In re Marlar
| Decision Date | 12 September 2000 |
| Docket Number | No. 00-6066EA.,00-6066EA. |
| Parties | In re John Samuel MARLAR, Debtor. Renee S. Williams, Plaintiff-Appellee, v. John Samuel Marlar, Defendant-Appellant. William Bradley Marlar; Cheyla Evans Marlar, Defendants. |
| Court | Bankruptcy Appellate Panels. U.S. Bankruptcy Appellate Panel, Eighth Circuit |
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Ted Botner, El Dorado, AR, for appellant.
Thomas S. Streetman, Crossett, AR, for appellee.
Before KOGER, Chief Judge, KRESSEL and SCHERMER, Bankruptcy Judges.
The Chapter 7 trustee, Renee S. Williams, filed an adversary proceeding under 11 U.S.C. § 544 and the Arkansas Fraudulent Transfer Act, Ark.Code Ann. § 4-59-201, et seq., to recover three parcels of farm property alleging a pre-petition fraudulent transfer by the debtor, John S. Marlar, to his son. The bankruptcy court1 granted summary judgment in favor of the trustee and set aside the transfer. The debtor appeals. We affirm.
On December 19, 1986, two days prior to his marriage to Paula Marlar Davis, the debtor, John S. Marlar, deeded three parcels of farm property consisting of approximately 712 acres located in Ouachita County, Arkansas and Dallas County, Arkansas to his son, William Bradley Marlar. Prior to the transfer the debtor had owned fee title to 600 acres and owned an undivided one-half interest in a 112 acre tract. The consideration for the transfer was stated as ten dollars with love and admiration. Although it appears that the debtor gave the deed to his son, the deed was not recorded. After the transfer, the debtor remained in possession of the property and continued to pay the real estate taxes. In 1993, the debtor valued this property at $335,000.00 in a loan application. In 1995, Paula Marlar Davis filed for divorce from the debtor. During the course of a very bitter divorce proceeding, the deed was recorded on June 30, 1995, in the Office of the Dallas County Recorder, and was recorded on July 3, 1995, in the Office of the Ouachita County Recorder. Subsequently, the divorce court granted the divorce and awarded Paula Marlar Davis a judgment against the debtor in the amount of about $52,000.00 for her interest in the couple's personal property, for improvements made to the debtor's real estate and for attorney's fees, and awarded her an equitable lien on any ownership interest that the debtor had in the three parcels of property transferred to his son.
Following the divorce, Paula Marlar Davis filed an action in state court against the debtor and his son seeking to set aside the transfer of the three parcels of farm property. Paula Marlar Davis alleged that the debtor conveyed the land to his son in an effort to defeat her marital property rights in a pending divorce action; that the debtor transferred the land with the actual intent to hinder, delay or defraud creditors in violation of Ark.Code Ann. § 4-59-204(a)(1); that the debtor conveyed the property to his son without receiving a reasonably equivalent value in exchange for the transfer; and that after the transfer the debtor was left with an unreasonably small amount of capital with which to operate his farming business in violation of Ark.Code Ann. § 4-59-204(a)(2). In an order filed June 5, 1998, the state court ruled against her. The state court found that the debtor was a single person when he transferred the property to his son in 1986, that Paula Marlar Davis had no marital interest in the real estate prior to its transfer, that the debtor had delivered the deed to his son in 1986, that love and affection served as sufficient consideration for the conveyance, that the conveyance was not ineffective as to Paula Marlar Davis and that there was no evidence when the deed was transferred in 1986 that the debtor intended to defraud his creditors. The state court opined:
The fact that the deed from John Marlar to Brad Marlar was not recorded does not render it ineffective. If it was executed and delivered and for sufficient consideration then title to the land was effectively conveyed from the grantor to the grantee. The failure to record the deed would only affect competing claims to the title.
Further, the state court ruled that there was "substantial evidence" presented which indicated that Paula Marlar Davis knew from the beginning of her marriage to the debtor that the debtor did not own fee simple title to the real estate in question.
On June 25, 1998, an involuntary petition for relief under Chapter 7 was filed against the debtor. It appears that Paula Marlar Davis was one of the petitioning creditors. On December 18, 1998, the bankruptcy court entered an order for relief in the involuntary case. On June 28, 1999, the Chapter 7 trustee filed a three-count complaint against the debtor, the debtor's son and the son's wife seeking to set aside the transfer of the three parcels of farm land as fraudulent under 11 U.S.C. § 544 and Ark.Code Ann. § 4-59-201, et seq. In Count I, the trustee sought avoidance of the transfer under Ark.Code Ann. § 4-59-204(a)(1); in Count II, the trustee sought avoidance under Ark.Code Ann. § 4-59-204(a)(2); and in Count III, the trustee sought avoidance under Ark.Code Ann. § 4-59-205. The debtor filed an answer asserting that the property was transferred in 1986 when he tendered the deed to his son; that due consideration existed for the transfer; and that the trustee's action was barred by res judicata arguing that the Arkansas state court had already ruled in favor of the debtor in a similar action brought by Paula Marlar Davis. The son and his wife filed an answer to the trustee's first amended complaint contending they had lawfully owned the property since 1986.
Upon the trustee's motion, on March 2, 2000, the bankruptcy court granted partial summary judgment in favor of the trustee on Count II and Count III of the complaint. The bankruptcy court determined that the effective date of the transfer was the date the deed was recorded in 1995; that the transfer was made without reasonably equivalent value; and that after the deed was recorded the debtor had virtually no assets of any value from which to satisfy a number of debts then in existence, thus, the conveyance rendered the debtor insolvent. The bankruptcy court rejected the debtor's argument that the trustee's action was barred by either res judicata or collateral estoppel. The court observed that the Chapter 7 trustee, who represents all the creditors of the bankruptcy estate, was neither a party nor was in privity with Paula Marlar Davis in the prior state court action. The bankruptcy court directed the debtor's son and his wife to convey all of the real estate in question to the Chapter 7 trustee.
The bankruptcy court rejected the debtor's post-summary judgment order attempt to submit evidence that he was solvent when the deed was recorded in 1995. The court ruled that the materials which the debtor sought to submit were in existence at the time he was required to respond to the motion for summary judgment, and he failed to present the evidence in a timely manner.
Subsequently, the bankruptcy court entered a final judgment in the adversary proceeding on June 5, 2000. Only the debtor appeals from the bankruptcy court's grant of summary judgment in favor of the trustee.
Further facts will be discussed as necessary to resolve the issues raised on appeal.
In her brief, the trustee questions whether the debtor has standing to appeal the bankruptcy court's order, contending that he is not an aggrieved party because he no longer has any interest in the real estate he transferred to his son. Because standing is an element of federal subject matter jurisdiction, it may be raised as an issue at any time. See Sioux Falls Cable Television v. State of South Dakota, 838 F.2d 249, 251 (8th Cir.1988).
"Ordinarily, a party to a lawsuit has no standing to appeal an order unless he can show some basis for arguing that the challenged action causes him a cognizable injury, i.e., that he is `aggrieved' by the order." Yukon Energy Corp. v. Brandon Invs., Inc. (In re Yukon Energy Corp.), 138 F.3d 1254, 1259 (8th Cir.1998)(quoting Spencer v. Casavilla, 44 F.3d 74, 78 (2d Cir.1994)). "To appeal from an order of the bankruptcy court, appellants must have been directly and adversely affected pecuniarily by the order." Fidelity Bank, Nat'l Ass'n v. M.M. Group, Inc., 77 F.3d 880, 882 (6th Cir. 1996) (citations omitted). "This principle, also known as the `person aggrieved' doctrine, limits standing to persons with a financial stake in the bankruptcy court's order." Id. (citation omitted). In Cult Awareness Network, Inc. v. Martino (In re Cult Awareness Network, Inc.), 151 F.3d 605, 607-08 (7th Cir.1998), the Seventh Circuit Court of Appeals instructs that:
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