In re Potter, No. 7-05-14071 MS (Bankr. N.M. 7/29/2008)
| Decision Date | 29 July 2008 |
| Docket Number | No. 7-05-14071 MS.,Adversary No. 07-1062 M.,7-05-14071 MS. |
| Parties | In re: JEFFERY POTTER, Debtor. YVETTE J. GONZALES, Plaintiff, v. JEFFERY W. POTTER; SUMMIT INVESTMENT COMPANY, LLC; SUMMIT VALDES BUSINESS PARK, LLC; THE LEGAL DEFENSE AND MAINTENANCE TRUST OF CALIFORNIA; MARIANA DANILOVIC, as Trustee of the Legal Defense and Maintenance Trust of California; and MARTIN FRIEDLANDER, Individually, and as Trustee of the Legal Defense and Maintenance Trust of California, Defendants. |
| Court | United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — District of New Mexico |
David T Thuma, Albuquerque, NM, Attorney for Plaintiff.
Jeffery W. Potter, Santa Fe, NM, Defendant.
Martin S. Friedlander, Los Angeles, CA, Defendant.
THIS MATTER is before the Court on the Plaintiff's Motion for Summary Judgment on Counts I-VII, XIV, XV, and XVI of the Second Amended Complaint ("Motion for Summary Judgment") filed by Yvette J. Gonzales, the Chapter 7 Trustee ("Trustee"), by and through her attorneys, Jacobvitz, Thuma, and Walker, P.C. (David T. Thuma). See Docket # 88. Defendants Martin Friedlander, pro se, and Jeffery Potter, pro se, each filed a response in opposition to the Motion for Summary Judgment.1 (See Docket # 93 and Docket # 97). The Motion for Summary Judgment requests the Court grant summary judgment against Jeffery Potter and Martin Friedlander, in his individual capacity, as to Counts I, II, III, IV, V, VI, VII, XIV, XV, and XVI of the Second Amended Complaint to Avoid Fraudulent Transfers, for Turnover, for Declaratory Judgment, for Injunction, and for Other Relief ("Second Amended Complaint").2
The object of the Second Amended Complaint is the Trustee's effort to recover for the benefit of the bankruptcy estate certain transfers of real and personal property made to the Legal Defense and Maintenance Trust of California ("California Trust"). The trust was formed in August of 2003, more than two years before the date of the filing of Defendant Jeffery Potter's bankruptcy petition.3 The Trustee asserts that the transfers to the California Trust are recoverable as fraudulent transfers based on actual fraud and constructive fraud under either California or New Mexico law.4 The Trustee primarily bases her request for summary judgment on previous statements Defendant Jeffery Potter has made in the Statements and Schedules filed in his bankruptcy proceeding, statements made in the Complaint to Avoid Transfers Pursuant to 11 U.S.C. § 544 and for Turnover ("Original Complaint") filed in Adversary Proceeding No. 05-1151M, and in statements made in Jeffery W. Potter's Approval of Proof of Claim filed by Martin S. Friedlander, bearing Claim No. 15, filed on 1/30/06, as a Secured Prior Claim of the Debtor in Possession in the Full Amount Stated and that Said Secured Claim Shall have Priority over any Proof of Claim filed by LANB ("Claims Approval"— Docket # 155). The Trustee also attaches certain communications between Mr. Potter and his former bankruptcy counsel which were admitted as exhibits in connection with the hearing in Defendant Jeffery Potter's bankruptcy proceeding, held on April 10, 2007 on the applications for compensation filed by Davis & Pierce. No affidavits or deposition testimony were offered in support of the Motion for Summary Judgment.
Defendant Martin Friedlander opposes the Motion for Summary Judgment, asserting that there is no evidence to support a finding of lack of reasonably equivalent value as of August 25 2003, the date the California Trust was formed; that the California Trust was not formed with the intent to hinder, delay, or defraud creditors; that Defendant Potter's prior bankruptcy counsel failed to represent him properly and caused the filing of a "sham" bankruptcy; and that any communications between Defendant Potter and his prior counsel are subject to the attorney-client privilege and constitute improper hearsay evidence as against Defendant Martin Friedlander.
Defendant Jeffery Potter's objection to the Motion for Summary Judgment echos the arguments asserted by Mr. Friedlander. He disputes that the statements contained in his statements and schedules establish that the transfers to the California Trust were fraudulent and maintains that he formed the California Trust for the purposes of funding litigation so that he could ultimately repay his creditors.
After consideration of the Motion for Summary Judgment and the supporting documentation, and objections thereto, the Court finds that, while the statements contained in Jeffery Potter's statements and schedules are insufficient to establish fraudulent intent, the statements contained in the Original Complaint coupled with the Defendant's other admissions regarding the facts and circumstances surrounding the formation of the California Trust are sufficient to establish actual intent to defraud under either California or New Mexico fraudulent transfer law. The Court will, therefore, grant summary judgment in favor of the Trustee.
Summary judgment is governed by Rule 56, Fed.R.Civ.P., made applicable to bankruptcy proceedings by Rule 7056, Fed.R.Bankr.P.5 It is appropriate to grant summary judgment when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Id. "[A] party seeking summary judgment always bears the initial responsibility of informing the . . . court of the basis for its motion, and . . . [must] demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Affidavits in support of a motion for summary judgment are not required. Rule 56(a), Fed.R.Civ.P. ()(emphasis added). Nor must a claimant wait until after a defendant responds to the complaint before filing a motion for summary judgment. See Rule 56(a), Fed.R.Civ.P. 6 It is appropriate to grant summary judgment if the undisputed facts, established by "the pleadings, the discovery and disclosure materials on file," are sufficient to show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. Rule 56(c), Fed.R.Civ.P.
In determining whether summary judgment should be granted, the Court must view the facts in the light most favorable to the party opposing summary judgment. Henderson v. Inter-Chem Coal Co., Inc., 41 F.3d 567, 569 (10th Cir. 1994)( that the court must "view all facts and any reasonable inferences that might be drawn from them in the light most favorable to the nonmoving party . . .")(citation omitted); Harris v. Beneficial Oklahoma, Inc., (In re Harris), 209 B.R. 990, 995 (10th Cir. BAP 1997)(same). To withstand a motion for summary judgment, the opposing party may not simply rest upon its pleading or denial of the allegations, but must demonstrate that genuine issues of material fact require a trial. Rule 56(e)(2), Fed.R.Civ.P.7 A fact is "material" when the fact is essential to the elements necessary under the substantive law to dispose of the claim. Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir. 1998)(citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). An issue is "genuine" when there is sufficient evidence on either side "so that a rational trier of fact could resolve the issue either way." Id. (citing Anderson v. Liberty Lobby, Inc., 477 U.S. at 248).
The "Declarations" of Martin Friedlander and Jeffery Potter are Insufficient to Satisfy the Requirements of Rule 56(e), Fed.R.Civ.P.
The responses filed by Martin Friedlander and by Jeffery Potter each purport to contain a declaration as to the facts each asserts are in dispute in this adversary proceeding. The declarations state that the declarant has "personal knowledge of all of the facts alleged herein and if sworn as a witness herein I could competently testify to these facts." See Defendant Friedlander's Opposition to Trustee's Motion for Summary Judgment filed on 2/11/08 ("Friedlander's Response"), p. 6; Defendant Jeffery W. Potter's Opposition to Trustee's Motion for Summary Judgment Filed on 2/11/08 ("Potter's Response"), p. 5. The declarations contained in Potter's Response and in Friedlander's Response also recite that they were executed "under the perjury laws of the United States." See Friedlander's Response, p. 15; Potter's Response, p. 10. The declaration in Potter's Response includes the following statements: There is no other attestation as to the truth of the statements contained in Mr. Potter's declaration, nor is the declaration signed by Mr. Potter. The declaration portion of Friedlander's Response contains no averment that the statements are true and correct, though elsewhere in Friedlander's Response, Mr. Friedlander states that the declaration "will attest to the truth". See, e.g., Friedlander's Response, p. 24.
Mr. Friedlander asserts that the declarations under penalty of perjury have the same effect as affidavits, citing 28 U.S.C.§ 1746. Unsworn declarations made under penalty of perjury may satisfy a requirement for an affidavit pursuant to 28 U.S.C. § 1746, which provides, in relevant part:
Wherever, under any law of the United States or under any rule . . . any matter is required or permitted to be supported, evidenced, established, or proved by . . . affidavit, . . . such matter may, with like force and effect, be supported, evidenced, established, or proved by the unsworn declaration . . . in writing of such person which is subscribed by him, as true under penalty of perjury, and dated, in substantially the following form:
. . . .
(2) If executed within the United States,. . . ...
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