In re Hansen
| Decision Date | 20 April 1990 |
| Docket Number | Bankruptcy No. 87-0094,Related Case No. 83-02074. |
| Citation | 114 BR 927 |
| Parties | In re Robert C. HANSEN, Debtor. John J. HUNTER, Trustee, Plaintiff, v. W. Arthur HANSEN, Defendant. |
| Court | U.S. Bankruptcy Court — Northern District of Ohio |
Steven Diller, Van Wert, Ohio, for plaintiff.
Charles D. Hering, Jr., Tiffin, Ohio, for defendant.
This cause comes before the Court on the Trustee's Motion for Summary Judgment on his Complaint For Judgment on Fraudulent Transfer against W. Arthur Hansen. The Court has reviewed the written arguments of counsel, the depositions and other evidence, as well as the entire record in this case. Based on that review, and for the following reasons, the Court finds that the Trustee's Motion for Summary Judgment should be denied.
On December 22, 1961, Robert C. Hansen, the Debtor in this case, and Barbara J. Hansen were married. On December 8, 1976, Robert C. Hansen purchased a One Hundred Eighty (180) acre farm (hereinafter "the Home Farm"), some farm machinery and grain equipment for One Hundred Fifty Thousand Dollars ($150,000.00) from the Defendant, W. Arthur Hansen. See, Exhibit 1. W. Arthur Hansen is the father of Robert Hansen.
Robert Hansen operated the farm and used its facilities to conduct his grain purchase and resale business. It is not disputed that W. Arthur Hansen did not have, at any time, a perfected security interest in the farm machinery and grain equipment. However, the business was conducted on real estate sold to Robert Hansen on a land contract by W. Arthur Hansen.
Under the terms of the land contract, if Robert Hansen did not keep the payments current, W. Arthur Hansen had the "right, but not the duty, to pay any charges which are obligations payable" by Robert Hansen. See, Exhibit 1, Paragraph 7. Any obligations paid by W. Arthur Hansen were to be added to the amount owed by Robert C. Hansen. Id.
On October 13, 1981, the Defendant commenced a foreclosure action in Tiffin Municipal Court against Robert Hansen's interest in the One Hundred Eighty (180) acres subject to the land contract. The forfeiture action was begun after W. Arthur Hansen learned that Robert Hansen was going to be divorced from his wife. See, Exhibit 6, at 29. Robert Hansen did not file any response to the foreclosure action. No action has ever been filed by W. Arthur Hansen on the farm machinery or the grain equipment.
In January of 1982, Robert C. Hansen "transferred" all of his farm machinery and grain handling equipment to the Defendant. W. Arthur Hansen asserts that the transfer was made in return for mortgage payments which he made on the Three (3) mortgages that both he and his son had signed, and the assumption of a number of Robert Hansen's debts, totalling Three Hundred Forty-seven Thousand Five Hundred Seventy-four Dollars and Fifty Cents ($347,574.50).
On March 9, 1982, a judgment was issued in the Tiffin Municipal Court foreclosure proceeding, awarding the real estate to W. Arthur Hansen. See, Exhibit 7. The judgment did not specifically include or exclude the farm machinery and grain equipment. On July 16, 1982, the domestic relations court issued a decree of divorce, which was subsequently appealed by Robert Hansen.
Robert C. Hansen filed a Chapter 7 Petition on November 23, 1983, and the Plaintiff, John J. Hunter accepted his interim appointment as Trustee for the estate on December 7, 1983. The first meeting of creditors was held on January 5, 1984, and Mr. Hunter became the permanent Trustee at that time. The Trustee subsequently filed the instant Complaint on May 20, 1987.
The Trustee's Motion for Summary Judgment is governed by Federal Rule of Civil Procedure 56(c), which states in pertinent part:
The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to 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.
See, Bankruptcy Rule 7056 and Fed.R. Civ.P. 56(c).
If there is no genuine issue of material fact, summary judgment is proper because it avoids needless and costly litigation and promotes judicial efficiency. U.S. v. Porter, 581 F.2d 698, 703 (8th Cir.1978); U.S. v. Feinstein, 717 F.Supp. 1552, 1555 (S.D.Fla. 1989); Midwest Mechanical Contractors, Inc. v. Tampa Constructors, Inc., 659 F.Supp. 526, 529 (W.D.Mo.1987). Summary judgment is not "a disfavored procedural shortcut". Rather, it is an "integral part of the Federal Rules as a whole". Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S.Ct. 2548, 2555, 91 L.Ed.2d 265, 276 (1986).
The moving party bears the initial burden of demonstrating by reference to portions of pleadings, depositions, answers to interrogatories and admissions on file, together with affidavits, if any, the absence of any genuine issues of material fact. Celotex Corp. v. Catrett, 477 U.S. at 323, 106 S.Ct. at 2553, 91 L.Ed.2d at 274. A motion for summary judgment must be construed in the light most favorable to the party opposing the motion. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142, 154 (1970).
The first issue raised by the Defendant is the timeliness of Plaintiff's Complaint. The Trustee's Complaint is based on two statutes. The Trustee's standing to bring this action is derived from his status as an actual unsecured creditor under Bankruptcy Code Section 544(b). Using that status, the Trustee seeks to avoid the transfer of the farm machinery and grain equipment based upon Ohio's fraudulent conveyance law, O.R.C. § 1336.01 et seq. Initially, the Court will assume that the time allowed for bringing an action under § 544 is governed by 11 U.S.C. Section 546(a)(1), which provided:
The Defendant argues that under the above statute the Trustee's Complaint is not timely filed. The Trustee accepted his appointment as interim Trustee on December 7, 1983, and became the permanent Trustee on January 5, 1984. See, Exhibit 4, Transcript of § 341 First Meeting of Creditors, at 3. However, the instant Complaint was not filed until May 20, 1987, more than Three (3) years after the appointment of the Trustee. The Trustee contends that the time should be tolled because evidence of the fraudulent transfer was concealed by the Debtor. See, Complaint For Judgment on Fraudulent Transfer, at ¶ 13.
The statute of limitations issue raised by the Defendant has been the subject of frequent litigation. It involves difficult questions of the proper balance between "plain meaning" and equitable policy considerations. White v. Boston, 104 B.R. 951, 956 (S.D.Ind.1989).
The initial question is, when did the trustee's statute of limitations begin to run? Was it from the date of the trustee's interim appointment, or from the date of his permanent appointment? A recent decision of the Ninth Circuit Bankruptcy Appellate Panel discusses the relevant statutes. See, In re Conco Building Supplies, Inc., 102 B.R. 190, 191-192 (9th Cir. BAP 1989). In Conco, the court noted that § 546(a)(1) commences the running of statutory time limit after the appointment of a trustee under 11 U.S.C. § 702.
Section 702 stated, in pertinent part:
11 U.S.C. § 702 (1983) (emphasis added).
Based on the statutory language, the Conco court held that the two year time limitation does not begin to run until the election or qualification of a permanent trustee at the § 341 meeting of creditors. In re Conco Building Supplies, Inc., 102 B.R. at 191-192. This is clearly the majority view. See, In re Young, 97 B.R. 679, 680 (Bankr.N.D.Ga.1988); In re Metro Shippers Inc., 95 B.R. 366, 369 (Bankr.E. D.Pa. 1989); In re O'Neill, 94 B.R. 739, 741 (Bankr.M.D.Fla.1988); In re Southard, 91 B.R. 160, 163 (Bankr.M.D.Fla.1988); In re Afco Development Corp., 65 B.R. 781, 785 (Bankr.D.Utah 1986); In re North American Dealer Group, Inc., 62 B.R. 423, 426 (Bankr.E.D.N.Y.1986); In re Outlet Department Stores, Inc., 49 B.R. 536, 538 (Bankr.S.D.N.Y.1985); In re Sin-Ko Inc., 48 B.R. 180, 181 (Bankr.N.D.Ohio 1985); In re Black and Geddes, Inc., 35 B.R. 827, 828-829 (Bankr.S.D.N.Y.1983); In re Killian Construction Co., 24 B.R. 848, 849-850 (Bankr.D.Idaho 1982). Here, the Trustee having become "permanent" at the § 341 meeting on January 5, 1984, the Complaint was filed more than One (1) year and Four (4) months after expiration of the time period allowed under § 546.
II(B). THE FEDERAL EQUITABLE TOLLING DOCTRINE.
Despite the ostensible lateness of his Complaint, the Trustee appears to contend that the filing was timely because the fraud was concealed by Robert Hansen. See, Complaint For Judgment on Fraudulent Transfer, at 13. Thus, the question becomes, under what circumstances is the statute of limitations tolled?
In White v. Boston, supra, the court discussed the history of the federal equitable tolling doctrine. See, White v. Boston, 104 B.R. at 956. This doctrine was first applied by the United States Supreme Court in a 1875 Bankruptcy case. See, Bailey v. Glover, 88 U.S. (21 Wall.) 342, 22 L.Ed. 636 (1875). The equitable tolling doctrine was later extended to apply to...
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