Anderson v. Architectural Glass Constr., Inc. (In re Pfister), No. 12–2465.

CourtUnited States Courts of Appeals. United States Court of Appeals (4th Circuit)
Writing for the CourtDIANA GRIBBON MOTZ
Citation749 F.3d 294
PartiesIn re Patricia Susan PFISTER, Debtor. Robert F. Anderson, Plaintiff–Appellant, v. Architectural Glass Construction, Inc., Defendant–Appellee.
Docket NumberNo. 12–2465.
Decision Date17 April 2014

749 F.3d 294

In re Patricia Susan PFISTER, Debtor.
Robert F. Anderson, Plaintiff–Appellant,
v.
Architectural Glass Construction, Inc., Defendant–Appellee.

No. 12–2465.

United States Court of Appeals,
Fourth Circuit.

Argued: Dec. 11, 2013.
Decided: April 17, 2014.


[749 F.3d 295]


ARGUED: Richard I. Simons, Anderson & Associates, P.A., Columbia, South Carolina, for Appellant.
William Norman Epps, III, Epps, Nelson & Epps, Anderson, South Carolina, for Appellee. ON BRIEF: Marilyn E. Gartley, Anderson & Associates, P.A., Columbia, South Carolina, for Appellant.

Before MOTZ, KING, and SHEDD, Circuit Judges.


Reversed in part, vacated in part, and remanded by published opinion.
Judge MOTZ wrote the opinion, in which Judge KING joined. Judge SHEDD wrote a dissenting opinion.

DIANA GRIBBON MOTZ, Circuit Judge:

Seven months before declaring bankruptcy, Patricia Pfister transferred her interest in real property to Architectural Glass Construction, Inc. (“AGC”), a corporation wholly owned by her husband. After a trial, the bankruptcy court made findings of fact and concluded on the basis of those findings that this conveyance was constructively fraudulent. The bankruptcy court therefore ordered AGC to reimburse the bankruptcy estate in the amount of $43,500. The district court found no fault in the bankruptcy court's findings of fact, but nonetheless reversed. For the reasons that follow, we reverse in part, vacate in part, and remand the case to the district court for further proceedings consistent with this opinion.

I.

The following facts were found by the bankruptcy court or are otherwise undisputed.

On May 10, 2001, Mrs. Pfister and her husband, Phillip Pfister, acquired undeveloped

[749 F.3d 296]

real property in Greer, South Carolina. Branch Banking & Trust (“BB & T”), as mortgagee, entirely financed the transaction. Under the terms of the mortgage, Mr. and Mrs. Pfister granted the bank a security interest in the property and undertook to repay the loan.

Originally, Mr. Pfister intended to have his wholly owned corporation, AGC, buy the property. The company, not Mr. and Mrs. Pfister, would utilize the land. An initial contract specified AGC as the buyer, but on the date of purchase, Mr. Pfister changed his mind. On the advice of his accountant, Mr. Pfister opted to buy the land himself, then lease the property to AGC. This, he believed, would lower the company's taxes, benefiting him as the company's sole owner. In furtherance of this intent, Mr. Pfister titled the property in the name of himself and Mrs. Pfister. As Mr. and Mrs. Pfister both testified on repeated occasions, the decision to title the property in their names—not AGC's—was considered and intentional.

Ultimately, AGC never paid any rent to the Pfisters. Instead, AGC made mortgage payments directly to the bank. The Pfisters did not transfer title to AGC. Thus, although the company paid for the land, Mr. and Mrs. Pfister remained its record owners.

On January 24, 2002, the Pfisters refinanced their mortgage. In an agreement with South Trust Bank (“South Trust”), the Pfisters granted South Trust a security interest in the property in exchange for $168,000. In contrast to the mortgage with BB & T, the agreement with South Trust listed AGC as the borrower. As a result, the company bore legal responsibility for making the loan repayments. Of course, the new obligation did not change the parties' pattern of practice: AGC continued, as it always had, to shoulder the property's mortgage expense.

Over the next six years, the property was mortgaged several more times. In each case, Mr. and Mrs. Pfister granted the bank a security interest in the property. The mortgages differed, however, with respect to the identity of the borrower. One contract specified Mr. and Mrs. Pfister as the borrowers; others obligated AGC. Notwithstanding the borrower listed, AGC made all the loan repayments.

On December 31, 2008, AGC took out an $87,000 loan from Greer State Bank. As with the other loan agreements, Mr. and Mrs. Pfister pledged the property as collateral. In preparing the mortgage documents, however, the bank listed AGC, not Mr. and Mrs. Pfister, as the mortgagor. At closing, an attorney realized that AGC could not grant the mortgage because the company was not listed on the property's deed. To rectify the problem, Mr. and Mrs. Pfister deeded the property to AGC in exchange for ten dollars consideration. With AGC now the record owner, the bank processed the mortgage as drafted.

Seven months later, on July 31, 2009, Mrs. Pfister filed for Chapter 7 bankruptcy protection. Some months after that, the bankruptcy trustee moved to set aside the transfer of her interest in the property to AGC as a constructively fraudulent conveyance. In his complaint, the trustee alleged that Mrs. Pfister's one-half interest in the property had a value of $270,000, but that she had disposed of the property for nominal consideration. Because Mrs. Pfister was insolvent at the time of the transfer, the transaction was assertedly avoidable under 11 U.S.C. §§ 548(a)(1)(B) and 544(b).

After a two-day trial in which a number of witnesses testified, including both Mr. and Mrs. Pfister, the bankruptcy court found in the trustee's favor. It determined that Mrs. Pfister held a one-half

[749 F.3d 297]

interest in the property, which she transferred to AGC in December 2008 for less than “reasonably equivalent value.” In so holding, the court rejected AGC's argument that it had always owned the property by way of a resulting trust. The court concluded that prior to the December 2008 transfer, Mr. and Mrs. Pfister owned the property free from any interest of AGC. Accordingly, the court held that Mrs. Pfister's transfer of the property to AGC at that time-seven months before filing her bankruptcy petition-was a constructively fraudulent, voidable transfer.

The district court reversed. It accepted the facts as found by the bankruptcy court, but determined that AGC's use of the property and payment of the mortgage compelled reversal. The district court reasoned that the facts found by the bankruptcy court evidenced a resulting trust, pursuant to which AGC held equitable title to the property and Mrs. Pfister held only bare legal title. Because the district court concluded that the interest Mrs. Pfister held lacked any value at the time she conveyed it, the court held that Mrs. Pfister had not made a voidable, constructively fraudulent conveyance in December 2008.

The trustee noted a timely appeal.

II.

A bankruptcy estate includes all the property a debtor owns at the moment she files for bankruptcy. 11 U.S.C. § 541(a)(1). Under certain conditions, the bankruptcy estate also includes property the debtor disposed of before declaring bankruptcy. Specifically, the Bankruptcy Code permits the bankruptcy trustee to reclaim property the debtor fraudulently transferred before filing her petition. 11 U.S.C. §§ 544 & 548.1

The Bankruptcy Code bars both actual and constructive fraud. See id. § 548(a)(1). Constructive fraud, the type at issue here, obtains when in the two years preceding bankruptcy, an insolvent debtor transfers an asset for less than “reasonably equivalent value.” Id. § 541(a)(1)(B). If the debtor so transfers an asset, the trustee may avoid the transaction and reclaim the relinquished asset. Id. The transferee must surrender the property or provide the bankrupt's estate with the asset's cash equivalent. Id. § 550.

Although a trustee may reclaim a property interest that the bankrupt debtor has owned in the past, the trustee may not reclaim a greater property interest than that which the debtor actually owned. Mid–Atl. Supply, Inc. v. Three Rivers Aluminum Co., 790 F.2d 1121, 1124 (4th Cir.1986). This rule becomes particularly important in the context of trusts. A trust severs the legal and equitable interests in property, allowing the debtor to possess either the property's equitable interest (a valuable asset) or bare legal title (a valueless asset). Cf. id. at 1125;Epworth Children's Home v. Beasley, 365 S.C. 157, 616 S.E.2d 710, 718 (2005). Property in which the debtor holds “only legal title and not an equitable interest ... becomes property of the [bankruptcy] estate”—and so becomes available to satisfy the debtor's obligations—“only to the extent of the debtor's [bare] legal title.” 11 U.S.C. § 541(d). The equitable interest, owned by another,

[749 F.3d 298]

cannot be reached by the bankrupt debtor's creditors. Id.

Here, the parties dispute the operation of a resulting trust, and thus, the value of the property interest transferred by Mrs. Pfister to AGC. On the one hand, AGC contends that a resulting trust arose in its favor because it made all the payments on the mortgage, which provided the funds to buy the property. According to AGC, Mr. and Mrs. Pfister retained only bare legal title (an asset without significant value), and so, Mrs. Pfister could not—and did not—transfer property for less than its value. See Mid–Atl. Supply, 790 F.2d at 1125. On the other hand, the trustee contends that the ownership of the property involved no resulting trust. The trustee maintains that the legal and equitable interests in the property were never divided, and thus, in December 2008, seven months before declaring bankruptcy, Mrs. Pfister transferred something of value to AGC, i.e., her one-half interest in the property.

After finding the facts set forth above, the bankruptcy court determined that there was “no justification for a resulting trust.” The district court expressly accepted the factual findings of the bankruptcy court, but nonetheless reversed. It held that Mrs. Pfister held only bare legal title to a one-half interest in the property, and that AGC, by operation of a resulting trust, was the property's equitable owner. Accordingly, the transfer to AGC was not avoidable under the Bankruptcy Code.

On appeal, we review the factual findings of the bankruptcy court for clear...

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7 practice notes
  • Vieira v. Gaither (In re Gaither), C/A No. 18-01317-dd
    • United States
    • United States Bankruptcy Courts. Fourth Circuit. U.S. Bankruptcy Court — District of South Carolina
    • November 29, 2018
    ...v. Architectural Glass Constr., Inc. (In re Pfister) , No. 09-05670-HB, 2012 WL 1144540, at *5 (Bankr. D.S.C. Apr. 4, 2012), aff'd , 749 F.3d 294 (4th Cir. 2014) ("Because Debtor was indebted to the IRS at the time of the Transfer, the Court finds that the Transfer is also constructively fr......
  • Holtzclaw v. Morgan (In re Holtzclaw), C/A No. 20-03558-HB
    • United States
    • United States Bankruptcy Courts. Fourth Circuit. U.S. Bankruptcy Court — District of South Carolina
    • August 27, 2021
    ...(1960). For a resulting trust to arise, payment and intent must coincide with a deed's execution. Larisey, 77 S.E. at 130. In re Pfister , 749 F.3d 294, 299 (4th Cir. 2014) (finding no resulting trust arose where the entire purchase price was financed and, therefore, was not paid for or int......
  • In re Gardner, Case No. 14-33734
    • United States
    • United States Bankruptcy Courts. Sixth Circuit. U.S. Bankruptcy Court — Northern District of Ohio
    • April 3, 2015
    ...541. See, In re Cannon, 277 F.3d 838, 849 (6th Cir. 2002)(legal title is property of the estate under §541(a) & (d)); In re Pfister, 749 F.3d 294, 297 (4th Cir. 2014)("bare legal title" is property of the estate); In re Convenient Food Mart No. 144, Inc., 968 F.2d 592, 594 (6th Cir. 1992)(t......
  • In re Waycaster, Case Number: 20-30529-jda
    • United States
    • United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — Eastern District of Michigan
    • November 18, 2020
    ...and accordingly a resulting trust is raised in his behalf ...." Anderson v. Architectural Glass Construction, Inc. (In re Pfister) , 749 F.3d 294, 298 (4th Cir. 2014), quoting Caulk v. Caulk , 211 S.C. 57, 43 S.E.2d 600, 603 (1947). But this presumption is just that – a presumption. A resul......
  • Request a trial to view additional results
7 cases
  • Vieira v. Gaither (In re Gaither), C/A No. 18-01317-dd
    • United States
    • United States Bankruptcy Courts. Fourth Circuit. U.S. Bankruptcy Court — District of South Carolina
    • November 29, 2018
    ...v. Architectural Glass Constr., Inc. (In re Pfister) , No. 09-05670-HB, 2012 WL 1144540, at *5 (Bankr. D.S.C. Apr. 4, 2012), aff'd , 749 F.3d 294 (4th Cir. 2014) ("Because Debtor was indebted to the IRS at the time of the Transfer, the Court finds that the Transfer is also constructively fr......
  • Holtzclaw v. Morgan (In re Holtzclaw), C/A No. 20-03558-HB
    • United States
    • United States Bankruptcy Courts. Fourth Circuit. U.S. Bankruptcy Court — District of South Carolina
    • August 27, 2021
    ...(1960). For a resulting trust to arise, payment and intent must coincide with a deed's execution. Larisey, 77 S.E. at 130. In re Pfister , 749 F.3d 294, 299 (4th Cir. 2014) (finding no resulting trust arose where the entire purchase price was financed and, therefore, was not paid for or int......
  • In re Gardner, Case No. 14-33734
    • United States
    • United States Bankruptcy Courts. Sixth Circuit. U.S. Bankruptcy Court — Northern District of Ohio
    • April 3, 2015
    ...541. See, In re Cannon, 277 F.3d 838, 849 (6th Cir. 2002)(legal title is property of the estate under §541(a) & (d)); In re Pfister, 749 F.3d 294, 297 (4th Cir. 2014)("bare legal title" is property of the estate); In re Convenient Food Mart No. 144, Inc., 968 F.2d 592, 594 (6th Cir. 1992)(t......
  • In re Waycaster, Case Number: 20-30529-jda
    • United States
    • United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — Eastern District of Michigan
    • November 18, 2020
    ...and accordingly a resulting trust is raised in his behalf ...." Anderson v. Architectural Glass Construction, Inc. (In re Pfister) , 749 F.3d 294, 298 (4th Cir. 2014), quoting Caulk v. Caulk , 211 S.C. 57, 43 S.E.2d 600, 603 (1947). But this presumption is just that – a presumption. A resul......
  • Request a trial to view additional results

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