Bajgar, In re

• Decision Date: 09 October 1996
• Docket Number: No. 96-1600,96-1600
• Citation: 104 F.3d 495
• Parties: , 37 Collier Bankr.Cas.2d 596, Bankr. L. Rep. P 77,247 In re Juraj J. BAJGAR, Debtor. Carol B. MARTIN, Administrator of Estate of Francis A. Martin, Plaintiff/Creditor, Appellant, v. Juraj J. BAJGAR, Defendant/Debtor, Appellee. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 495

104 F.3d 495

65 USLW 2491, 37 Collier Bankr.Cas.2d 596,

Bankr. L. Rep. P 77,247

In re Juraj J. BAJGAR, Debtor Carol B. MARTIN, Administrator of Estate of Francis A Martin, Plaintiff/Creditor, Appellant, v. Juraj J. BAJGAR, Defendant/Debtor, Appellee.

No. 96-1600.

United States Court of Appeals First Circuit.

Heard Oct. 9, 1996.

Decided Jan. 17, 1997.

Arthur J. Carakatsane, Middleton, MA, for plaintiff/creditor-appellant.

Richard S. Hackel, Boston, MA, for defendant/debtor-appellee.

Before TORRUELLA, Chief Judge, BOWNES, Senior Circuit Judge, and STAHL, Circuit Judge.

STAHL, Circuit Judge.

Creditor-Appellant Carol B. Martin appeals the district court's affirmance of the bankruptcy court's decision to grant Debtor-Appellee Juraj J. Bajgar a discharge pursuant to 11 U.S.C. § 727(a)(2)(A) with respect to property that Bajgar fraudulently transferred within one year before the filing of his voluntary petition for relief under Chapter 7 of the Bankruptcy Code. We reverse.

Background

Bajgar and his wife jointly owned a vacant parcel of land in Port St. Lucie, Florida ("the Florida property"). On November 10, 1993, Bajgar conveyed his interest in the land to his wife, purportedly as a belated engagement gift, delayed twenty-three years. In return, Bajgar received "love and affection." The conveyance was recorded on December 2, 1993. At the time of the conveyance, Bajgar faced a collection action and several foreclosures. He conceded at trial that the transfer was fraudulent within the meaning of the Bankruptcy Code, admitting that the transfer was completed with actual intent to hinder, delay, or defraud his creditors.

On May 16, 1994, less than one year after the conveyance of the Florida property, Bajgar filed a petition for relief under Chapter 7 of the Bankruptcy Code. In his petition, Bajgar disclosed the fraudulent transfer by attaching a copy of the deed to the statement of affairs filed pursuant to 11 U.S.C. § 521(1). At a June 20, 1994, mandatory creditors meeting, Bajgar and his wife volunteered to reconvey the Florida property.

On August 19, 1994, Martin, one of Bajgar's creditors, filed a Complaint to Object to Discharge, which she amended on September 21, 1994. Martin's amended complaint alleged a violation of 11 U.S.C. § 727(a)(2)(A), which precludes discharge for a debtor who transfers property within one year of the filing of a bankruptcy petition if he acts with the intent to hinder, delay, or defraud a creditor. On September 30, 1994, at Bajgar's request and on the advice of counsel, Bajgar's wife reconveyed the Florida property to herself and Bajgar jointly by quitclaim deed. Bajgar's wife completed the retransfer more than four months after Bajgar filed his voluntary bankruptcy petition, more than three months after the meeting with creditors, and more than one month after Martin first objected to discharge.

The bankruptcy court (Hillman, J.) held that the conveyance of the Florida property did not constitute grounds to deny Bajgar's discharge under Section 727(a)(2)(A). Martin appealed this decision to the United States District Court for the District of Massachusetts. The district court (Lasker, J.) affirmed, determining that the re-transfer of the Florida property to Bajgar cured Bajgar's admittedly fraudulent initial transfer. This appeal ensued.

Standard of Review

"In an appeal from the district court's review of a bankruptcy court order, we independently review the bankruptcy court's decision, applying the 'clearly erroneous' standard to findings of fact and de novo review to conclusions of law." Grella v. Salem Five Cent Sav. Bank, 42 F.3d 26, 30 (1st Cir.1994); see also In re G.S.F. Corp., 938 F.2d 1467, 1474 (1st Cir.1991). The district court's determination that the re-transfer justified discharging Bajgar pursuant to Section 727(a)(2)(A) constitutes a conclusion of law that we subject to plenary review. See Century 21 Balfour Real Estate v. Menna (In re Menna ), 16 F.3d 7, 10 (1st Cir.1994); In re Erin Food Servs., Inc., 980 F.2d 792, 799 (1st Cir.1992).

Discussion

This case presents this Circuit with an issue of first impression: whether an admittedly fraudulent transfer of a debtor's property within one year before the filing of a voluntary petition for relief under Chapter 7 of the Bankruptcy Code is cured for purposes of dischargeability pursuant to Section 727(a)(2)(A) by its re-transfer to the debtor after the debtor files his petition. We hold that retransfer subsequent to filing a voluntary bankruptcy petition does not cure the fraudulent transfer, and, thus, does not avail the debtor discharge under Section 727.

Title 11, Section 727(a)(2)(A) states in pertinent part:

(a) The court shall grant the debtor a discharge, unless--

(2) The debtor, with intent to hinder, delay, or defraud a creditor ... has transferred ...

(A) property of the debtor within one year before the date of the filing of the petition.

11 U.S.C. § 727(a)(2)(A). Bajgar urges us to interpret the term "transferred" to mean "transferred and remained transferred" in the context of a debtor who reconveys property subsequent to filing a voluntary bankruptcy petition.

As we have stated previously, "the task of interpretation begins with the text of the statute itself, and statutory language must be accorded its ordinary meaning." Telematics Int'l, Inc. v. NEMLC Leasing Corp., 967 F.2d 703, 706 (1st Cir.1992). "Where, as here, the statute's language is plain, 'the sole function of the courts is to enforce it according to its terms.' " United States v. Ron Pair Enters., Inc., 489 U.S. 235, 241, 109 S.Ct. 1026, 1030, 103 L.Ed.2d 290 (1989) (quoting Caminetti v. United States, 242 U.S. 470, 485, 37 S.Ct. 192, 194, 61 L.Ed. 442 (1917)). "The plain meaning of legislation should be conclusive, except in the 'rare cases [in which] the literal application of a statute will produce a result demonstrably at odds with the intentions of the drafters.' " Ron Pair, 489 U.S. at 242, 109 S.Ct. at 1031 (quoting Griffin v. Oceanic Contractors, Inc. 458 U.S. 564, 571, 102 S.Ct. 3245, 3250, 73 L.Ed.2d 973 (1982)).

The statutory language of Section 727(a)(2)(A) is sufficiently plain. The statute specifically authorizes denial of discharge if the debtor "transferred" property within one year prior to the date of filing the bankruptcy petition; it does not qualify this provision with a clause to the effect that transferred property must remain transferred. See 11 U.S.C. § 727(a)(2)(A).

The Bankruptcy Code, moreover, defines the term "transfer" broadly 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). Although the legislative history offers no guidance in interpreting "transfer" in the context of Section 727(a)(2)(A), the legislative history of Section 101(54), which defines "transfer," explains that "[t]he definition of transfer is as broad as possible." S.Rep. No. 989, 95th Cong. 27 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5813; H.R.Rep. No. 595, 95th Cong. 314 (1977). Limiting the definition of "transferred" to "transferred and remained transferred," in fact, would contradict the drafters' intent.

In support of his position, Bajgar recites Justice Douglas' admonition that courts "do not read ... statutory words with the ease of a computer. There is an overriding consideration that equitable principles govern the exercise of bankruptcy jurisdiction." Bank of Marin v. England, 385 U.S. 99, 103, 87 S.Ct. 274, 277, 17 L.Ed.2d 197 (1966). This recitation, however, is misplaced in this case. Bank of Marin addressed the issue of whether or not "the payment by the drawee of a drawer bankrupt's checks after the date of th[e] filing [in bankruptcy] is a 'transfer' within the meaning of [repealed 11 U.S.C. § 110(d)(5) ]." Id. at 102, 87 S.Ct. at 277. The Court determined "it would be inequitable to hold liable a drawee who pays checks of the bankrupt duly drawn but presented after bankruptcy, where no actual revocation of its authority has been made and it has not notice or knowledge of the bankruptcy." Id. at 103, 87 S.Ct. at 277. Although Congress "has legislated the exception [that the Marin Court articulated with respect to the need for notice] in § 542(c)," Poonja v. Charles Schwab & Co. (In re Dominion Corp.), 199 B.R. 410, 413 (9th Cir.BAP 1996), the legislative history makes plain that Congress, in revising the Bankruptcy Code, did not intend to limit the definition of the term "transfer." See S.Rep. No. 989, at 27; H.R. Rep. No 595, at 314; see also Dominion Corp., 199 B.R. at 413 (explaining that changes made to the Code following Marin pertained to the definition of "transferee" not "transfer"). In fact, "[t]he word 'transfer' has always had a most comprehensive meaning under the bankruptcy laws and has been construed to include every method of disposing of or parting with property or its possession." 4 Collier on Bankruptcy p 727.02 (15th ed.1996). And, "[w]hatever force the assertion in Bank of Marin v. England, that 'equitable principles govern the exercise of bankruptcy jurisdiction' may have had under the 1898 Act, this approach has no place under the Code to the extent the statute addresses the question." Levit v. Ingersoll Rand Fin. Corp., 874 F.2d 1186, 1189 (7th Cir.1989); see also In re Taubman, 160 B.R. 964, 980 (S.D.Ohio 1993) ("It must [ ] be recognized that the exercise of [ ] equitable principles ... 'cannot contravene specific provisions of the Bankruptcy Code.' ") (quoting Terex Corp. v. Metropolitan Life Ins. Co., 984 F.2d 170, 173 (6th Cir.1993)). ¹

Without delving into the murky realm of legislative purpose and equitable principles, the Eleventh Circuit, one of the two other courts of appeals to address this issue, reached the same conclusion we reach today. See Davis v. Davis (In re Davis ), 911 F.2d 560 (11th Cir.1990) (per curiam). In Davis,...