Anderson v. Architectural Glass Constr., Inc. (In re Pfister), C/A No. 09-05670-HB
| Decision Date | 04 April 2012 |
| Docket Number | C/A No. 09-05670-HB,Adv. Pro. No. 10-80162-HB |
| Court | U.S. Bankruptcy Court — District of South Carolina |
| Parties | In re, Patricia Susan Pfister, Debtor(s). Robert F. Anderson, Trustee, Plaintiff(s), v. Architectural Glass Construction, Inc., Defendant(s). |
The relief set forth on the following pages, for a total of 14 pages including this page, is hereby ORDERED.
________________________
US Bankruptcy Judge
District of South Carolina
Plaintiff Robert F. Anderson, Chapter 7 Trustee, seeks to avoid a transfer of property made by Debtor Patricia Susan Pfister to Defendant Architectural Glass Construction, Inc.1 Trustee asserts that the transfer is fraudulent and avoidable and that he is entitled to judgment in his favor pursuant to all or a combination of the following: 11 U.S.C. § 548(a)(1)(A) and (B) (2010),2 § 544(b), § 550(a), S.C. Code Ann. § 27-23-10 (Supp. 2010) ("Statute of Elizabeth"), and the Federal Debt Collection Procedure Act ("FDCPA"), 28 U.S.C. § 3304(a) and (b)(1)(B) (2010).
This Court has jurisdiction over this matter under 28 U.S.C. §§ 157 and 1334 and Local Civil Rule 83.IX.01, DSC. This matter is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2)(A) and (H). Venue of this proceeding is proper in this district pursuant to 28 U.S.C. §§ 1408 and 1409.
The Court makes the following findings of fact and conclusions of law pursuant to Fed. R. Civ. P. 52, made applicable to this adversary proceeding by Fed. R. Bankr. P. 7052.
1. Defendant is in the business of designing and constructing glass structures (i.e., sunrooms, greenhouses, etc.). Debtor is a residential real estate agent. Her husband, Phillip W. Pfister ("Pfister"), is the sole owner and operator of Defendant. Debtor is not and has never been directly involved with or employed by Defendant; however, Debtor's son was employed by Defendant for several years and Pfister derives income from Defendant.
2. On May 10, 2001, Debtor and Pfister purchased undeveloped real property located at 3098 Highway 101 South, Greer, South Carolina ("Property") for approximately $74,000. The deed was properly recorded in Spartanburg County on June 13, 2001, in Book 732, Page 725.
3. The purchase of the Property was financed entirely by a loan from BB&T. The loan was secured by a mortgage on the Property executed by Debtor and Pfister. The mortgage was properly recorded in on June 13, 2001, in Book 2504, Page 213.
4. Based on the advice of their accountant, the Property was titled and owned in Debtor's and Pfister's individual names. Pfister testified that he and Debtor were advised that Defendant could pay rent for use of the Property and Debtor and Pfister could receive tax advantages from this arrangement.
5. Thereafter, two buildings were erected on the Property: a warehouse; and a second warehouse with a showroom. The construction was financed by various local banks with loans made in Defendant's name. These loans were secured by mortgagesencumbering the Property executed by Debtor and Pfister. Each new mortgage would pay off the prior mortgage.3
6. On October 22, 2004, Defendant executed a promissory note for $355,000 in favor of Greer State Bank, secured by a mortgage on the Property executed by Debtor and Pfister ("First Mortgage).
7. Although the Property and its buildings were used by Defendant, rental payments were never made to Debtor or Pfister as originally contemplated. Instead, Defendant made all the mortgage payments and covered expenses from funds in its bank accounts.
8. In 2008, Defendant opened an additional business location in Wichita, Kansas. During late 2008 and early 2009, Pfister spent most of his time at the Wichita office while his son operated Defendant's South Carolina office. In December 2008, Pfister approached Greer State Bank regarding a loan related to the Wichita expansion. On December 28, 2008, the bank agreed to loan $87,000, and Defendant executed a note in that amount on December 31, 2008. This note was to be secured by the Property, and was an amount loaned in addition to any outstanding balance encumbering the Property at that time.
9. Also on December 31, 2008, Debtor and Pfister executed a deed transferring the Property to Defendant ("Transfer"). The deed was properly recorded on January 13, 2009, and states that the consideration paid by Defendant to Debtor and Pfister for the Property was ten dollars ($10.00). There was no evidence of any additional amounts paid by Defendant to Debtor and Pfister at that time.
10. The evidence indicated that the Transfer was made because Greer State Bank made an error in the loan documents by placing Defendant's name on a mortgage securing the $87,000 note—not the names of the owners, Debtor and Pfister. Debtor and Pfister testified that they were advised that the easiest way to alleviate this problem and complete the loan transaction was to transfer title of the Property to Defendant. Thereafter, Debtor and Pfister voluntarily transferred their interests to Defendant so that Defendant could receive the loan. Execution of the relevant documents was somewhat pressing because Pfister was leaving for Defendant's Wichita office and would be staying there for an extended period of time.
11. Three employees of Greer State Bank testified that the Transfer was made to quickly correct the bank's error and as a last-minute fix and condition of closing the loan. After considering the testimony of the witnesses, and accounting for their demeanor and any bias or interest in this matter, the Court finds as a fact that the Transfer was made by Debtor for reasons other than to intentionally hinder, delay, or defraud her creditors.
12. Debtor filed a voluntary petition for Chapter 7 relief on July 31, 2009.4
13. Debtor's bankruptcy schedules and statements included the following information:
Debtor transferred her ½ interest in the property located at 3098 Hwy 101 South, Greer SC 29651 to Arcitectural [sic] Glass Construction, Inc. At the time of the transfer the property was valued at approximately $540,000 and had first and second mortgages totalling [sic] approximately $391,000.5
Debtor's Amended SOFA corrected the information about the mortgages encumbering the Property at the time of the Transfer by decreasing the amount to $304,000.6
14. Appraiser, R. Bruce Owen, valued the Property at $470,000 less than a month before the Transfer,7 at $420,000 as of August 3, 2010, and then at $297,500 as of August 18, 2011.
15. From the evidence, the Court concludes that there was significant equity in Debtor's interest in the Property at the time of the Transfer.
16. Debtor was having significant financial difficulties in late 2008 and early 2009, and was unable to pay obligations when due and/or became insolvent as a result of the Transfer. Many of her financial problems arose from her involvement with a business owned by her daughter. Debtor guaranteed the lease obligations for that business as well as a working capital loan in 2006. However, the business failed and Debtor's daughter filed a voluntary petition for Chapter 7 relief on April 17, 2009.8 Because the payments on these obligations became delinquent, the creditors initiated pre-petition lawsuits in state court to collect on their debts and then filed proofs of claim in Debtor's bankruptcy case.9
17. When the bankruptcy was filed, Debtor owed various creditors that she was indebted to at the time of the Transfer, including the Internal Revenue Service ("IRS") for 2002, 2006 and 2007 taxes.10 Debtor's schedules indicate that at the time of her bankruptcypetition, her liabilities exceeded her assets.11 Debtor testified that her assets did not significantly change between the time of the Transfer and the time of the petition.
18. Several transactions have occurred since the Transfer that interfere with the practicality of avoiding the Transfer. Defendant and/or Greer State Bank have since altered or renewed the debt obligations and encumbrances that existed at the time of the Transfer.
Section 541 defines property of the estate and specifies that it includes "all legal or equitable interests of the debtor in property as of the commencement of the case." 11 U.S.C. § 541(a)(1). However, Section 541(d) provides:
Property in which the debtor holds, as of the commencement of the case, only legal title and not an equitable interest, such as a mortgage secured by real property, or an interest in such a mortgage, sold by the debtor but as to which the debtor retains legal title to service or supervise the servicing of such mortgage or interest, becomes property of the estate under subsection (a)(1) or (2) of this section only to the extent of the debtor's legal title to such property, but not to the extent of any equitable interest in such property that the debtor does not hold.
11 U.S.C. § 541(d). Defendant asserts that the Property would not constitute property of Debtor's estate had it not been transferred because Defendant was the equitable owner and Debtor only held bare legal title by virtue of a resulting or constructive trust.
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