Taylor, In re, 96-4100

• Decision Date: 12 January 1998
• Docket Number: No. 96-4100,96-4100
• Citation: 133 F.3d 1336
• Parties: Bankr. L. Rep. P 77,605, 98 CJ C.A.R. 149, 15 Colo. Bankr. Ct. Rep. 22 In re Hal TAYLOR, Debtor. Julia W. TAYLOR, Appellant, v. Stephen W. RUPP, Trustee, Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1336

133 F.3d 1336

Bankr. L. Rep. P 77,605, 98 CJ C.A.R. 149,

15 Colo. Bankr. Ct. Rep. 22

In re Hal TAYLOR, Debtor Julia W. TAYLOR, Appellant, v. Stephen W. RUPP, Trustee, Appellee.

No. 96-4100.

United States Court of Appeals Tenth Circuit.

Jan. 12, 1998.

J. Kent Holland of Anderson & Holland, Salt Lake City, UT, and Brenda Flanders of Flanders & Associates, Salt Lake City, UT, for Appellant.

Jeffrey E. Nelson of Van Cott, Bagley, Cornwall & McCarthy, Salt Lake City, UT, for Appellee.

Before MURPHY and LOGAN, Circuit Judges, and MILES-LaGRANGE, District Judge. ^*

LOGAN, Circuit Judge.

Julia W. Taylor (Julia) appeals the district court's judgment imposing a trust for the benefit of creditors upon real and personal property titled in her name. In an earlier proceeding, her husband, Harold Taylor (Harold), was denied discharge in bankruptcy on the basis that he had willfully and fraudulently omitted material information from his statements and schedules. Steven W. Rupp, bankruptcy trustee, then brought this proceeding against Julia, claiming that Harold's transfers to Julia of the assets at issue here were void or voidable as fraudulent conveyances or, in the alternative, that Harold had equitable interests in them such that the court should impose a constructive or resulting trust.

The bankruptcy judge determined that Harold retained a one-half equitable interest in the couple's Park City home even though he had conveyed his share of a joint tenancy title to Julia seven years before when he was solvent, and that this equitable interest was part of Harold's bankruptcy estate. The judge imposed a resulting and constructive trust for the benefit of creditors on an undivided one-half interest in the home. The judge also determined that the bankruptcy estate was entitled to a money judgment against Julia for $5,743.50, one-half the allowance for a jointly owned Jeep the couple traded in on another, which they titled in Julia's name alone, about two weeks before Harold filed bankruptcy. The district court summarily affirmed. ¹ Julia has appealed both determinations.

I

We have no problem affirming the judgment respecting the Jeep transaction. In 1991 the Taylors purchased a 1990 Jeep and titled it jointly. In June 1992, seventeen days before Harold filed for bankruptcy, they traded that Jeep in as partial payment, receiving $11,487 credit, for a new 1993 Jeep Grand Cherokee titled only to Julia.

Under both the Uniform Fraudulent Transfer Act, Utah Code Ann. §§ 25-6-1 through -13 (1988), and the Bankruptcy Code, 11 U.S.C. § 548(a)(1), when a person has transferred his assets with actual intent to hinder, delay or defraud his creditors, such a transfer can be avoided. Whether the trustee must show actual fraud by a clear and convincing standard, see, e.g., Glinka v. Bank of Vermont (In re Kelton Motors, Inc.), 130 B.R. 170, 179 (Bankr.D.Vt.1991), or only by a preponderance of the evidence, see Thompson v. Jonovich (In re Food & Fibre Protection, Ltd.), 168 B.R. 408, 418 (Bankr.D.Ariz.1994), we need not decide because, as the court found, the trustee's evidence met the higher standard.

The Uniform Fraudulent Transfer Act includes a nonexclusive list of "badges of fraud" that may be considered as actual evidence of a debtor's intent to defraud. The factors are:

(a) the transfer or obligation was to an insider;

(b) the debtor retained possession or control of the property transferred after the transfer;

(c) the transfer or obligation was disclosed or concealed;

(d) before the transfer was made or obligation was incurred, the debtor had been sued or threatened with suit;

(e) the transfer was of substantially all the debtor's assets;

(f) the debtor absconded;

(g) the debtor removed or concealed assets;

(h) the value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred;

(i) the debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred;

(j) the transfer occurred shortly before or shortly after a substantial debt was incurred; and

(k) the debtor transferred the essential assets of the business to a lienor who transferred the assets to an insider of the debtor.

Utah Code Ann. § 25-6-5(2) (1988). When one or more of these badges are present fraudulent intent can be inferred. Likewise, under 11 U.S.C. § 548(a)(1) bankruptcy courts consider similar badges of fraud as evidence of actual fraudulent intent. See Max Sugarman Funeral Home, Inc. v. A.D.B. Investors, 926 F.2d 1248, 1254 (1st Cir.1991).

As the bankruptcy judge pointed out, in this case there are several badges of fraud. Harold transferred his half interest in the 1990 Jeep to an insider, his wife, two weeks before declaring himself insolvent. In his bankruptcy filing, Harold listed Lynn Knight as his only creditor. Knight had sued Harold in June 1990 in relation to a real estate transaction, and received a $36,879 judgment against him, on which she had pursued a writ of execution in December 1991. The Jeep title transfer occurred after that judgment and only a few days before Harold's filing as a bankrupt. Further, Harold concealed the transfer when he did not disclose it in his statement of financial affairs or list it as an asset in his schedule when he took bankruptcy.

Julia claims that the 1990 Jeep was improperly titled, that it had been purchased with a trade-in from a vehicle which should have been titled in her name, and that the two were merely correcting this error when they purchased the 1993 Jeep. The bankruptcy judge rejected these arguments and also Julia's argument that she used her money to purchase both of the vehicles. The record supports the bankruptcy judge's determination on this issue.

II

A

We have much more difficulty with the findings and conclusions respecting the real estate transfer.

Harold and Julia Taylor purchased their Park City home in November 1973 for approximately $70,000, which they financed by paying $14,000 down and taking a mortgage of approximately $56,000. They took title to the home in joint tenancy. In 1982 Harold suffered a heart attack. In May 1985 he executed and recorded a warranty deed conveying his interest in the home to Julia, so that thereafter it was titled solely in her name. Shortly after the 1985 conveyance to Julia they retired the remaining $25,000 mortgage, with funds which the bankruptcy judge stated "may have come from an inheritance received by" Julia. Appellant's App. 26. ²

The bankruptcy judge found that until 1985 Harold's income from his real estate business was the primary source for the mortgage payments. The court also found that, although until around 1985 Harold earned a much higher income than Julia, they treated the marriage as a financial partnership and considered income earned by either spouse as part of their joint family funds. Both continued living in the home, sharing the expenses of taxes, utilities, and insurance--with many payments made by checks signed by Harold.

From 1986 to 1989 Harold's income from his real estate business declined dramatically, partly because he was serving as mayor of Park City. During this time Julia's income increased. In 1989 Harold suffered a stroke and ceased earning any income. He began receiving social security benefits in 1992. In March 1989, the Taylors cosigned a $60,000 line of credit secured by the Park City home and utilized at least $29,000 of this line of credit for living expenses. Harold did not include any equitable interest in the Park City home in his schedule of assets filed in the bankruptcy proceeding.

B

Julia first argues that the statute of limitations barred the trustee's equitable claims against the Park City home. The trustee filed suit in March 1994. The applicable Utah statute of limitations on equitable claims is four years. See Utah Code Annotated § 78-12-25(3) (four-year statute of limitations on actions "for relief not otherwise provided for by law"); see also American Tierra Corp. v. City of West Jordan, 840 P.2d 757, 760-61 (Utah 1992) (applying § 78-12-25(3) to equity action). The bankruptcy judge determined that the four-year statute began to run in July 1992, when Harold filed his bankruptcy schedules and did not claim an equitable interest in the Park City home. She said this failure to list his equitable interest was the first time Harold took a position contrary to the equitable interest claimed by the plaintiffs. See Carnesecca v. Carnesecca, 572 P.2d 708, 711 (Utah 1977). Julia counters that the statute began to run when Harold transferred his interest and recorded the deed in May 1985. She quotes from Baker v. Pattee, 684 P.2d 632 (Utah 1984), that "[n]o resulting trust could come into being, as the plaintiff did not prove that [the grantor] intended anything but an unconditional conveyance of her property.... The date of delivery of the deed set the period of limitations in motion and those actions were barred years before [the grantor's] death." Id. at 638.

In Baker, the Utah Supreme Court affirmed the district court's decision because it found that the evidence did not support a resulting trust. "Had [a resulting trust] been the finding in the instant case, the statute of limitations would not begin to run until the trustees affirmatively repudiated the trust. Therefore this action would not be barred." 684 P.2d at 635 (citing Parks v. Zions First Nat'l Bank, 673 P.2d 590 (Utah 1983)). Baker indicates that the statute of limitations is intertwined with the substantive question whether Harold had an equitable interest in the home. If the bankruptcy judge correctly determined that Harold retained an equitable interest, under Utah law the statute of limitations would not have run until he took an action to repudiate that interest when he filed his bankruptcy schedules. If, however, Harold did not retain any equitable interest, then the...