In re Bryan, Bankruptcy No. 05-38302 SBB.

• Decision Date: 04 September 2009
• Docket Number: Adversary No. 08-01102-SBB.,Bankruptcy No. 05-38302 SBB.
• Citation: 415 B.R. 454
• Parties: In re Gary Lee BRYAN, SS# xxx-xx-5578, Debtor. M. Stephen Peters, Chapter 7 trustee, Plaintiff, v. Gary Lee Bryan, Janel K. Bryan, Vectra Bank Colorado, N.A., Auto Source, LLC, and Brad Hunt, Trustee of The Bryan Family Trust, Defendants.
• Court: U.S. Bankruptcy Court — District of Colorado

415 B.R. 454

In re Gary Lee BRYAN, SS# xxx-xx-5578, Debtor.

M. Stephen Peters, Chapter 7 trustee, Plaintiff, v. Gary Lee Bryan, Janel K. Bryan, Vectra Bank Colorado, N.A., Auto Source, LLC, and Brad Hunt, Trustee of The Bryan Family Trust, Defendants.

Bankruptcy No. 05-38302 SBB.

Adversary No. 08-01102-SBB.

United States Bankruptcy Court, D. Colorado.

September 4, 2009.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

David Wadsworth, Denver, CO, for Plaintiff.

John G. Nelson, Denver, CO, for Defendant.

Vectra Bank Colorado, N.A., pro se.

MEMORANDUM OPINION AND ORDER

SIDNEY B. BROOKS, Bankruptcy Judge.

THIS MATTER comes before the Court on the Plaintiffs Complaint and the Amended Answer thereto filed by Defendants Gary Lee Bryan ("Debtor"), Janel K. Bryan ("Mrs. Bryan"), Auto Source, LLC, and Brad Hunt, Trustee of The Bryan Family Trust. The trial in this adversary proceeding was held on April 2, 3, and 5, 2009. The Court, having reviewed the pleadings and considered the testimony, exhibits, arguments of counsel, and legal authority cited by the parties, makes the following findings of fact, conclusions of law, and enters the following Order.

                TABLE OF CONTENTS
                I. Summary .....................................................................................458
                II. Jurisdiction ................................................................................459
                III. Procedural Background ......................................................................459
                IV. Findings of Fact .............................................................................460
                    A. The Parties to this Action ................................................................460
                    B. The Bankruptcy ............................................................................460
                    C. The Bryan Family Trust ....................................................................460
                    D. The One Finch Property ....................................................................461
                    E. The Leases ................................................................................463
                    F. The February 2003 Refinance ...............................................................464
                    G. The Scientific Cylinder Transaction .......................................................464
                    H. The January 25, 2005 Refinance ............................................................466
                    I. The May 9, 2005 Home Equity Line of Credit ................................................467
                    J. The 2003 Range Rover ......................................................................469
                    K. Credibility of Witnesses ..................................................................469
                 V. Discussiori ..................................................................................470
                    A. Plaintiffs First Claim for Relief—Declaratory Relief ................................470
                       1. 11 U.S.C. § 541 ...................................................................470
                       2. Colorado Spendthrift Trusts ............................................................470
                       3. Sham Trusts ............................................................................472
                          a. Primary and True Beneficiaries of the Trust .........................................473
                          b. Disregard for formalities ...........................................................474
                          c. Bryans' Complete Dominion and Control Over the Trust ................................475
                             i. The Scientific Cylinder "Investment ..............................................475
                            ii. The Trust Certificate ............................................................476
                           iii. Personal Retention of Cash Proceeds ..............................................476
                       4. Conclusion .............................................................................482
                

                B. Plaintiffs Second Claim for Relief—Turnover—One Finch Property ................482
                    C. Plaintiffs Third Claim for Relief—Turnover—Range Rover Proceeds ...............483
                    D. Plaintiffs Fourth through Eleventh Claims for Relief ......................................483
                    E. Plaintiffs Twelfth Claim for Relief—Constructive Trust ..............................483
                    F. Plaintiffs Thirteenth Claim for Relief—Sale of One Finch Property ...................485
                 VI. Order ........................................................... ...........................486
                

I. Summary

This Court has previously granted Defendant's Motion for Reconsideration, which, in turn, granted Defendants' Motion for Summary Judgment on Plaintiffs Fourth through Eleventh Claims for Relief.¹ The remaining matters before this Court are:

(a) Plaintiffs First Claim for Relief wherein the Plaintiff seeks declaratory relief that assets of a trust are property of the estate. The assets of the trust include certain real estate known as the One Finch Property and the proceeds of a sale of a Range Rover.

(b) Plaintiffs Second Claim for Relief wherein the Plaintiff seeks turnover of the One Finch Property as property of the estate.

(c) Plaintiffs Third Claim for Relief wherein the Plaintiff seeks turnover of the Range Rover Sales Proceeds as property of the estate.

(d) Plaintiffs Twelfth Claim for Relief wherein the Plaintiff seeks the imposition of a constructive trust.

(e) Plaintiffs Thirteenth Claim for Relief wherein the Plaintiff seeks authority to sell the turned over property pursuant to 11 U.S.C. § 363.

As addressed herein, the Court concludes that the assets of the trust are property of the estate and, consequently, the real estate known as the One Finch Property, certain personal property, and the proceeds of the sale of the Range Rover must be turned over to the Trustee and the Court will grant him authority to sell the One Finch Property and certain personal property pursuant to 11 U.S.C. § 363.

II. Jurisdiction

The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 1334(b) and (e) and 28 U.S.C. §§ 157(b)(2)(A), (E), (H), and (N) as it involves the administration of the underlying bankruptcy estate, requests for orders to turn over property of the estate, the determination of fraudulent conveyances, and orders regarding the sale of property.

III. Procedural Background

Plaintiff commenced this adversary proceeding by filing his Complaint against Defendants Gary Lee Bryan, Mrs. Bryan, Vectra Bank Colorado, N.A., Auto Source, LLC, and Brad Hunt, Trustee of The Bryan Family Trust.²

Vectra Bank failed to timely file an answer to the Complaint. Accordingly, Plaintiff moved for entry of default and default judgment against Vectra Bank. The motion was granted on May 21, 2008 and judgment entered in favor of Plaintiff and against Vectra Bank as to the Plaintiffs Eighth and Ninth Claims for Relief in the amount of $52,001.23.

Thereafter, on December 5, 2009, the Defendants filed their Motion for Summary Judgment on Plaintiffs Fourth through Eleventh Claims for Relief.³ In addition, Defendants also sought a Motion for Judgment on the Pleadings on the Eighth and Ninth Claims for Relief on December 5, 2009.⁴ The Court denied the Motion for Summary Judgment on January 22, 2009.⁵ The Court denied the Motion for Judgment on the Pleadings on January 29, 2009.⁶

The matter was tried to the Court on April 2, 3 and 5, 2009. Plaintiff's Exhibits 1 through 24 were admitted into evidence. Defendants' Exhibits J, L, U and X were admitted into evidence. Portions of Defendants' Exhibit K were admitted into evidence, as discussed in more detail herein.

Immediately prior to trial, Defendants filed a Motion to Reconsider its ruling on the Motion for Summary Judgment.⁷ A response thereto was filed by the Plaintiff on April 9, 2009.⁸ The Court granted the Motion for Reconsideration and granted the Motion for Summary Judgment as to the Fourth through Eleventh Claims asserted by the Plaintiff on May 1, 2009.⁹ The Court hereby incorporates its Order Granting Motion for Reconsideration herein. Consequently, this Memorandum Opinion and Order only addresses the First through Third Claims for Relief and the Twelfth and Thirteenth Claims for Relief.

IV. Findings of Fact

Many of the following facts were stipulated to by the parties prior to trial. Stipulated facts are identified herein by reference to the numbered joint Statement of Stipulated and Undisputed Fact ("Statement of Stipulated Facts") set forth in the parties' Joint Pretrial Statement filed on March 18, 2009.¹⁰ Many other facts were alleged in the Plaintiffs Complaint and admitted by Defendants in their Amended Answer filed March 2, 2009.¹¹ Other factual findings are based upon exhibits admitted at trial and/or witness testimony, and are cited accordingly.

A. The Parties to this Action

Plaintiff M. Stephen Peters (the "Plaintiff" or "Chapter 7 Trustee") is the duly appointed Chapter 7 trustee of the bankruptcy estate of Gary Lee Bryan, Case No. 05-38302 SBB.¹²

The Debtor and Mrs. Bryan are residents of Colorado with an address of 1 Finch, Littleton, Colorado 80127.¹³

Defendant Vectra Bank Colorado, N.A. ("Vectra Bank") is a national bank doing business in Colorado.¹⁴

Defendant Auto Source, LLC ("Auto Source") is a Colorado limited liability company.¹⁵

Defendant Brad Hunt ("Mr. Hunt") is the trustee of The Bryan Family Trust.¹⁶

B. The Bankruptcy

The Debtor filed for relief under Chapter 13 of the Bankruptcy Code on October 3, 2005 (the "Petition Date").¹⁷ The Standing Chapter 13 Trustee, Sally Zeman, automatically was appointed as trustee under 11 U.S.C. § 1302 on the same date.¹⁸

On November 2, 2006, the Debtor's Chapter 13 bankruptcy case was converted to a case under Chapter 7.¹⁹ Plaintiff was appointed interim Chapter 7 trustee on November 2, 2006.²⁰ The Debtor's 11 U.S.C. § 341 meeting of creditors was not completed until February 2, 2007.²¹ Under 11 U.S.C. § 702(d), the Plaintiff became permanent trustee in ...