In re Gurley, Bankruptcy No. 6:95-bk-03833-ABB.

• Decision Date: 22 November 2006
• Docket Number: Bankruptcy No. 6:95-bk-03833-ABB.,Adversary No. 6:06-ap-00121-ABB.
• Parties: In re William M. GURLEY, Debtor. Cheryl Jane Followell, as Executrix of the Estate of Betty Jean Gurley, and William M. Gurley, Plaintiffs, v. United States of America, Defendant.
• Court: United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Middle District of Florida

357 B.R. 868

In re William M. GURLEY, Debtor.

Cheryl Jane Followell, as Executrix of the Estate of Betty Jean Gurley, and William M. Gurley, Plaintiffs, v. United States of America, Defendant.

Bankruptcy No. 6:95-bk-03833-ABB.

Adversary No. 6:06-ap-00121-ABB.

United States Bankruptcy Court, M.D. Florida, Orlando Division.

November 22, 2006.

COPYRIGHT MATERIAL OMITTED

Robert H. Pflueger, Robert H. Pflueger PA, Altamonte Springs, FL, Robert L. Young, Carlton Fields PA, Orlando, FL, for Debtor.

ORDER

ARTHUR B. BRISKMAN, Bankruptcy Judge.

This matter came before the Court on the Motion to Dismiss (Doc. No. 4) ("Motion") filed by the Defendant United States of America through its agency the Environmental Protection Agency ("EPA" or "Defendant") seeking dismissal of the Complaint (Doc. No. 1) ("Complaint") filed by Cheryl Jane Followell, as Executrix of the Estate of Betty Jean Gurley, and William M. Gurley, the Plaintiffs herein (collectively, the "Plaintiffs"). A hearing on the Motion was held on September 19, 2006 at which counsel for the parties appeared. The parties were granted leave to submit supplemental legal memoranda and proposed findings of fact and conclusions of law in support of their positions.¹ The Court makes the following Findings of Fact and Conclusions of Law after reviewing the pleadings and evidence, hearing live argument, and being otherwise fully advised in the premises.

FINDINGS OF FACT

Case Background

William M. Gurley ("Mr. Gurley" or the "Debtor") filed a Chapter 7 bankruptcy petition on July 26, 1995 and George E. Mills, Jr. is the Chapter 7 Trustee ("Trustee"). The Debtor's wife Betty Jean Gurley ("Mrs. Gurley") filed an individual Chapter 11 in the United States Bankruptcy Court for the Western District of Tennessee, Western Division ("Tennessee Bankruptcy Court"), on October 28, 1997.² Mrs. Gurley died on May 2, 2003. Cheryl Jane Followell ("Followell"), who is Mr. and Mrs. Gurley's daughter, is the Executrix of Mrs. Gurley's probate estate.

Mr. and Mrs. Gurley's bankruptcy filings were precipitated by actions instituted by the EPA against the Gurleys in 1987 and 1992 pursuant to CERCLA for past and future response costs relating to the clean-up of environmentally hazardous materials at two sites in Arkansas referred to as the Edmonson Site and the South 8th Street Site.³ The parties have been embroiled in contentious litigation for almost two decades, litigating in a number of federal courts with appeals taken to the Sixth, Eighth, and Eleventh Circuit Courts of Appeals.

Mr. Gurley's bankruptcy case has been intensely litigious. The litigation centerpiece was the Trustee's adversary proceeding to determine property of the estate and recover assets transferred, or purportedly transferred, by Mr. Gurley to Mrs. Gurley. The Trustee's action was consolidated with the objection to discharge instituted by the Defendant against Mr. Gurley.⁴ A Memorandum Opinion, Judgment, and Amended Judgment were entered in 1997 (collectively, the `Trustee Judgment") in favor of the Trustee and the EPA.⁵ The Trustee Judgment: (i) denied Mr. Gurley's discharge; (ii) concluded Mr. Gurley's alleged gift of Moltan Co. to his wife was ineffective; (iii) found the bankruptcy estate includes the approximately $17 million in assets, including Moltan Co., Mr. Gurley supposedly transferred to his wife (but no transfer actually occurred); and (iv) granted the Trustee authority to recover any assets fraudulently transferred prior to April 1990.⁶

This Court found none of the property purportedly transferred had been effectively transferred:

At the time of the petition, the Debtor had an equitable interest in all of the property, real property, and cash transferred to Mrs. Gurley . . . The Debtor is the effective owner of all property transferred to his wife and in an effort to secrete his ownership he made his wife his nominee . . . All property transferred by the Debtor to his wife is property of the estate pursuant to 11 U.S.C. § 541(a)(1).

Trustee Judgment (Memo.Op.) at pp. 24-25. The Court further held: "Additionally, the Trustee may recover property fraudulently transferred by the Debtor with actual intent to hinder, delay, and defraud the United States as described by the Court pursuant to Fla. Stat. § 726.105, 28 U.S.C. § 3304, and 11 U.S.C. § 544(b)." Id. at p. 25.

Mrs. Gurley appealed the Trustee Judgment⁷ and it was affirmed by the United States District Court for the Middle District of Florida, Orlando Division⁸ and the Eleventh Circuit Court of Appeals.⁹ The Eleventh Circuit Court of Appeals, per curiam, issued an unpublished written decision finding:

The facts of this case at hand lead us to conclude that the debtor maintained equitable ownership of all the assets and properties at issue here. The debtor was aware that a judgment against him (and not his wife) was imminent. He precipitously undertook to transfer certain assets and real property to his wife, the appellant, and to purchase assets in her name . . . The appellant's arguments that the instant action is barred by a statute of limitations is unavailing. The statute of limitations applies where a party is seeking to set aside fraudulent transfers not, as here where there was no valid transfer in the first place.

Eleventh Circuit Decision at p. 4. The United States Supreme Court denied Mrs. Gurley's petition for writ of certiorari on April 30, 2001.¹⁰ The findings of fact and conclusions of law contained in the Trustee Judgment and the related appellate decisions are adopted and incorporated herein.

The Trustee filed a $26,070,287.00 proof of claim in Mrs. Gurley's bankruptcy case based upon the Trustee Judgment and asserted equitable lien claims relating to Mr. Gurley's survivorship interest in certain assets. The Tennessee Bankruptcy Court allowed the Trustee's claim in the amount of $22,053,956.00.¹¹ Mrs. Gurley paid the claim through her confirmed plan. Mr. Gurley's bankruptcy estate consists of more than $22,000,000.00 from assets recovered through the Trustee Judgment.

Mrs. Gurley sought recovery of the funds paid to the Trustee by filing proofs of claim, Claim Nos. 3, 4, 8, and 9, in Mr Gurley's case. The Trustee's objections to her claims were sustained and the claims were disallowed by Order entered on December 27, 2001 on the basis the doctrines of res judicata and collateral estoppel barred Mrs. Gurley's relitigation of the issues underlying the claims.¹² The Florida District Court¹³ and the Eleventh Circuit Court of Appeals affirmed the decision and the Supreme Court denied certiorari.¹⁴ The December 27, 2001 Order constitutes a final judgment on the merits. The findings of fact and conclusions of law contained in the Order and the related appellate decisions are adopted and incorporated herein.

Followell challenged the Trustee's receipt of Mrs. Gurley's plan payments through an adversary proceeding instituted in Mrs. Gurley's bankruptcy case asserting the Trustee Judgment should be set aside because it was obtained through fraud and Mrs. Gurley's confirmation order should be revoked.¹⁵ The Tennessee Bankruptcy Court dismissed Followell's complaint on jurisdictional grounds and she appealed.¹⁶ The United States District Court for the Western District of Tennessee reversed the ruling in part holding the Tennessee Bankruptcy Court has jurisdiction to consider the complaint, but made no determination as to the legal sufficiency of the complaint.¹⁷ The Trustee appealed the District Court decision to the Sixth Circuit Court of Appeals, which dismissed the appeal on July 25, 2006. The adversary proceeding was held in abeyance¹⁸ and Followell filed a motion on October 30, 2006 requesting a status conference be scheduled.¹⁹

The EPA's Claims

Mr. Gurley's case has reached its final stage and the Trustee stands ready to distribute the estate's assets. The only claimants of Mr. Gurley's bankruptcy estate are the EPA, the Trustee and his counsel for costs incurred in the administration of the case.²⁰ A distribution surplus would be created, which would flow to Mr. Gurley, if the EPA was restricted from fully participating in the distribution of estate assets.

The EPA filed claims based upon judgments in favor of the EPA entered by the United. States District Court for the Eastern District of Arkansas ("Arkansas District Court") and the United States District Court for the Western District of Tennessee, Western Division ("Tennessee District Court"). The Arkansas District Court entered judgment in favor of the EPA and against the Debtor and others in 1992 for clean-up costs for the Edmonson Site in the amount of $1,786,502.95, awarded prejudgment interest²¹ and granted the EPA a declaratory judgment for all future clean-up costs associated with the Edmondson Site.²² The judgment against Mr. Gurley was affirmed by the Eighth Circuit Court of Appeals and the Supreme Court denied the certiorari petition.²³

The Defendant instituted a separate CERCLA action in the Tennessee District Court regarding requests for information for the South 8th Street Site. The Tennessee District Court entered judgment on November 27, 2002²⁴ in favor of the EPA and against Mr. Gurley and others in the amount of $1,908,000.00 for civil penalties.²⁵ The judgment was affirmed by the Sixth Circuit Court of Appeals and the rehearing request was denied.²⁶

The EPA timely filed Claim No. 2 for $14,784,143.95 and amended the claim by Claim No. 7 for $23,757,240.00 for costs incurred and to be incurred at the Edmondson Site, post-judgment response costs pursuant to the declaratory judgment, and interest. The claim also contains response costs for the South 8th Street Site plus interest. The EPA filed Claim No. 11 on March 3, 2006 for $1,325,628.72 based upon the Tennessee District Court civil penalties judgment. The EPA amended Claim No. 11 by Claim No. 13 filed on March 6, 2006 (for the same amount of $1,325,628.72) in order to attach three exhibits it had...