In re Granderson

• Decision Date: 18 November 1997
• Docket Number: Bankruptcy No. 95-15951-JNF,Adversary No. 97-1418.
• Citation: 214 BR 671
• Parties: In re Vernard M. GRANDERSON f/d/b/a Almeida Rest Home, Debtor. M. Ellen CARPENTER, Chapter 11 Trustee of the Estate of the Debtor, Plaintiff, v. Vernard M. GRANDERSON and Lillian B. Granderson, Defendants.
• Court: U.S. Bankruptcy Court — District of Massachusetts

214 B.R. 671 (1997)

In re Vernard M. GRANDERSON f/d/b/a Almeida Rest Home, Debtor.

M. Ellen CARPENTER, Chapter 11 Trustee of the Estate of the Debtor, Plaintiff, v. Vernard M. GRANDERSON and Lillian B. Granderson, Defendants.

Bankruptcy No. 95-15951-JNF, Adversary No. 97-1418.

United States Bankruptcy Court, D. Massachusetts.

November 18, 1997.

M. Carpenter, Kern, Roach & Carpenter, Boston, MA, Chapter 11 Trustee of the Estate of the Debtor.

Jack E. Robinson, Carpenter & Robinson, Stamford, CT, for Defendants.

MEMORANDUM

JOAN N. FEENEY, Bankruptcy Judge.

I. INTRODUCTION

The matter before the Court is the Defendants' Motion for Summary Judgment (the "Motion") and the Chapter 11 Trustee's objection to the Motion. The issue raised by the Motion is whether Massachusetts' version of the Uniform Fraudulent Transfer Act (the "UFTA"), which was enacted after the Debtor filed his bankruptcy petition, should apply retroactively to time bar the avoidance action brought by the Trustee. The material facts necessary to decide the Motion are not in dispute. See Fed.R.Civ.P. 56(c), made applicable to this proceeding by Fed. R. Bankr.P. 7056.

II. PROCEDURAL BACKGROUND

The Debtor filed a voluntary Chapter 11 petition on September 1, 1995. Over one year later, on February 27, 1997, the United States Trustee filed a motion to appoint a Chapter 11 trustee, which this Court granted. Thereafter, M. Ellen Carpenter was appointed the Chapter 11 Trustee ("Trustee").

On July 10, 1997, seeking to set aside a transfer of property as a fraudulent conveyance, the Trustee commenced an adversary proceeding against Vernard M. Granderson (the "Debtor"), individually, and against the Debtor's non-debtor spouse, Lillian B. Granderson, individually, and as trustee of both the Arrow Realty Trust and the E & L Realty Trust. On July 24, 1997, the Trustee filed a Motion for Leave to File a Memorandum of Lis Pendens (the "Lis Pendens Motion"). The Defendants objected to the Lis Pendens Motion and moved to dismiss the Trustee's complaint. The Court heard both motions on August 14, 1997 and continued the Lis Pendens Motion generally. At the conclusion of the hearing, the Defendants agreed to file a motion for summary judgment.

On August 20, 1997, the Defendants filed their Motion for Summary Judgment. Additionally, the parties filed a Statement of Agreed Facts. On September 12, 1997, the Trustee filed an Objection to the Motion for Summary Judgment. Both the Trustee and the Defendants filed briefs in support of their respective positions.

III. FACTS

The parties have stipulated to the material facts in their Statement of Agreed Facts. On or about March 17, 1974, the Debtor and his spouse acquired a residence located in Duxbury, Massachusetts (the "Property") for a purchase price of $72,500.00. They held title to the Property as tenants by the entirety for 17 years until July 12, 1991, when they transferred it to Lillian Granderson, as trustee of the Arrow Realty Trust ("Arrow"), for consideration of less than one dollar. Later that same day, Arrow transferred the Property to Lillian Granderson as trustee of the E & L Realty Trust, also for consideration of less than one dollar. On September 1, 1995, the Debtor filed his voluntary petition under Chapter 11 of the Bankruptcy Code.

IV. APPLICABLE LAW

On July 8, 1996, the Massachusetts legislature enacted the UFTA. Codified at Massachusetts General Law chapter 109A, the UFTA became effective on October 6, 1996. Mass. Gen. Laws Ann. ch. 109A, §§ 1-12 (West Supp.1997). In replacing the Uniform Fraudulent Conveyance Act (the "UFCA") with the UFTA, the legislature stated, "the General Laws are hereby amended by striking out chapter 109A and inserting in place thereof the following chapter...." 1996 Mass. Legis. Serv. ch. 157 (West). The UFTA provides for both a four-year and a one-year limitations period depending upon the section of the UFTA under which an action is brought.¹ In contrast, the UFCA was governed by the general six-year statute of limitations applicable to breach of contract actions under Mass. Gen. Laws ch. 260, § 2 (West 1948)². See Desmond v. Moffie, 375 F.2d 742, 743-744 (1st Cir.1967).

V. ARGUMENTS OF THE PARTIES

A. Should the UFTA Be Applied Retroactively?

The Defendants contend that the UFTA should be applied retroactively. They rely upon the only reported case to address the retroactivity of the UFTA in the First Circuit, In re Carroll Industries, Inc., 153 B.R. 100, 102 (Bankr.D.N.H.1993), in which the court predicted that New Hampshire courts would apply the UFTA retroactively. The Defendants contend that the reasoning in Carroll Industries is persuasive and urge the Court to follow it. The Defendants also rely upon In re Gherman, 103 B.R. 326, 331 (Bankr.M.D.Fla.1989), a case in which the court concluded that the UFTA is remedial and should be applied retroactively. However, they recognize that the Florida bankruptcy court in In re Smith, 110 B.R. 597, 598-99 (Bankr.M.D.Fla.1990), disagreed with the Gherman court and concluded that the UFTA should not be applied retroactively.

The Trustee urges the Court to adopt the majority rule: the UFTA should not be applied retroactively. The Trustee cites numerous decisions from around the United States in which courts have held that the law in effect at the time of the transfer is controlling, not the subsequently enacted UFTA. See, e.g., U.S. v. Bacon, 82 F.3d 822, 824 (9th Cir.1996); Karras v. Karras, 846 F.Supp. 804, 808 (D.S.D.1993), aff'd, 16 F.3d 245, 247 (8th Cir.1994); Towe Antique Ford Foundation v. U.S., 791 F.Supp. 1450, 1457-58 (D.Mont.1992), aff'd on other grounds, 999 F.2d 1387 (9th Cir.1993); In re C-T of Virginia, Inc., 124 B.R. 700, 703 n. 1 (W.D.Va. 1990); In re Fleet, 122 B.R. 910, 914-15 (E.D.Pa.1990); In re Sverica Acquisition Corp., Inc., 179 B.R. 457, 463 n. 1 (Bankr. E.D.Pa.1995); In re Taubman, 160 B.R. 964, 989 (Bankr.S.D.Ohio 1993); In re Carmean, 153 B.R. 985, 988 (Bankr.S.D.Ohio 1993); In re Carrousel Motels, Inc., 146 B.R. 733, 735 (Bankr.S.D.Ohio 1992); In re Sevko, 143 B.R. 167, 172 (Bankr.N.D.Ill.1992); In re Aluminum Mills Corp., 132 B.R. 869, 885 n. 14 (Bankr.N.D.Ill.1991); In re Rachles, Inc., 131 B.R. 782, 786-87 (Bankr.D.N.J.1991); In re Martin, 113 B.R. 949, 956 n. 2 (Bankr. N.D.Ill.1990); In re Smith, 110 B.R. 597, 598-99 (Bankr.M.D.Fla.1990); In re Warner, 83 B.R. 807, 809-10 (Bankr.M.D.Fla.1988); Koffman v. Smith, 453 Pa.Super. 15, 25 n. 2, 682 A.2d 1282, 1287 n. 2 (1996); Tyler v. Schnabel, 34 Conn.App. 216, 220-21, 641 A.2d 388, 390 (1994); Snellgrove v. Fogazzi, 616 So.2d 527, 528-29 (Fla.App.1993); Schall v. Anderson's Implement, Inc., 240 Neb. 658, 662, 484 N.W.2d 86 (1992); Holthaus v. Parsons, 238 Neb. 223, 224, 469 N.W.2d 536 (1991); First State Bank v. McConnell, 410 N.W.2d 139, 140 n. 1 (N.D.1987); Production Credit Ass'n of Minot v. Klein, 385 N.W.2d 485, 487 n. 2 (N.D.1986); Blankenship v. Myers, 97 Idaho 356, 366, 544 P.2d 314, 324 (1975); Vinlis Const. Co. v. Roreck, 67 Misc.2d 942, 944-45, 325 N.Y.S.2d 457, 460-61 (1971). But see Carroll Industries, 153 B.R. at 102; Gherman, 103 B.R. at 331; Cannon v. Whitman Corp., 212 Ill.App.3d 79, 155 Ill.Dec. 503, 507, 569 N.E.2d 1114, 1118, appeal denied, 141 Ill.2d 536, 162 Ill.Dec. 483, 580 N.E.2d 109 (1991).

B. Under Massachusetts Law is the Statute of Limitations under the UFTA Procedural or Substantive?

In support of their Motion for Summary Judgment, the Defendants argue that the Trustee's complaint is time-barred as it was filed more than four years after the alleged fraudulent transfer. According to the Defendants, because statutes of limitations are procedural in Massachusetts and because current procedure controls a prior cause of action, the statute of limitations period included in the UFTA should be applied retroactively to preclude the avoidance of the 1991 transfer. Citing Anderson v. Phoenix Investment Counsel of Boston, Inc., 387 Mass. 444, 453-454, 440 N.E.2d 1164 (1982),³ and Cioffi v. Guenther, 374 Mass. 1, 3, 370 N.E.2d 1003 (1977),⁴ the Defendants argue that if a statute of limitations does not contain language restricting its application to causes of action arising in the future, it controls future procedure with reference to a previously existing cause of action.

The Trustee argues that the UFCA is the applicable statute. She distinguishes the cases cited by the Defendants from the present facts and claims that the issue in the Defendants' cases was merely whether an amendment to a statute of limitations should be applied retroactively. The Trustee argues that because the UFTA entirely replaced the UFCA and because the UFTA contains many provisions that differ from the UFCA, the UFTA created a new statutory scheme. While conceding that remedial or procedural statutes may be applied retroactively, the Trustee argues that the UFTA is a wholly new statute dealing with substantive rights, not a mere alteration of a limitations period. Citing Moakley v. Eastwick, 423 Mass. 52, 666 N.E.2d 505 (1996),⁵ and Local 589, Amalgamated Transit Union v. Massachusetts Bay Transportation Authority, 414 Mass. 323, 607 N.E.2d 1011 (1993),⁶ the Trustee maintains that Massachusetts statutes affecting substantive rights cannot be applied retroactively.

VI. DISCUSSION

The Trustee's complaint is predicated upon § 544(b) of the Bankruptcy Code, which provides in relevant part the following:

(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 that is allowable under section 502 of this title or that is not allowable only under section 502(e) of this title.

11 U.S.C. § 544(b). Accordingly, applicable law is either Massachusetts' version of the UFCA or its version of the UFTA, depending upon which version of the statute applies to the alleged fraudulent transfer.

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