In re Leneve

• Decision Date: 08 March 2006
• Docket Number: Bankruptcy No. 03-36439-BKC-PGH.,Adversary No. 04-3014-BKC-PGH-A.
• Citation: 341 B.R. 53
• Parties: In re William Lawrence LENEVE, Debtor. Soneet R. Kapila, Chapter 7 Trustee, Plaintiff, v. WLN Family Limited Partnership and Carlayne Holloway, Defendants.
• Court: U.S. Bankruptcy Court — Southern District of Florida

Page 53

341 B.R. 53

In re William Lawrence LENEVE, Debtor Soneet R. Kapila, Chapter 7 Trustee, Plaintiff, v. WLN Family Limited Partnership and Carlayne Holloway, Defendants.

Bankruptcy No. 03-36439-BKC-PGH.

Adversary No. 04-3014-BKC-PGH-A.

United States Bankruptcy Court, S.D. Florida.

March 8, 2006.

COPYRIGHT MATERIAL OMITTED

Kenneth B. Robinson, Rice Pugatch Robinson & Schiller, P.A., Fort Lauderdale, FL, for Plaintiff.

Kevin C. Gleason, Kevin Gleason, P.A., Hollywood, FL, for Defendant Carlayne Holloway.

MEMORANDUM OPINION, FINDINGS OF FACT, AND CONCLUSIONS OF LAW

THOMAS S. UTSCHIG, Bankruptcy Judge.

This bankruptcy case began when the debtor filed a chapter 7 petition in the Western District of North Carolina on September 23, 2003. The North Carolina bankruptcy court transferred the case to the Southern District of Florida on November 12, 2003. Thus began what is clearly a long and tortured investigation into the debtor's business affairs. As the trustee states in his direct testimony, from the outset the case has represented "a tangled web." Sir Walter Scott once famously observed, "Oh, what a tangled web we weave, when first we practice to deceive." This case easily illustrates how others can become ensnared in that web of deception. According to the trustee, he and his professionals have identified some 23 distinct corporations, limited partnerships, limited liability companies, and other entities over which the debtor had some level of control, if not outright ownership. How, and to what extent, the defendant Carlayne Holloway became involved in the debtor's schemes is the issue now before the Court.

The trustee believes that the debtor engaged in a fraudulent pattern of conduct regarding his assets, and that Carlayne Holloway assisted him in some manner. Certainly it is clear that the debtor's business dealings were murky at best, and the present adversary proceeding is but one of the many disparate threads the trustee has pursued in an effort to recover assets for the benefit of creditors. The principal question before the Court at present is whether the trustee has successfully proven the existence of a series of fraudulent transfers by the debtor (or on the debtor's behalf) to the defendant, Carlayne Holloway. In that regard, the trustee seeks to recover a total of $957,215.00 in purportedly fraudulent transfers from Holloway.

Both 11 U.S.C. § 548(a)(1)(A) of the bankruptcy code and Fla. Stat § 726.105(1)(a)¹ permit a bankruptcy trustee to avoid transfers of a debtor's property if those transfers were made with the actual intent to hinder, delay, or defraud the debtor's creditors. Under 11 U.S.C. § 548(a)(1)(B) and Fla. Stat. § 726.105(1)(b), a trustee may likewise avoid a transfer if the debtor received "less than a reasonably equivalent value" in exchange for the transfer and the debtor was insolvent or otherwise financially impaired at the time of the transfer.

In order to prove that a fraudulent transfer has occurred under § 548(a)(1)(A) or Fla. Stat. § 726.105(1)(a), the plaintiff must demonstrate several things. First, the plaintiff must prove that a transfer of property has in fact occurred. Second, the plaintiff must prove that the property transferred belonged to the debtor. Third, the plaintiff must prove that the transfer occurred within certain statutory time periods. And fourth, the plaintiff must demonstrate that the debtor made the transfer with the intent to hinder, delay, or defraud creditors. See Martino v. Edison Worldwide Capital (In re Randy), 189 B.R. 425, 440 (Bankr.N.D.Ill. 1995); In re Ingersoll, 124 B.R. 116, 120 (M.D.Fla.1991). The purpose and policy of both the state and federal provisions is to preserve assets of the estate for the benefit of creditors. Solomon, 300 B.R. at 63. Essentially, the fraudulent transfer provisions prevent the debtor from engaging in transactions which have the effect of placing assets beyond the reach of legitimate creditors. Whitaker v. Mortg. Miracles, Inc. (In re Summit Place, LLC), 298 B.R. 62 (Bankr.W.D.N.C.2002).²

The defendant, Carlayne Holloway, concedes receiving certain amounts from the debtor's various entities within the proscribed time periods. However, issues exist as to whether Mrs. Holloway actually received all of the transfers alleged by the trustee. Further, Mrs. Holloway contends that she invested money in the debtor's business, and that his repayment of the debt does not indicate fraudulent intent. In that regard, however, it must be remembered that it is the debtor's intent, not the transferee's intent, which is critical in determining whether a transfer is fraudulent. In re Metro Shippers, Inc., 78 B.R. 747, 752 (Bankr.E.D.Pa.1987).

Under both § 548(a)(1)(B) and Fla. Stat. § 726.105(1)(b), the plaintiff must prove that the debtor did not receive "reasonably equivalent value" in exchange for the transferred property. What constitutes "reasonable value" is not statutorily defined. However, among the factors considered by courts include the good faith of the parties, the disparity between the fair value of the property and what the debtor actually received, and whether the transaction was at arm's length. See Washington v. County of King William (In re Washington), 232 B.R. 340 (Bankr. E.D.Va.1999); Heritage Bank v. Steinberg (In re Grabill Corp.), 121 B.R. 983, 994 (Bankr.N.D.Ill.1990). As the court stated in Steinberg, in determining whether the debtor received reasonably equivalent value, the essential examination is a comparison of "what went out" with "what was received."

The facts are as follows. As has been documented by the trustee, the financial dealings of the debtor may fairly be characterized as questionable. He established over 20 companies and seemingly transferred funds and assets between these various entities without much regard for corporate form. LeNeve was involved in a variety of real estate and other business ventures, many of which involved the solicitation of investment funding from third parties.³ LeNeve has conceded that he exercised "dominion and control" over a variety of entities, including WLN Family Limited Partnership, Government Receivables Factoring Limited Partnership, Haverhill, PMS, Real Partners Limited Partnership, and others. He acknowledges that these entities had "no discretion" regarding the funds deposited in their names, and that they simply took direction from him as to how those funds would be spent or otherwise dispersed. The record conclusively establishes that LeNeve acted with little concern for the formalities of corporate governance, preferring instead to shift funds from entity to entity as part of a transactional shell game.

During the trial, the trustee asserted that the debtor had engaged in a general scheme or course of conduct designed to hinder, delay, or defraud creditors. In support of this argument, the trustee pointed out that in July of 2002, a $9 million consent judgment was entered against LeNeve and several other named defendants, including Mrs. Holloway's son Greg and his wife, Laura Andre. Likewise, in December 2001, an arbitration panel rendered an award against LeNeve in excess of $4 million. That award was confirmed in a state court proceeding in January 2003. From the trustee's perspective, LeNeve was clearly aware of all of these pending claims, and the likelihood of ultimate liability, when he made these transfers to Carlayne Holloway in 2002 and 2003.

These transfers were made by several different LeNeve-controlled entities, including Jefferson Capital, Partnership Mgt., WLN, and Haverhill Palm.⁴ The transactions targeted by the trustee total $957,215.00. Carlayne Holloway acknowledges receipt of virtually all of the transfers. Notably, however, she contests receipt of a $450,000.00 transfer made from Jefferson Capital on or about September 17, 2002.⁵ In his testimony, LeNeve says that he "believed" the transfer was to have been for the benefit of Carlayne Holloway but he has no "personal knowledge" of that fact.

Carlayne Holloway denies that she ever owned an account at Compass Bank in Texas, the bank to which this transfer was wired pursuant to LeNeve's directions. She also emphatically says that she has never had a bank account anywhere in the state of Texas, nor does she have any record of this transfer or any knowledge of how she might have received the funds in the Compass Bank account. To support his position, the trustee introduced the testimony of Patrick Wilhelm Francois Toothe, the manager of a law office in Nassau, Bahamas, who indicated that LeNeve instructed him to wire the funds to the Compass Bank in Houston, Texas for a borrower named "Holloway."

The resolution of this issue is one of the significant components of this case. And the determination the Court is required to make is whether the trustee has demonstrated, by the proverbial preponderance of the evidence, that Carlayne Holloway received these funds. Clearly, Toothe's testimony reveals that the funds were in fact wired to a bank account in Houston, Texas. And there is also a bit of conflict in the testimony about why this sizeable sum was in fact sent to this seemingly obscure bank.⁶ The trustee did not introduce any evidence, however, to show that the bank account in question was in fact owned by Carlayne Holloway. While the trustee doubts that the funds would have been wired to an "unknown recipient," it seems incumbent upon the plaintiff to demonstrate, as part of its case in chief, actual receipt of the transferred funds, be it directly by the defendant or simply by the transfer into an account over which she had dominion and control.

As indicated at the outset, one of the essential elements which must be proven by the plaintiff in a fraudulent transfer action is the existence of the transfer itself. If it is the plaintiff's burden to demonstrate that a transfer has taken place, it is axiomatic that for purposes of liability, the plaintiff...