In re Todd

• Decision Date: 16 July 2008
• Docket Number: Adversary No. 07-01149-JKO-A.,Bankruptcy No. 06-16898-BKC-JKO.
• Citation: 391 B.R. 504
• Parties: In re Sybil TODD, Debtor. Marika Tolz, Chapter 7 Trustee, Plaintiff, v. Vincent Miller, Defendant.
• Court: U.S. Bankruptcy Court — Southern District of Florida

391 B.R. 504

In re Sybil TODD, Debtor Marika Tolz, Chapter 7 Trustee, Plaintiff, v. Vincent Miller, Defendant.

Bankruptcy No. 06-16898-BKC-JKO.

Adversary No. 07-01149-JKO-A.

United States Bankruptcy Court, S.D. Florida, Fort Lauderdale Division.

July 16, 2008.

Timothy S. Kingcade, Esq., Miami, FL, for Debtor.

Andrew A. Pineiro, Pineiro, Wortman & Byrd, P.A., Jupiter, FL, Brett A. Elam, Esq., West Palm Beach, FL, for Plaintiff.

ORDER DENYING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AND GRANTING DEFENDANT'S CROSS MOTION FOR SUMMARY JUDGMENT MOTION

JOHN KARL OLSON, Bankruptcy Judge.

THIS MATTER came before the Court for hearing on March 25, 2008, upon Marika Tolz's (the "Trustee") Motion for Summary Judgment as to Counts I, III, and IV (the "Motion") [DE 42] and Vincent Miller's (the "Defendant") Cross Motion for Summary Judgment (the "Cross Motion") [DE 59]. This case presents the narrow legal question as to whether the transfer of bare legal title of real property to Sybil Todd (the "Debtor") and subsequent transfer of that real property for no consideration constitutes a fraudulent transfer recoverable for the benefit of the estate. Since the Debtor maintained bare legal title of the real property in trust for the original transferee at the time of the transfer, the Debtor essentially received reasonably equivalent value for that transfer. The Court, therefore, must conclude that such a transfer does not constitute a fraudulent transfer.

JURISDICTION AND VENUE

This is an adversary proceeding seeking to avoid and recover a fraudulent transfer pursuant to 11 U.S.C. § 548 and Fla. Stat. §§ 726.105(1) & 726.106(1). I have jurisdiction over this matter pursuant to 28 U.S.C. §§ 1334(b) and 157(a). This is a core proceeding within the meaning of 28 U.S.C. § 157(b)(1) and § 157(b)(2)(H). Venue of this proceeding is properly before the Court pursuant to 28 U.S.C. § 1409.

FACTS

1. Procedural history

The Debtor filed her voluntary Chapter 7 petition on December 27, 2006. See [DE 1] in the main bankruptcy case. On March 20, 2007, the Plaintiff filed her Complaint to Avoid and Recover Fraudulent Transfer Pursuant to 11 U.S.C. § 548 and § 726, Florida Statutes [DE 1]. The Trustee's Motion for summary judgment [DE 42] was filed on November 9, 2007. The Defendant filed a Response to the Motion on January 9, 2008, and a Memorandum of Law in Support [DE 58] and Cross Motion [DE 59]on January 17, 2008. On January 23, 2008, the Plaintiff filed a reply to the Defendant's Response and Cross Motion. On March 25, 2008, the Court conducted oral arguments on the Motion and Cross Motion.

2. Stipulated facts

On or about May 20, 2005, Hubert and Cecelia Miller (the "Millers") executed a deed that transferred the real property located at 1275 NE 94th Street, Miami Shores, FL 33138, better described as Lot 10, Miami Shores Bay View, according to the Plat thereof, as recorded in Plat Book 40, at Page 16, of the Public Records of Miami-Dade County, Florida, (hereinafter referred to as "Real Property") to the Debtor. The Debtor paid nothing, nor did the Millers receive anything in regard to the transfer of the Real Property. The deed was recorded in the Official Records of Miami-Dade County, Florida on May 26, 2005, at Bk 23415, Pg 882.

The Millers transferred the Real Property to the Debtor in an attempt to lower the "loan to value" ratio of Mrs. Miller, so that it would be acceptable to a lender in order to qualify for financing to purchase a check cashing business. It was the intention of the parties to transfer title of the Real Property back to the Millers once the requisite funding was approved by the bank. On or about February 1, 2006, at the direction of the Millers the Debtor executed a deed that transferred the Real Property to the Defendant, Vincent Miller, the Millers' son. The Defendant paid nothing, nor did the Debtor receive anything, in regard to the transfer of the Real Property. The deed was recorded in the Official Records of Miami-Dade County, Florida on May 2, 2006, at Bk 24479, Pg 1969.

At the time of the transfer of the Real Property to the Defendant, Vincent Miller, the Debtor was insolvent. At the time of the transfer to the Defendant, Vincent Miller, the Real Property contained $391,923.15 of equity.

DISCUSSION

1. Legal standard for summary judgment

Under Rule 56 of the Federal Rules of Civil Procedure, incorporated into bankruptcy proceedings by Rule 7056 of the Federal Rules of Bankruptcy Procedure, summary judgment is proper if the pleadings, deposition, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material facts that the moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

The moving party bears the initial burden of showing the Court that there are no genuine issues of material fact that should be decided at trial. Jeffery v. Sarasota White Sox, 64 F.3d 590, 593-94 (11th Cir. 1995); Clark v. Coats & Clark, Inc., 929 F.2d 604 (11th Cir.1991). The Supreme Court explained in Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970), that when assessing whether the movant has met this burden, the court should view the evidence and all factual inferences in the light most favorable to the party opposing the motion and resolve all reasonable doubts in that party's favor. See also Samples on behalf of Samples v. City of Atlanta, 846 F.2d 1328, 1330 (11th Cir.1988). The Eleventh Circuit has explained the reasonableness standard:

In deciding whether an inference is reasonable, the Court must "cull the universe of possible inferences from the facts established by weighing each against the abstract standard of reasonableness." [citation omitted]. The opposing party's inferences need not be more probable than those inferences in favor of the movant to create a factual dispute, so long as they reasonably may be drawn from the facts. When more than one inference reasonably can be drawn, it is for the trier of fact to determine the proper one

WSB-TV v. Lee, 842 F.2d 1266, 1270 (11th Cir.1988). In the present case there are no genuine issues of material fact, thus, the Motion and Cross Motion are ripe for adjudication as a matter of law.

2. Trustee's § 548(a)(1)(B) and State Law Fraudulent Conveyance Claim Pursuant to Counts I, III, & IV of the Adversary Complaint.

Count I in the adversary complaint relies upon Section 548 of the Bankruptcy Code. Section 548 provides a trustee with the ability to avoid transfers made by the debtor with actual intent to defraud his creditors or as alleged here, that constructively defraud his creditors. This section provides in relevant part that:

(a) (1) The trustee may avoid any transfer ... of an interest of the debtor in property, or any obligation ... incurred by the debtor, that was made or incurred on or within 2 years before the date of the filing of the petition, if the debtor voluntarily or involuntarily—

... (B)(1) received less than a reasonably equivalent value in exchange for such transfer or obligation; and

(ii) (I) was insolvent on the date that such transfer was made or such obligation was incurred, or became insolvent as a result of such transfer or obligation; 11 U.S.C. § 548. The Trustee must prove that the Debtor (a) within two years, (b) had interest in property, (c) transferred it, (d) received less that reasonably equivalent value for that transfer, and (e) was insolvent on the date of that transfer. With regard to part (a), (c), and (e) there is no dispute that the Debtor transferred said Real Property within two years of the filing for bankruptcy while she was insolvent at the time of the transfer. A more in depth discussion is required as to the remaining two parts.

The pertinent factors for constructive fraud under Fla. Stat. § 726.106(1), the statute relied upon in Count IV of the adversary complaint, are identical to those in 11 U.S.C. § 548(a)(1)(B). See In re Moodie, 362 B.R. 554, n. 6 (Bankr.S.D.Fla. 2007). Therefore, the section 548(a)(1)(B) analysis the Court will undertake will apply to Count TV as well.

Count III of the adversary complaint relies upon Fla. Sta. § 726.105()(b). This section states in relevant part:

(1) A transfer made or obligation incurred by a debtor is fraudulent as to a creditor, whether the creditor's claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation:

... (b) Without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor:

1. Was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction; or

2. Intended to incur, or believed or reasonably should have believed that he or she would incur, debts beyond his or her ability to pay as they became due.

Fla. Sta. § 726.105(1). The crucial factor under this code section in this instance is whether or not the Debtor received reasonably equivalent value for the transfer of the Real Property. This is the identical component to part (d) of the section 548(a)(1)(B) analysis and will be covered during that discussion.

(a) Debtor's interest in the Real Property

The Debtor held bare legal title to the Real Property as she essentially maintained the property in "trust",for the Millers. This is evidenced by the fact that the Millers "parked" the Real Property with the Debtor in an attempt to make Mrs. Miller a more attractive candidate for financing in a business venture. The transfer was completed without consideration and the Debtor was merely holding legal ownership of the property so as to allow Ms. Miller to perpetrate her scheme to garner financing for the unrelated business venture. The true ownership interest...