Heilman v. Habitech, Inc.
| Decision Date | 11 January 2012 |
| Docket Number | Opinion No. 2012 DNH 008,Civil No. 11-cv-408-JD |
| Parties | Georgina C. Heilman v. Habitech, Inc. and D. Bruce Wheeler |
| Court | U.S. District Court — District of New Hampshire |
During her bankruptcy case, Georgina Heilman brought an adversary proceeding to avoid the transfer of certain property to Habitech, Inc. and D. Bruce Wheeler, contending the transfer was fraudulent under 11 U.S.C. § 548(a). The bankruptcy court granted Heilman's claim in part and avoided the transfer of her personal property and her interest, but not her husband's interest, in their house. Heilman appealed, arguing that the entire transfer, including the transfer of her husband's interest in the house, was fraudulent and should be avoided. Habitech and Wheeler filed a cross-appeal, arguing that the transfer of the property was not fraudulent.
Georgina Heilman and her husband, Robert, rented a house in Windham, New Hampshire, (the "Windham House") from 1995 until 2000. In August of 2000, Erin, the couple's daughter, purchased the Windham House. The Heilmans continued to reside in the house and paid Erin rent until February 2003, when Erin transferred the house to the Heilmans for $1.00. At the same time, the Heilmans obtained a mortgage for $175,000. Shortly thereafter, the Heilmans began renovating the Windham House, which included adding rooms and remodeling the kitchen. In the spring of 2005, the Heilmans obtained an $80,000 home equity line of credit. A few months later, they added a two-car garage with a bedroom to the Windham House. Beginning in January of 2000 and continuing throughout the Heilmans' purchase and improvements of the Windham House, Robert was employed by Habitech.
In the fall of 2007, Habitech discovered that Robert had been embezzling funds from the company for several years. In total, Robert embezzled between $700,000 and $1.1 million during his employment with the company. On October 12, 2007, D. Bruce Wheeler, the co-founder and principal of Habitech, along with anoutside accountant and a private investigator, confronted Robert about the embezzlement. Robert admitted to embezzling an undisclosed amount of money over several years. Wheeler then asked Robert to transfer to Habitech the deed to the Windham House, as well as some of the Heilmans' personal property, as partial repayment of the embezzled funds.
Robert called Georgina that same day, and made arrangements to meet her at the Windham House later that evening. Georgina arrived home from work that night after 11:00 p.m., to find Robert, Wheeler, and the others waiting for her. Wheeler insinuated that Georgina's cooperation would be helpful in terms of Robert's potential criminal liability and both of their continuing health coverage. Wheeler and the others also gave Georgina the impression that they would not leave until the Heilmans transferred their property to Habitech. That night, Georgina signed a Quitclaim Deed and a document titled "Transfer of all Property." Both documents were executed in the Windham House and signed by a notary public.
Habitech represents that the "Transfer of all Property" document purported to transfer to Habitech "[a]ll of the property owned by [the Heilmans] . . . real and personal, tangible and intangible, contingent and non-contingent, including but expressly not limited to, all of the furnishings and othercontents in the [Windham House]." Wheeler took a computer and several pieces of Georgina's jewelry that night, and Georgina delivered an additional piece of jewelry to him a few days later. Georgina was not implicated in, and had no knowledge of, Robert's embezzlement, and had no liability to Habitech.
On or about January 14, 2008, Georgina filed for bankruptcy under Chapter 13 of the Bankruptcy Code. On or about April 2, 2008, Georgina filed a complaint against Habitech and Wheeler (hereinafter, "Habitech"), seeking to avoid her transfer of property that she made on October 12, 2007, on the ground that it was a fraudulent transfer. Robert, who is currently incarcerated, moved to intervene shortly before the adversary proceeding was set to begin. The bankruptcy court denied the motion.
After a hearing, the bankruptcy court entered judgment in favor of Georgina on the fraudulent transfer claim and avoided the transfer of her personal property and furnishings, as well as her interest in the Windham House. This appeal and cross-appeal followed.
This court has jurisdiction to hear appeals from final judgments, orders, and decrees of the bankruptcy court. See 28U.S.C. § 158(a); see also L.R. 77.4(c). The court conducts a de novo review of legal determinations of the bankruptcy court, In re Gonic Realty Trust, 909 F.2d 624, 626 (1st Cir. 1990), but will not reverse the bankruptcy court's factual findings unless clearly erroneous, Briden v. Foley, 776 F.2d 379, 381 (1st Cir. 1985). A factual finding "is clearly erroneous when[,] although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." Anderson v. City of Bessemer City, 470 U.S. 564, 573 (1985) (internal quotation marks and citation omitted).
Heilman appeals part of the bankruptcy court's order, arguing that the court's decision avoiding the transfer of her interest in the Windham House applies, or should apply, to the transfer of the Windham House in its entirety, not just to her interest in the house. Habitech cross-appeals, arguing that the transfer of Heilman's property, including her interest in the Windham House, was not fraudulent.
Although the parties did not address the issue, the court notes that § 548 authorizes a bankruptcy trustee to avoid a debtor's fraudulent transfer. Based on the language of thestatute, Heilman, as the debtor, would not have standing to avoid a transfer under § 548. Habitech moved to dismiss the adversary proceeding on this ground. The bankruptcy court denied the motion, but the parties did not provide the court with a copy of the bankruptcy court's decision.
11 U.S.C. § 522(h) gives a Chapter 13 debtor standing to avoid a fraudulent transfer under § 548 if certain conditions are met. See, e.g., In re Dickson, 655 F.3d 585, 592 (6th Cir. 2011). The court is unable to determine, based on the appellate record, whether Heilman meets those conditions. Because Habitech did not raise the issue on appeal, the court will assume, without deciding, that Heilman has standing to avoid the transfer of her interest in the property under § 522(h).
Heilman does not contest the bankruptcy court's factual findings or legal rulings. She contends that the bankruptcy court's determination that the transfer of her interest in the Windham House was fraudulent under § 548 applies with equal force to the transfer of her husband's interest in the house. Alternatively, Heilman contends that because she and her husband held the house as tenants in the entirety, her interest is 100% of the house.
Because Robert is not a debtor, § 548 does not apply to his interest in the Windham House. The bankruptcy court properly did not make any ruling with respect to Robert's interest in the house. Therefore, the bankruptcy court's decision to avoid the transfer of Georgina's interest in the house does not apply to Robert's interest.
Heilman also argues that her interest in the Windham House was 100% because she and Robert held the house as tenants in theentirety. Therefore, she contends, the transfer of the entire house should be set aside as fraudulent. Heilman's property interests in the Windham House on the date of the transfer is a matter of state law. Butner v. United States, 440 U.S. 48, 54 (1979).
A tenancy in the entirety gives each tenant a 100% interest in the property. See In re Snyder, 249 B.R. 40, 46 (B.A.P. 1st Cir. 2000). New Hampshire, however, does not recognize the ownership form of tenancy in the entirety. See Estate of Croteau v. Croteau, 143 N.H. 177, 180 (1998); see also Boissonnault v. Savage, 137 N.H. 229, 231 (1993). New Hampshire law provides that every conveyance of real estate made to two or more persons creates an estate in common or, if otherwise provided in the conveying deed, a joint tenancy. See Revised Statutes Annotated ("RSA") 477:18. Neither a tenant in common nor a joint tenant holds a 100% interest in the property. See Land Am. Commonwealth Title Ins. Co. v. Kolozetski, 159 N.H. 689, 692 (2010) (); see also Walshire v. United States, 288 F.3d 342, 348 (8th Cir. 2002) () (quoting Black's Law Dictionary 1478 (17th ed. 1999)).
The Quitclaim Deed by which the Heilmans obtained the Windham House conveyed the house to them "as tenants by theEntirety." Under New Hampshire law, such language creates a joint tenancy. See RSA 477:18 (...
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