Opinion
Bankruptcy No. 01-32215DWS, Adversary No. 02-0332.
August 10, 2005
MEMORANDUM OPINION
Before me is the Trustee's Motion for Summary Judgment on the Issue of Fraudulent Transfer or, in the alternative, for Collateral Estoppel Findings (the "Motion"). The Chapter 7 Trustee, Christine C. Shubert (the "Trustee"), seeks to have certain transfers made by defendant/debtor, William Dawley ("Debtor"), avoided as fraudulent based on: (1) 11 U.S.C. § 544(b) and the Pennsylvania Uniform Fraudulent Transfer Act ("UFTA"), 12 Pa. C.S. §§ 5101 et seq.; and (ii) 11 U.S.C. § 548. To the extent the transfers are avoided, she also seeks, pursuant to § 550 of the Bankruptcy Code, to have judgment entered, jointly and severally, against Debtor and his wife, co-defendant Judith Dawley ("Mrs. Dawley"), for the total amount of such transfers. Upon consideration, I enter partial summary judgment in favor of the Trustee and against Debtor and Mrs. Dawley jointly and severally in the amount of $173,718.00.
In the alternative, the Trustee seeks to have defendants, Debtor and Mrs. Dawley, collaterally estopped from relitigating certain findings that I made in Estate of Harris v. Dawley (In re Dawley), 312 B.R. 765 (Bankr. E.D. Pa. 2004) (the "Dischargeability Action"). For the reasons set forth in note 13infra, I find that I need not rule on that request.
The Trustee relies, inter alia, on a documentary record to support her Motion. The documents were made part of the record in the Dischargeability Action and are listed, without objection, in the parties' Joint Pretrial Statement. Doc. No. 56. In addition to the documents, the Trustee offers testimony from Debtor and Mrs. Dawley's depositions which also was admitted into evidence in the Dischargeability Action and identified in the Joint Pretrial Statement. Rather than again submit a copy of each document, she has referred to them in her Memorandum in Support of Motion by their identifying number in the Dischargeability Action. She has not provided another copy of the referenced transcripts. Defendants did not challenge the admissibility of any of the Trustee's underlying documents, copies of which are part of the court record and available to me. While the Trustee's counsel's assumption that the Court will access these documents from the prior litigation is somewhat presumptous, I have done so. On a motion for summary judgment, "uncertified or otherwise inadmissible documents may be considered by the court if not challenged." 10A Charles A. Wright, Arthur R. Miller Mary K. Kane, Federal Practice and Procedure § 2722, at 384 (1998).Accord Johnson v. United States Postal Service, 64 F.3d 233, 237 (6th Cir. 1995) (ruling that the "failure to object to evidentiary material submitted in support of a summary judgment motion constitutes a waiver of those objections."); H. Sand Co., Inc. v. Airtemp Corporation, 934 F.2d 450, 454-55 (2d Cir. 1991) (Rule 56 does not require parties to authenticate documents "where appellee did not challenge the authenticity of the documents in the district court."); Dautremont v. Broadlawns Hospital, 827 F.2d 291, 294-95 (8th Cir. 1987) (affirming summary judgment where appellant failed to object in district court to its consideration of documents not in compliance with Rule 56 and failed to demonstrate that district court's consideration of documents constituted reversible error);Giovacchini v. Perrine (In re Giovacchini), 1995 WL 80102, at *3 n. 1 (E.D. Pa. Feb. 27, 1995) (holding that unauthenticated medical reports would be considered in ruling on motion for summary judgment since no objection was raised thereto). I have followed this principle here.
Debtor was the director and also the operating shareholder of a close corporation named Payphone, Inc. ("Payphone"). Statement of Uncontested Facts ("Uncontested Facts") ¶ 1. The other relevant shareholders of Payphone were Stanford Harris ("Harris") and Bernard Greenstein ("Greenstein"). In November 1998, Harris commenced a lawsuit (the "State Lawsuit") in the Court of Common Pleas of Philadelphia County ("State Court") against Debtor and Payphone. Id. In the suit, Harris alleged that Debtor failed to pay him distributions to which he was entitled as a shareholder of Payphone. Id. In February of 2000, after a non-jury trial, the State Court issued a judgment in favor of Harris and against Debtor and Payphone, jointly and severally, in the amount of $180,000. Id. ¶ 5. On June 9, 2000, the State Court denied Debtor's post-trial motion and entered final judgment against Debtor and Payphone. Id. ¶ 6.
The Statement of Uncontested Facts is contained in the parties' Joint Pretrial Statement.
Harris died in November, 1999; thereafter his estate pursued the State Lawsuit. See Plaintiff's Exhibit 32 (Opinion, dated September 5, 2000 ["State Court Opinion"], by Judge McInerny in Harris v. Payphone, Inc. And William Dawley, November Term, 1998, No. 3135, in the Court of Common Pleas for Philadelphia County, Pennsylvania) at 1, 4.
In an Order dated August 21, 2003, I granted the Trustee'sunopposed Motion in Limine to Enforce Collateral Estoppel As to Findings of the September 5, 2000 Opinion and decreed that the "factual findings" of the State Court Opinion are "binding in this adversary proceeding." Plaintiff's Exhibit 2.
Defendants now assert that it "is not proper for this Court to bind Mrs. Dawley to the factual findings of the September 5, 2000 State Court Opinion, or to permit those findings to be introduced into evidence and become binding upon Mrs. Dawley in this adversary proceeding."). See Defendants William and Judith Dawley's Memorandum of Law in Opposition to the Trustee's Motion for Summary Judgment on the Issue of Fraudulent Transfer or in the Alternative for Collateral Estoppel Findings ("Defendants' Brief") at 4. Under the law of the case doctrine, "`once an issue has been decided, parties may not relitigate that issue in the case.'" Ogbudimkpa v. Ashcroft, 342 F.3d 207, 210 n. 7 (3d Cir. 2003) ( quoting Waldorf v. Shuta, 142 F.3d 601, 616 n. 4 (3d Cir. 1998)). My ruling regarding the collateral estoppel effect of the factual findings in the State Court Opinion is the "law of the case." Defendants have not argued that any exception to the rule applies. Consequently, they are not entitled to relitigate the issue.
Having so concluded, it is important to note that the reason that Defendants originally did not object to the binding effect of the State Court Opinion was their counsel's view that the findings were not dispositive of the issues in this litigation. I agree. The findings made by Judge McInerny dealt with events that preceded the State Court Complaint. The relevant conduct here is the response to the State Court Complaint and Judgment. Thus while the State Court Opinion provides a context to this litigation, its findings do not establish any of the elements of the cause of action.
In addition to their ownership interests in Payphone, Debtor and Greenstein were also 50% owners of two other close corporation, i.e., Franbern, Inc. ("Franbern") and Coin Call, Inc. ("Coin Call"). Id. ¶ 2. On March 1, 1999, which was less than four months after Harris commenced the State Lawsuit, Coin Call entered into an agreement to sell its assets to Elgee-Savar, Inc. ("Elgee-Savar") for $255,700.00 plus interest. Id. ¶ 2; Plaintiff's Exhibit 5 (Payphone Asset Purchase Agreement). Between March 1, 1999 and July 15, 2001, Debtor received a total of approximately $138,718 for Elgee-Savar's purchase of Coin Call. Uncontested Facts ¶ 3. Of that amount, $107,670 was deposited into the joint checking account which Debtor maintained with his wife, Mrs. Dawley. Id. ¶ 4. The remaining $31,048 was deposited into Mrs. Dawley's individual savings account at Mellon Bank. Id. ¶ 12.
Franbern started out in the same business as Payphone. State Court Opinion at 3. When Payphone began operating, Debtor and Greenstein ceased doing business through Franbern. Id. As time progressed, Payphone's shareholders grew aged and infirm.Id. at 4. On July 1, 1998, Debtor transferred Payphone's accounts to Franbern accounts. Id. at 5. Payphone's general ledger shows that its business stopped abruptly on June 30, 1998; Franbern's general ledger shows that its business "resumed" on July 1, 1998, after being completely nonexistent for some ten years. Id. Since July 1998, Debtor has managed all of Payphone's current and prospective accounts as Franbern accounts, for his own financial gain. Id. On the "books," Payphone has had no income since June 1998. Id.
Lest the title of this exhibit be confusing, I note that the asset being sold by Coin Call was payphones and their related parts.
The parties' Statement of Uncontested Facts conflicts in the following respect: Paragraph 4 states that all of the money which Debtor received from Elgee-Savar ($138,718) "was deposited by Mr. Dawley into the joint checking account he maintained with his wife Judith Dawley" while Paragraph 12 states that "[o]n July 15, 2001, Elgee-Savar, Inc. tendered payment in full for Mr. Dawley's interest in Coin Call, Inc. by check in the amount of $31,048.37 payable to `William and Judith Dawley,' which was deposited into Judith Dawley's individual Mellon Bank Savings Account." See Uncontested Facts ¶ 4 ¶ 12 (italics added).See infra at 9-10. A review of the evidence in the record confirms that the check for $31,048.37 was deposited directly into Mrs. Dawley's savings account at Mellon Bank. See Plaintiff's Exhibit 11 (check for $31,048.37 showing deposit at Mellon Bank), Plaintiff's Exhibit 12 (Mellon Bank Account History for Judith Dawley's savings account which lists deposit of $31,048.37 on July 19, 2001) and Plaintiff's Exhibit 17 (bank statements for defendants' joint account).
Elgee-Savar made its initial payments towards its purchase of Coin Call by checks payable to Coin Call which then distributed the payments equally to Debtor and Greenstein. Plaintiff's Exhibit 7. That practice changed in May of 2000. On May 15, 2000, Elgee-Savar made one monthly payment of $2,063.81 towards its purchase of Coin Call by check payable to "Bill Dawley." Plaintiff's Exhibit P-9. The cancelled check shows that it was deposited into a joint bank account held by Debtor and his wife.Id. See also Plaintiff's Exhibit P-18 (joint bank statement dated 8/4/00 showing deposit on 7/20/00 of $2,063.81). Beginning June 15, 2000, which was less than a week after the judgment was entered in favor of Harris in the State Lawsuit, Elgee-Savar begin making its payments for Debtor's interest in Coin Call by checks payable to "William and Judith Dawley." Uncontested Facts ¶ 7. Debtor continued his practice of depositing these payments into his joint account with his wife. Id.
On June 19, 2000, Debtor filed an appeal of the State Court judgment to the Pennsylvania Superior Court. Id. ¶ 8. Less than two weeks later, on June 28, 2000, Debtor entered into an agreement (the "Franbern Stock Sale Agreement") with Greenstein to sell him Debtor's 50% ownership in Franbern for $35,000. Id. ¶ 9. See also Plaintiff's Exhibit 3 (Agreement for the Sale of Corporate Stock). As the agreement is worded, it suggests that Debtor and his wife owned 50% of Franbern's stock and Greenstein and his wife owned the other 50% of the stock. See id. Pursuant to the agreement, Greenstein paid $35,000 by check made payable to "William Dawley and Judith Dawley." Uncontested Facts ¶ 10. This check was deposited into the Defendants' joint checking account on June 29, 2000. Id.; Plaintiff's Exhibit 18 (Account Statement dated July 7, 2000).
Prior to Debtor's sale of his 50% ownership interest in Franbern, Debtor received weekly payments from Franbern of $594.00. Plaintiff's Exhibit 45A (Transcript of Meeting of Creditors on 9/28/01) at 19. After the sale, he continued receiving these weekly payments at the same amount for another eighteen months. Id. In approximately late November 2000, the weekly payments were raised to $734.00. Id. Dawley Deposition, dated 1/20/02, at 9. Debtor volunteered that the "raise" was motivated by Greenstein's wish to "keep him out of the office."Id. at 19, 20. Debtor received these payments from Franbern by check made payable solely to him. See Plaintiff's Exhibits 23 24. See also Dawley Deposition, dated 1/20/02, at 9. During the period beginning April 26, 1999 through June 28, 2000, a total of $30,294.00 was deposited into Defendants' joint account from payments which Franbern made solely to Debtor. See Plaintiff's Exhibits 18, 23 and 34. During the period beginning June 29, 2000 through August 29, 2001, the date the bankruptcy case was commenced, a total of $23,213.92 was deposited into Defendants' joint account from payments which Franbern made solely to Debtor. See Plaintiff's Exhibit 18, 24 and 34. As for payments which Franbern made solely to Debtor after August 29, 2001, there is no evidence as to where these payments were deposited.
The Trustee contends that these weekly payments were "shareholder distributions" rather than wages. See Trustee's Memorandum of Law in Support of Trustee's Motion for Summary Judgment on the Issue of Fraudulent Transfer or in the Alternative for Collateral Estoppel Findings ("Trustee's Brief") at 10. In support of this contention, she points to the practice at Payphone of taking profits through W-2 wages as opposed to K-1 distributions that would reduce the corporation's earnings for tax purposes. State Court Opinion at 2. I make no finding on this disputed issue but do not find the characterization of the payments to be dispositive of the outcome here. The relevant point in this adversary proceeding is that these payments, regardless of the label applied to them, were made solely to Debtor and then transferred by him to himself and his wife.
Plaintiff's Exhibit 34 is a summary which the Trustee prepared of Franbern's weekly payments to Debtor. On this summary, the Trustee represents that during the period beginning April 26, 1999 through June 28, 2000, Franbern made 55 weekly payments to Debtor of $594.00. Based on my review of P-18 (account statements from Summit Bank for joint account of Debtor and his wife) and P-23 (checks from Franbern to Debtor), I find that, during the aforementioned period of time:
(i) 49 deposits of $594.00 were made into Defendants' joint account from Franbern's weekly payments to Debtor. See Plaintiff's Exhibit 18 check Nos. 1485, 1492, 1498, 1510, 1517, 1526, 1529, 1546, 1552, 1566, 1575, 1581, 1584, 1592, 1615, 1616, 1619, 1632, 1647, 1666, 1678, 1682, 1692, 1696, 1702, 1710, 1718, 1728, 1738, 1740, 1746, 1907, 1909, 1920, 1923, 1931, 1934, 1941, 1952, 1957, 1967, 1977, 1993, 1996, 2019, 2041, 2057, 2066 of Plaintiff's Exhibit P-23. While no check was produced for a deposit made on April 28, 1999, the deposit is shown on the account statement dated 5/6/99 in Plaintiff's Exhibit 18.
(ii) 1 deposit of $1,188 (which equals two payments of $594.00) from Franbern's weekly payments was made into the Defendants' joint account. See Plaintiff's Exhibit 18 and Check No. 1660 of Plaintiff's Exhibit P-23.
(iii) Debtor cashed five payments from Franbern of $594.00 each. Unlike the checks which Debtor deposited into the joint account, these five checks bear the notation "Cash On Us Check" or "Cash Foreign Check." See Checks Nos. 1535, 1635, 2001, 2008 and 2037 of Plaintiff's Exhibit P-23.
Based on these findings, I conclude that, during the period beginning April 26, 1999 through June 28, 2000, a total of $30,294.00 was deposited into the Defendants' joint account from payments which Franbern made solely to Debtor.
On Plaintiff's Exhibit 34 (Trustee's summary of Franbern's weekly distributions to Debtor), the Trustee represents that, during the period from June 29, 2000 to August 29, 2001, 32 of the weekly payments (17 at the weekly amount of $594.00 and 15 at the increased weekly amount of $734 for a total of $21,108.00) were "definitely deposited" into the Dawleys' joint account. In support of this representation, the Trustee cites generally to P-18 (bank statements from March 1999 through January 2002) and P-24 (checks from Franbern to Debtor) as well as pages 81-0 and 49-52 of Dawley's Deposition of 1/20/02. Based on my review of these exhibits, I find that, during the aforementioned period of time:
(i) 13 deposits of $500 were made into Defendants' joint account (on 8/9/00, 8/17/00, 8/23/00, 8/31/00, 9/6/00, 9/20/00, 10/11/00, 10/19/00, 10/20/00, 11/6/00, 11/16/00, 12/19/00 and 2/13/01) from Franbern's weekly payments to Debtor. This finding is supported by checks which Franbern made payable to Debtor and statements from the joint account. See Plaintiff's Exhibit 18 and Check Nos. 2122, 2129, 2131, 2136, 2145, 2158, 2172, 2197, 2205, 2207, 2228, 2236, 2277, and 2334 from Plaintiff's Exhibit 24.
(ii) 4 deposits of $594.00 were made into Defendants' joint account (made on 7/12/00, 9/13/00, 9/28/00 and 10/4/00) from Franbern's weekly payments to Debtor. This finding is supported by checks which Franbern made payable to Debtor and the applicable monthly statements from the joint account. See Plaintiff's Exhibit 18 and Check Nos. 2090, 2166, 2181 and 2190 from Plaintiff's Exhibit 24.
(iii) 7 deposits of $734 were made into Defendants' joint account (made on 11/22/00, 12/4/00, 12/26/00, 1/3/01, 1/8/01, 1/22/01 and 2/6/01) from Franbern's weekly payments to Debtor. This finding is supported by checks which Franbern made payable to Debtor and the applicable monthly statements from the joint account. See Plaintiff's Exhibit 18 and Check Nos. 2241, 2250, 2280, 2290, 2298, 2310 and 2316 from Plaintiff's Exhibit 24.
(iv) 5 deposits of $734 were made into Defendants' joint account (made on 3/14/01, 3/21/01, 5/15/01, 6/20/01 and 6/28/01) from Franbern's weekly payments to Debtor. This finding is supported by the applicable monthly statements from the joint account. See Plaintiff's Exhibit 18.
(v) 1 deposit of $506.92 was made into Defendants' joint account (made on 1/17/01) from Franbern's weekly payment to Debtor. This finding is supported by check No. 2307 from Franbern and by the applicable monthly statement from the joint account. See Plaintiff's Exhibit 18 and Check No. 2307 in Plaintiff's Exhibit 24.
(vi) 1 deposit of $619.00 was made into Defendants' joint account (made on 12/12/00) from Franbern's weekly payment to Debtor. This finding is supported by check No. 2271 from Franbern and by the applicable monthly statement from the joint account. See Plaintiff's Exhibit 18 and Check No. 2271 in Plaintiff's Exhibit 24.
(vii) 3 deposits of $1,468 were made into Defendants' joint account (made on 5/9/01, 7/12/01 and 7/26/01) from Franbern's weekly payments to Debtor. This finding is supported by the applicable monthly statements from the joint account. See Plaintiff's Exhibit 24. Since the sum of $734 and $734 is $1,468 exactly, I conclude that these deposits are the sum of two weekly payments from Franbern.
(viii) Check Nos. 2096, 2112 and 2263 were cashed. They bear the notation "Cash On Us Check."
Based on these findings, I conclude that, during the period beginning June 29, 2000 through August 29, 2001, when Debtor commenced his bankruptcy case, a total of $23,213.92 was deposited into the Defendants' joint account from Franbern's weekly payments to Debtor.
The Trustee's summary of Franbern's distributions to Debtor states that the "Location" of the payments which Franbern made to Debtor after August 29, 2001 is "indeterminate." Plaintiff's Exhibit 34.
On April 19, 2001, the Superior Court affirmed the State Court Judgment in favor of the Estate of Harris. Uncontested Facts ¶ 11. On June 20, 2001, the Superior Court denied Debtor's application for reargument. Id.
On July 15, 2001, Elgee-Savar tendered payment in full for Debtor's interest in Coin Call by check made payable to "William and Judith Dawley" in the amount of $31,048.37. Id. ¶ 12. This check was deposited into Mrs. Dawley's individual savings account at Mellon Bank. Id. See also Plaintiff's Exhibit 45A (Transcript from Meeting of Creditors on 9/28/01) at 15.
The transcribed minutes of the § 341 meeting is one of the documents referred to in note 1. Also Defendants have attached excerpts from the transcript as Exhibit B to their response.
The next month, on August 29, 2001, Debtor filed a Voluntary Petition for Relief under Chapter 7 of the Bankruptcy Code. Uncontested Facts ¶ 18. Harris is scheduled as an unsecured creditor of the bankruptcy estate. Id. On November 20, 2001 Harris' estate commenced an adversary proceeding against him seeking an Order denying Debtor a discharge pursuant to 11 U.S.C. §§ 727(a)(2) and (a)(4) or, alternatively, excepting from discharge the Debtor's debt to the Estate of Harris pursuant to 11 U.S.C. § 523(a)(4). That relief was granted on April 16, 2004. On February 20, 2002, the Trustee initiated the instant adversary proceeding against Debtor and his wife.
After a non-jury trial, I issued a Memorandum Opinion in the Dischargeability Action, granting judgment in favor of the Estate of Harris and denying Debtor a discharge based on § 727(a)(4). The Trustee seeks to have Defendants collaterally estopped from relitigating certain findings that I made in the Dischargeability Action. I conclude that the referenced findings fall into two categories: (1) findings that while relevant to the Dischargeability Action, provide mere background and are not dispositive of the issues before me now and (2) findings that I am able to make on the record that is before me on this Motion without regard to collateral estoppel. Having so concluded, I find no need to further address the alternative request for relief. Since the Trustee has not prevailed as to all her claims, she is not foreclosed from renewing her motion should this case, after the conference referred to below, be set for trial.
I do note, however, that Defendants argue, without any legal support, that collateral estoppel does not apply to this Court's judgment because the judgment is on appeal to the United States District Court. See Defendants' Brief at 4. Under the federal rule, the pendency of an appeal does not prevent the application of collateral estoppel except where the appeal "constitutes a trial de novo." Nixon v. Richey, 513 F.2d 430, 438 n. 75 (D.C. Cir. 1975). See also Ruyle v. Continental Oil Co., 44 F.3d 837, 846 (10th Cir. 1994).
Defendants have demanded a jury trial and have agreed that it can be held in the bankruptcy court. While it was initially scheduled for August 26, 2003, it was postponed on the eve of trial due to Debtor's inability to be present in court on or about that date. The Motion has deferred the rescheduling of the jury trial.
In the Motion, the Trustee contends that Debtor fraudulently transferred $324,384 which is the sum of the following amounts: (i) $138,718 which is half of the amount paid by Elgee-Savor, Inc. for its purchase of Coin Call; (ii) $35,000 which Greenstein paid for the sale of Debtor's 50% interest in Franbern; and (iii) $150,666 which is the total amount of Franbern's weekly payments to Debtor for the period beginning on April 26, 1999 (the day after the sale of Debtor's 50% interest in Franbern) until August 31, 2003. Trustee seeks judgment against Debtor and Judith, jointly and severally, for $324,384. In response, the Defendants posit that there are disputed factual issues regarding the Debtor's intent, the amount he received for the transfers and whether he was insolvent when the transfers were made that foreclose summary judgment being granted.
DISCUSSION
I. Standard of Review
A motion for summary judgment is governed by Federal Rules of Civil Procedure ("Fed.R.Civ.P.") 56 applicable in this proceeding pursuant to Federal Rule of Bankruptcy 7056. Summary judgment, "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories and admissions on file, and affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The party moving for summary judgment must overcome the initial burden of demonstrating the absence of a material question of fact. Celotex v. Catrett, 477 U.S. 317, 325 (1986). The substantive law will determine which facts are material.Anderson v. Liberty Lobby, 477 U.S. 242, 248 (1986). A court's function is not to weigh the evidence and determine the truth of the matter, but to determine whether there is a genuine issue for trial. Id. at 255. A court must find that the motion alleges facts which, if proven at trial, would require a directed verdict. 6 J. Moore, Moore's Federal Practice, ¶ 56.26 (2d ed. 1988).
Once the moving party establishes its burden of production, the burden then shifts to the nonmoving party to show that there is in fact a genuine issue for trial. In such event, the respondent "must set forth specific facts showing there is a genuine issue for trial," and may not "rest upon the mere allegations or denials of the pleading." Fed.R. Civ P. 56(e). If the non-movant's evidence "is merely colorable, or is not significantly probative, summary judgment may be granted.Anderson, 477 U.S. at 250. The absence of a genuine issue for trial is evident where the record, taken as a whole, could not lead a rational trier of fact to find for the non-moving party. Mashusita Electrical Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Thus, a court must enter summary judgment against a nonmoving party who bears the burden of persuasion at trial and fails to establish each element of its case. Celotex, 477 U.S. at 325.
In Anderson, the Supreme Court found support in an old decision, quoting:
"Nor are judges any longer required to submit a question to a jury merely because some evidence has been introduced by the party having the burden of proof, unless the evidence be of such a character that it would warrant the jury in finding a verdict in favor of that party. Formerly it was held that if there was what is called a scintilla of evidence in support of a case the judge was bound to leave it to the jury, but recent decisions of high authority have established a more reasonable rule, that in every case, before the evidence is left to the jury, there is a preliminary question for the judge, not whether there is literally no evidence, but whether there is any upon which a jury could properly proceed to find a verdict for the party producing it, upon whom the onus of proof is imposed." (Footnotes omitted.)
477 U.S. at 251 ( quoting Improvement Co. v. Munson, 14 Wall. 442, 448, 20 L.Ed. 867 (1872)).
II. The Law of Fraudulent Conveyances
The Trustee's Complaint contains two counts. Count I is based on 11 U.S.C. § 544(b) and the UFTA; Count II is based on 11 U.S.C. § 548. Both fraudulent conveyance statutes allow transfers to be avoided upon evidence of actual fraud and/or constructive fraud. The Trustee bears the burden of proof generally on these causes of action. Bohm v. Dolata (In re Dolata), 306 B.R. 97, 117 (Bankr. W.D. Pa. 2004).
A. Section 544(b) and the UFTA
Pursuant to Code § 544(b), the Trustee "may set aside any transfer that is voidable under applicable state law[.]" Bally's Park Place, Inc. v. Rush (In re Schaps), 58 B.R. 581, 584 (E.D. Pa. 1986), aff'd, 815 F.2d 693 (3d Cir. 1987). The state law upon which the Trustee relies is the UFTA. However, to have standing to bring an action under UFTA, a creditor must exist as of the petition date who possessed identical causes of action against defendants. Allegheny University et. al v. Philadelphia Health Care Trust (In re Allegheny Health, Education and Research Foundation), 253 B.R. 157, 164 (Bankr. W.D. Pa. 2000). Harris' claim provides the Trustee with such standing.
The UFTA, which became effective February 1, 1994, replaced the repealed Pennsylvania Uniform Fraudulent Conveyance Act ("UFCA"), 39 P.S. §§ 351-363. See In re Estate of Israel, 435 Pa. Super. 347, 354 n. 6, 645 A.2d 1333, 1337 n. 6 (1994).
UFTA has a reach back period for transfers of four years. 12 Pa.C.S.A § 5109 ("A cause of action with respect to a fraudulent transfer . . . under this chapter is extinguished unless [the] action is brought" within "four years after the transfer was made or the obligation was incurred[.]"). The earliest transfer the Trustee seeks to avoid was made on March 1, 1999, well within the statutory period tolled when this adversary action was commenced on February 20, 2002.
The more liberal reach back period of UFTA generally renders this statute more useful to trustees than the fraudulent conveyance provisions of the Bankruptcy Code which only allow a trustee to attach transfers made within one year of the filing of the petition. 11 U.S.C. § 548(a)(1).
The pertinent sections of the UFTA are §§ 5104(a)(1), 5104(a)(2)(ii) and 5105. While § 5104(a)(1) requires a showing of actual fraud, § 5104(a)(2)(ii) and § 5105 do not. See 718 Arch Street Associates, Ltd. v. Blatstein (In re Blaststein), 192 F.3d 88, 96 (3d Cir. 1999). Sections 5104(a)(1), 5104(a)(2)(ii) and 5105 of the UFTA apply only to "transfers" made by a debtor.See 12 Pa.C.S.A. §§ 5104(a)(1), 5104(a)(2) 5105. Since the Trustee is the movant herein, she has the burden of proof on this issue. Krasny v. Gi Nam (In re Gi Nam), 257 B.R. 749, 760-61 (E.D. Bankr. 2000). Under the UFTA, a "transfer" is defined as "every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an asset or an interest in an asset." 12 Pa.C.S.A. § 5101. The term "asset" is defined, in relevant part, as "property of a debtor."Id. § 5101(b).
The term does not include "an interest in property held in tenancy by the entireties to the extent it is not subject to process by a creditor holding a claim against only one tenant." 12 Pa.C.S.A. § 5101(b)(3). In this sense, the fraudulent conveyance provisions of the Bankruptcy Code will capture transfers that the UFCA will not since a transfer of property held in the entireties qualifies as a transfer under § 548.
Under Pennsylvania law, entireties property cannot be used to satisfy the claims of a creditor of only one of the tenants. Property owned solely by a debtor is an "asset" under the UFTA but property owned by the debtor as a tenant in the entirety is not. Reitmeyer v. Meinen (In re Meinen), 232 B.R. 827, 840 (Bankr. W.D. Pa. 1999). Consequently, the conversion of property owned solely by a debtor which would constitute an asset under the UFTA into entireties property which would not, constitutes a transfer under the UFTA. Id. at 840-41. Thus to the extent that Debtor has insulated his vulnerable individually owned property by transferring it to himself and his wife as tenants by the entireties, such transfers are subject to avoidance if the statutory elements of the UFTA are satisfied.
B. Section 548 of the Bankruptcy Code
Pursuant to § 548, a Trustee may avoid fraudulent transfers made or incurred within one year before the debtor filed for bankruptcy. 11 U.S.C. § 548. Since Debtor filed his bankruptcy case on August 29, 2001, the transfers which could be avoided under § 548 are those transfers made on or after August 29, 2000.
"The determination of what constitutes a transfer under Section 548 is a question of federal law." Carmel v. River Bank America (In re FBN Food Services, Inc.), 185 B.R. 265, 271-72 (N.D. Ill. 1995), aff'd and remanded on other grounds, 82 F.3d 1387 (7th Cir. 1996). Section 101 of the Bankruptcy Code defines a "transfer" as "every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with property or with an interest in property." 11 U.S.C. § 101(54). "Congress intended the term "transfer" to be as broad as possible. Besing v. Hawthorne (In re Bessing), 981 F.2d 1488, 1492 (5th Cir. 1993). The conversion of Debtor's solely owned property into entireties property constitutes a "transfer" under the Bankruptcy Code because it disposed of his sole interest in property and replaced it with a tenancy by the entireties interest in the property. The conversion from one interest to the other had the effect of placing such property out of the reach of Debtor's creditors under Pennsylvania law.
C. The Transfers
The following transfers are at issue in this adversary proceeding although as will be discussed below, the more expansive reach back period of the UFTA provides the Trustee with a more powerful weapon than § 548 of the Bankruptcy Code.
Payments by Elgee-Savar for its Purchase of Coin Call
The first category of transfers is Debtor's share in the payments from Elgee-Savar for its purchase of Coin Call. Based on the parties' Statement of Uncontested Facts, between March 1, 1999 and July 15, 2001, Debtor received a total of $138,718 from Elgee-Savar's purchase of Coin Call. Debtor received this amount in checks payable: (i) solely to him and deposited into the Defendants' joint account ($82,902); (ii) to him and his wife and deposited into their joint account ($24,768); or (iii) to him and his wife and deposited into Mrs. Dawley's individual account ($31,048). In all three cases, Debtor's solely owned property was converted into entireties property which constitutes a transfer under the UFTA and the Bankruptcy Code. However, only the payments which Elgee-Savar made by check payable to "William and Judith Dawley" from August 29, 2000 through July 15, 2001 are susceptible of recovery under § 548. Debtor's 50% interest in Franbern
Defendants admit in the Statement of Uncontested Facts that Debtor and Greenstein each owned 50% of Franbern. See Statement of Uncontested Facts at ¶ 9. However, Debtor entered into the Franbern Stock Sale Agreement which represented the ownership interest in Franbern as being held by himself and his wife. By signing the agreement with this misrepresentation intact, Debtor caused the check from Greenstein for $35,000 to be made payable to him and his wife rather than to him alone. The check was deposited into Defendants' joint account on June 29, 2000. By insulating his entitlement to the proceeds from the sale of Franbern from the reach of his creditors, the transfer of Debtor's 50% interest in Franbern into entireties property constitutes a transfer under the UFTA and the Bankruptcy Code. Meinen, supra. However, because the transfer occurred outside the one year reach back period of § 548, it is subject to avoidance solely under the UFTA.
Debtor seeks to explain this legal misrepresentation by stating that because his wife is his life's partner, he views her to be a partner in all he owns. Without commenting on the credibility of that statement, suffice it to say that he does not contend that she had any legal ownership of the asset and the evidence, as stated, is to the contrary.
Debtors' weekly payments from Franbern
The deposit of payments from Franbern to Debtor, be they salary, gift or distribution of profit, into the joint account constitutes a transfer under both statutes. By these deposits Debtor changed the character of the funds from solely owned property into entireties property. The fact that Debtor may have always deposited his paychecks into the joint marital account is not relevant to the issue of whether the deposits constituted transfers but rather represents his defense to their avoidance which I discuss below. The Trustee seeks to recover these weekly payments from April 26, 1999 through August 31, 2003. However, she has only established payments through August 29, 2001. Deposits of payments into Defendants' joint account in the amount of $53,507.92 were proven for this period. Needless to say, only the deposits that were made into the Defendants' joint account during the period from August 29, 2000 through August 29, 2001 are subject to challenge under § 548.
Accordingly, I need not address whether she is entitled to pursue the continuing post-petition payments by Franbern to Debtor.
III. Application of the Law A. Actual Fraud Under 12 Pa.C.S.A. § 5104(a)(1)
Section 5104(a)(1) of the UFTA provides, in relevant part:
A transfer made or obligation incurred by a debtor is fraudulent as to a creditor, whether the creditor's claim arose before or after the transfer was made . . . if the debtor made the transfer . . . with actual intent to hinder, delay or defraud any creditor of the debtor[.]
12 Pa.C.S.A. § 5104(a)(1). In accordance with this provision, the Trustee must prove that the transfers at issue were made with actual intent to hinder, delay or defraud any creditor of the debtor.
Section 5104(a)(1) of the UFTA is similar to § 357 of the UFCA which provided:
Every conveyance made and every obligation incurred with actual intent, as distinguished from intent presumed in law, to hinder, delay, or defraud either present or future creditors, is fraudulent as to both present and future creditors.
39 P.S. § 357 (repealed).
Subsection (b) contains a non-exclusive list of factors to be considered in determining whether a transfer has been made with an actual intent to defraud a creditor. Of the eleven enumerated factors, at least the following are relevant here:
(1) the transfer was to an insider;
(2) the debtor retained possession or control of the property transferred after the transfer;
(4) before the transfer was made, the debtor had been sued;
(8) the value of the consideration received by the debtor was not reasonably equivalent to the value of the asset transferred;
(9) the transfer occurred shortly after a substantial debt was incurred.
The legislative history of the provision provides guidance on its application in this case. The Committee comments state,inter alia:
The fact that a transfer has been made to a relative . . . has not been regarded as a badge of fraud sufficient to warrant avoidance when unaccompanied by any other evidence of fraud. The courts have uniformly recognized, however, that a transfer to a closely related person warrants close scrutiny of the other circumstances, including the nature and extent of the consideration exchanged.
12 Pa. C.S.A. § 5104, Committee Comment-1993, No. 5.
As noted above, all of the transfers at issue involve the conversion of property owned solely by the Debtor into property owned by Debtor and his wife as tenants by the entirety. While the Committee commentary makes no special mention of a transfer between husband and wife (versus a closely related person generally), it demonstrates its concern that a court should consider all relevant circumstances involving a transfer by citing cases involving husband/wife transfers. Id., No. 6.
The Trustee seeks to have this Court apply a presumption that all these transfers are actually fraudulent because they were between spouses and therefore the burden shifts to defendants to establish their fairness. She relies on United States v. Green, 201 F.3d 251 (3d Cir. 2000), a case decided under the UFCA. The Third Circuit in turn relied on Iscovitz v. Filderman, 334 Pa. 585, 589 (1939), in which the Pennsylvania Supreme Court stated:
She also cites my decision in Krasny v. Nam (In re Nam), 257 B.R. 749, 766 (Bankr. E.D. Pa. 2000), where I applied the presumption. In that case, the debtor transferred his paychecks into his wife's sole bank account for which he received no consideration. I concluded that the wife had failed to rebut the presumption as she provided no evidence that the transfers were fair.
Where the transaction is between husband and wife actual intent does appear where it is shown that there was a deed given for a nominal consideration. This is but a presumption of fact and places on the wife the burden of showing the fairness of the transaction.
In Green, supra, the Third Circuit in affirming the trial court's application of the interspousal presumption of actual intent to defraud in a UFCA case, quoted the Pennsylvania Supreme Court's statement that "because `family collusion by a debtor is so easy to execute and so difficult to prove, the evidence must sustain the claim of the wife in such cases must be clear and satisfactory."' Id. at 254 ( quoting Iscovitz, 334 Pa. 589-90, 6 A.2d at 270).
This heightened evidentiary standard has been explained as follows:
The term "clear and convincing evidencing," means that the witnesses must be found to be credible, that the facts to which they have testified are remembered distinctly and the details thereof narrated exactly and in due order, and that their testimony is so clear, direct, weighty, and convincing as to enable either a judge or jury to come to a clear conviction, without hesitancy, of the truth of the precise facts in issue.
"Clear and convincing" and "clear and satisfactory" have the same meaning in Pennsylvania jurisprudence. See, e.g., Tudor Ins. Co. V. Township of Stowe, 697 A. 2d 1010 (Pa.Super. 1997).
Jones v. Prudential Property and Cas. Ins. Co., 856 A.2d 838, 844 (Pa.Super. 2004). In this case, the court found that the motor vehicle owner's testimony that she was informed by an insurance representative that her coverage would remain in effect if she forwarded a check in the amount of $123.83 failed to rebut the legal presumption that her vehicle lacked required insurance coverage upon termination of the insurance policy. The owner's failure to provide the representative's name or position left her testimony uncorroborated. In light of the evidence of a rescission notice and the refund of the $123.83 payment sent after that notice, her testimony did not overcome the strict evidentiary standard necessary to overcome the presumption.Id.
Notably the foregoing cases arose under the actual intent provision of the UFCA, namely § 357, which is the predecessor to § 5104(a)(1) that governs this litigation. See n. 16supra. My research did not reveal any discussion in the decisional or academic literature regarding the continuing vitality of the presumption, and in particular the legislative history of the UFTA that cautions the court to consider all relevant circumstances even when deciding whether an interspousal transfer is based on actual fraud. Some guidance, however, is provided by the Third Circuit in Green. Although holding that in cases of interspousal transfer for nominal consideration, the presumption of fraud exists, the court tests the conclusion reached by considering the totality of the circumstances, including subsequent conduct. 201 F.3d at 256. The court observes that the trial judge did not wear blinders in presuming actual fraudulent intent and notes that Pennsylvania law clearly endorses this approach. Id. I will follow suit.
In United States v. Green, the Third Circuit commented on the continued vitality of the presumption. Noting that the presumption has been restated and applied numerous times for the past sixty years, it referred to its decision in 718 Arch Street v. Blatstein (In re Blatstein), 192 F.3d 88, 97-98 (3d Cir. 1999), as having "discussed the continuation of the principle under Pennsylvania's new fraudulent transfer statute." 201 F.3d at 254. A close reading of Blatstein, a UFTA case, reveals a discussion of the shifting burden of proof for establishingconstructive fraud. While admittedly dicta even as to constructive fraud, see note 38 infra, the court did not apply the shifting burden as to actual fraud.
i.
Sale of Coin Call. As noted above, Debtor received a total of $138,718 from Elgee-Savar's purchase of Coin Call. Elgee-Savar paid this amount in installment payments. Beginning in March of 1999, Elgee-Savar made its installment payments to Coin Call (whose assets were sold), which distributed them to Greenstein and Debtor, the sole shareholders. In May of 2000, Elgee-Savar began making its payments directly to Debtor and Greenstein. However, Elgee-Savar made only one monthly payment by check payable solely to Debtor. The next month, on June 15, 2000, which was less than a week after the State Court entered the final judgment against Debtor for $180,000, Elgee-Savar began making its payment by check to "William and Judith Dawley." Elgee-Savar continued making its monthly payments to both Defendants through July of 2001 when it tendered payment of 50% of the balance of the purchase price to them. Contrary to Defendants' usual routine, this final check for $31,048.37 was deposited into Mrs. Dawley's individual savings account at Mellon Bank rather than into their joint account. In less than two months after this $31,048.37 deposit into Mrs. Dawley's individual account, Debtor commenced his bankruptcy case. Moreover, at some point, Mrs. Dawley removed the money from her bank account and placed it in a home safe, presumably to protect it from attachment by Harris.
I am aware from administering the Chapter 7 case, and in particular a motion for a temporary restraining order and preliminary injunction, that the Trustee recovered some of this money which was being held in the safe although that fact or the amount recovered was not made part of the record by the parties. Doc. No. 7 (Order granting Trustee's motion). Defendants are entitled to a credit against the judgment being entered herein for any money returned to the estate.
The change within less than a week after the State Court entered its final judgment in the amount of $180,000 against Debtor from Elgee-Savar's payments being made to Coin Call or Debtor to the payments being made to "William Dawley and Judith Dawley" is compelling circumstantial evidence of an intent to defraud the Estate of Harris. Given the timing of the change what other purpose could the change have been designed to serve? The evidence in the record offers none.
Sale of Franbern. Contemporaneously with the change in the payee of the Coin Call sale proceeds was a change in the ownership of Franbern. In February 2000, the judgment was entered; on June 19, 2000, the appeal was rejected. On June 28, 2000, ten days later, Debtor sold his 50% interest in Franbern to Greenstein, with whom he had structured the Coin Call transaction, for $35,000. In that transaction, Debtor misrepresented the ownership of Franbern's equity and as such he caused a check to be issued to himself and Mrs. Dawley which was then deposited in their joint account, thereby placing the asset out of the reach of his creditors. Mrs. Dawley gave no consideration for her receipt of the transfer.
While acknowledging the incorrect legal characterization of the pre-sale ownership of Franbern, Debtor contends he viewed everything he had as belonging to him and his wife, including the Franbern stock. This statement does not explain why the asset was titled in his name initially, payments were made to him initially and the payee was changed contemporaneously with entry of the judgment. It appears that Debtor's identification of a joint ownership of all his assets was motivated by the entry of the judgment and his vulnerability to Harris's contemplated collection efforts.
On his Schedules and Statement of Affairs, he disclosed his interests in Franbern and Coin Call as being "T/E," including the payments that he received from their sale. Indeed every asset he listed on his Schedules he affixed with the designation "T/E" although his testimony at the § 341 meeting was to the contrary as to the boat and his pension. Fed.R.Evid. 201. (While a court may not take judicial notice sua sponte of facts contained in the debtor's file that are disputed, In re Augenbaugh, 125 F.2d 887 (3d Cir. 1942), it may take judicial notice of adjudicative facts "not subject to reasonable dispute . . . [and] so long as it is not unfair to a party to do so and does not undermine the trial court's factfinding authority." In re Indian Palms Assoc., 61 F.3d 197, 205 (3d Cir. 1995) (citing Fed.R.Evid. 201(f) advisory committee note (1972 proposed rules). Moreover, "factual assertions in pleadings, which have not been superceded by amended pleadings, are judicial admissions against the party that made them. Larson v. Gross Bank. 204 B.R. 500, 502 (W.D. Tex. 1996) (statements in schedules). See also In re Musgrove, 187 B.R. 808 (Bankr. N.D. Ga. 1995) (same); In re Leonard, 151 B.R. 639 (Bankr. N.D.N.Y. 1992) (same)).
The transfers of the proceeds of the sale of Debtor's interests in Coin Call and Franbern have all the indicia of fraud. Indeed the evidence is sufficiently strong to meet the Trustee's burden without resort to the presumption of fraud. With the burden thus shifted, I turn to the Defendants' contention that the transfers were fair because the funds from the above asset sales as well as the weekly payments from Franbern were used for the ordinary living expenses of Debtor and Mrs. Dawley. Notably Defendants offer no support for the proposition that the payment of Mrs. Dawley's expenses provides value to the Debtor for the transfer of his assets to her. However, it is reasonable to conclude that the payment of Debtor's existing debts is consideration provided by Mrs. Dawley for the transfer of money into the joint account. Meinen, supra, 232 B.R. at 842 ( quoting 12 Pa.C.S.A. § 5103(a) that "value is given for a transfer . . . if, in exchange for the transfer . . . property is transferred or an antecedent debt . . . is satisfied."). Accordingly, the Meinen court concluded that to the extent that debtor and his wife used the debtor's deposits which were made into defendants' joint bank accounts to satisfy the debtor's reasonable and necessary household expenses, such deposits may not be avoided as fraudulent transfers under the Pennsylvania UFTA.
In connection with the aborted jury trial, defendants asked for a jury instruction that "reasonably equivalent value" includes the payment of a husband and wife's existing debts, and furnishing support for the husband and wife. They citedBlatstein, 193 F.3d at 98, as support for the instruction. However, their reading of that opinion is far too broad.Blatstein suggests that the payment of the husband debtor's debts would be consideration for the deposit of his income into the wife's account; there is no reference to the payment of the wife's existing debts nor the furnishing of her support.
Notably the Meinen court validates legitimate payments that satisfy pre-existing obligations of the debtor. It cites toWatters v. DeMilio, 16 Pa. D.C.2d 747, 752 (1957), noting the examples of reasonable and necessary household expenses to include real estate taxes and interest on the mortgage on the entireties property. Meinen, 232 B.R. at 827. Watters, on the other hand, appears to view expenses of the family as consideration for the use of the debtor's funds. However, which expenditures of debtor funds for non-debtor obligations provide value to the debtor was not defined because the debtor had simply failed to provide the court with any evidence of how the funds were spent. The Watters Court ruled that the debtor had not sustained his burden in establishing any amount which could be considered as a defense to the claim of fraudulent transfer.
Meinen points out that Watters "conspicuously" excluded mortgage principal as a legitimate payment because it results in an accretion to entireties property, and defendants may not shield from avoidance deposits that were used to purchase other entireties assets. 232 B.R. at 827.
A similar lack of proof exists in this case. Notwithstanding the statements in Defendants' brief that all the funds deposited in their joint account were used for household expenses, there is no evidence, testimonial or otherwise that proves that to have been the case. The only evidence which Defendants offer in support of their defense that the money was used for ordinary and necessary living expenses is their testimony in the Dischargeability Action. See Defendants' Brief at 13-14. Specifically Defendants refer to Mrs. Dawley's statement that she used approximately $30,000 of the Coin Call proceeds that she withdrew from the joint account and placed in the house safe to pay their living expenses and bills. Defendants simply make no effort to demonstrate how the aggregate proven transfers of $227,225.92 were utilized for household expenses.
Given the Defendants' heavy reliance (frequently without making the transcript a part of the record) on the testimony given in the Dischargeability Action, see e.g., Defendants' Brief at 5-6, 12, 13, there is a certain irony in their contention that the findings of the Dischargeability Action are not entitled to collateral estoppel effect in this proceeding because the issues there were different. Defendants appear to want me to remember the evidence that was elicited therein but not the conclusions I drew therefrom. I will do neither. Rather I will only consider the actual testimony which has been made part of this record.
The sum total of the evidence on this point are four responses to the same question asking Mrs. Dawley what she did with the approximately $30,000 she removed from the joint account and placed in a house safe. Asked by her counsel the first time, she responded simply "I used it for living expenses." Asked by her counsel again what she did with the money, she stated she put it in the safe and "I used it for expenses and all our bills." Asked by her counsel the third time, did you spend the $20,000, she responded simply "I used it for household expenses, just living expenses." When asked by her counsel to be specific, he still could not elicit a concrete response. She stated again: "Our bills, our food, clothing, all — everything that I usually pay bills on." Exhibit A to Defendants' Memorandum in Opposition to Motion at 189, 193, 194. Defendants' Memorandum also refers to Debtor's testimony at the § 341 Meeting of Creditors although it fails to bolster the case. When asked what happened to the $31,048 final payment check from Elgee-Savar that he received between July 15, 2001 and July 24, 2001, he responded "we lived on it." In follow-up, the Trustee's counsel queried, "You received it July 15, between July 15, 2001 and July 24, 2001, and you state that your monthly expenditures. . . ." Debtor interrupted, "I eat out a lot and drink a lot." The Trustee's counsel finished, "$3,739 and you receive monthly income of $3,178 and you've spent $31,000.48 since July 15, to which Debtor replied "yes." When asked again what he spent it on, he responded "wine, women and song." Exhibit B at 15-16.
Indeed the Trustee offers evidence from the depositions of Debtor and his wife where her counsel questioned each about the use of the asset sale proceeds. According to Debtor, the Coin Call proceeds were used for clothing, partying, toys and two vehicle purchases. W. Dawley Dep. (1/30/02) at 103, 104, 115-120. Mrs. Dawley acknowledges a loan to her sister, improvements to a second home, a vacation, and the purchase of a $1,000 telescope and electronic gifts for family members. J. Dawley (1/29/02) at 104,107-108, 111-114, 153-56).
Rather then offer evidence that the sale proceeds of the Debtor's interests in Franbern and Coin Call as well as the weekly payments from Franbern were used for living expenses and bills, Defendants rest on the misguided legal position that their unsupported argument presents a disputed fact that will enable them to survive summary judgment on this critical defense. In Anderson v. Liberty Lobby, supra, the Supreme Court held that "the inquiry involved in a ruling on a motion for summary judgment or for a directed verdict necessarily implicates the substantive evidentiary standard of proof that would apply at the trial on the merits." 477 U.S. at 252, 106 S.Ct. at 2512. There, like here, the clear and convincing evidence standard applied. The Court described the trial judge's summary judgment inquiry as to whether a genuine issue exists not to be whether there is any evidence but "whether the evidence presented is such that a jury applying that evidentiary standard could reasonably find for either plaintiff or defendant." Id. at 255, 106 S.Ct. at 2514. If there is insufficient evidence upon which a jury could find for the party upon which the onus of proof is imposed, summary judgment is warranted.
Based on the record before me, I conclude that Defendants' testimony is insufficient, as a matter of law, to rebut the evidence of fraudulent intent. See Meinen, supra, 232 B.R. at 843 (concluding that defendants "clearly have not carried [their] burden since they have yet to produce any proof that any of the deposits in question, let alone each of the deposits, were used to satisfy reasonable and necessary expenses of the debtor."); County of Butler v. Brocker, 455 Pa. 343, 348, 314 A.2d 265, 268-69 (Pa. 1974) (ruling on record consisting of pleadings and deposition of the appellee-husband, that appellees' self-serving statement alone, that the conveyance of property from husband to himself and his wife was made for tax probate purposes, "did not constitute `clear and satisfactory' evidence of an untainted conveyance). Their testimony is not "clear and satisfactory evidence" that the "transfers were fair." Consequently, the record, taken as a whole, could not lead the trier of fact to find for the defendants on this issue. The transfers of the asset sale proceeds, which total $173,718.00, are fraudulent under § 5104(a)(1).
ii.
Weekly Franbern Payments. A different situation obtains with respect to the weekly payments from Franbern. The Trustee argues that these payments were in effect a return of equity from Debtor's ownership interest, presumably supplementing the $35,000 distribution in June 2000 made to Debtor and Mrs. Dawley by Greenstein for Debtor's interest. I find no evidence to support this theory. On this record it appears that Debtor was employed by Franbern as a manager. There is evidence of weekly payments being made to him by Franbern as far back as April 26, 1999, almost one year prior to the entry of the judgment and prior to the June 2000 sale. They continued in the same amount thereafter for one and a half years. The increase to $794 was described as a raise Greenstein gave him "to stay out of the office," and while it raises the question of what consideration Franbern was receiving for the payments to Debtor, there is no evidence that the additional compensation is a response to the Harris judgment.
Defendants assert that the transfers were fair because Debtor, in making the deposits into the joint account, simply continued the practice which he had followed through the many years of his marriage. The record supports Debtor's contention that it was his longstanding custom and regular practice over many years of marriage to deposit his checks into the Defendants' joint account. By depositing his weekly payments from Franbern into Defendants' joint account, Debtor merely continued that practice. Contrary to the handling of the Coin Call and Franbern sale proceeds, there is no evidence that the Debtor acted with any different state of mind in making the weekly deposits after he became indebted to the Estate of Harris.
Notably I have not applied the presumption to shift the burden to Defendants to prove by clear and convincing evidence that the regular and historic weekly deposits were fair, i.e., that Debtor, not Mrs. Dawley, received consideration for the deposits in the joint account. I am mindful of the legislative commentary to § 5104 that endorses a close scrutiny of a family transfer but suggests that the relationship alone should not be dispositive without other evidence of fraud. Likewise I note the Third Circuit's approval in Green of the trial court's consideration of the totality of the circumstances so as not to "wear blinders" in applying the presumption. I am satisfied on this record that these transfers are reflective of the common practice of a married couple depositing their regular income in a joint bank account. Without more, these transfers do not have the hallmark of "collusion" that the presumption is intended to address. Accordingly, summary judgment will not be granted as to the Franbern weekly payments.
B. Intent to Defraud Under § 548(a)(1)(A)
Section 548(a)(1)(A) provides, in pertinent part, that the "Trustee may avoid any transfer of an interest of the debtor in property . . . that was made . . . within one year before the date of the filing of the petition, if the debtor voluntarily or involuntarily — made such transfer . . . with actual intent to hinder, delay or defraud any entity to which the debtor was or became, on or after the date that such transfer was made . . ., indebted." 11 U.S.C. § 548(a)(1)(A). Because a debtor is unlikely to admit that his intent was fraudulent, a court may "deduce fraudulent intent from all of the facts and circumstances of the case." Carmel v. River Bank America (In re FBN Food Services, Inc.), supra, 185 B.R. at 275 ( quoting Devers v. Bank of Sheridan, Mont. (In re Devers), 759 F.2d 751, 764 (9th Cir. 1985)). "Courts often look to the `badges of fraud' as circumstantial evidence. Frierdich v. Mottaz, 294 F.3d 864, (7th Cir. 2002). These "badges" include:
(1) lack or inadequacy of consideration;
(2) the family, friendship or close associate relationship between the parties;
(3) the retention of possession, benefit or use of the property in question, although title exists in another entity;
(4) the financial condition of the party sought to be charged both before and after the transaction in question;
(5) conveyance of all of the debtor's property;
(6) secrecy of the conveyance;
(7) existence of a trust or trust relationship between the debtor and the person to whom the property was conveyed;
(8) the existence or cumulative effect of a pattern of series of transactions or a course of conduct after the incurring debt, onset of financial difficulties, or pendency or threat of suit by creditors;
(9) the instrument affecting the transfer suspiciously states it is in fact bona fide;
(10) the debtor makes a voluntary gift to a family member; and
(11) the general chronology of events and transactions under inquiry.
Morse Operations, Inc. v. Goodway Graphics of Virginia, Inc. (In re Lease-A-Fleet), 155 B.R. 666, 674 (Bankr. E.D. Pa. 1993). These "badges" are similar to the factors set forth in § 5104(b) of the UFTA.
(a) Sale of Coin Call
As noted above, Debtor received a total of $138,718 from Elgee-Savar's purchase of Coin Call. I have outlined in detail the manner in which those payments were made and handled by the Debtor and Mrs. Dawley, and that discussion is incorporated herein. I have already concluded that the change in the recipient of the Elgee-Savar installment sale proceeds from Debtor to Debtor and Mrs. Dawley within less than a week after the State Court entered its final judgment against Debtor is compelling circumstantial evidence of an intent to defraud the Estate of Harris and found liability under 12 Pa C.S.A. § 5104. Accordingly, I also conclude that the Trustee's has proven that Debtor had the intent to defraud the Estate of Harris of the payments which Elgee-Savar made to him and his wife from August 29, 2000 to July 15, 2001, the avoidance period of § 548. These payments which total $47,558.85 shall also be avoided pursuant to § 548(a)(1)(a).
This total consists of eight payments of $2,063.81 (checks dated 9/15/00, 10/16/00, 11/15/00, 12/15/00, 1/15/01, 2/15/01, 3/15/01 and 5/14/01) and one payment of $31,048.37. See Plaintiff's Exhibits 10-11 (copies of checks). Because of the shorter reach back period under § 548, fewer than all the transfers of the Elgee-Savar proceeds can be recaptured under § 548.
(b) Weekly Payments from Franbern
Based on the evidence in the record, I cannot conclude, as a matter of law, that Debtor acted with an intent to hinder, delay or defraud the Estate of Harris when he deposited his weekly payments from Franbern into Defendant's joint account. To the extent that § 5104 of the UFTA places a heavier burden on the Defendants to show these transfers to be fair, it stands to reason that my conclusion under a lesser burden will be the same as above. By establishing that it was Debtor's longstanding custom and regular practice over many years of marriage to deposit his weekly compensation checks into the Defendants' joint account, I cannot find that Debtor acted with any different state of mind in making these deposits after he became indebted to the Estate of Harris (i.e., with the intent to defraud the Estate of Harris by making the deposits) than he had beforehand. The Trustee has not proven her claim under § 548(a)(1)(A).
C. Constructive Fraud Under Both Statutes (i)
Sections 5104(a)(2)(ii) and 5105 of the UFTA are constructive fraud provisions. Section 5104(a)(2)(ii) states, in pertinent part:
A transfer made . . . or obligation incurred by a debtor is fraudulent as to a creditor, whether the creditor's claim arose before or after the transfer was made . . . if the debtor made the transfer. . . . without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor . . . intended to incur, or believed or reasonably should have believed that the debtor would incur, debts beyond the debtor's ability to pay as they became due.
12 Pa. C.S.A. § 5104(a)(2)(ii). Section 5105 states, in pertinent part:
A transfer made . . . by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made . . . if the debtor made the transfer . . . without receiving a reasonably equivalent value in exchange for the transfer . . . and the debtor was insolvent at that time or the debtor became insolvent as a result of the transfer[.]12 Pa.C.S.A. § 5105.
Section 5105 of the UFTA is similar to § 354 of the UFCA which stated:
Every conveyance made and every obligation incurred by a person who is or will be thereby rendered insolvent, is fraudulent as to creditors, without regard to his actual intent, if the conveyance is made or the obligation is incurred without fair consideration.
39 P.S. § 354 (repealed).
Each of these provisions requires a showing regarding the Debtor's financial situation. Section 5104(a)(2)(ii) applies only if the debtor "intended to incur, or believed or reasonably should have believed that the debtor would incur, debts beyond the debtor's ability to pay as they became due." Section 5105 applies only if the debtor "was insolvent at the time of the transfer or the debtor became insolvent as a result of the transfer." The Trustee has failed to show that any of these financial requirements are met.
In her brief, the Trustee contends that Debtor was "insolvent under applicable law from before the March 1, 1999 Coin Call sale because he was indebted to Harris and Harris had started suit." Trustee's Brief at 7. See also Trustee's Brief at 21 ("Harris's claim arose at least in November 1998 when the summons was filed and William Dawley was in debt or insolvent at that time."). While the Trustee has established that Debtor was in debt, this fact does not prove insolvency. Such proof would require evidence regarding Debtor's total financial situation at the relevant time. What assets did he own? What other debts did he have? The Trustee's only other reference in her brief to the Debtor's financial condition with regard to the requirements of § 5104(a)(2)(ii) or § 5105 is her statement of law that "[a] debtor, who is generally not paying his debts as they become due, is presumed to be insolvent." See Trustee's Brief at 21. While this statement of law is correct,see 12 Pa.C.S.A. § 5102(b), the Trustee made no effort to apply this legal principle to the record before me. She failed to identify a date by which the Debtor was "generally not paying his debts" as they became due and she failed to support her designated date with evidence of non-payments. While the record is clear that the Debtor was not paying Harris, were there other debts not being paid? Is the failure to pay this one, albeit large debt, sufficient to meet the statutory test? These questions were not addressed.
The Trustee failed to cite to any evidence in the record to support her assertion that the Debtor was insolvent in November of 1998.
The transfers at issue occurred over a substantial period of time: (i) the deposits of Debtor's weekly payments from Franbern into the joint account occurred from April 26, 1999 through August 21, 2001; (ii) the deposits of Debtor's payments from Elgee-Savar for Coin Call occurred between March 1, 1999 and July 19, 2001; and (iii) the execution of the agreement to sell his ownership interest in Franbern on June 28, 2000. Debtor must specifically identify the evidence which she contends proves the requirements of § 5104(a)(2)(ii) and the requirement of § 5105 that the Debtor was insolvent at the time or became insolvent as a result of the transfers at issue.
The Trustee's failure to make a case on the Debtor's financial condition may be attributable to her view of the burdens of proof on this element of § 5104(a)(2) and § 5105. She contends that federal and state courts addressing constructive fraud cases have held that "once the Trustee shows that the transferor was in debt at the time of the transfer, the burden of proof then shifts to the transferee to demonstrate insolvency of the transferor and consideration." Trustee's Brief at 20. This shifting of the burden of proof clearly applied under the UFCA. However, there is no decision of the Pennsylvania courts that indicates whether the shifting burden continues under the UFTA.
Having found that the Debtor is liable under the actual intent standard of the UFTA and being prepared to grant summary judgment as to the asset sale proceed transfers, a finding of liability under another theory is superfluous as to the $173,718 judgment to be entered. However, as I have concluded that summary judgment is not warranted as to the Franbern weekly payments under the actual intent provision of both fraudulent conveyance laws, I must consider whether the Trustee can prevail under the more lenient constructive fraud theory. Needless to say, if the Trustee is correct that the burden to prove solvency resides with the Debtor upon a showing that he was in debt at the time of the transfer, she would prevail with respect to these transfers on constructive fraud grounds since Harris' judgment preceded all the transfers and Debtor has failed to adduce any evidence that would establish his solvency.
The continued vitality of the shifting burden of proof of insolvency under the UFTA was addressed in great length by my colleague the Honorable Kevin J. Carey in Liebersohn v. Campus Crusade for Christ, Inc. (In re C.F. Foods, L.P.), 280 B.R. 103, 112-115 (Bankr. E.D. Pa. 2002). He concluded that there is no shifting of the burden under the constructive fraud provisions in § 5104(a)(2) or 5105; rather the burden always remains on the plaintiff. In the absence of authoritative decisional law under UFTA, his analysis drew heavily from the Committee Comments to the § 5102 of UFTA. I quote from that source as did he:
The Third Circuit in 718 Arch Street Associates, Ltd. v. Blatstein (In re Blatstein), 192 F.3d 88, 98 (3d Cir. 1999), suggested that the shifting burden would continue to apply under the UFTA. However, as that case arose under UFCA and relied on actual, not constructive fraud grounds of liability, the comments were mere dicta.
Neither this chapter nor these comments comprehensively address such evidentiary and procedural matters as the standard of proof required to establish particular facts, allocation of the burden of proof and burden of persuasion, and the circumstances in which such burdens may shift. Certain specific points are addressed. See, e.g., subsection (b), Comment (5) to 12 Pa.C.S. § 5104 infra, and Comments (1) and (6) to 12 Pa.C.S. § 5108 infra. Except for points specifically addressed, these matters are left to the courts to determine, giving appropriate consideration to, among other things, the policy of construing uniform laws to make uniform the laws of those states that have enacted similar uniform laws . . ., the possible desirability of conformity with similar provisions of the Bankruptcy Code and, to the extent not inconsistent with this chapter, prior Pennsylvania case law. However, certain cases applying prior Pennsylvania law have stated in effect (if rephrased in the terms used in this chapter) that if a creditor establishes that the transferor was in debt at the time of a transfer, the burden shifts to the parties seeking to uphold the transfer to establish that the transferor received reasonably equivalent value or met the financial conditions required by 12 Pa.C.S. §§ 5104(a)(2) and 5105. Stinner v. Stinner, 300 Pa.Super. 351, 446 A.2d 651 (1982); In re Glenn, 108 B.R. 70 (Bankr. W.D. Pa. 1989). That principle is an archaism and has not been consistently followed (compare, e.g., In re Joshua Slocum, Ltd., 103 B.R. 610 (Bankr. E.D. Pa. 1989), aff'd. mem., 121 B.R. 442 (E.D. Pa. 1989)), and in any event should not be followed in applying this chapter.
Id. at 114 ( quoting 12 Pa.C.S.A. § 5102, Committee Comment — 1993, No. 6 (1999) (emphasis added). Given the clarity of this legislative directive, I find that I must agree withC.F. Foods that the burden of proof for establishing insolvency is no different under the UFTA than it is under § 548, i.e., it belongs to the plaintiff. Since the Trustee's evidentiary record fails to establish the financial condition that is a condition to avoidance of a transfer, summary judgment under a constructive fraud theory is unwarranted.
Compare Committee Comment regarding 12 Pa.C.S.A. § 5104 which makes no similar comment about the shifting burden for husband/wife transfers.
(ii)
The constructive fraud provision of the Bankruptcy Code is contained in § 548(a)(1)(B) which provides, in relevant part:
The trustee may avoid any transfer of an interest of the debtor in property . . . that was made within one year before the date of the filing of the petition, if the debtor voluntarily or involuntarily — . . . received less than a reasonably equivalent value in exchange for such transfer or obligation; and . . . was insolvent on the date that such transfer was made . . . or became insolvent as a result of such transfer. . . . or . . . intended to incur, or believed that the debtor would incur, debts that would be beyond the debtor's ability to pay as such debts matured.
11 U.S.C. § 548(a)(1)(B). To utilize this provision, the Trustee must establish that: (i) Debtor had an interest in the property; (ii) the interest was transferred within one year of the filing of his bankruptcy petition; (iii) he received less than equivalent value in exchange for the transfer; and (iv) he was insolvent at the time of the transfer or became insolvent as a result thereof or intended to incur, or believed that he would incur, debts that would be beyond his ability to pay them as they became matured. In re Gutpelet, 137 F.3d 748, 751 (3d Cir. 1998). Having found that the Trustee failed to meet her burden to prove that the Debtor was insolvent at the time of the transfer or became insolvent as a result thereof or intended to incur, or believed that he would incur, debts that would be beyond his ability to pay as they matured, her claim of constructive fraud under § 548(a)(1)(B)(i) or § 548(a)(1)(B)(iii) also has not been sustained on summary judgment.
While the drafters of the Bankruptcy Code included a presumption of insolvency in the preference avoidance provision, they did not do likewise with respect to fraudulent transfers. 11 U.S.C. § 547(f) (debtor presumed to be insolvent on and during 90 days immediately preceding the petition date).
IV. 11 U.S.C. § 550 — Judgment Against Transferee
The Trustee seeks a judgment against both defendants, jointly and severally, for the value of the property transferred. Pursuant to § 550 of the Bankruptcy Code, to the extent that a transfer is avoided under sections 544 or 548:
[T]he trustee may recover, for the benefit of the estate, the property transferred, or, if the court so orders, the value of such property, from —
(1) the initial transferee of such transfer or the entity for whose benefit such transfer was made; or
(2) any immediate or mediate transferee of such initial transferee.
The individual who is the first to receive property is the "initial transferee"; the second person to receive the property is the "immediate transferee." Bay Plastics, Inc. v. BT Commercial Corp. (In re Bay Plastics, Inc.), 187 B.R. 315, 325 n. 16 (Bankr. C.D. Cal. 1995). Initial transferees are subject to strict liability under § 550(a). Leonard v. Mountainwest Financial Corp. (In re Whaley), 229 B.R. 767, 776 (Bankr. D. Minn. 1999). Immediate or mediate transferees have a defense available to them. A trustee may not recover from an immediate or mediate transferee who "takes for value, . . . in good faith, and without knowledge of the voidability of the transfer avoided." 11 U.S.C. § 550(b).
The Trustee argues that Mrs. Dawley is the initial transferee and as such she is liable both jointly and individually in the amount of the transfers. In support she cites cases that have imposed liability on a spouse who receives transfers from the other spouse that are found to be actually or constructively fraudulent. Notably in all of them, as Defendants point out, the property was transferred to the spouse alone. Defendants contend that because the Debtor retained an interest in the transferred property, a different result should obtain.
Defendants also argue that joint and several liability cannot be imposed because the Trustee cannot prove that Mrs. Dawley received a fraudulent transfer or that Mr. Dawley was insolvent, and because the Dawleys have accounted for all the money received by them since 1998 as ordinary and necessary living expenses and deposited their funds in a joint account for many years. They also curiously state that § 550 is not applicable because no transfers have been avoided. These arguments have been addressed elsewhere and are not responsive to the present question, i.e., having found fraudulent transfers, what is the Trustee's remedy when the property no longer exists? They also contend that it is not possible to determine whether Mrs. Dawley is an initial transferee at this stage of the case "as this is a mixed question of fact and law." Defendants' Brief at 15-18. I respectfully disagree. All the facts about the transfers have been proven so that application of the law to those facts enables a determination to be made.
The fraudulent transfers at issue here consist of (i) the payment to Debtor and his wife for the sale of Debtor's interest in Franbern, (ii) the payments from Elgee-Savar to "William and Judith Dawley" (rather than Debtor) and deposited in their joint account; (iii) the payment from Elgee Savar made payable to Debtor and his wife and deposited in her individual Mellon account and subsequently withdrawn by her and placed in a house safe.
The issue suggested by Defendants' argument although not clearly framed is whether Mrs. Dawley can be held liable individually when, as it appears, the initial transferee was both Mr. and Mrs. Dawley. In other words, as the property that was transferred from the Debtor to himself and Mrs. Dawley presumptively became entireties property, see, e.g., Spinelli v. Spinelli, 264 F. Supp. 107, 110-111 (E.D. Pa. 1967); Gilliland v. Gilliland, 751 A.2d 1169, 1172 (Pa.Super. 2000), can a judgment be entered against her "severally" that will reach her individual assets.
Defendants fail to acknowledge that with respect to the last transfer, i.e., the $31,048 deposit into Mrs. Dawley's Mellon account, the Trustee's cases are directly on point. While the initial transferee was Mr. and Mrs. Dawley, Mrs. Dawley was the mediate transferee of the check from Elgee-Savar for $31,048.37 because it was deposited into her individual savings account rather than into Defendants' joint account. Since she did not take for value, she is not entitled to the defense under § 550(b)(1). She is solely liable under § 550 for $31,048.37, and Defendants' argument is overbroad when applied to this transfer. However, since I find Mr. and Mrs. Dawley jointly and severally liable for this transfer as initial transferees, this is but another theory of recovery of the same transfer from Mrs. Dawley.
In Lichtenstein v. Buttery (In re Computer Personalities Systems, Inc.), 2002 WL 31988134 (Bankr. E.D. Pa. 2002), a fraudulent transfer of $20,000 was made to husband and fraudulent transfers aggregating $135,000 were made solely to wife. The entire $155,000 was subsequently deposited into the joint account of husband and wife. The defendants argued that to the extent the transfers were fraudulent, only judgment of $20,000 and $135,000 should be entered against each respectively. I disagreed, and imposed joint and several liability in the amount of $135,000 against husband and wife. I found that each was an initial transferee for the transfers made to him/her and each was an immediate transferee for the transfer made into the joint account by reason of their right to exercise control over the joint account. I found support for this view in O'Neal v. Southwest Missouro Bank of Carthage, 168 B.R. 941, 961 (Bankr. W.D. Mo. 1994), which found under Missouri law and § 550 that the debtor's wife was a mediate transferee for avoided transfers where the debtor's president received $61,551.43 in an unauthorized post-petition transfer from the debtor and deposited it into the couple's joint checking account. As mediate transferee, the wife was liable for the $61,069.43. Defendants have provided no authority, nor has my independent research revealed any case, to suggest that this conclusion is incorrect. Consequently, I conclude that Defendants are liable jointly and severally under § 550, as the initial transferees, for the total value of the property fraudulently transferred which is $173,718.00.
But see Hoerner v. Elkins (In re Elkins), 94 B.R. 935, 938 (Bankr. W.D. Mich. 1988). In Elkins, the court concluded that since the transfer found fraudulent was made to the debtor and his wife as tenants by the entirety, they as tenants by the entirety are the initial transferees and the tenancy by the entirety is the entity for whose benefit the transfer was made. Since the issue was whether another party was the initial transferee and as such strictly liable, the Court did not address the nature of the judgment against the tenant by entirety entity. However, since under Pennsylvania law a tenancy by entireties is no longer a distinct legal entity, Napotnik v. Equibank and Parkvale Association, 679 F.2d 316, 319 (3d Cir. 1982), but rather a form of ownership of property when parties are husband and wife, it is unlikely that the Pennsylvania Supreme Court would find the transferee to be the tenancy by the entirety as the Elkins Court did. Gagliardi v. Chicago Title Ins. Co. (In re Gagliardi), 2002 WL 31478205, at *3 (Bankr. E.D. Pa. Oct. 22, 2002).
V. Summary
Based on the foregoing discussion, the Trustee is entitled to partial summary judgment on her claims under 11 U.S.C. § 544(b), 12 Pa.C.S.A. § 5104(a) and 11 U.S.C. § 550(a) in her favor and against Defendants jointly and severally in the amount of $173,718.00. An Order consistent with this Memorandum Opinion shall be entered.
ORDER
AND NOW, this 10th day of August 2005, upon consideration of the Trustee's Motion for Summary Judgment on the Issue of Fraudulent Transfer, or in the alternative, for Collateral Estoppel Findings (the "Motion") and for the reasons stated in the accompanying Memorandum Opinion;
It is hereby ORDERED and DECREED that:
1. The following transfers are avoided pursuant to 11 U.S.C. § 544(b) and 12 Pa.C.S.A. § 5104(a)(1):
a). The transfer by William Dawley ("Debtor") to himself and his wife, Judith Dawley, of his 50% ownership in Franbern, Inc. for which he received $35,000;
b). Debtor's transfers to himself and his wife of the $138,718 which he received from Elgee-Savar's purchase of Coin Call, Inc.
2. The following transfers are avoided pursuant to 11 U.S.C. § 548(a)(1): the payments which Elgee-Savar made to Debtor and his wife, Mrs. Dawley, from August 29, 2000 to July 15, 2001, totaling $47,558.85.
3. Partial Summary Judgment is GRANTED in favor of the Trustee and against the defendants jointly and severally in the amount of $173,718.00.
The Trustee has sought the recovery of $324,384. The difference between the amount awarded and the amount claimed are $150,670 of weekly payments made by Franbern to the Debtor, $97,000 of which were unproven on this record. As I will not be the fact finder for any future trial, I will schedule a settlement conference with counsel and the parties to see if I can assist in bringing this long and costly dispute to closure.