Cafferty v. Blackmar (In re Blackmar)
| Decision Date | 24 June 2021 |
| Docket Number | Adv. Pro. No. 20-03036,Case No. 20-31036 |
| Parties | In Re: Todd M. Blackmar and Amy B. Blackmar Debtor(s). Thomas E. Cafferty, Trustee Plaintiff, v. Todd M. Blackmar, et al. Defendant(s). |
| Court | U.S. Bankruptcy Court — Northern District of Ohio |
The court incorporates by reference in this paragraph and adopts as the findings and orders of this court the document set forth below. This document has been entered electronically in the record of the United States Bankruptcy Court for the Northern District of Ohio.
MEMORANDUM OF DECISION AND ORDER
This adversary proceeding is before the court on Defendants' Motion for Judgment on the Pleadings [Doc. # 11], Defendants' Renewed Motion for Judgment on the Pleadings [Doc. # 29], Plaintiff's Response [Doc. # 11], and Plaintiff's Renewed Response [Doc. # 30].
Defendant Todd M. Blackmar is a co-debtor in an underlying Chapter 7 bankruptcy case filed in this court on April 13, 2020. [See Case No. 20-31036]. Plaintiff is the duly appointed and acting trustee in that case. On June 23, 2020, Plaintiff filed a complaint against Blackmar, alleging the fraudulent transfer of a 2007 BMW Alpina motor vehicle by him "to TMB Enterprises, LLC, an entity wholly owned by Blackmar, for no consideration." [Doc. # 1 at ¶ 6]. Plaintiff's complaint sought to avoid the alleged fraudulent transfer of the 2007 BMW by Defendant under 11 U.S.C. § 548 and Ohio R.C. § 1336. He did not, however, sue the alleged transferee, TMB Enterprises, LLC. On July 16, 2020, Blackmar filed a timely answer to the complaint.
Following Defendant Blackmar's timely answer, Plaintiff moved to amend the pleadings to add TMB Enterprises, LLC as a defendant [Doc. # 8]. Defendant moved for judgment on the pleadings [Doc. # 11] as well as objecting to Plaintiff's motion to amend [Doc. # 12]. Plaintiff filed a response to Defendant's objection on the motion to amend [Doc. # 15], and an objection to the Motion for Judgment on the Pleadings [Doc. # 17].
The court granted Plaintiff leave to file an amended complaint and held Defendant's Motion for Judgment on the Pleadings in abeyance pending a further pretrial conference and the filing of an amended complaint. [Doc. # 20].
As permitted by the court, Plaintiff filed his amended complaint [Doc. # 21] against both Todd M. Blackmar and TMB Enterprises LLC. Defendants filed a timely answer to Plaintiff's amended complaint. [Doc. # 24]. The court held a further pretrial conference on February 11, 2021, and at that conference, the court granted Defendants leave to renew Defendant Blackmar's motion for judgment on the pleadings as a supplement to his original motion. [Doc. ## 28, 29]. Likewise, Plaintiff was given leave to renew his response as a supplement. [Doc. # 30]. Defendants' renewed motion for judgment on the pleading is ripe for disposition.
A motion for judgment on the pleadings brought pursuant to Fed. R. Civ. P. 12(c) is made applicable to adversary proceedings by Fed. R. Bankr. P. 7012. The court evaluates a motion for judgment on the pleadings in the same manner as it reviews a motion for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). Vickers v. Fairfield Medical Center, 453 F.3d 757, 761 (6th Cir. 2006). Thus, under Rule 12(c), "well pleaded material allegations of the opposing party's pleading are to be taken as true and all inferences are to be taking in favor the nonmoving party." 10 COLLIER ON BANKRUPTCY ¶ 7012.06 (16th ed.), citing Fritz v. Charter Twp. of Comstock, 592 F.3d 718, 722 (6th Cir. 2010). See also Donovan v. FirstCredit, Inc., 983 F.3d 246, 252 (6th Cir. 2020) (citation omitted). A Rule 12(c) motion for judgment on the pleadings asks whether the "complaint . . . contain[s] sufficient factual material, accepted as true to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
Originally the motion for judgment on the pleadings asserted two grounds for dismissal: failure to join a necessary party and that the complaint was filed outside the applicable statutory reach-back period(s) for the alleged transfer.
The court's order granting Plaintiff's competing motion for leave to amend his complaint and the amended complaint adding alleged transferee TMB Enterprises, LLC moot failure to join a necessary party as a basis for dismissal under Rule 12(c). Defendants' renewed motion for judgment on the pleadings will be denied as moot to that extent.
The remaining basis for dismissal on the pleadings is that Plaintiff commenced this action outside the applicable statutory reach-back period for an action to avoid a transfer commenced under 11 U.S.C. § 548. In response, Plaintiff contends that under 11 U.S.C. § 544(b)(1), he can separately utilize the "strong-arm" provision of the Bankruptcy Code to pursue claims of unsecured creditors under state law (Ohio), for which the reach-back period between the filing of the complaint and the alleged transfer is longer than under § 548.
Avoidance of fraudulent transfers is addressed by two sections of the Bankruptcy Code, 11 U.S.C. § 548 and 11 U.S.C. § 544. As explained by a sister court:
The key difference between an action under § 548 and an action under § 544(b)(1) is the reach-back period. Section 548, captures only transfers made in the two years preceding the filing of the bankruptcy. Section § 544(b)(1) looks to the specific state statute's reach-back period, which is generally longer than two years. Thus, a bankruptcy trustee seeking to recover transfers made more than two years prior to the filing of the bankruptcy must file an action under § 544(b)(1).
McClarty v. Hatchett (In the Matter of Hatchett), 588 B.R. 472, 477 (Bankr. E.D. Mich. 2018).
Plaintiff's amended complaint clearly invokes both § 548 of the Bankruptcy Code and Ohio Revised Code Chapter 1336 as statutory bases for avoiding the alleged fraudulent transfer of the BMW. [Doc. # 21, ¶ 1]. It never mentions § 544. Nevertheless, the failure to properly cite to statutes relied upon in a complaint is not a fatal flaw; the purpose of a complaint is to plead facts not law. As this court has previously held, "where Plaintiff[] ha[s] failed to cite the relevant statute or an incorrect statute is cited, the court must only review Plaintiff['s] allegations to determine whether they allege sufficient facts to state a claim for relief under some viable legal theory." Palazolla v. City of Toledo (In re Palazolla), Bankruptcy No. 09-37696, Adversary No. 10-3254, 2011 WL 3667624 at *8 (Bankr. N.D. Ohio 2011) (citing Gean v. Hattaway, 330 F.3d 758, 765 (6th Cir. 2003)). The court thus construes the amended complaint as being brought under both § 544 (incorporating applicable Ohio law) and § 548.
Plaintiff filed his original complaint on June 23, 2020.1 The amended complaint alleges that Defendant Blackmar filed his petition for relief under Chapter 7 on April 13, 2020, and that he transferred the BMW to TMB Enterprises, Inc. for no consideration "on or about November 7, 2017." [Doc. # 21, ¶¶ 5-6]. Under Rule 12(c), these facts must be taken as true.
Under 11 U.S.C. § 548(a)(1), one of the elements of an avoidable fraudulent transfer is that it "was made...on or within 2 years before the date of filing of the petition." In order for the transfer of the BMW to be avoidable under § 548(a)(1), Debtors would have had to have filed their petition by approximately November 7, 2019, some 5 months earlier than it was filed according to the amended complaint. Defendants are correct that the amended complaint does not state a claim under § 548. The renewed motion for judgment on the pleadings will be granted to the extent of the Trustee's claim for avoidance brought under § 548 of the Bankruptcy Code.
Under 11 U.S.C. § 544(b), "the trustee may avoid any transfer of an interest of the debtor in property or any obligation incurred by the debtor that is voidable under applicable law by a creditor holding an unsecured claim that is allowable under section 502 of this title or that is not allowable only under section 502(e) of this title." The trustee must have standing, which is accomplished by virtue of a "triggering creditor," i.e., "a creditor who can avoid the transfer under applicable state law who also 'hold[s] an unsecured claim that is allowable under 11 U.S.C. § 502[.]'" Whitacre v. Groves Venture LLC (In re Bolon), 538 B.R. 391, 404 (Bankr. S.D. Ohio 2015) (citing Solomon v. Fellmy (In re Felsner), 289 Fed. Appx. 879, 882 (6th Cir. 2008)). This allows the trustee to "'stand in the shoes' of an unsecured creditor and assert causes of action under state fraudulent conveyance laws for the benefit of all creditors." Lyon v. Forbes (In re Forbes), 372 B.R. 321, 330 (B.A.P. 6th Cir. 2007). The elements of a § 544(b) claim include: "(1) a creditor; (2) holding an allowable unsecured claim; (3) a transfer of an interest of the debtor in property; (4) that is voidable under applicable [state] law." In re Felsner, 289 Fed. Appx. at 882 (citing In re Forbes, 372 B.R. at 330).
Applying these requirements to pleadings, Plaintiff alleges that Debtors' petition "scheduled $1,834.969.06 in unsecured debts[.]" [Doc. # 21 at ¶ 8]. There is no requirement that the trustee plead the existence of a creditor by name, Felsner, 289 Fed. Appx. at 883; UMB Bank v. Sun Capital Partners V, LP (In re LSC Wind Down, LLC), 610 B.R. 779, 786 (Bankr. Del. 2020); Picard v. Estate of Stanley Chais (In re Bernard L. Madoff Investment Securities, LLC), 445 B.R. 206, 234 (Bankr. S.D.N.Y. 2011). But see, e.g., In re Petters Co., Inc., 495 B.R. 887, 900-901 (Bankr. D. Minn. 2013),2 but the allegation of unsecured debts of over one million dollars creates an inference in Plaintiff's favor for pleading purposes that there exists at least one creditor holding an allowable unsecured claim in whose shoes Plaintiff may...
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