Justice PARRISH, opinion of the Court:
¶ 1 Angie Moffo lived rent free for eight years in a home that belonged to her brother-in-law, Doug Rich. After Mr. Rich filed for Chapter 7 bankruptcy, the trustee, Stephen Rupp, sued Ms. Moffo for back rent under Utah's Uniform Fraudulent Transfer Act (the Act), sections 25-6-1 to -14 of the Utah Code. The district court, concluding that Ms. Moffo was the recipient of a fraudulent transfer, granted Mr. Rupp summary judgment and entered a $34,200 judgment against Ms. Moffo. On appeal, Ms. Moffo argues that Mr. Rupp lacks statutory standing under the Act and, in the alternative, that Mr. Rich did not transfer an asset within the scope of the Act.
¶ 2 The material facts in this matter are not in dispute. In 2003, Mr. Rich invited Ms. Moffo to move into his newly-acquired investment property. At the time, Ms. Moffo, a single mother of eight, was in serious financial trouble as the sole provider for herself and her children. Ms. Moffo and Mr. Rich agreed that she would not pay any rent, but would help out if she were able. Ms. Moffo lived in the house for eight years and never paid any rent.
¶ 3 In 2006, Mr. Rich obtained a mortgage on the home and signed a trust deed in favor of Bayrock Mortgage Company, which included a rent assignment provision. Three years later, Mr. Rich, who had suffered financial setback, became insolvent and stopped making payments on the mortgage. In October 2009, Bayrock served Mr. Rich with a notice of default, which triggered the rent assignment to Bayrock. In 2011, Mr. Rich filed for bankruptcy. At that time, the mortgage on the home was more than double the home's fair market value.
¶ 4 In 2012, Mr. Rupp, the appointed Chapter 7 bankruptcy trustee, filed suit against Ms. Moffo under Utah's Uniform Fraudulent Transfer Act. Mr. Rupp sought $1,300 per month in back rent from Ms. Moffo, asserting that Mr. Rich had defrauded his creditors by allowing her to live in the house rent free after he became insolvent in October 2009. On cross-motions for summary judgment, the district court ruled that Ms. Moffo was the recipient of a fraudulent transfer and ordered her to pay the bankruptcy estate $34,200. Ms. Moffo appealed.
¶ 5 This case comes to us on summary judgment. Because a district court's ruling on summary judgment is a question of law, we review it for correctness.
¶ 6 Mr. Rupp brought this suit against Ms. Moffo under Utah's Uniform Fraudulent Transfer Act. Section 25-6-9 of the Act provides that a
On the basis of this provision, Mr. Rupp secured a $34,200 judgment against Ms. Moffo for back rent.
¶ 7 Ms. Moffo raises two questions of statutory interpretation on appeal. The first question is one of statutory standing—is Mr. Rupp a "creditor" entitled to file suit under the statute? The second is whether the house in which she lived constitutes an "asset."
¶ 8 Our well-established rules of statutory interpretation dictate that, when interpreting any statute, "our primary goal is to effectuate the intent of the Legislature."
And the "best evidence" of that intent is the "plain language" of the provision read in context with the whole statute and related sections of the Code.
¶ 9 Ms. Moffo asserts that Mr. Rupp lacks statutory standing. To resolve this issue, we must determine to what class of plaintiffs the Act grants a right to sue and whether Mr. Rupp is within that class.
¶ 10 A "creditor" has the right to recover judgment for the value of a fraudulently transferred asset.
Notably absent is any indication that a creditor's standing is contingent on any actual interest in the property at issue. Instead, the Act gives standing to anyone with a "right to payment" from the debtor.
¶ 11 Our conclusion that all creditors have standing under the Act is buttressed by other provisions. For example, the Act provides that "[a] transfer made . . . is fraudulent as to a creditor . . . if the debtor made the transfer . . . with actual intent to hinder, delay, or defraud any creditor of the debtor."
¶ 12 Accordingly, we hold that a party has standing as a creditor under the Act if the party has a right to payment from the debtor. And a creditor has that standing regardless of whether the creditor has any actual interest in the transferred property.
¶ 13 In this case, Mr. Rupp, as the trustee for Mr. Rich's bankruptcy, qualifies as a creditor under the Act. Pursuant to the United States Bankruptcy Code, a "trustee . . . [has], as of the commencement of the case,. . . the rights and powers of . . . a creditor."
¶ 14 Ms. Moffo argues that even if Mr. Rupp has standing to sue, he is not entitled to recovery because Mr. Rich's agreement to let Ms. Moffo reside in the home did not constitute a transfer of an
¶ 15 Under the Act, a "creditor may recover judgment for the value of [a fraudulently transferred asset] . . . or the amount necessary to satisfy the creditor's claim, whichever is less."
At the heart of this definition is the meaning of the term "asset." The Act also defines this term. An "asset" is
While the Act broadly defines "transfer," it specifically excludes from that definition the transfer of property "to the extent it is encumbered by a valid lien." Thus, the plain language of the Act dictates that property that is fully encumbered is not an "asset" within the Act's reach.
¶ 16 Mr. Rupp urges us to ignore this plain language, arguing that the Act cannot mean what it says. Instead, he asks us to derive a definition for the word asset from our opinion in Zuniga v. Evans, which considered the Uniform Fraudulent Conveyances Act not the Uniform Fraudulent Transfer Act.
¶ 17 Our conclusion that the transfer of fully-encumbered property does not constitute a fraudulent transfer under the Act is consistent with the Act's purpose. The Act provides a remedy for creditors who are actually harmed when a debtor transfers property; it does not provide a remedy in cases of only theoretical harm. For example, the Act is applicable when a debtor is insolvent because a solvent debtor who transfers property does not harm creditors.
¶ 18 The same reasoning applies in the context of property that is fully encumbered by a valid lien. When such property is transferred, there is no harm done to either the creditor holding the lien—the secured creditor—or any other unsecured creditor of the debtor. The secured creditor is not harmed because it retains the right to proceed against the property by foreclosing its
¶ 19 Mr. Rupp also tries to avoid the clear language of the Act by asserting that the possessory interest that Ms. Moffo enjoyed was distinct from the rents that were admittedly encumbered by the mortgage and were assigned to Bayrock. But this reasoning is a nonstarter because it is unmoored from the basic principles of property law.
¶ 20 In this case, at all relevant times, the home in which Ms. Moffo resided was fully encumbered by Bayrock's mortgage and any rents that may have been owed were never property of the bankruptcy estate, but were payable to Bayrock. Indeed, Mr. Rupp has not asserted the contrary. Accordingly, we hold that Mr. Rich did not make a transfer to Ms. Moffo under the Act because the house was not an "asset" falling within its reach.
¶ 21 Mr. Rupp has standing to sue Ms. Moffo under Utah's Uniform Fraudulent Transfer Act because he is a creditor pursuant to the rights granted to him as a bankruptcy trustee. But no "asset" was transferred from Mr. Rich pursuant to the Act's definition of that term. The house in which Ms. Moffo lived was fully encumbered by a mortgage and any rents were the property not of Mr. Rich, but of Bayrock. Accordingly, we reverse the ruling of the district court and remand with instructions to enter summary judgment in favor of Ms. Moffo.
Associate Chief Justice LEE, concurring in the result:
¶ 22 I concur in the judgment reversing the summary judgment entered by the district court in favor of bankruptcy trustee Stephen Rupp. I write separately, however, because I conclude that Rupp lacks standing to pursue a claim under the Utah Fraudulent Transfer Act (UFTA). For reasons explained below, I would reverse on the ground that Rupp's case should be dismissed for lack of standing.
¶ 23 The UFTA authorizes suit by "creditors" or by those with "a right to payment." See UTAH CODE § 25-6-2, -8. Under the majority's reading of UFTA and the Bankruptcy Code, trustees will always have standing. But the Utah Legislature, in conjunction with Congress, cannot alter the judicial power bestowed by our state constitution and the inherent limitations imposed by standing and similar doctrines. Rupp does not qualify for standing, and we should not reach the merits.
¶ 24 To have standing a trustee must show that "the challenged transfer involved an interest of the debtor in property, i.e., the debtor transferred property in which it had
¶ 25 The majority seems to agree. It observes that there is no injury here, and thus concludes that the trustee could never have had an interest in that to which he was not entitled. See supra ¶¶ 17-20 (using language such as "theoretical harm" and "no-harm-nofoul," and noting that under the "clear language of the Act," Rupp essentially had nothing he could lay claim to since the house and the rents flowing from it were entirely the property of the mortgage company).
¶ 26 I see no basis for the trustee's standing in light of the above. Trustees may pursue claims "if [the] claim is a general one, with no particularized injury arising from it, and if that claim could be brought by any creditor of the debtor." See, e.g. St. Paul Fire & Marine Ins. Co. v. PepsiCo, Inc., 884 F.2d 688, 701 (2d Cir.1989). Conversely, where a claim is "specific" to a creditor (such as when one creditor holds a perfected security interest), it is a "legal or equitable interest only of the creditor," and the trustee lacks standing to bring it. Bd. of Trs. of Teamsters Local 863 Pension Fund v. Foodtown, Inc., 296 F.3d 164, 169-70 (3d Cir.2002) (emphasis added).
¶ 27 Claims that are general, with no "particularized injury" arising from them, and that "could be brought by any creditor" are precisely the sorts of claims that belong to the bankruptcy estate. But claims that belong to one creditor, the denial of which would result in a "particularized injury" and which accordingly could not "be brought by any creditor of the estate" do not belong to the estate, and thus are not within the reach of the trustee. The trustee simply has no third-party standing to sue on behalf of such a creditor, and therefore suffers no particularized injury.
¶ 28 This problem is apparent in the district court's award of the rents to Rupp. After deeming the transfer fraudulent, the court awarded $34,200 to Rupp, to then be placed in the bankruptcy estate for creditors to sort through. But those rents belonged to Bayrock, not Rupp or any of the debtor's other creditors. Giving them to someone else is not an appropriate exercise of our judicial power. For that reason the trustee lacks standing. I would reverse on that basis, without reaching the merits.
As Justice Lee points out, Mr. Rupp cannot co-opt the rights of one creditor for the benefit of the creditors generally by asserting a claim that belongs to only one specific creditor. See St. Paul Fire & Marine Ins. Co. v. PepsiCo, Inc., 884 F.2d 688, 700-01 (2nd Cir.1989). He argues that Mr. Rupp is asserting a claim that belongs to Bayrock. But Mr. Rupp has not asserted a claim on behalf of Bayrock because the Act allows him to bring this claim in his own right as a creditor under 11 U.S.C. § 544(a). Accordingly, the cases Justice Lee cites on that point are inapplicable.
Moreover, Justice Lee's analysis turns on significant factual determinations that are part and parcel of the merits of the case. "Utah standing law operates as gatekeeper to the courthouse, allowing in only those cases that are fit for judicial resolution," but it does not resolve them. Utah Chapter of Sierra Club, 2006 UT 74, ¶ 17, 148 P.3d 960 (internal quotation marks omitted). The Act does not require a plaintiff to show that he has a winning claim to establish standing; he only needs to qualify as a creditor. Under Justice Lee's reasoning, before a court can determine whether a party has standing to bring a claim under the Act, it must determine whether he has a perfected security interest and then determine the value protected by that security interest and the fair market value of the asset. In short, a court must determine that the plaintiff will succeed in recovering on his claim before it allows the case to proceed. This puts the cart before the horse by requiring extensive fact finding. The better course—and the course contemplated by the language of the Act—is that standing turns on whether the plaintiff is a creditor, not on whether he will ultimately be successful in recovering on his claim.
