In re Bushey

Decision Date21 July 1997
Docket NumberBAP No. 97-8015.
Citation210 BR 95
PartiesIn re Wilma L. BUSHEY, Debtor. Kathryn A. BELFANCE, Trustee, Plaintiff-Appellant, v. Wilma L. BUSHEY and Sharon M. Jones, a.k.a. Sharon M. Nolan, Defendants-Appellees.
CourtU.S. Bankruptcy Appellate Panel, Sixth Circuit


Eve V. Belfance, Belfance & Belfance, Akron, OH (Kathryn A. Belfance, Eve V. Belfance, Belfance & Belfance, on brief), for plaintiff-appellant.

David C. Weick, Weick & Weick, Cuyahoga Falls, OH, Chris Manos, Hyatt Legal Services, Akron, OH (David C. Weick, Chris Manos, on brief), for Appellee.

Before: LUNDIN, RHODES, and WALDRON, Bankruptcy Appellate Panel Judges.


On the ground that the Chapter 7 trustee lacked standing under 11 U.S.C. § 544(b) and Ohio fraudulent conveyance law, the bankruptcy court granted summary judgment to the defendants in this action to avoid the transfer of a residence by the debtor to her daughter. Because the bankruptcy court applied the wrong legal standard to determine standing to avoid a fraudulent conveyance under 11 U.S.C. § 544(b) and Ohio law, we reverse the grant of summary judgment and remand for further proceedings.


There are four issues: (1) Whether the standing of a trustee to avoid a fraudulent conveyance under 11 U.S.C. § 544(b) is limited by the condition that the claim used by the trustee as the predicate for the avoidance action must be identical to a claim in the bankruptcy case; (2) whether a creditor with a continuously open credit card account is an "existing" creditor under OHIO REV.CODE ANN. §§ 1336.04, 1336.06, and 1336.07 (Anderson 1979 & Supp.1986) (repealed),1 notwithstanding that the account balance passed through zero between the challenged transfer and the bankruptcy filing; (3) whether a creditor with a continuously open credit card account is a "future" creditor under OHIO REV.CODE ANN. § 1336.06 and § 1336.07 notwithstanding that the account balance passed through zero between the challenged transfer and the bankruptcy filing; and (4) whether a constructive or resulting trust is an available remedy under Ohio law in this litigation.


The United States District Court for the Northern District of Ohio authorized appeals to the Bankruptcy Appellate Panel of the Sixth Circuit and transferred this appeal to the BAP with the consent of all parties. The BAP has jurisdiction to hear the appeal of a final order of the bankruptcy court. 28 U.S.C. § 158(a).

A final order "ends the litigation on the merits and leaves nothing for the court to do but execute the judgment." Midland Asphalt Corp. v. United States, 489 U.S. 794, 798, 109 S.Ct. 1494, 1497, 103 L.Ed.2d 879 (1989) (citations and internal quotations omitted). The grant of summary judgment to the defendants in this adversary proceeding was a final, appealable order.2

The grant of summary judgment is reviewed de novo. Monette v. Electronic Data Sys. Corp., 90 F.3d 1173, 1176 (6th Cir.1996); Investors Credit Corp. v. Batie (In re Batie), 995 F.2d 85, 88-9 (6th Cir.1993). Summary judgment is appropriate when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED. R. CIV. P. 56(c). "In determining whether the non-moving party has raised a genuine issue of material fact, `the evidence of appellant is to be believed, and all justifiable inferences are to be drawn in its favor.'" PSI Repair Servs., Inc. v. Honeywell, Inc., 104 F.3d 811, 814 (6th Cir.1997) (quoting Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451, 456, 112 S.Ct. 2072, 2076, 119 L.Ed.2d 265 (1992)). See also Brooks v. American Broadcasting Cos., 932 F.2d 495, 500 (6th Cir.1991). "When a court reviews an issue under a de novo standard of review, the court is determining questions of fact and law as though the reviewing court was the original trial court." Razavi v. Commissioner, 74 F.3d 125, 127 (6th Cir.1996).


Wilma L. Bushey filed a Chapter 7 petition on September 23, 1994. The statements and schedules revealed her residence as 888 Blanding Avenue, Akron, Ohio, but no interest in real property was listed as an asset. The trustee inquired about the Blanding Avenue property at the meeting of creditors. Debtor explained that she lived at the property since its transfer to her daughter, Sharon M. Nolan, on April 8, 1986. Further investigation established that debtor's interest in the property had been transferred to her daughter for $1.00, at the insistence of debtor's husband.3 Debtor professes not to know why her husband insisted on the transfer to their daughter. Debtor pays Nolan no rent. Nolan does not reside at the property, although as an adult she lived there briefly during a divorce.

At the 1986 transfer to Nolan, the property was mortgaged with less than two years of payments remaining. After the conveyance, debtor and her husband continued to pay the mortgage, insurance and taxes. After the final mortgage payment, Nolan began to pay the property taxes. There is conflicting evidence regarding who now pays for insurance.

On March 28, 1988, debtor's husband passed away. Debtor used life insurance proceeds to pay off debt. Among the creditors paid in full in 1988 were Citibank Visa and Citibank MasterCard. Each was owed a debt on a revolving charge or open account.

In 1986, at the time the debtor transferred the property to her daughter, the Citibank MasterCard account existed and had a balance due.4 Citibank MasterCard is a creditor in this Chapter 7 case, based on its continuous credit relationship with the debtor.

The Citibank Visa account traces back at least to its payment in full in 1988. Citibank Visa is a creditor in this bankruptcy case. The Visa account number changed sometime during 1992, but there is no evidence of any break in the credit relationship between Visa and the debtor.

The trustee brought this action under 11 U.S.C. § 544(b) to avoid the 1986 transfer of the property as a fraudulent conveyance under OHIO REV.CODE ANN. §§ 1336.04, 1336.06 and 1336.07. The trustee asked that a constructive or resulting trust be imposed on the property. The trustee and defendants filed several motions for summary judgment.5 The bankruptcy court eventually granted summary judgment to the defendants, on the ground that the trustee lacked standing to maintain this action.

The bankruptcy court reasoned that to qualify as an "existing creditor" under Ohio fraudulent conveyance law and 11 U.S.C. § 544(b) there must be a creditor in the bankruptcy case that has "current claims against the debtor that were owing at the time of the alleged fraudulent transfer in 1986." Belfance v. Bushey (In re Bushey), Ch. 7 Case No. 94-51481, Adv. No. 95-5005, slip op. at 6 (Bankr.N.D.Ohio Sept. 30, 1996). Although at least one creditor listed in debtor's bankruptcy schedules, Citibank MasterCard, was also a creditor in 1986, that account balance was paid in full in 1988. That the debtor subsequently incurred debt on the same account with MasterCard, concluding with a balance due in her Chapter 7 case, was not sufficient "to invoke . . . § 544(b) in relation to OHIO REV.CODE ANN. § 1336.04." Id. at 7.

The bankruptcy court rejected the trustee's actions as to "future" creditors under §§ 1336.06 and 1336.07 on similar reasoning. The court held that the trustee must identify a future creditor "harmed" by the conveyance. Citibank Visa and Citibank MasterCard, creditors relied upon by the trustee, failed this test because their account balances were reduced to zero sometime in 1988 and both creditors received periodic payments (toward ever increasing balances) between 1988 and the bankruptcy filing in 1994.

Lastly, the bankruptcy court found the trustee's request for a constructive trust or a resulting trust "unsupportable in light of her failure to establish her right to pursue any claim under OHIO REV.CODE ANN. §§ 1336.04, 1336.06 or 1336.07." Id. at 8.

The trustee appeals the grant of summary judgment.

A. Standing Under Federal Law: § 544(b).

Section 544(b) of the Bankruptcy Code confers upon a trustee the powers of a "creditor" with an allowable unsecured claim to "avoid any transfer of an interest of the debtor in property . . . that is voidable under applicable law. . . ." 11 U.S.C. § 544(b).6 It is often said of § 544(b) that the trustee "stands in the shoes" of the creditor, subject to any defenses that could be asserted against the creditor. See, e.g., Sender v. Simon, 84 F.3d 1299, 1304 (10th Cir.1996); Rieser v. Reno (In re Douglas), 190 B.R. 831, 836 (Bankr.S.D.Ohio 1995).

The plain language of § 544(b) contains four requirements:

1. A creditor,
2. holding an allowable unsecured claim; and
3. a transfer of an interest of the debtor in property,7
4. that is voidable under applicable (here, Ohio) law.

Citibank MasterCard and Citibank Visa are creditors holding allowable unsecured claims in this bankruptcy case. To the extent the bankruptcy court imposed additional "federal" requirements with respect to the kind of creditor that satisfies the allowable unsecured creditor requirement in § 544(b), the bankruptcy court exceeded the plain statutory language.

Appellees interpret the bankruptcy court to hold that a Chapter 7 trustee's "standing" under § 544(b) is not co-extensive with the "standing" of the creditor into whose shoes the trustee would step. Rather, argue Appellees, federal law (§ 544(b) itself) imposes an additional requirement that the claim asserted in the bankruptcy case must be identical to the claim used by the trustee as the basis for the avoidance action under "applicable law."

Section 544(b) does not impose any additional requirement with respect to the nature or...

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