Geile v. Wickersham (In re Gray)
| Docket Number | 21-00532-NGH,Adv. 22-06001-NGH |
| Decision Date | 23 June 2023 |
| Parties | IN RE: REBECCA GOEL GRAY, Debtor. v. ANNE ODILE WICKERSHAM, Defendant. PATRICK GEILE, Plaintiff, |
| Court | U.S. Bankruptcy Court — District of Idaho |
The chapter 7 trustee, Patrick Geile ("Trustee") commenced this adversary proceeding against Anne Wickersham ("Defendant") seeking to avoid a transfer of real property made by Rebecca Gray ("Debtor") to Defendant in 2018.[1] A trial on the matter was held on March 28, 2023, and April 20, 2023, after which the Court took the issues under advisement. The Court has now considered the testimony and evidence presented the briefs and arguments of the parties, and the applicable law. The following Memorandum constitutes the Court's findings of facts and conclusions of law. See Rule 7052.
Ex. 202. Debtor and York contemplated that the third party referenced in the Decree was Ray Wickersham ("Wickersham"), Debtor's father. Wickersham lived nearby and attempted to assume the mortgage after Debtor and York divorced. However, for various reasons Wickersham was unsuccessful in his attempts to assume the mortgage. Despite the fact that Wickersham never assumed the mortgage, Wickersham began taking care of the Property. Wickersham paid the mortgage payments, maintained and repaired the Property, and rented the Property to third parties. Debtor testified at trial that she had nothing to do with the Property after the divorce-Debtor had not paid the mortgage since 2008 and had only lived in the Property briefly after the divorce. Debtor and York also unsuccessfully attempted to sell the Property in 2011 and 2012. See Ex. 207.
When Debtor's sister, Defendant, moved back to the area, Wickersham proposed Defendant purchase the Property. In April 2017, York agreed to sell the Property to Defendant, stating that he wished "to gift the equity back to you to use as you see fit as I will not be claiming any profits from the transaction." Ex. 107. The purchase and sale agreement between Defendant and York and Debtor was signed June 29, 2017. Ex. 104. In September 2017, Defendant obtained an appraisal for the Property, valuing the Property at $170,000. Ex. 214.
Defendant purchased the Property for $90,000 on February 18, 2018. Exs. 105 & 106. At closing, the proceeds of the sale were used to pay off a deed of trust in the amount of $78,448.02. Ex. 105. Debtor received $2,842.49 from the proceeds.[2] Id.
Debtor filed a chapter 7 bankruptcy on August 16, 2021. Case No. 21-00532, Doc. No. 1. On January 26, 2022, Trustee initiated this adversary proceeding seeking to avoid the transfer of the Property pursuant § 544(b) and the Idaho Uniform Voidable Transfer Act (UVTA). During the litigation, Trustee obtained a retrospective appraisal of the Property that valued the Property at $182,000 as of the transfer date. Ex. 110.
Pursuant to § 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." Trustee seeks to avoid the transfer of the Property under the Idaho UVTA. In particular, Trustee alleges the transfer was either an actual or constructively fraudulent transfer under I.C. § 55-913 or § 55-914. Under the Idaho UVTA, a trustee may avoid a transfer made within four years of the petition date. I.C. § 55-918.
A prerequisite to both I.C. § 55-913 and § 55-914 is the presence of creditors who had antecedent debts at the time of the transfer. Parkinson Seed Farm, Inc. v. Arlo Weeks & Brookside, LLC (In re Parkinson Seed Farm, Inc.), 640 B.R. 218, 250 (Bankr. D. Idaho 2022). Through Debtor's testimony, Trustee established that Debtor owed a student loans to unsecured creditor Nelnets, and that such debts were incurred prior to 2018. See also Ex. 100 at 26-30. As such, Trustee has established the presence of unsecured creditors whose debts were incurred prior to the transfer.
1. Transferable Interest
Both I.C. § 55-913 and § 55-914 require that there was a transfer of a debtor's interest. "Transfer" is defined under Idaho law as "every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an asset or an interest in an asset, and includes payment of money, release, lease, license and creation of a lien or other encumbrance." I.C. § 55-910(16). An "asset" is defined as "property of a debtor" but not "property to the extent it is encumbered by a valid lien" or "property to the extent it is generally exempt under nonbankruptcy law." I.C. § 55-910(2).
Because asset is defined as property of the debtor, Debtor must have had an interest in the Property at the time of the transfer. Debtor unquestionably held an ownership interest in the Property at some point, but there is a question as whether she still had that interest at the time of the transfer. Debtor and York purchased the Property in the fall of 2000. Ex. 200. Debtor and York divorced on July 22, 2008. Ex. 202. The Decree contemplated Wickersham would assume the mortgage and Debtor and York would quitclaim their interest in the Property to him. However, Wickersham was never able to get approved to assume or refinance the mortgage on the Property.[3] Despite his inability to assume the mortgage, Wickersham took the responsibility of paying the mortgage, maintaining the Property, and renting the Property to others. As such, Wickersham put a significant amount of time, labor, and money into the Property. Neither Debtor nor York did anything with the Property after Wickersham assumed those responsibilities, and the parties disagree over the legal significance as to the ownership of the Property due to those events.
Defendant argues Wickersham became the owner of the Property by operation of the Decree. Under Idaho law, a state court has the power to divide the community property between spouses upon termination of the marriage. Idaho Code § 32-712. Bromund v. Bromund, 477 P.3d 979, 986 (Idaho 2020).
Defendant cites to Hopkins v. Arave (In re Arave), 2008 WL 833504 (Bankr. D. Idaho Mar. 27, 2007), to support her position. However, Arave is factually distinguishable. In Arave, a cabin was awarded to the ex-husband in a divorce proceeding and the divorce decree instructed the ex-wife to execute a quitclaim deed. Id. at *1. Without the ex-wife quitclaiming the property, the ex-husband then executed a warranty deed in favor of his parents, transferring the property. Id. at *2. Later, when the parents wished to sell the cabin, the ex-husband had the ex-wife execute a quitclaim deed in his favor and then recorded a quitclaim deed in his parent's favor. Id. Ultimately, the bankruptcy court concluded the divorce decree was sufficient to transfer the property, and that the ex-husband successfully transferred his interest to his parents when he issued the initial warranty deed, even though the ex-wife had not yet executed a quitclaim deed. Id. at 4.
In Arave, the divorce decree clearly transferred the interest in the cabin solely to the ex-husband, with all encumbrances and obligations. Here, the Decree specified that a third party would assume the mortgage, and then Debtor and York would quitclaim the deed to the third party who assumed the mortgage. Though not specified, the parties testified Wickersham was the third party referenced in the Decree. However, the transfer of Debtor and York's interest in the Property to Wickersham was conditional upon Wickersham assuming the mortgage. Because Wickersham was never able to assume the mortgage, that condition did not occur and the Property was not transferred to Wickersham. Further, Debtor and York never recorded any deed in favor of Wickersham.
While the Court recognizes the parties intended for Wickersham to assume the mortgage and become the owner of the Property, and all parties acted accordingly for nearly a decade, the Court cannot ignore the plain language of the Decree. Here, the plain language of the Decree specified that Debtor and York would quitclaim the deed to the Property to the third party who assumed the mortgage. Because Wickersham was unable to assume the mortgage, no transfer occurred. Accordingly, the Court finds the Decree did not operate to transfer Debtor's interest in the Property to Wickersham.
Defendant also asserts Wickersham became the equitable owner of the Property due to his significant contributions to the Property. Defendant cites to no case...
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