In re Miera
| Decision Date | 12 September 1989 |
| Docket Number | Bankruptcy No. 3-88-1897,Adv. No. 3-88-203. |
| Citation | 104 BR 989 |
| Parties | In re Alberto Obed MIERA, Jr., Debtor. Molly T. SHIELDS, Trustee of the Bankruptcy Estate of Alberto Obed Miera, Jr., Plaintiff, v. Alberto Obed MIERA, Jr., and Carla R. Miera, Defendants. |
| Court | U.S. Bankruptcy Court — District of Minnesota |
Molly T. Shields, Peterson, Franke & Riach, St. Paul, Minn., for plaintiff.
Ronald J. Walsh, Levy & Miller, Minneapolis, Minn., for defendants.
ORDER DENYING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT
This adversary proceeding came on before the Court on June 21, 1989, for hearing on Defendants' motion for summary judgment. Defendants1 appeared by their attorney, Ronald J. Walsh. Plaintiff-Trustee Molly T. Shields appeared pro se. Upon the moving and responsive documents, record made at hearing, the other files and records in this adversary proceeding, and certain facts and events judicially noticed from other state and federal court proceedings involving Debtor, the Court denies Defendants' motion.
In this adversary proceeding, the Trustee of Debtor's bankruptcy estate seeks a judgment avoiding Debtor's pre-petition transfer to Carla Miera of an interest in real estate as a fraudulent conveyance under 11 U.S.C. § 548(a)(1). She also seeks a judgment denying Debtor his general discharge in bankruptcy because of that transfer, pursuant to 11 U.S.C. § 727(a)(2)(A). Certain basic facts are uncontroverted, either by way of Defendants' admission, because they are a matter of public record, or because of Defendants' failure to adduce evidence to establish a genuine issue of material fact as to them.
Debtor filed a voluntary petition under Chapter 7 of the Bankruptcy Code in this Court on June 13, 1988. At all times relevant to this adversary proceeding, Debtor was a judge of the Minnesota State District Court for the Second Judicial District, Ramsey County. He is a law school graduate and had been a practicing lawyer for a number of years before his appointment to the bench in 1983. Carla Miera is his sister. She apparently has lived with Debtor for several years.
For several years before May, 1988, Debtor owned and occupied a homestead located at 956 Birchview Court in St. Paul. He had been the sole holder of record title since his divorce in November 1986. In his bankruptcy schedules he stated the value of the homestead at $152,000.00, and noted a first mortgage against it securing a debt in a stated balance of $80,000.00. The homestead apparently is subject to a dissolution lien in favor of Debtor's ex-wife. The precise nature and amount of the debt this lien secures are not clear from the record. Debtor claimed his homestead interest exempt pursuant to Minnesota statute.
During the spring and early summer of 1988, Debtor was the subject of considerable public controversy. His former court reporter had obtained a substantial judgment against him in a tort and employment discrimination lawsuit. Cross-appeals from that judgment were pending in the Minnesota Court of Appeals.2 Garnishments made to collect on that judgment had attached a portion of Debtor's salary on several occasions. As a result of the allegations made in the lawsuit, and certain other allegations, the Minnesota Board on Judicial Standards had filed a formal complaint against Debtor in August, 1987, seeking his removal from office. After fact-finding by a three-judge panel, the judicial disciplinary proceedings were pending in the Minnesota Supreme Court in the spring of 1988.3
In November 1987, Debtor had filed a petition for relief under Chapter 11 in this Court. The case did not make any cognizable progress toward the proposal and confirmation of a plan of reorganization during the five months in which it remained pending. On March 4, 1988, this Court granted the motion of the U.S. Trustee for dismissal of the case, on the authority of Wamsganz v. Boatmen's Bank of De Soto, 804 F.2d 503 (8th Cir.1986).
In early April 1988, Debtor announced through the local news media that he was embarking on a "life-threatening fast" to protest what he described as discriminatory treatment against him in the lawsuit and disciplinary proceedings. He has stated in essence that he expected to die during the course of this fast.4
On May 5, 1988, Debtor met with Timothy L. Piepkorn, a Minneapolis attorney whom Debtor had known while both were in law school. Debtor had not had a will or an estate plan before this meeting. As a result of the meeting, Piepkorn drafted a quit claim deed under which Debtor transferred his homestead from his sole ownership into a joint tenancy between himself and Carla Miera. Debtor executed that deed later in May 1988; it was then recorded.5 Debtor admits that he received no consideration from anyone for the transfer. He also admits that he has retained control and possession of the homestead, though he states that Carla Miera has continued to live there. Piepkorn also prepared a will and various other estate-planning documents for Debtor's later execution.
Debtor's current bankruptcy filing followed within approximately one month. Plaintiff repeatedly continued the Meeting of Creditors in Debtor's case because Debtor's attorney advised her that the fast had made Debtor too weak to attend. Debtor ended his protest after the Minnesota Supreme Court announced its decision in the judicial disciplinary proceedings in early July, 1988.
Plaintiff bases this adversary proceeding exclusively upon the event of Debtor's creation of the joint tenancy in his homestead. The parties do not dispute that this act was a transfer of an undivided one-half interest in the homestead to Carla Miera. Plaintiff asserts that Debtor made that transfer "with actual intent to hinder, delay or defraud" a creditor or his creditors generally, by doing it with the knowledge and intent that it would remove the unencumbered value of his homestead from the assets which would have been subject to probate administration if he were to have died during the course of his protest fast. She points out that in that administration, Debtor's creditors would have been able to file claims against the probate estate. Those claims would have received priority in the distribution of probate assets over the claims of beneficiaries under a will or of his heirs under intestate succession. See MINN.STAT. § 525.145(2) (), and §§ 524.2-101, 524.3-807 and 524.3-901, inter alia.
In her prayer for relief, Plaintiff seeks judgment avoiding Debtor's transfer of the interest in the homestead as a fraudulent transfer under 11 U.S.C. § 548(a), preserving that transfer for the benefit of the estate pursuant to 11 U.S.C. § 551, and then recovering the property or its value from the transferee pursuant to 11 U.S.C. § 550(a). She also seeks to have Debtor denied his general discharge in bankruptcy as a sanction for the making of the transfer, pursuant to 11 U.S.C. § 727(a)(2)(A). She has focused her theory of recovery in the fraudulent-transfer count on the "actual intent" provision of 11 U.S.C. § 548(a)(1).6 The discharge-objection provisions of 11 U.S.C. § 727(a)(2)(A) contain comparable language requiring a showing of actual intent to hinder, delay, or defraud creditors, on the part of the debtor.7
Defendants argue that they are entitled as a matter of law to a judgment denying both of Plaintiff's requests for relief. They make two alternative arguments in support.
First, Defendants argue that, as a matter of law, a debtor's conveyance of property, which property is exempt from claims of creditors under state law, does not deprive such creditors of anything to which they would have been entitled otherwise. Under this argument, then, any transfer of exempt property is not a transfer within the ambit of 11 U.S.C. §§ 548(a)(1) and 727(a)(2), even if the debtor was motivated by a desire to frustrate creditors in making the transfer.8 Because the element of intent is irrelevant under this variant analysis, and because the only factual elements going directly to this argument are undisputed, the issue is purely legal in nature.
In the alternative, Defendants acknowledge for the sake of argument that Debtor's creation of the joint tenancy constituted a transfer actionable under 11 U.S.C. §§ 548(a)(1) and 727(a)(2). They then argue that there is no evidence of record to support a finding that Debtor made the transfer with actual intent to hinder, delay, or defraud his creditors, asserting that Defendants' evidence on the intent issue stands alone and unchallenged. Defendants maintain, accordingly, that there is no genuine issue of material fact as to the non-existence of a necessary element of both counts of Plaintiff's complaint, and that they are entitled to judgment as a matter of law in their favor, denying all of Plaintiff's requests for relief.
To support their first alternative argument, Defendants have cited a number of federal cases9 which hold that a debtor's transfer of property which would have been exemptible10 from the estate in his ensuing bankruptcy case does not constitute a transfer avoidable under § 548(a), In re Treadwell, 699 F.2d 1050 (11th Cir.1983), In re Weis, 92 B.R. 816 (Bankr.W.D.Wis. 1988), and In re Robinett, 47 B.R. 591 (Bankr.S.D.Fla.1985)11, and does not support an objection to discharge under 11 U.S.C. § 727(a)(2)(A), In re Agnew, 818 F.2d 1284 (7th Cir.1987), and In re MacDonald, 50 B.R. 255 (Bankr.D.Mass. 1985).12
These decisions are based on the principle of "no harm, no foul." This Court has no quarrel with their general proposition, stemming as it does from certain fundamental precepts of...
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