In re 8699 Biscayne, LLC, Case No. 08-22814-BKC-AJC (Bankr. S.D.Fla. 4/2/2010)
| Decision Date | 02 April 2010 |
| Docket Number | Adversary No. 08-01749-AJC.,Case No. 08-22814-BKC-AJC. |
| Parties | In re: 8699 BISCAYNE, LLC, Chapter 11, Debtor. 8699 BISCAYNE, LLC, Debtor-in-Possession, Plaintiff, v. INDIGO REAL ESTATE, LLC, as assignee of WESTLB AG & WESTLB AG, a Foreign Corporation; BUILDER FINANCIAL CORP., a Florida corporation; BUILDER FUNDING, LLC, a Delaware limited liability Company; BFSPE, LLC, a Delaware limited liability Company; and BFWEST, LLC, a Delaware limited liability company, Defendants. |
| Court | U.S. Bankruptcy Court — Southern District of Florida |
THIS MATTER came before the Court on October 14, 2009 at 3:00 p.m. for a hearing on WestLB AG New York Branch and Indigo Real Estate LLC's Motion to Dismiss Debtor's Second Amended Complaint [D.E. # 146] (the "Motion"). Pursuant to Federal Rule of Bankruptcy Procedure 7012 and Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6), Defendants WestLB and Indigo raised various grounds for dismissal of Debtor 8699 Biscayne, LLC's Second Amended Complaint to Determine the Extent, Validity and Priority of Lien; Equitable Subordination; Fraudulent Transfer and Related Relief [D.E. # 132, Ex. 3] (the "Second Amended Complaint").
"To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to `state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955, 167 L.Ed.2d 929). "The plausibility standard is not akin to a `probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955, 167 L.Ed.2d 929). "When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement for relief." Id. at 1950. In evaluating the sufficiency of a plaintiffs pleadings, the court should "make reasonable inferences in plaintiffs favor," though it is "not required to draw
plaintiffs inference." Sinaltrainal v. Coca-Cola Co., 578 F.3d 1252, 1260 (11th Cir. 2009) (citing Aldana v. Del Monte Fresh Produce, N.A., Inc., 416 F.3d 1242, 1248 (11th Cir. 2005)) (quotation omitted). And "[i]t is sufficient if the complaint succeeds in identifying facts that are suggestive enough to render the element plausible." Rivell v. Private Healthcare Sys., 520 F.3d 1308, 1309 (11th Cir. 2008).
In the case at hand, the Debtor's Second Amended Complaint alleges three Counts against both Defendants WestLB and Indigo: Count I. Fraudulent Transfer; Count II. Equitable Subordination; and Count III. Usury. [D.E. # 132, Ex. 3]. This Court finds that Plaintiff has properly stated a cause of action on all three Counts and, thus, denies the Motion to Dismiss on all Counts and as to both Defendants WestLB and Indigo.
Count I. Fraudulent Transfer
"The elements of a case under Bankruptcy Code [11 U.S.C.] section 548 and Florida Statutes section 726.105(1)(a), are as follows: a. The debtor must have transferred the property within one year (under section 548) or four years (under section 726.105) of filing of the bankruptcy petition. . . . b. The transfer must have been made with the actual intent to hinder, delay, or defraud any entity to which the debtor was indebted." Bauman v. Bliese (In re McCarn's Allstate Fin., Inc.), 326 B.R. 843, 848 (Bankr. M.D. Fla. 2005). "Bankruptcy Code section 548 and Florida Statutes section 726.105 are substantially the same, and both address claims under the same legal framework." Id. at 849.
In this case, Plaintiff 8699 Biscayne, LLC has properly alleged the first element of the cause of action: within four years of filing of its bankruptcy petition, the Promissory Note reflecting a debt from Plaintiff to Builder Defendants (as defined in the Second Amended Complaint) in the amount of four million two hundred forty seven thousand one hundred fifty
and 00/100 dollars as well as the Mortgage, Assignment of Leases and Security Agreement Between Plaintiff as mortgagor and Builder Defendants as mortgagees were transferred.
As to the fraudulent intent element, section 726.105(2) guides that "consideration may be given, among other factors, to whether: (e) The transfer was of substantially all the debtor's assets; (h) The value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred; (i) The debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred." Given such statutory provision, Plaintiff, here, has set forth numerous facts that are more than "suggestive enough to render the [fraudulent intent] element plausible." See Rivell v. Private Healthcare Sys., 520 F.3d 1308, 1309 (11th Cir. 2008). The Second Amended Complaint alleged, in pertinent part:
8699 Biscayne has transferred to or for the benefit of the Defendants the Note and Mortgage (the "Transfer") whose value is nearly double the value of the collateral supplied by 8699 Biscayne.
The Defendants did not provide reasonably equivalent value in exchange for the Transfer.
At the time of the Transfer, 8699 Biscayne was insolvent, or became insolvent as a result of the Transfer in that after the Transfer the fair value of the property held by 8699 Biscayne was less than the sum of its debts.
After the time of the Transfer, the property remaining in the ownership and control of 8699 Biscayne was unreasonably small capital for the business venture in which it engaged.
At the time of the Transfer, 8699 Biscayne incurred debts that would be beyond its reasonable ability to pay as its debts matured.
Compl. ¶¶ 37, 38, 40, 41, & 42. It is well established that facts, such as those of Plaintiff alleged under section 726.105(2), constitute "badges of fraud," giving rise to a presumption which shifts to the transferee the burden of explaining the transaction. See Shear v. Seminara (In re PSI Indus., Inc.), 306 B.R. 377, 387 (Bankr. S.D. Fla. 2003) ("Given the difficulties in establishing a transferor's actual intent, courts generally look at the totality of the circumstances and the
`badges of fraud' surrounding the transfers; while a single badge of fraud may create only a suspicious circumstance, several of them together may afford a basis to infer fraud. Cuthill v. Greenmark, LLC (In re World Vision Entm't, Inc.), 275 B.R. 641 (Bankr. M.D. Fla. 2002)."). Thus, it is indisputable that Plaintiff has properly alleged sufficient facts giving rise to a cause of action for fraudulent transfer under Florida law.
Despite such, Defendants WestLB and Indigo argue that Plaintiff cannot assert a claim for fraudulent transfer against them because "Florida does not recognize a cause of action for aiding and abetting a fraudulent transfer or conspiracy to commit a fraudulent transfer." In making this argument, the Defendants rely on Freeman v. First Union Nat'l Bank, 865 So.2d 1272 (Fla. 2004) and Chepstow Ltd. v. Hunt, 381 F.3d 1077 (11th Cir. 2004). This Court, however, finds the Defendants' argument as well as their case law inapplicable to the case at hand.
In both Freeman and Hunt, it was held that "the Uniform Fraudulent Transfer Act (chapter 726, Florida Statutes) was not intended to serve as a vehicle by which a creditor may bring a suit against a non-transferee party for monetary damages arising from the non-transferee party's alleged aiding-abetting of a fraudulent money transfer." 865 So.2d at 1277 (emphasis added); see also Hunt, 381 F.3d at 1089. In the case at hand, however, WestLB and Indigo are both alleged to be active participants and transferees to the purported fraudulent transaction. See Compl. ¶¶ 4, 23, 24 & 25. Put another way, the allegations against WestLB and Indigo rise beyond the contention that they merely aided and abetted and "simply held the property as agents or conduits for one of the real parties to the transaction." Super Vision Int'l, Inc. v. Mega Int'l Commercial Bank Co., Ltd., 534 F.Supp.2d 1326, 1344 (S.D. Fla. 2008) (citing In re Chase & Sanborn Corp., 848 F.2d 1196, 1200 (11th Cir. 1988)). As such, this Court finds that Plaintiff
sufficiently and properly alleged a cause of action for fraudulent transfer against Defendants WestLB and Indigo. The Motion to Dismiss is denied as to both Defendants on this Count.
Count II. Equitable Subordination
Under 11 U.S.C. § 510(c), "[p]roper exercise of the equitable subordination power can take place only where three elements are established: (1) The claimant must have engaged in some type of inequitable conduct, (2) The misconduct must have resulted in injury to the creditors or conferred an unfair advantage on the claimant, (3) Subordination of the claim must not be inconsistent with the provisions of the Bankruptcy Act." In re Lemco Gypsum, Inc., 911 F.2d 1553, 1556 (11th Cir. 1990).
"In determining whether the first element is satisfied, the requisite inequitable conduct need not be related to the acquisition of the disputed claim as long as it is directed to the debtor or its creditors." In re Beverages Int'l Ltd., 50 B.R. 273, 281 (Bankr. D. Mass. 1985). Although where the claimant is not an insider or fiduciary of the debtor, egregious conduct must be proven with particularity," the power of equitable subordination may be used to subordinate even the claim of a secured...
To continue reading
Request your trial