In re Kelton Motors, Inc.

• Decision Date: 26 March 1991
• Docket Number: Adv. Pro. No. 90-00024A.,Bankruptcy No. 89-00255
• Citation: 130 BR 170
• Court: U.S. Bankruptcy Court — District of Vermont
• Parties: In re KELTON MOTORS, INC., Debtor. Gleb GLINKA, Trustee of the Estate of Kelton Motors, Plaintiff, v. BANK OF VERMONT, Defendant.

130 B.R. 170 (1991)

In re KELTON MOTORS, INC., Debtor Gleb GLINKA, Trustee of the Estate of Kelton Motors, Plaintiff, v. BANK OF VERMONT, Defendant.

Bankruptcy No. 89-00255, Adv. Pro. No. 90-00024A.

United States Bankruptcy Court, D. Vermont.

March 26, 1991.

COPYRIGHT MATERIAL OMITTED

G. Glinka, Glinka & Palmer, Cabot, Vt., Trustee of the Estate of Kelton Motors, pro se (Trustee).

D. Wolinsky, Saxer, Anderson, Wolinsky & Sunshine, Burlington, Vt. for Bank of Vermont (Bank).

MEMORANDUM OF DECISION DETERMINING THE STANDARD OF PROOF UNDER 11 USC §§ 547, 548(a)(2), AND 9 Vt.Stat.Ann. § 2281

FRANCIS G. CONRAD, Bankruptcy Judge.

This matter is before us¹ for pretrial determination of the appropriate standard of proof to be applied under 11 U.S.C. § 547, 11 U.S.C. § 548(a)(2), and a fraudulent conveyance action under 9 Vt.Stat. Ann. § 2281.²

Trustee argues that the preponderance of the evidence standard should be applied to each cause of action stated in the complaint. Bank, on the other hand, argues that a higher standard of proof is required in this adversary proceeding.

We hold that the "preponderance of the evidence" standard must be met to prevail on the claims of preferential transfer under 11 U.S.C. § 547 and fraudulent conveyance under 11 U.S.C. § 548(a)(2). But, the "clear and convincing" standard of proof applies in the 11 U.S.C. § 548(a)(1) and the State law based claim of fraudulent conveyance under 9 Vt.Stat.Ann. § 2281.

Under 11 U.S.C. §§ 542(a)³ and 550(a)⁴, Trustee demands Bank turn over property of the estate. Trustee claims that the transferred property at issue, namely a check in the amount of $2,948,255.52, is recoverable as a § 547(b) preference⁵, or as a § 548(a)(2) fraudulent conveyance⁶, or in the alternative, as a fraudulent conveyance under 9 Vt.Stat.Ann. § 2281.⁷

Here, as in any other civil action, a plaintiff has the burden of proving the material allegations of a complaint. McCormick on Evidence, Burden of Proof and Presumptions, § 337 (3d Ed.1989). We recently had an occasion to observe that the terms "burden of proof," "burden of persuasion," and "standard of proof" are not susceptible to easy definition, and are often confused by Judges and litigants alike. Chittenden Trust Company v. Mayo (In re Mayo), 94 BR 315, 321, 18 BCD 931, 20 CBC.2d 641 (Bkrtcy.D.Vt.1988). Often, the standard of proof applicable to a particular case will be determined by the legislature. Other times, it is determined by the Court. The standard of proof applicable to a plaintiff's claim may vary depending on the nature of the facts and the statutory predicate for the action. It is the standard we use as the trier of fact to determine whether the evidence in a trial rises to a level sufficient to establish that an alleged claim is true.

In criminal cases, the standard of proof the trier of fact must use in weighing the evidence is proof "beyond a reasonable doubt." In re Winship, 397 U.S. 358, 90 S.Ct. 1068, 25 L.Ed.2d 368 (1970). This standard apparently has been the formula since ancient times. McCormick on Evidence, Burdens of Proof and Presumptions, § 341 (3d Ed.1989).

Blacks Law Dictionary defines "reasonable doubt" as "doubt based on reason and arising from evidence or lack of evidence, and it is doubt which reasonable man or woman might entertain, and it is not fanciful doubt, is not imagined doubt, and is not doubt that juror might conjure up to avoid performing unpleasant task or duty. Reasonable doubt is such a doubt as would cause prudent men to hesitate before acting in matters of importance to themselves." Id., at p. 1138 (5th Ed.1979) (citations omitted).

American Jurisprudence 2d defines "reasonable doubt" as "actual and substantial doubt of the defendant's guilt arising from the evidence, or from a want of evidence, as contradistinguished from a mere vague apprehension." 30 Am.Jur.2d, Evidence § 1171, at 351 (2d Ed.1967), citing, Holland v. United States, 209 F.2d 516 (10th Cir.1954), aff'd, 348 U.S. 121, 75 S.Ct. 127, 99 L.Ed. 150 (1954), reh. denied, 348 U.S. 932, 75 S.Ct. 334, 99 L.Ed. 731 (1955). Additionally, in some cases the term reasonable doubt is defined as "the doubt that jurors are conscious of after going over in their own minds the entire case and after giving consideration to all the evidence." 30 Am.Jur.2d, Evidence, § 1171, at 351-2 (2d Ed.1967).

The Supreme Court has never defined the term "reasonable doubt" and has noted that attempts to explain the couplet to a jury do not usually make the terms any clearer. Holland v. United States, supra, 348 U.S. at 140, 75 S.Ct. at 137-38. Consequently, a number of the Federal Circuits, reviewing District Court decisions which omitted instruction on the term reasonable doubt to the jury, have held that it is not an error to omit the definition of reasonable doubt in their instructions. Such circuits reason that the phrase "reasonable doubt" is self-explanatory and is its own best definition. Modern Federal Jury Instructions, Burden of Proof, Section 4.01 (1989).⁸

In civil cases, as a general rule, the standard burden or measure of proof imposed on the plaintiff is "preponderance of the evidence." McCormick on Evidence, Burdens of Proof and Presumptions, § 340 (3d Ed.1989). The standards applied in a civil suit have constitutional dimensions and range along a "continuum" representing a varying "degree of confidence . . . in the correctness of factual conclusions" produced in the mind of the trier of fact. Addington v. Texas, 441 U.S. 418, 423, 99 S.Ct. 1804, 1808, 60 L.Ed.2d 323 (1979).

Furthermore, as the Supreme Court has explained, the standard of proof required of a litigant will be determined by a "due process requirement reflecting not only the weight of the private and public interests affected, but also a societal judgment about how the risk of error should be distributed between the litigants." Santosky v. Kramer, 455 U.S. 745, 755, 102 S.Ct. 1388, 1395, 71 L.Ed.2d 599 (1982). Thus, in a civil suit between private parties, the standard of proof the Court will demand depends on the nature of the claim and the policy considerations implied.

In most civil cases the standard applied is proof by a "preponderance of the evidence." The reason for this rule is that "as between man and woman, where a loss must fall upon one or the other, it is right that the law should cast it upon one person who is shown to have been the cause of the loss, by proof establishing the reasonable probability of the fact." 30 Am.Jur.2d, Evidence, § 1163, at 337 (2d Ed.1967).

"Preponderance of the evidence" has been defined as the weight, credit, and value of the aggregate evidence on either side. It is usually considered to be synonymous with the term "greater weight of the evidence," or "greater weight of the credible evidence." Id., § 1164, at 339. This standard is not so strict as to require the moving party to establish a fact to the "satisfaction of the jury," or to present evidence sufficient to "convince their minds" of any particular fact. Id. It is, as the term itself suggests, a tilting of the scales in favor of the party whose evidence carries greater weight.

The Second Circuit has defined preponderance as meaning "that . . . the facts asserted by the plaintiff are more probably true than false." Nissho-Iwai Co., Ltd. v. M/T Stolt Lion, 719 F.2d 34, 38 (2d Cir. 1983). If, after considering all the evidence, including testimony, the trier of fact is satisfied that the moving party's submissions are more probable and credible than the opposing party's evidence, then the moving party will have carried the burden as to each essential point of the claims. On the other hand, if the trier of fact finds that the testimony of both parties is in balance, or equally probable, then the moving party will have failed to sustain the required burden.

In certain classes of civil cases, a heightened standard of proof has been applied because of legislative mandate, or policy considerations. This heightened standard is usually described as proof by "clear and convincing" evidence, or evidence that is "clear and satisfactory," or evidence described by similar terms, or even in rare cases, proof "beyond a reasonable doubt." McCormick on Evidence, Burden of Proof and Presumptions, § 340 (3d Ed.1989).

The "clear and convincing" standard is not susceptible to precise definition. For example, terms such as "clear, cogent, and convincing;" "clear, satisfactory, and convincing;" "clear, unequivocal, and convincing;" "clear, distinct, and irresistible;" "clear, unequivocal, and definite;" "plain and convincing beyond a reasonable controversy;" or "clearest and most satisfactory," have all been used interchangeably. 30 Am.Jur.2d, Evidence, § 1167 (2d Ed. 1967).

The reason for requiring a heightened standard of proof in certain civil cases is embodied in the Due Process clause of the Constitution. The "clear and convincing evidence" standard is used, typically, in civil cases where the defendant's private interests at stake are more substantial than risk of monetary loss. Addington v. Texas, supra, 441 U.S. at 424, 99 S.Ct. at 1808-09. An example of cases requiring this heightened standard of proof are: 1) civil cases involving fraud, undue influence, or other similar elements; 2) suits on oral contracts to make a will, and suits to establish the terms of a lost will; 3) suits for the specific performance of an oral contract; 4) civil cases where a criminal act is charged as a part of the case; or, 5) civil cases which involve a statutory penalty. Wigmore on Evidence, Measure of Jury's Persuasion, § 2498 (Chadbourn rev. 1981); see also, McCormick on Evidence, Burden of Proof and Presumptions, § 340 (3rd Ed. 1989) and 30 Am.Jur.2d, Evidence, § 1164 (1989).

The Fifth Circuit in Aetna Ins. Co. v. Paddock, 301 F.2d 807 (5th Cir.1962), stated that when a Court requires a party to establish the facts under the clear and convincing standard, the evidence...