In re Schuman
| Decision Date | 11 December 1987 |
| Docket Number | Adv. No. LA85-4030-SB.,BAP No. CC-87-1032 JMoV,Bankruptcy No. LA84-19139-SB |
| Citation | 81 BR 583 |
| Court | U.S. Bankruptcy Appellate Panel, Ninth Circuit |
| Parties | In re Marvin SCHUMAN, dba H & M Electric, Debtor. Gary MILLER, Chapter 7 Trustee, Appellant, v. Harriet SCHUMAN, Appellee. |
Susan C. Jay, Law Offices of David B. Bloom, Los Angeles, Cal., for appellant.
R. Wayne Dorcy, Moneymaker & Kelley, Los Angeles, Cal., for appellee.
Before JONES, MOOREMAN and VOLINN, Bankruptcy Judges.
The Chapter 7 trustee, Gary Miller, appeals the bankruptcy court's order granting summary judgment dismissing this adversary proceeding. We AFFIRM.
The Debtor, Marvin Schuman, and the Appellee, Harriet Schuman, were divorced by Final Judgment of the Superior Court of Los Angeles on August 10, 1983. The Debtor and Mrs. Schuman have two children. During the course of the divorce proceedings, Mrs. Schuman received custody of the children and the Debtor became obligated to pay child support. On February 21, 1984, a Stipulation for Modification of Interlocutory Judgment of Dissolution of Marriage was filed ("modification"). The modification was signed by the Judge of the Superior Court on March 22, 1984. Pursuant to the modification the Debtor transferred to Mrs. Schuman his interest in their community property residence. The deed to the property was recorded on March 7, 1984. The modification stated that the transfer was in consideration for:
The modification further contained a provision that Marvin Schuman was not to file a voluntary bankruptcy petition within 120 days of the date of recordation of the deed transferring his interest in the residence.
On October 13, 1984, less than one year after the transfer of property pursuant to the modification, Marvin Schuman filed a petition under chapter 7 of the Bankruptcy Code.
The chapter 7 trustee, Gary Miller, brought an action against Mrs. Schuman to set aside, as a preference, the transfer pursuant to the modification. The trustee argued that Mrs. Schuman was an "insider" within the meaning of the Bankruptcy Code. Mrs. Schuman brought a motion for summary judgment on the ground that she was not an insider and, thus, since the transfer fell outside of the 90 day preference period, the transfer could not be avoided pursuant to section 547(b) of the Bankruptcy Code.
At the hearing on September 23, 1986 the trial court granted the motion for summary judgment, finding that Mrs. Schuman was not an insider. The court also found that the transfer occurred at the time of the divorce in August, 1983 and, therefore, outside of the one year preference period of section 547. On October 31, 1986 Proposed Findings of Fact and Conclusions of Law in support of the motion for summary judgment were filed. On December 12, 1986 the order granting summary judgment was entered. The trustee timely appealed.
A reviewing court will affirm a grant of summary judgment only if it appears from the record, after viewing all evidence and factual inferences in the light most favorable to the nonmoving party, that there are no genuine issues of material fact and that the moving party is entitled to prevail as a matter of law. In re Stephens, 51 B.R. 591, 594 (9th Cir. BAP 1985). A bankruptcy court's grant of summary judgment is reviewed de novo. In re Center Wholesale, Inc., 788 F.2d 541, 542 (9th Cir.1986).
When a transfer occurs within the meaning of the Bankruptcy Code is a question of law and subject to de novo review. In re Newcomb, 744 F.2d 621, 625 (8th Cir.1984).
The first question before the Panel is whether any genuine issues of material fact exist that would preclude the entry of summary judgment. If not, we must determine whether the trial court correctly concluded that Mrs. Schuman was entitled to judgment as a matter of law.
Section 547 of the Bankruptcy Code authorizes a bankruptcy trustee to avoid preferential transfers made by a debtor within a certain period of time prior to the bankruptcy filing. 11 U.S.C. section 547. Where the creditor is not an insider, the preference period is 90 days. 11 U.S.C. section 547(b)(4)(A). Where the creditor is an insider, the period is extended to one year. 11 U.S.C. section 547(b)(4)(B). The term "insider" is defined in Bankruptcy Code section 101(30). That section provides in relevant part:
11 U.S.C. section 101(30). Section 101(39) provides:
(39) "relative" means individual related by affinity or consanguinity within the third degree as determined by the common law, or individual in a step or adoptive relationship within such third degree;
11 U.S.C. section 101(39).
A spouse of a debtor is a relative as defined by section 101(39) because the definition includes individuals "related by affinity". A former spouse, however, is not related by affinity; thus, "a former spouse will not be considered a relative". 2 L. King, Collier on Bankruptcy, paragraph 101.39 (15th ed. 1986). Nevertheless, the definition of insider is subject to 11 U.S.C. section 102(3) which states that the terms "includes" and "including" are not limiting. Thus, the courts have widely agreed that Congress did not intend to limit the classification of insiders to the statutory definition. See, e.g., In re Missionary Baptist Foundation of America, Inc., 712 F.2d 206, 210 (5th Cir.1983) (); In re Ribcke, 64 B.R. 663, 666 (Bankr.D.Md. 1986); In re Hartley, 52 B.R. 679, 689 (Bankr.N.D.Ohio 1985); In re Montanino, 15 B.R. 307, 310 (Bankr.D.N.J.1981).
According to the legislative history, an insider is "one who has a sufficiently close relationship with a debtor that his conduct is made subject to closer scrutiny than those dealing at arms length with the debtor." S.Rep. No. 95-989, 95th Cong., 2nd Sess. 25 (1978) and H.R.Rep. No. 95-595, 95th Cong. 1st Sess. 312 (1977), reprinted in U.S. Code Cong. & Admin. News, 1978, pp. 5787, 5810, 6269. The tests developed by the courts in determining who is an insider focus on the closeness of the parties and the degree to which the transferee is able to exert control or influence over the debtor. In In re Lemanski, 56 B.R. 981, 983 (Bankr.W.D.Wis.1986), the court stated that a transferee "is an insider if, as a matter of fact, he exercises such control or influence over the debtor as to render their transaction not arms-length." See also In re Taylor, 29 B.R. 5, 7 (Bankr.W.D.Ky. 1983) )1
It appears in this case that the facts which might indicate control or influence on the part of Mrs. Schuman are undisputed. For instance, it is undisputed that the Debtor and Mrs. Schuman were married for 19 years, that Mrs. Schuman has custody of the two children, and that the Debtor has expressed his desire that his children be well provided for. It is also undisputed that, at the time of the transfer, the Debtor was remarried and that his relationship with Mrs. Schuman was marked by hostility.
The trustee argues that summary judgment should not have been granted since there was a dispute over whether Mrs. Schuman had reasonable cause to believe the Debtor was insolvent. Even if Mrs. Schuman's knowledge is disputed, it appears to be irrelevant. Prior to the 1984 amendments, a trustee seeking to avoid a preferential transfer to an insider had to show that the insider had reasonable cause to believe that the debtor was insolvent. 11 U.S.C. section 547(b)(4)(B)(ii) (1978). However, the effect of the 1984 amendment to section 547(b)(4)(B) was to remove the requirement that an insider have reasonable cause to believe that the debtor was insolvent.2See In re Craig Oil Co., 785 F.2d 1563, 1566 (11th Cir.1986) ( ) (citations omitted); see also In re Lemanski, 56 B.R. 981, 984-985 (Bankr.W.D.Wis. 1986). Since this element need no longer be established, even if Mrs. Schuman's knowledge of the Debtor's insolvency is disputed, it cannot be considered relevant or material so as to preclude summary judgment. Accordingly, since there was no dispute as to the material facts, the trial court was free to determine whether the facts satisfy the statutory standard.
In our view, the trial court correctly concluded that Mrs. Schuman is not an insider within the meaning of section 101(30). Although it is true that the parties had been married for nineteen years and the Debtor had expressed a desire that his children be well provided for, these facts do not indicate that Mrs. Schuman was able to exert...
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