Kelley v. Haar (In re Haar)
| Decision Date | 29 September 2021 |
| Docket Number | Adversary Proceeding No. 19-05001-JPS,Case No. 18-50476-JPS |
| Citation | 634 B.R. 429 |
| Parties | In the MATTER OF: Julia Marie HAAR, Debtor. Walter W. Kelley, Trustee Plaintiff v. David P. Haar, Defendant |
| Court | U.S. Bankruptcy Court — Middle District of Georgia |
For Debtor/Plaintiff: Thomas D. Lovett, Kelley, Lovett, Blakey and Sanders, P.C., P.O. Box 1164, 2912-B North Oak Street, Valdosta, GA 31603-1164.
For Defendants: David L. Bury, Jr., Matthew S. Cathey, Thomas B. Norton, Stone & Baxter, LLP, 577 Mulberry Street, Suite 800, Macon, GA 31201.
In this adversary proceeding, Trustee seeks to avoid, as fraudulent conveyances, the transfer of two parcels of real property by Debtor to Defendant. Before the Court is Defendant's Motion For Summary Judgment.1 Defendant and Trustee have each filed briefs on the legal issues presented. The Court has considered Defendant's Statement of Material Facts, Trustee's response, the depositions on file, the legal arguments and the law. The Court now publishes this memorandum opinion.
The following facts are not in dispute.2 Debtor is Defendant's sister. Defendant purchased real property at 110 Princeton Trace, Fayetteville, Georgia ("Fayetteville") in October 1989, using his own money. Defendant married his wife in 1990 and they resided in this residence for a number of years. He has since maintained it as rental property.
Defendant purchased real property at 160 Pruett Street, Riverdale, Georgia ("Riverdale") in April 1992, again using his own money. Shortly after this purchase, Defendant began leasing this residence to Debtor. Debtor paid rent to Defendant and made the utility payments until she moved in 2006. Defendant has since maintained it as rental property.
Defendant and his wife separated in January 2005. Defendant signed quitclaim deeds dated March 28, 2005, conveying each property to Debtor. Defendant did not receive any consideration from Debtor. Each deed was recorded in the public property records of the respective counties on March 28, 2005. Debtor continued to reside at the Riverdale property and pay monthly rent to Defendant, who continued to maintain both the Riverdale and Fayetteville properties and pay the taxes, insurance and repairs.
Defendant's wife filed for divorce on May 10, 2005, seeking, in part, an equitable division of all marital property, including rental properties. Thereafter, Defendant and his wife reconciled their marital problems and the divorce proceeding was disposed of and closed on August 19, 2005.
Defendant advised Debtor to move out of the Riverdale property in 2006 because the residence and neighborhood were in poor shape.3 Debtor moved to another property owned by Defendant and paid rent to him.4
Defendant and his wife moved to South Dakota in 2007 and returned to Georgia in late 2008. Defendant had been in discussions for some time with Debtor about her conveying the properties back to Defendant but was unable to do so due to logistical issues. On October 20, 2009, Debtor conveyed the properties back to Defendant. Defendant paid Debtor no consideration for the transfers. Defendant prepared the quitclaim deeds for the properties5 which, after being signed by Debtor, were recorded in the public property records of the respective counties on October 20, 2009.
At all relevant times, and notwithstanding the transfers to Debtor, Defendant has been the sole party collecting rent on the properties, the sole party responsible for maintenance, real estate taxes, insurance and repairs, and the sole party reporting the properties on tax returns. Defendant's tenants, including Debtor, have paid monthly rent solely to Defendant and have made the utility payments.
Debtor filed a Chapter 7 petition on March 12, 2018. She listed on Schedule E/F an unsecured priority claim of $400 owed to the Internal Revenue Service ("IRS"). In fact, at the time of filing, she owed the IRS $449 for 2016 taxes, $10.46 for late filing penalty and $8.79 in interest for late payment of tax.
The notice of bankruptcy sent to creditors did not set a proof of claim deadline and requested that creditors not file a proof of claim because there appeared to be no property available to pay creditors.6 Subsequently, notice was sent to creditors that assets had been recovered by Trustee and set April 9, 2019, as the deadline to file a proof of claim.7 The IRS was served with both notices but did not file a proof of claim; nor did Trustee file one on behalf of the IRS.8
In her deposition, Debtor testified that she and Defendant did not discuss personal or financial matters, including his divorce.10 Debtor is uncertain when she first heard about Defendant's divorce, but it may have been after the divorce "happened."11 Defendant did not tell Debtor why he was conveying the properties to her and she did not know his motives, thoughts, intentions or reasoning.12 Defendant initiated the reconveyances of the properties from Debtor to him. She did not hold title to the properties in trust, under a trust agreement or pursuant to any written agreement with Defendant.13 The properties were not given or gifted to her.14 After the conveyances from Defendant, Debtor continued to pay rent to him on her residence in Riverdale even though the property was now in her name.15 Debtor did not collect rent from any tenant while the properties were in her name.16 She testified, "I was a renter and a renter only."17
As stated above, on October 20, 2009, Debtor conveyed the properties back to Defendant. In her deposition, she testified that it was Defendant's decision, as the "owner" of the properties, that the properties went back to him.18 Debtor conveyed the properties back because 19 Defendant asked Debtor to sign the deeds conveying the properties back to him.20 Defendant initiated the paperwork, the transfers and "anything."21 He told Debtor to, 22
In his deposition, Defendant testified that he paid cash when he purchased the properties in 1990 and 1992.24 He told Debtor that he was conveying the properties to her but did not tell her the reason and she did not ask.25 Defendant had no verbal or written agreement with Debtor as to how long the properties would be in her name.26 Defendant testified, 27 He testified that Debtor knew that she would eventually need to convey the properties back to him.28 Defendant dealt with all tenant problems even when Debtor held title to the properties.29 The insurance policies on the properties were not changed into Debtor's name, but continued to show Defendant as the owner.30
Defendant prepared the quitclaim deeds31 that Debtor signed at the courthouses in the respective counties conveying the properties back to him.32 Defendant paid the recording fees for the Fayetteville property. The record is silent as to who paid the recording fees for the Riverdale property.33 During his deposition, Defendant gave several reasons why he conveyed the properties to Debtor.34 For purposes of Defendant's motion for summary judgment, the response most favorable to the nonmoving party (Trustee)35 is that Defendant was worried that his wife might try to take the properties if she went through with the divorce and he was trying to protect properties that he had purchased with his own money.36 Defendant did not transfer other properties to Debtor because they had mortgages or were joint properties acquired during his marriage.37
Defendant's attorney, his wife and her attorney were not aware that he had conveyed the properties to Debtor at the time the transfers were made.38 Defendant's wife subsequently learned of the conveyances, but Defendant does not know when.39 Defendant "picked" Debtor to convey the properties to because she was the only sibling living in Georgia.40
Trustee filed this complaint to avoid fraudulent transfers on January 2, 2019. Pursuant to 11 U.S.C. § 544(b)(1), Trustee seeks to avoid Debtor's October 2009 conveyances of the Fayetteville and Riverdale properties to Defendant and to recover the properties for the benefit of the estate.41 Section 544(b)(1), in relevant part, gives Trustee the right to avoid any transfer of an interest of Debtor in property that is voidable under applicable law by a creditor holding an unsecured claim that is allowable under 11 U.S.C. § 502. In order to take advantage of the IRS’ extended statute of limitations under 26 U.S.C. § 6502(a)(1), Trustee has selected the IRS42 as his "triggering creditor."43 Trustee is subject to the same defenses that would be applicable against the IRS. See Miller v. United States (In re All Resort Group, Inc.), 617 B.R. 375, 382 (Bankr. D. Utah 2020) ().
Under section 544(b)(1), "applicable law" includes state fraudulent transfer law.44 Kelley v. Speciale (In re Gregg), No. 11-4047, 2014 WL 3339595, at *4 (Bankr. M.D. Ga. July 8, 2014) (Laney, J.). In this case, Trustee, standing in the shoes of the IRS,45 relies on section 18-2-7446 of Georgia's Uniform Fraudulent Transfers Act (UFTA),47 which allows a creditor to avoid a transfer made with actual intent to defraud creditors or a transfer for which the debtor did not receive reasonably equivalent value and where the debtor is left unable to pay her debts.
The parties have raised and briefed a number of issues, including (1) whether Trustee can step into the shoes of the IRS and use the ten year statute of limitations under 26 U.S.C. § 6502(a)(1) ; (2) whether Trustee's avoidance action is time barred by Georgia's four year...
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