In re Miner
| Decision Date | 30 June 1995 |
| Docket Number | No. 94-50391-RV.,94-50391-RV. |
| Court | U.S. District Court — Northern District of Florida |
| Parties | In re Woodman H. MINER, Sr., Debtor. Woodman H. MINER, Sr. and Doug E. Gilmore, Appellants, v. BAY BANK & TRUST COMPANY, Appellee. |
David L. Fleming, David L. Fleming P.A., Gulf Breeze, FL, for Woodman H. Miner, Sr., and Doug E. Gilmore.
Jack G. Williams, Jack G. Williams, P.A., Panama City, FL, for Bay Bank & Trust Co.
Appellants Woodman H. Miner, Sr. and Doug E. Gilmore have appealed from a decision of the Bankruptcy Unit of this Court which granted appellee Bay Bank & Trust Company's motion to dismiss the appellants' amended complaint for failure to state a claim upon which relief can be granted. For the reasons set forth below, the decision of the Bankruptcy Judge is AFFIRMED.
While the record on appeal is somewhat sparse, the following facts may be gleaned from the record. Appellant Woodman H. Miner, Sr. ("Miner") was the sole stockholder of The Miner Corporation of Bay County, Inc. ("Miner Corp."). Miner Corp. owned certain real and personal property in Panama City Beach, Florida, on which it operated a restaurant. Miner Corp.'s property was subject to a mortgage in favor of Miner, individually. On or about August 10, 1988, appellant Bay Bank and Trust Company ("Bay Bank") extended a loan to Miner Corp. As security for the loan, Bay Bank held a mortgage on the restaurant's real property and equipment. As additional security for the debt, Miner assigned his mortgage on the property to Bay Bank. Bay Bank properly recorded the assignment of the mortgage in the public records. Also, appellants Miner and Gilmore personally guaranteed Miner Corp.'s debt to Bay Bank. On October 11, 1991, Miner Corp. was dissolved.1 The record on appeal does not reveal whether the restaurant had discontinued operations at the time the corporation was dissolved.
On March 26, 1992, appellant Doug E. Gilmore executed a promissory note for $45,590.92 in favor of Bay Bank. Apparently, the proceeds of the note were used to pay the overdue accrued interest on the loan from Bay Bank. Gilmore also executed a document acknowledging that his guarantee of the debt was legally binding, and that legal proceedings were pending against Miner Corp. which was in default on its loan. Gilmore also acknowledged that his execution of the promissory note did not relieve him of his obligations as guarantor, or in any way affect the pending lawsuit against Miner Corp.
On July 23, 1992, a Final Judgment in Foreclosure and on Guarantee was entered in the Circuit Court in and for Bay County, Florida Bay Bank and Trust Co. v. The Miner Corp. of Bay County, a dissolved corporation, by and through its surviving officer W.H. Miner, Sr.; Woodman H. Miner, Sr.; Douglas E. Gilmore; et al. Case Number 91-2563(B). The final judgment declared that Bay Bank was owed a total of $420,358.32 in principal, interest, and attorneys' fees; and that the appellee held valid guarantees from each of the appellants, individually, for the total amount owing. The judgment ordered that the property on which Bay Bank held a lien, specifically three parcels of real estate and the restaurant's fixtures and equipment, including its Florida alcoholic beverage license, be sold at a public sale. Pursuant to the judgement, on September 3, 1992, the property was sold at a foreclosure sale.
On July 1, 1993, Miner filed a voluntary Chapter 11 petition in the Bankruptcy Unit of this court In re Woodman H. Miner, Sr., Case No. 93-02205, and was appointed as debtor-in-possession of the bankruptcy estate. Miner Corp. was not a party to the bankruptcy petition. On June 9, 1994, Miner filed a two-count complaint against appellee Bay Bank & Trust Company ("Bay Bank") in the bankruptcy action Woodman H. Miner, Sr. v. Bay Bank and Trust Co., Case Number 94-90041.2 On July 1, 1994, Bay Bank moved to dismiss the complaint. On August 3, 1994, Bankruptcy Judge Lewis M. Killian entered an order dismissing the complaint, but granting leave to file an amended complaint within 20 days.
On August 26, 1994, an amended two-count complaint was filed. The amended complaint named both of the appellants as plaintiffs. Count I alleged that the sale of the realty and personalty was a fraudulent transfer pursuant to Title 11, United States Code, Section 548. Paragraph (7) further alleged that, "there was collusion between the defendant and another party in said foreclosure with regard to the conduct of the sale of the real estate, so that said sale is not conclusive as to fair value." Count I also alleged that the foreclosure sale had the effect of perfecting the assignment of the mortgage held by Miner, and thus, was a transfer of the debtor's property. Count II sought cancellation of the promissory note executed by Gilmore. Although the language is not entirely clear, paragraph (13) in Count II of the amended complaint seems to allege a failure of consideration, as well as fraud in the inducement, with regard to the promissory note.
On September 7, 1994, the appellee moved to dismiss the amended complaint for failure to state a cause of action upon which relief may be granted. On November 3, 1994, Judge Killian entered a two-paragraph ordering dismissing the amended complaint without making any written findings. On November 15, 1994, the appellants filed a "motion for rehearing." The motion for rehearing sought reconsideration of Judge Killian's order dismissing Count I of the amended complaint, and leave to file a second amended complaint. The motion for rehearing explicitly stated that it did not seek reconsideration of the dismissal of Count II. (doc. 15, p. 2).
On November 30, 1994, 177 B.R. 104, the Bankruptcy Judge entered a written order denying the motion for rehearing. Appellants timely filed a notice of appeal.
A district court reviewing the decision of its Bankruptcy Unit functions as an appellate court. In re Sublett, 895 F.2d 1381, 1383 (11th Cir.1990). The factual determinations of the bankruptcy court are reviewed under the clearly erroneous standard; determinations of law are reviewed de novo. In re Monetary Group, 2 F.3d 1098, 1103 (11th Cir.1993). The standard for review for an appeal of an order on a motion to dismiss is the same as it was for the trial court Stephens v. Dept. of Health and Human Services, 901 F.2d 1571, 1573 (11th Cir. 1990): the court must accept all the alleged facts as true and find all inferences from those facts in the light most favorable to the plaintiff. See, e.g., Hunnings v. Texaco, Inc., 29 F.3d 1480, 1483 (11th Cir.1994); Delong Equipment Co. v. Washington Mills Abrasive Co., 840 F.2d 843, 845 (11th Cir.1988). Nevertheless, Rule 12(b)(6) authorizes dismissal of a complaint on a dispositive issue of law. Marshall County Bd. of Educ. v. Marshall County Gas Dist., 992 F.2d 1171, 1174 (11th Cir.1993).
Count I seeks to avoid the sale of Miner Corp.'s property at the foreclosure sale, pursuant to Title 11, United States Code, Section 548(a)(2), which permits a trustee or debtor-in-possession to recover so-called constructive fraudulent transfers. To succeed on a Section 548(a)(2) claim, the trustee must establish (1) that the debtor had an interest in the property, (2) that a transfer of that interest occurred within one year of the filing of the bankruptcy estate, (3) that the debtor was insolvent at the time of the transfer, or became insolvent as a result thereof, and (4) that the debtor received less than reasonably equivalent value for the interest transferred. BFP v. Resolution Trust Corp., 511 U.S. ___, ___, 114 S.Ct. 1757, 1760-61, 128 L.Ed.2d 556, 563 (1994). In this appeal, the second and third elements are not at issue.
An essential element in a fraudulent transfer action is that the debtor have had an interest in the property transferred. A fraudulent transfer may not be avoided under Section 548(a) if the debtor had no interest in the property transferred. Estes v. N & D Properties, Inc. (In re N & D Properties, Inc.), 799 F.2d 726, 733 (11th Cir.1986). The property sold at the foreclosure sale was owned by the corporation, not by the debtor. The Bankruptcy Judge held, therefore, that no property of the debtor was transferred, and Section 548(a) was inapplicable. The appellants contend that this was error, urging that the term "property of the debtor" be read liberally to include property of a corporation controlled by the debtor in order "to effectuate the purpose of the Bankruptcy Code."
What constitutes "property" and an "interest in property," terms not defined in the Bankruptcy Code, are determined by state law. Barnhill v. Johnson, 503 U.S. 393, 397-98, 112 S.Ct. 1386, 1389, 118 L.Ed.2d 39, 46 (1992); Butner v. United States, 440 U.S. 48, 54, 99 S.Ct. 914, 918, 59 L.Ed.2d 136, 141 (1979).
The law of Florida is that corporations, even closely held corporations, are distinct legal entities from their stockholders. "Corporations are legal entities separate and distinct from the persons compromising them." 111 Properties v. Lassiter, 605 So.2d 123, 126 (Fla. 4th DCA 1992) (quoting American States Ins. Co. v. Kelley, 446 So.2d 1085, 1086 (Fla. 4th DCA), rev. denied, 456 So.2d 1181 (Fla.1984)). Under Florida law, the stockholders do not hold title to property owned by the corporation. Rather, the corporation, as a legal entity, holds the title. The appellants have not disputed this general principle. However, appellants contend that because Miner Corp. was a dissolved corporation, the result should be different, at least in the bankruptcy context. Appellants argue that for bankruptcy purposes, when Miner Corp. was dissolved, title to Miner Corp.'s property vested in Miner as the sole stockholder of the corporation.
The appellants rely upon another decision of the Bankruptcy Unit of this court: Hall v. Quigley (In re Hall), 131 B.R. 213 (...
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