In re v. Amelung, Case No.: 07-15492-BKC-PGH (Bankr. S.D.Fla. 4/7/2010), Case No.: 07-15492-BKC-PGH.
| Decision Date | 07 April 2010 |
| Docket Number | Adv Proc. No.: 09-01719-BKC-PGH.,Case No.: 07-15492-BKC-PGH. |
| Parties | In re: Frank A. Amelung, Jr., Eugenia M. Amelung, Chapter 7, Debtors. Michael R. Bakst, Trustee, Plaintiff. v. Michael Lester, Defendant. |
| Court | U.S. Bankruptcy Court — Southern District of Florida |
This matter came before the Court on January 29, 2010, upon Michael R. Bakst as Trustee's Motion for Summary Judgment against Defendant Michael Lester (the "Motion for Summary Judgment").
On July 13, 2007, Frank A. Amelung, Jr. ("Mr. Amelung") and Eugenia M. Amelung (collectively with Mr. Amelung, the "Debtors") filed a joint petition for relief under Chapter 7 of the Bankruptcy Code. On the same day, Michael R. Bakst was appointed as the Chapter 7 Trustee ("Trustee"). On July 10, 2009, the Trustee filed a Complaint ("Complaint") against Michael Lester ("Defendant") initiating this adversary proceeding. The five-Count Complaint seeks to avoid and recover an allegedly fraudulent transfer in the amount of $20,000.00 pursuant to 11 U.S.C. § 544, Fla. Stat. §§ 726.105(1)(a)&(b), 726.106(1), and 11 U.S.C. § 550. The Complaint also seeks to disallow Defendant's claim against the Debtors' estate pursuant to 11 U.S.C. § 502(d). On November 13, 2009, the Defendant filed an Answer and Affirmative Defenses to the Complaint ("Answer").
On February 11, 2010, the Court entered an Order Setting Briefing Schedule on Plaintiff's Motion for Summary Judgment ("Briefing Order"), which set deadlines for filing a joint stipulation of facts, a response by the Defendant to the Motion for Summary Judgment, and a reply by the Trustee to the Defendant's response. Despite the Briefing Order's warning that: "Failure to file a timely response may result in the granting of the Motion", the Defendant filed no response to the Motion for Summary Judgment.
On March 4, 2010, the Trustee filed a Motion to Compel Defendant's Compliance with the Joint Stipulation of Facts Requirement Set Forth in the Court's Briefing Schedule ("Motion to Compel"), wherein the Trustee stated that the Defendant had been unresponsive to requests for Defendant's comments on the Trustee's proposed joint stipulation of facts. At a hearing conducted on March 16, 2010, the Court granted Trustee's Motion to Compel and gave the Defendant five days to respond to the Trustee's draft stipulation of facts or otherwise comply with the requirement set forth in the Briefing Order. The Defendant failed to comply with the Order Granting Motion to Compel. Thus, pursuant to the Order Granting Motion to Compel, the Court is herewith ruling on the Motion for Summary Judgment based upon the record submitted by the Trustee. This includes Soneet Kapila's, CPA, CIRA, CFF, CFE, Affidavit and Expert Report (the "Kapila Report")(D.E. #38), the transcript of the January 19, 2010 telephonic deposition of the Defendant ("Transcript")(D.E. #39), and the Defendant's Response to Plaintiff's First Set of Interrogatories (D.E. #31). For the reasons stated below, the Court finds that summary judgment in favor of the Trustee is warranted in part.
The Trustee's submissions, filed in support of his Motion for Summary Judgment, establish the following facts. The Defendant was the Director of Operations and Development for Peerless Real Estate Services ("Peerless"), an entity of which the Debtor, Mr. Amelung, was a principal. (Transcript 12:22-25, 13:1-6, 20:25, 21:1-6). On or about March 24, 2005, a transfer was made by Mr. Amelung to the Defendant in the amount of $20,000.00 (the "Transfer"). (Answer ¶7; Transcript 20:15-22). The Defendant admitted he was the initial transferee of the funds in the amount of $20,000.00. (Answer ¶7; Transcript 20:15-22). The funds were sent via wire transfer to the Defendant's account from a personal account of Mr. Amelung. (Transcript 24:1-25, 25:1-14, 28:17-25). The Defendant was not involved in any business transactions with the Debtors in their individual capacities, and the Debtors were not obligated to pay the Defendant $20,000.00. (Transcript, 23:2-11, 26:1-10, 29:21-25, 30:1-16). On May 15, 2009, the Trustee made written demand upon the Defendant for repayment of the Transfer. (Transcript 27:20-22). The Defendant failed to return the $20,000.00.
The claims register in the Debtors' Chapter 7 case shows that on October 2, 2007, Michael Lester and Julie Lester filed a proof of claim in the amount of $91,252.00.
The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(B) and (H). Venue is proper pursuant to 28 U.S.C. § 1409.
Federal Rule of Civil Procedure 56(c), made applicable to bankruptcy proceedings by Federal Rule of Bankruptcy Procedure 7056(c), provides that "[t]he judgment sought should be rendered if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986); Rice v. Braniger Org., Inc., 922 F.2d 788 (11th Cir. 1991); Rollins v. TechSouth, Inc., 833 F.2d 1525 (11th Cir. 1987); In re Pierre, 198 B.R. 389 (Bankr. S.D. Fla. 1996). Rule 56 is based upon the principle that if the court is made aware of the absence of genuine issues of material fact, the court should, upon motion, promptly adjudicate the legal questions which remain and terminate the case, thus avoiding the delay and expense associated with a trial. See United States v. Feinstein, 717 F. Supp. 1552 (S.D. Fla. 1989).
In considering a motion for summary judgment, "the court's responsibility is not to resolve disputed issues of fact but to assess whether there are any factual issues to be tried, while resolving ambiguities and drawing reasonable inferences against the moving party." Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 11 (2d Cir. 1986), cert. denied, 480 U.S. 932 (1987) (citing Anderson, 477 U.S. at 248). "Summary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed `to secure the just, speedy, and inexpensive determination of every action.'" Celotex 477 U.S. at 327 (citing Fed R. Civ. P. 1).
The party moving for summary judgment initially bears the burden of establishing the absence of a genuine issue as to any material fact. Celotex, 477 U.S. at 322 (citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 159 (1970)). That burden can be satisfied by demonstrating the absence of evidence supporting the nonmovant's case. Celotex, 477 U.S. at 325. When a motion for summary judgment is made and supported by the movant, Federal Rule of Civil Procedure 56(e) requires the nonmoving party to set forth specific facts demonstrating that genuine issues of material fact remain for trial. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986).
The federal and state fraudulent conveyance statutes are designed to prevent harm to creditors by a transfer of property from the debtor. Sears Petroleum & Transp. Corp. v. Burgess Constr. Serv., Inc., 417 F. Supp. 2d 212, 222 (D. Mass. 2006); In re Leneve, 341 B.R. 53, 56 (Bankr. S.D. Fla. 2006). Section 544(b) of the Bankruptcy Code, commonly referred to as the "strong arm" clause, gives the Trustee the power to avoid transfers of property of the debtor that are voidable under state law. In re Van Diepen, P.A., 236 Fed. Appx. 498, 501 (11th Cir. 2007)(citing Munford Inc. v. Valuation Research Corp., 98 F.3d 604, 609 (11th Cir.1996)); see also In re Int'l Pharmacy & Discount II, Inc., 443 F.3d 767, 770 (11th Cir. 2005) (). Florida's Uniform Fraudulent Transfer Act, the applicable nonbankruptcy law in this matter, allows a creditor to bring a fraudulent transfer action to set aside a constructively or actually fraudulent attempt to hide assets. Steffen v. Gray, Harris & Robinson, P.A., 283 F. Supp. 2d 1272, 1284 (M.D. Fla. 2003) (citing Fla. Stat. § 726.101, et seq.). In this matter, the Trustee seeks to avoid the Transfer under 11 U.S.C. § 544(b), Florida's constructive fraud statutes, §§ 726.105(1)(b) & 726.106(1), and under Florida's actual fraud statute, § 726.105(1)(a).
Florida Statutes §§ 726.105(1)(b)1 and 726.106(1)2 "deal with transfers made by a debtor without receiving reasonably equivalent value in exchange for the obligation while the debtor was insolvent or intended to incur or believed or should have believed that he or she would incur debts beyond his or her ability to pay as they became due." In re Goldberg, 229 B.R. 877, 884 (Bankr. S.D. Fla. 1998). Florida's constructive fraud statutes do not require proof of fraudulent intent. See Gen. Trading Inc. v. Yale Materials Handling Corp., 119 F.3d 1485 1499 (11th Cir. 1997). "To demonstrate constructive fraud, the trustee must prove that the debtor was insolvent at the time the transfer was made and that the debtor received less than reasonably equivalent value in exchange for the transfer." In re World Vision Entm't, Inc., 275 B.R. 641, 657 (Bankr. M.D. Fla. 2002); see also In re Aqua Clear Tech., Inc., 361 B.R. 567, 584 (Bankr. S.D. Fla. 2007)("Transfers made for less...
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