 2018, the Court entered an Order on Rule 26(f) Report (Docket No. 19), in which it approved and made an order of the Court the parties' Report of Rule 26(f) Conference (Docket No. 18)(the "
Plaintiff argues in the Summary Judgment Memo that there is no genuine issue of material fact that the Second Transfer was a transfer of the Debtor's one-third (1/3) interest in the Property. Plaintiff also contends that the Debtor received less than reasonably equivalent value for the Second Transfer, as such transfer was not for any monetary consideration whatsoever. Lastly, Plaintiff asserts that the Debtor was insolvent on the date of the Second Transfer, or was rendered insolvent by such transfer.
Defendant filed his Response to Plaintiff's Motion for Summary Judgment (Docket No. 25-1)(the "
The Debtor's and Defendant's relationship to the Property and the facts surrounding the First Transfer and Second Transfer are disputed. Plaintiff asserts that the Debtor owned an undivided one-third (1/3) interest in the Property by virtue of the First Transfer, that she received less than reasonably equivalent value when she transferred this interest to Defendant by making the Second Transfer within two (2) years of the Petition Date, and that the Debtor was insolvent at the time of the Second Transfer or became insolvent as a result of the Second Transfer. Defendant, however, proffers facts not referenced or refuted by Plaintiff in any of his pleadings, including a reply brief (which was never filed). Specifically, Defendant contends that the Debtor was never intended to have an interest in the Property, but that through an error, the Debtor was inadvertently transferred an interest in the Property through the First Transfer.
Defendant cites to the Mathis Affidavit, Debtor Affidavit, and Defendant Affidavit in support of the factual circumstances surrounding the First Transfer and Second Transfer. According to the Debtor, Ms. Mathis, and Defendant, Ms. Sanders sustained an injury in 2011 that caused her to be unable to care for herself. [Debtor Aff'd ¶ 5; Defendant Aff'd ¶ 3; Mathis Aff'd pg. 1]. At this time, Ms. Sanders resided at the Property. [Debtor Aff'd ¶ 6; Defendant Aff'd ¶ 3]. Defendant was asked if he would move into the Property to care for Ms. Sanders, rather than having Ms. Sanders' family pay for caregiving services. [Debtor Aff'd ¶¶ 7-8; Defendant Aff'd ¶ 3; Mathis Aff'd pg. 1]. Defendant agreed, and he subsequently moved into the Property and cared for Ms. Sanders until her death in 2015. [Debtor Aff'd ¶ 10; Mathis Aff'd pgs. 1-2]. As part of this arrangement, Ms. Sanders and her family agreed that Defendant would be deeded the Property as consideration for his caregiving services rendered on behalf of Ms. Sanders, and that Defendant would receive full ownership of the Property upon Ms. Sanders' death. [Debtor Aff'd ¶¶ 8-10; Defendant Aff'd ¶¶ 3, 5; Mathis Aff'd pgs. 1-2]. An attorney, Lynn Wilson ("
However, rather than transferring the Property solely to Ms. Sanders and Defendant, the document prepared by Ms. Wilson (the First Deed) also included the Debtor's name, such that the First Transfer resulted in the Property being transferred jointly to Ms. Sanders, Defendant, and the Debtor. Defendant asserts that the First Transfer was contrary to the parties' intentions, and was caused by Ms. Wilson's error in drafting the First Deed. In the Debtor Affidavit, the Debtor states that she did not realize she was included on the First Deed until Ms. Sanders passed away in 2015, and that the interest she obtained in the Property by the First Transfer was not part of the agreement between her family and Defendant. [Debtor Aff'd ¶¶ 12-14].
When Ms. Sanders passed away in 2015, the Debtor realized the error on the First Deed and executed the Second Deed to correct the error. [Debtor Aff'd ¶¶ 21-24]. The Debtor contends that she did not execute the Second Deed with the intent to hinder, delay, or defraud any of her creditors, or with the intent to hide her assets. [Debtor Aff'd ¶ 25]. Rather, the Debtor states that the Second Transfer was executed solely to correct the error with the First Deed. [Debtor Aff'd ¶ 26].
In the Response, Defendant notes that the Motion for Partial Summary Judgement was filed nine (9) days after the deadline for such a motion, and argues that it should be denied on that basis alone.
Courts have broad discretion to consider untimely motions for summary judgment. See Wood v. Florida Atlantic Univ. Bd. of Trustees, 432 Fed.Appx. 812, 815 (11th Cir. 2011); Enwonwu v. Fulton-Dekalb Hosp. Auth., 286 Fed.Appx. 586, 595 (11th Cir. 2008). In the Eleventh Circuit, a court "may consider an otherwise untimely motion if, among other reasons, doing so `would be the course of action most consistent with the interest of judicial economy.'" Thomas v. Kroger Co., 24 F.3d 147, 149 (11th Cir. 1994)(quoting Matia v. Carpet Trans., Inc., 888 F.2d 118, 119 (11th Cir. 1989)). Hence, in deciding whether to permit an untimely motion for summary judgment, courts must evaluate whether deciding the motion would promote judicial economy rather than proceeding to trial. In Matter of Camp, 2016 WL 3135668, at *2 (Bankr. N.D. Ga. May 17, 2016).
Under this Court's broad discretion to consider untimely motions for summary judgment, the Court has determined that it will consider the Motion for Partial Summary Judgment. Although such motion was untimely under the Rule 26(f) Report, it was filed only nine (9) days after the April 30, 2018 deadline, and thus did not result in substantial prejudice to Defendant. The Court also finds that considering the substance of the Motion for Partial Summary Judgment, rather than denying it outright for untimeliness, promotes judicial economy. Although the Motion for Partial Summary Judgment is denied for the substantive reasons discussed infra, consideration of the Motion for Partial Summary Judgment should assist the parties in narrowing and focusing the issues for trial, and might also assist them in reaching an amicable settlement. The Court does, however, reserve the right to assess the untimeliness of the Motion for Partial Summary Judgment in connection with any application filed by Plaintiff for compensation in the underlying bankruptcy case.
Summary judgment may be granted pursuant to Federal Rule of Civil Procedure 56, made applicable herein by Federal Rule of Bankruptcy Procedure 7056, "if the movant shows 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).
The initial burden of proving the absence of dispute as to any material fact rests with the moving party. Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir. 1991). In meeting this initial burden, the moving party must identify "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact." Celotex, 477 U.S. at 323, 106 S.Ct. 2548 (internal quotations omitted). Once the party moving for summary judgment has identified those materials demonstrating the absence of a genuine issue of material fact, the non-moving party cannot rest on mere denials or conclusory allegations, but must go beyond the pleadings and designate, through proper evidence such as by affidavits or personal knowledge or otherwise, specific facts showing the existence of a genuine issue for trial. See Fed.R.Civ.P. 56(e); see also Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Johnson v. Fleet Finance Inc., 4 F.3d 946, 948-49 (11th Cir. 1993); Fitzpatrick v. City of Atlanta, 2 F.3d 1112, 1115-16 (11th Cir. 1993). Further, all reasonable doubts should be resolved in favor of the non-moving party, and "[i]f reasonable minds could differ on any inferences arising from undisputed facts, summary judgment should be denied." Twiss v. Kury, 25 F.3d 1551, 1555 (11th Cir. 1994)(citing Mercantile Bank & Trust v. Fidelity & Deposit Co., 750 F.2d 838, 841 (11th Cir. 1985)).
Under 11 U.S.C. § 548(a)(1)(B),
It does not appear that the parties dispute the first and third elements above: that there was a transfer that occurred within two (2) years of the Petition Date. Defendant does not dispute that the Second Transfer was in fact a "transfer" under 11 U.S.C. § 548(a)(1)(B). Further, the Second Transfer occurred within two (2) years of the Petition Date, as the Second Deed is dated June 15, 2015 and was recorded on June 17, 2015. Thus, the only elements that remain in dispute are whether: (i) the Second Transfer constituted a transfer of an interest of the Debtor in property; (ii) the Debtor received less than reasonably equivalent value for the Second Transfer; and (iii) the Debtor was insolvent at the time of the Second Transfer or was rendered insolvent by the Second Transfer.
Although the Mathis Affidavit and Defendant Affidavit were attached to the Answer, Plaintiff failed to address any of the facts alleged in them in the Summary Judgment Memo. Moreover, having filed no reply, Plaintiff failed to address the arguments raised in the Response. Specifically, Plaintiff failed to controvert Defendant's allegations with regard to the Debtor's interest in the Property, and whether such interest is subject to avoidance under Section 548. Thus, there appears to be a dispute as to material facts regarding the Debtor's interest in the Property and whether such interest is subject to avoidance under 11 U.S.C. § 548(a)(1)(B). Moreover, Plaintiff has failed to carry his burden to prove the insolvency element of Section 548(a)(1)(B). By contrast, no genuine issue of fact exists as to reasonably equivalent value—the facts alleged by Plaintiff and Defendant show that the Debtor received less than reasonably equivalent value for the Second Transfer, and that if any value was provided, it was not in exchange for the Second Transfer.
In analyzing the Trustee's Section 548 fraudulent transfer claim, the Court must determine, as a threshold issue, whether the Second Transfer constituted a transfer of an interest of the Debtor in the Property. Matter of Dunston, 566 B.R. 624, 631 (Bankr. S.D. Ga. 2017). "[C]ourts generally look to the Code's definition of `property of the estate' when determining what constitutes `an interest of the debtor in property.'" Id. Pursuant to 11 U.S.C. § 541(a)(1), "property of the estate" includes "all legal or equitable interests of the debtor in property as of the commencement of the case." Property of the estate does not, however, include "property in which a debtor holds only legal title and not an equitable interest." Wallace v. McFarland (In re McFarland), 619 Fed.Appx. 962, 967 (11th Cir. 2015)(citing 11 U.S.C. § 541(d)). Similarly, "property the debtor holds only in trust for another is not an `interest of the debtor in property' under § 548(a)(1)." Id.
Here, Defendant argues that the First Transfer conveyed only bare legal title to a one-third (1/3) interest in the Property to the Debtor. Consequently, Defendant asserts that the First Transfer resulted in the Debtor merely holding her interest in the Property in an implied trust for the benefit of Defendant. Because property held in trust by the Debtor is not property of the estate, Defendant contends that the Debtor's implied trust interest in the Property cannot be subject to a Section 548 claim.
Courts look to state law to determine the nature of a debtor's interest in property under Section 541. In Matter of High-Top Holdings, Inc., 564 B.R. 784, 793 (Bankr. N.D. Ga. 2017)("It is well-established that state law determines interests in property."). Under Georgia law, trusts are either express or implied. Bullard v. Bullard, 214 Ga. 122, 123, 103 S.E.2d 570 (1958). "An implied trust results from the fact that one person's money has been invested in land, and the conveyance taken in the name of another. It is a mere creature of equity." Id. (internal quotations and citations omitted). Implied trusts are further broken down into two (2) categories under Georgia law: resulting trusts and constructive trusts. See O.C.G.A. § 53-12-2(5).
One form of resulting trust that Defendant argues applies here is a purchase money resulting trust. A purchase money resulting trust "is a resulting trust implied for the benefit of the person paying consideration for the transfer to another person of legal title to real or personal property." O.C.G.A. § 53-12-131(a). To establish a purchase money resulting trust, the alleged beneficiary must either show "(1) that the party contributed purchase money at or before the time of purchase or (2) an agreement at the time of purchase for the party claiming the benefit to contribute purchase money so as to create a resulting trust." In re McFarland, 619 Fed.Appx at 968. Such a showing must be proved by clear and convincing evidence. In Matter of High-Top Holdings, Inc., 564 B.R. at 794.
Valuable consideration for a purchase money resulting trust may come in the form of "money, property, or services, or an equivalent . . . [as long as such consideration is] furnished by the alleged beneficiary of the resulting trust." 85 Am. Jur. Proof of Facts 3d 221 § 7 (2005); See Restatement (Third) of Trusts § 9 (2003)(stating that the requirements for purchase money resulting trusts "apply regardless of whether the purchase price is paid with money or other property . . ."). Additionally, "the party claiming the benefit of a purchase money resulting trust must show with certainty what part of the total purchase price he paid." In re McFarland, 619 Fed. Appx. at 969 (quoting Brown v. Leggitt, 226 Ga. 366, 368, 174 S.E.2d 889, 891 (1970))(alteration omitted).
Defendant contends that at the time of the First Transfer, the Sanders intended for Defendant to have sole title to the Property in exchange for his caring for Ms. Sanders until her death. Defendant asserts that such intent was partially, yet erroneously, effectuated when the Debtor received bare legal title to the Property as a result of the First Transfer. Defendant asserts that he provided services as consideration for the First Transfer, and when Ms. Wilson created the First Deed that inadvertently transferred a portion of Defendant's interest in the Property to the Debtor, a purchase money resulting trust arose in favor of Defendant.
Based upon the factual assertions raised by Defendant and uncontroverted by Plaintiff, there appears to be evidence that may support the existence of purchase money resulting trust in this case. Although Defendant and Debtor admit that no money was paid for the First Transfer, Defendant has presented evidence through his own declarations and those of the Debtor that show he provided caregiving services in exchange for the First Transfer. Defendant contends that, in exchange for him moving into the Property to care for Ms. Sanders, the Debtor's and Defendant's family agreed that title to the Property should pass solely to Defendant upon Ms. Sanders' death. Defendant asserts that such agreement was made at the time of the First Transfer, and that the furnishing of caregiving services to Ms. Sanders constituted valuable consideration to support the First Transfer. Though it is unclear when Defendant began rendering the services, construing the statements of the Debtor and Defendant in the light most favorable to Defendant, there exists some evidence of an agreement at the time of the First Transfer that Defendant would furnish the full purchase price of the Property for the First Transfer by rendering caregiving services to Ms. Sanders. Accordingly, there exist issues of fact as to whether a purchase money resulting trust arose in Defendant's favor at the time of the First Transfer in light of the uncontroverted factual circumstances surrounding such transfer.
A constructive trust under Georgia law is defined as "a trust implied whenever the circumstances are such that the person holding legal title to property, either from fraud or otherwise, cannot enjoy the beneficial interest in the property without violating some established principle of equity." O.C.G.A. § 53-12-132(a). Put differently, a constructive trust is employed by courts to prevent unjust enrichment. In re McFarland, 619 Fed.Appx. at 973 (quoting Lee v. Lee, 260 Ga. 356, 392 S.E.2d 870, 871 (1990)). "A constructive trust arises not from the intent of the parties, but by equity with respect to property acquired by fraud, or although acquired without fraud where it is against equity that the property should be retained by the one who holds it." Aetna Life Ins. Co. v. Weekes, 241 Ga. 169, 172, 244 S.E.2d 46 (1978)(emphasis added). Courts employ constructive trusts because "[i]t is inherently unjust to allow one with a legal interest in a piece of property a windfall recovery when the beneficial interest should flow to another." In re Francois, 525 B.R. 531, 534 (Bankr. N.D. Ga. 2015)(internal quotations and citations omitted).
Courts are generally reluctant to impose constructive trusts on property of the bankruptcy estate, as the Bankruptcy Code "creat[es] a distribution scheme that is both mandatory and strict—[it] presumes that [a] debtor's limited resources are to be distributed equally among the creditors in the manner prescribed by Congress." Id. at 535. Because a constructive trust "thwarts the principle of ratable distribution underlying the Bankruptcy Code," bankruptcy courts imply such trusts sparingly. Id. (quoting In re Chambers, 500 B.R. 221, 230 (Bankr. N.D. Ga. 2013)).
Based upon the factual assertions in the Response and the Debtor Affidavit, Defendant Affidavit, and Mathis Affidavit, there is evidence that may support the existence of an implied constructive trust. As noted supra, a constructive trust is implied to prevent unjust enrichment and, if the property is not acquired by fraud, where it would be against principles of equity for the individual who holds the property to retain such ownership. Aetna Life Ins. Co. v. Weekes, 241 Ga. at 172. Here, the Debtor asserts that she paid no consideration for her interest in the Property, nor has she contributed any funds or services towards maintenance of the Property, including mortgage payments. The Debtor also maintains that she has not taken income tax deductions or claimed any business expenses with regard to the Property. Conversely, both Defendant and the Debtor contend that Defendant provided significant services in exchange for the First Transfer. Defendant asserts that, per his grandmother's wishes and his family's agreement, he was intended to obtain sole title to the Property upon her death. Instead, an error in the First Deed thwarted such an agreement.
In light of these unaddressed factual assertions by Defendant, there may be sufficient evidence to support the finding of a constructive trust. Both the Debtor and Defendant agree that the Debtor was never intended to receive an interest in the Property, nor did she provide consideration for her one-third (1/3) interest in the Property or make contributions towards maintenance of the Property. Rather, it was Ms. Sanders' and her family's intent that Defendant receive full ownership interest in the Property upon Ms. Sanders' death in exchange for his provision of caregiving services. Accordingly, an implied constructive trust may have arisen at the time of the First Transfer to prevent unjust enrichment by the Debtor to Defendant's detriment.
At the summary judgment stage, Plaintiff has the burden of establishing that there is no genuine issue of material fact as to each element of his claim. Plaintiff also has the burden to prove all of the elements of his claim by a preponderance of the evidence. As to this element— transfer of "an interest of the debtor in property" —the parties appear to dispute whether the Debtor held an interest in the Property sufficient to support an avoidance claim under 11 U.S.C. § 548. Plaintiff merely states in his pleadings that the Second Transfer was a transfer of the Debtor's interest in property within two (2) years of the Petition Date, and that the Debtor owned a one-third (1/3) interest in the Property. Defendant argues that the Debtor obtained a bare legal interest in the Property by virtue of the First Transfer, and that the Debtor held her interest in the Property subject to an implied trust (either a purchase money resulting trust or constructive trust) for the benefit of the Defendant. Plaintiff did not address these issues in his Summary Judgment Memo, and failed to file a reply brief to address Defendant's arguments on this point. Because issues of fact remain with regard to the existence of an implied trust due to the uncontroverted factual circumstances surrounding the First Transfer, Plaintiff has not carried his burden to show that the Second Transfer was a transfer of "an interest of the debtor in property," thereby precluding summary judgment at this time. The existence of an implied trust is therefore best left for resolution at trial.
Reasonably equivalent value is analyzed through a three-part test: "(i) whether the debtor received value; (ii) whether the value received was in exchange for the property transferred; and (iii) whether the value was reasonably equivalent to the value of the property transferred." In re Knight, 473 at 850 (citing Pummill v. Greensfelder, Hemker & Gale(In re Richards & Conover Steel, Co.) 267 B.R. 602, 612 (8th Cir. BAP 2001)). Where the subject transfer was made to an insider, courts scrutinize the transaction more closely. In re McFarland, 619 Fed.Appx at 975 (citing 11 U.S.C. § 101(31)(A)(i) which defines "insider" as a "relative of the debtor").
Section 548(d) defines "value" under that code section as "property, or satisfaction or securing of a present or antecedent debt of the debtor," excluding "an unperformed promise to furnish support to the debtor or to a relative of the debtor." 11 U.S.C. § 548(d)(2)(A). The term "value" is is broadly construed by courts, with the Eleventh Circuit holding "that value is something that confers an economic benefit upon the debtor either directly or indirectly." In re White, 559 B.R. 787, 800 (Bankr. N.D. Ga. 2016)(quoting PSN Liquidating Trust v. Intelsat Corp. (In re PSN USA, Inc.), 615 Fed.Appx. 925, 928 (11th Cir. 2015))(internal quotations omitted). With regard to whether the value received was "in exchange" for the transfer, "[a] transfer is in exchange for value if one is the quid pro quo of the other." In re Knight, 473 B.R. at 850 (citation omitted).
Plaintiff argues that the Second Transfer was not made for reasonably equivalent value because there was no monetary consideration to support the Second Transfer, nor was any transfer tax paid as part of the Second Transfer according to the face of the Second Deed. Defendant contends that the Debtor received reasonably equivalent value for the Second Transfer in the form of the caregiving services Defendant rendered to the Debtor's mother, Ms. Sanders. Defendant notes that, in the Debtor Affidavit, the Debtor alleges that she received a benefit from Defendant in that he cared for Ms. Sanders. In turn, the Debtor and her family were relieved from having to shoulder the economic burden of providing caregiving services for Ms. Sanders. Defendant contends that being relieved from having to provide for Ms. Sanders constitutes reasonably equivalent value for the Second Transfer. Defendant also argues that Plaintiff failed to provide evidence of the value of the Property on the date of the Second Transfer; rather Plaintiff merely asserts that the Property sold nearly a year and one half (1 ½) after the Second Transfer for $50,000.00. Thus, Defendant contends that Plaintiff has not presented evidence to show that the Debtor received less than reasonably equivalent value for the Second Transfer; rather, the evidence shows that the Debtor received substantial value in exchange for the Second Transfer.
Upon review of the pleadings and affidavits filed by the parties, the Court finds that no "value" was given by Defendant to the Debtor in exchange for the Second Transfer. First, although Defendant's rendering of caregiving services to Ms. Sanders may constitute "value," such services do not constitute "value" to the Debtor. Although it appears that Defendant conferred a benefit upon Ms. Sanders in rendering caregiving services, such services did not confer a benefit sufficient to constitute "value" to the Debtor of the type required in this analysis.
The Debtor contends that Defendant's provision of care for Ms. Sanders relieved her and her family from having to provide the same caregiving services. Though it may be true that the Debtor may have felt a moral obligation to pay for her mother's caregiving expenses, it does not appear that the Debtor had any legal obligation to provide such care.
Second, even if the Court found that the caregiving services rendered for Ms. Sanders constituted "value" to the Debtor, it is clear that such "value" was not received in exchange for the Second Transfer. As noted above, to constitute reasonably equivalent value, the transfer must be in exchange for the value given—one must be the quid pro quo of the other. In re Knight, 473 B.R. at 850. Here, Defendant explains, and the Debtor Affidavit, Mathis Affidavit, and Defendant Affidavit all contend, that the basis for the First Transfer was to compensate Defendant for the caregiving services he would render for Ms. Sanders.
In light of the discussion supra, it is also clear that a one-third (1/3) interest in the Property was not the reasonable equivalent of any "value" given (to the extent any such "value" was given). Because the Court has found that no "value," within the meaning of Section 548(d), was given to the Debtor for the Second Transfer, it must also find that a one-third (1/3) interest in the Property is not the reasonable equivalent of this non-existent "value."
In sum, the Court finds that no "value" was given "in exchange for" the Second Transfer, such that the value of a one-third (1/3) interest in the Property is not the reasonable equivalent of the "value" given by Defendant. Thus, Plaintiff has demonstrated an absence of material factual dispute regarding the lack of reasonably equivalent value for the Second Transfer under 11 U.S.C. § 548(a)(1)(B)(i).
The Bankruptcy Code defines "insolvent" to mean the:
11 U.S.C. § 101(32). Under this "balance sheet test," a debtor's assets and liabilities are tallied to determine whether her debts exceed her assets. Mellon Bank, N.A. v. Official Comm. of Unsecured Creditors of R.M.L., Inc.(In re R.M.L., Inc.), 92 F.3d 139, 154-55 (3rd Cir. 1996). "For purposes of § 548, solvency is measured at the time the debtor transferred value, not at some later or earlier time." Id. at 154. Unlike preference actions under Section 547, fraudulent transfers under Section 548 are not subject to the ninety (90) day insolvency presumption prior to the petition date. In re Holloway, 2015 WL 1545376, at *9 (Bankr. S.D. Ga. Mar. 31, 2015).
With regard to insolvency, Plaintiff argues that the Debtor's insolvency is demonstrated by the fact that the Second Transfer occurred approximately eighteen (18) months prior to the Petition Date, and, on her bankruptcy disclosure forms, the Debtor scheduled total debts of $140,486.62 and total assets of $107,883.96, minus listed exemptions of $11,559.55. Additionally, Plaintiff contends that the Debtor's financial condition did not change substantially between the date of the Second Transfer and the Petition Date.
Defendant argues that Plaintiff offered no evidence of the Debtor's insolvency on the date of the Second Transfer, or that such transfer rendered her insolvent. More specifically, Defendant contends that Plaintiff has not presented any evidence as to the financial condition of the Debtor on the date of the Second Transfer. Defendant asserts that the only evidence Plaintiff presents in support of his insolvency argument is an inference that, because the Debtor was insolvent on the Petition Date and stated that her assets have not changed substantially since the date of the Second Transfer, the Debtor must have also been insolvent on the date of the Second Transfer, which occurred over a year and a half (1 ½) prior to the Petition Date.
Plaintiff has failed to carry his burden of proof in establishing that the Debtor was insolvent at the time of the Second Transfer, or was rendered insolvent by the Second Transfer, principally because he has failed to point to evidence regarding the Debtor's financial condition at the time of the Second Transfer. Rather, Plaintiff relies on the Debtor's scheduled assets and liabilities as of the Petition Date (which occurred nearly a year and a half (1 ½) after the Second Transfer) and the Debtor's statement that she did not dispose of any property within the two (2) years prior to the Petition Date to create an inference that the Debtor was insolvent on the date of the Second Transfer. Essentially, Plaintiff argues that because the Debtor was insolvent on the Petition Date, and because the Debtor's assets did not substantially change between the date of the Second Transfer and the Petition Date (other than the loss of the value of her one-third (1/3) interest in the Property as a result of the Second Transfer), the Debtor must have also been insolvent on the date of the Second Transfer. These facts, as Defendant notes, are insufficient to prove by a preponderance of the evidence that the Debtor's assets exceeded her liabilities at the time of the Second Transfer, or that the Second Transfer caused the Debtor's assets to exceed her liabilities.
First, the Debtor's scheduled assets and liabilities, even coupled with statement that she did not sell, trade or transfer any property to anyone within two (2) years before she filed for bankruptcy, other than property transferred in the ordinary course of her business or financial affairs, does not equate to a finding that the same assets and liabilities scheduled by the Debtor on the Petition Date are the same assets and liabilities that the Debtor had on the date of the Second Transfer. Instead of citing to evidence regarding the Debtor's actual financial circumstances in June 2015, including both the value of her assets and liabilities at that time, Plaintiff merely infers the Debtor's insolvency on the date of the Second Transfer based upon assertions and disclosures made on the Petition Date, a year and one half (1 ½) after the date we look to for insolvency.
Second, although it could be true that the Debtor's assets have not substantially changed from the date of the Second Transfer to the Petition Date,
In the Response, Defendant seeks sanctions against Plaintiff, including his attorney's fees, pursuant to Federal Rule of Civil Procedure 16(f)(2), incorporated herein by Federal Rule of Bankruptcy Procedure 7016. Defendant contends that such sanctions are warranted due to Plaintiff's unjustified noncompliance with the Rule 26(f) Report and Defendant's contention that Plaintiff has no basis in law or fact to support this Adversary Proceeding. Defendant also seeks an award of his costs and attorney's fees.
Federal Rule of Civil Procedure 16(f), provides in relevant part as follows:
Fed.R.Civ.P. 16(f).
Here, Defendant appears to assert that the untimeliness of the Motion for Partial Summary Judgment constitutes unjustified noncompliance with Rule 16, such that Plaintiff is subject to sanctions under Rule 16(f)(2) in the amount of Defendant's attorney's fees and costs. Further, Defendant asserts that Plaintiff's lack of factual and legal support for the claims asserted in this Adversary Proceeding also supports the imposition of sanctions.
Based upon the foregoing, the Court finds that genuine issues of material fact exist as to the "interest of the debtor" and "insolvency" elements of Plaintiff's fraudulent transfer claim. Although the Court finds that Plaintiff successfully demonstrated that no genuine issue of fact exists as to the "reasonably equivalent value" element of his claim, Plaintiff must prove all of the elements of 11 U.S.C. § 548(a)(1)(B) to prevail at the summary judgment stage. Consequently, as material facts remain at issue, it is hereby
The Clerk is directed to serve a copy of this Order upon Plaintiff, counsel for Plaintiff, Defendant, and counsel for Defendant.
11 U.S.C. § 548(a)(1)(B)(i)-(ii)(I).
