In re Lucas Dallas, Inc.
| Decision Date | 17 August 1995 |
| Docket Number | NC-94-2116-HVR. Bankruptcy No. 91-46079 IN. Adv. No. 93-4562 AN.,BAP No. NC-94-2055-HVR |
| Citation | 185 BR 801 |
| Parties | In re LUCAS DALLAS, INC., Debtor. GENERAL ELECTRIC CAPITAL AUTO LEASE, INC., and GE Capital Mortgage Services, Inc., Appellants, Cross-Appellees, v. William H. BROACH, Trustee, Appellee, Cross-Appellant. |
| Court | U.S. Bankruptcy Appellate Panel, Ninth Circuit |
M. Michael Morgan, San Diego, CA, for appellants, cross-appellees.
Valerie L. Smith, San Francisco, CA, for appellee, cross-appellant.
Before HAGAN, VOLINN and RUSSELL, Bankruptcy Judges.
William H. Broach ("trustee") is the chapter 7 trustee for Lucas Dallas, Inc. ("debtor"). The trustee filed an adversary proceeding to recover numerous alleged fraudulent transfers by the debtor to GE Capital Mortgage Services, Inc. ("GE Mortgage"), and General Electric Auto Lease, Inc. ("GE Auto"), among others. (Collectively, GE Mortgage and GE Auto shall be referred to as the "GE defendants.") The trustee and the GE defendants filed cross-motions for summary judgment. The bankruptcy court granted the trustee's motion for summary judgment on the state law fraudulent transfer claims. The court granted the GE defendants' motion for summary judgment on the federal fraudulent transfer claims, however, finding those claims barred by the statute of limitations. Both the trustee and the GE defendants appeal. We AFFIRM the bankruptcy court's judgment but REMAND for corrections to conform with this opinion.
William Dallas ("Dallas") was a principal of the debtor, and Mansveto Lenci ("Lenci") an employee of the debtor. Dallas obtained a loan from Monarch Mortgage Corporation secured by a mortgage against his personal residence. Monarch Mortgage Corporation transferred the mortgage to Travelers Mortgage Service, Inc. ("Travelers"). GE Mortgage subsequently purchased Travelers and used its name for a time. From February, 1990 until January, 1991, the debtor paid GE Mortgage $41,811.59 against this debt.
Both Dallas and Lenci leased cars from GE Auto. Dallas and Lenci were billed directly for the lease payments. The debtor paid $31,716.01 to GE Auto on the leases. These payments occurred between June, 1989 and May, 1991.
The debtor did not have any direct obligation to the GE defendants, nor is there any evidence that the debtor was required to make these payments as part of the compensation paid to Dallas or Lenci. The trustee presented evidence that the debtor was insolvent at the time all of these payments were made.
In September, 1991, an involuntary petition was filed against the debtor. On November 7, 1991, the bankruptcy court entered an order for relief under chapter 7. On that date, the trustee was appointed as interim trustee under section1 701. The section 341 creditors' meeting was not held until October 12, 1994.2
On November 5, 1993, the trustee filed an adversary proceeding against Travelers and Dallas, alleging actions to recover preferential transfers, fraudulent transfers, and for an accounting. This adversary proceeding was assigned the number 93 4562 AN.3 The trustee alleged, inter alia, that the debtor made seven payments totalling $24,297.88 to Travelers during the four years prior to the date the involuntary bankruptcy petition was filed. These transfers were alleged to be avoidable under section 548, and section 544 and Cal.Civ.Code § 3439 et seq. ("California Uniform Fraudulent Transfer Act"). The complaint was served on November 17, 1993 on Travelers, GE Mortgage, and GE Mortgage's registered agent for service of process. Travelers did not answer the complaint.
On March 9, 1994, the trustee filed an amended complaint. The amended complaint listed as defendants Travelers, Dallas, GE Mortgage, GE Auto, and others. The amended complaint specifically alleged transfers to GE Mortgage and/or Travelers in the amount of $41,811.59, and transfers to GE Auto in the amount of $35,887.88. As with the initial complaint, the trustee sought recovery under, inter alia, sections 544 and Cal.Civ.Code § 3439 et seq., and section 548.
The trustee and the GE defendants filed cross-motions for summary judgment. The GE defendants alleged the federal causes of action were barred by section 546(a)(1)'s two-year statute of limitations, and that the transfers were not fraudulent under California law. The trustee contended the statute of limitations had not run on the federal causes of action, and presented evidence to support its contention the GE defendants had received fraudulent transfers.
The bankruptcy court concluded that the trustee had been appointed on November 7, 1991, the date of the order for relief and the date the trustee was appointed as interim trustee, and that the two-year period began to run from that date. The court found the federal causes of action were time-barred under section 546, having been brought more than two years later. Accordingly, the court granted the GE defendants' motion for summary judgment as to the federal claims.
The bankruptcy court granted summary judgment for the trustee on the California fraudulent transfer claims. All transfers were avoided in the full amount.
The GE defendants appeal the summary judgment against them on the California fraudulent transfer claims. The trustee cross-appeals the grant of summary judgment against him on the statute of limitations issue.
1. Whether the bankruptcy court properly granted summary judgment against the GE defendants on the California fraudulent transfer claims.
2. Whether the bankruptcy court properly determined that the federal claims were barred by the statute of limitations.
A grant of a motion for summary judgment is reviewed de novo. Danning v. Miller (In re Bullion Reserve of N. Am.), 922 F.2d 544, 546 (9th Cir.1991). Construing the evidence in the light most favorable to the nonmoving party, the Panel must determine whether there are genuine issues of material fact and whether the lower court correctly applied the relevant law. Id.
The trustee contends the federal claims are timely under the two-year statute of limitations. Section 546(a) provides as follows:
11 U.S.C. § 546(a)(1).4 The bankruptcy court specifically concluded that this statute began to run on November 7, 1991, the date the interim trustee was appointed, as opposed to the date that the permanent trustee was appointed. On this basis, the bankruptcy court held the trustee's claims under section 544 and 548 to be untimely.
"The federal courts are under an independent obligation to examine their own jurisdiction, and standing `is perhaps the most important of the jurisdictional doctrines.'" FW/PBS, Inc. v. City of Dallas, 493 U.S. 215, 231, 110 S.Ct. 596, 607, 107 L.Ed.2d 603 (1990) (alteration in original) (quoting Allen v. Wright, 468 U.S. 737, 750, 104 S.Ct. 3315, 3324, 82 L.Ed.2d 556 (1984)). If the bankruptcy court properly concluded the section 544 claims were barred by the statute of limitations, we would have to begin by examining the standing of the trustee to assert the state law cause of action, even though the trial court did not examine the question and the parties do not raise the issue here. See FW/PBS, 493 U.S. at 230-31, 110 S.Ct. at 607.
The trustee is authorized to prosecute state law fraudulent transfer actions under section 544(b). As noted, however, section 544 is subject to section 546(a)(1)'s two-year statute of limitations. While the trustee clearly has standing to bring the state action under section 544, he does not necessarily have standing to do so outside of section 544. As the bankruptcy court stated in Mahoney, Trocki & Assoc., Inc. v. Kunzman (In re Mahoney, Trocki & Assoc., Inc.), 111 B.R. 914 (Bankr.S.D.Cal.1990):
The fraudulent transfer action under § 544(b) is not an action to assert an independent state law created right on behalf of a trustee which was and is cognizable without the filing of a bankruptcy petition. This right, on behalf of a trustee or debtor-in-possession to recover the fraudulent transfer, is clearly the creation of the bankruptcy code.
The United States Supreme Court and the Ninth Circuit Court of Appeals have both held that bankruptcy trustees do not have standing to prosecute actions against third parties on behalf of creditors. Caplin v. Marine Midland Grace Trust Co., 406 U.S. 416, 428-34, 92 S.Ct. 1678, 1685, 32 L.Ed.2d 195 (1972) (); Williams v. Cal. 1st Bank, 859 F.2d 664, 666-67 (9th Cir.1988). Wyle v. Howard, Weil, Labouisse, Friedrichs Inc. (In re Hamilton Taft & Co.), 176 B.R. 895, 902 (Bankr. N.D.Cal.1995) (footnote omitted). See Mixon v. Anderson (In re Ozark Restaurant Equipment Co., Inc.), 816 F.2d 1222, 1224-26 (8th Cir.) (), cert. denied sub nom. Jacoway v. Anderson, 484 U.S. 848, 108 S.Ct. 147, 98 L.Ed.2d 102 (1987). The Ozark Restaurant court noted that section 544 as originally proposed would have permitted the trustee to assert causes of action on behalf of creditors, but that Congress deleted that provision before the statute was adopted. 816 F.2d at 1227-28 & nn. 9-10.
On its...
To continue reading
Request your trial
-
United States v. Whitman
...time, or was rendered insolvent by the transfer or obligation. Cal. Civ. Code § 3439.04(a), 3439.05; see, e.g., In re Lucas Dallas, Inc., 185 BR 801, 807-11 (9th Cir. BAP 1995). In addition to the uncontested allegations in the complaint regarding the fraudulent transfer of the Subject Prop......
- In re Keller, BAP No. CC-94-1850-VJO. Bankruptcy No. SA91-32957 JR. Adv. No. SA93-1264 JR.
-
Klein v. Bruno, Case No. 2:12-cv-00058-BSJ
...Defendant "gave reasonably equivalent value; it is whether [Winsome] received reasonably equivalent value." In re Lucas Dallas, Inc., 185 B.R. 801, 807 (9th Cir. 1995). 7. Defendant cannot meet the burden of proving the reasonably equivalent value affirmative defense because he cannot show ......