Kelley v. McCormack (In re Mitchell)

Decision Date23 March 2016
Docket NumberAdv. Proc. No. 14–5059–AEC,Case No. 14–51473–AEC
Citation548 B.R. 862
Parties In re: Stephen Earl Mitchell, Debtor. Walter W. Kelley, Chapter 7 Trustee, Plaintiff, v. Nancy McCormack, Defendant.
CourtU.S. Bankruptcy Court — Middle District of Georgia

For Defendant: Howard Peter Slomka, The Slomka Law Firm, P.C., 1069 Spring

Street, NW, 2nd Floor, Atlanta, Georgia 30309

For Trustee: Thomas D. Lovett, Kelley, Lovett, & Blakey, P.C., P.O. Box 1164, 2912–B North Oak Street, Valdosta, Georgia 31603


Austin E. Carter

, United States Bankruptcy Judge

Before the Court are the Defendant's and the Trustee's cross-motions for summary judgment under Federal Rule of Civil Procedure ("Rule") 56

, made applicable to this adversary proceeding by Federal Rule of Bankruptcy Procedure ("Bankruptcy Rule") 7056. This adversary proceeding was filed by the TrusteeWalter W. Kelley, as trustee of Stephen Earl Mitchell's Chapter 7 bankruptcy case—seeking to avoid, under §§ 544, 547, and/or 548 of the Bankruptcy Code, an alleged prepetition transfer of property by the Debtor to the Defendant.1

Proceedings to avoid and recover preferences and fraudulent conveyances are core proceedings under 28 U.S.C. § 157(b)(2)(F) and (H)

, respectively. Pursuant to Rule 56(a), the Court states on the record its reasons for its rulings on the parties' motions.


The underlying facts, as they appear from the record of this case, are as follows.2

In 2010, the Defendant bought some land and established her residence in a mobile home thereon (the "Property"). Shortly thereafter, the Debtor moved into the mobile home with the Defendant; it appears that he still lived there at the time that he commenced his Chapter 7 case.3

The Defendant contends that in early 2013, the Debtor and the Defendant entered into an agreement, whereby the Defendant was to transfer a one-half interest in the Property in exchange for the Defendant's execution of certain repairs and upgrades as to the Property, particularly the mobile home. The agreement—as reproduced in Exhibit 2 to the Defendant's Motion—consists of two pages.4 The first page contains an itemized list of tasks, which together constitute a substantial makeover of the mobile home and miscellaneous work to the land and outbuildings. The second page states: "In exchange for the work and completion of the items listed on Page 1, I [the Defendant] will add your [Debtor's] name to the deed. It is understood that if the work is not completed by January 1, 2014, your [Debtor's] name will be removed from the deed." The second page, showing the signatures of the parties, is dated May 14, 2013. (Such agreement, hereinafter, the "Agreement.")

In June 2013, the Defendant executed a quitclaim deed conveying the Property to herself and the Debtor as joint tenants in common with rights of survivorship.5 The deed is dated June 12, 20136 and was recorded on June 27, 2013 (such deed, the "First Deed").

On January 23, 2014, a judgment creditor of the Debtor seized approximately $110,000 in two bank accounts bearing his name and that of a third party.7 Also on January 23, 2014, the Debtor, who had not made the repairs as outlined in the Agreement, executed a quitclaim deed in favor of the Defendant as to the Property (the "Second Deed").8 The Second Deed was recorded on January 24, 2014.

The Debtor filed his Chapter 7 bankruptcy case on June 30, 2014. The Trustee thereafter filed the Complaint in this adversary proceeding, alleging that the delivery and recordation of the Second Deed constituted a transfer from the Debtor of a one-half interest in the Property, and that this transfer is avoidable under §§ 544

, 547, and/or 548, and recoverable from the Defendant as transferee pursuant to § 550.

The Defendant has filed her present Motion requesting that the Court grant summary judgment against the Trustee as to his claims, on the basis that the Debtor did not transfer an interest in property, which is an essential element to the Trustee's avoidance action. In the alternative, the Defendant requests partial summary judgment that the Debtor is entitled to an exemption under § 522(g) as to any transfer avoided by the Trustee, and (again in the alternative) that the Court grant summary judgment as to two affirmative defenses to the Trustee's § 547

preference action—new value under § 547(c)(4) and transfer in the ordinary course under § 547(c)(2). In response, the Trustee moves for summary judgment as to several discrete issues: (i) that the delivery and recordation of the Second Deed constituted a "transfer of an interest of the debtor in property" as that phrase is employed in § 547(b) ; (ii) that the Debtor's transfer was voluntary and, accordingly, that the Debtor is not entitled to claim an exemption as to any property recovered by the Trustee in this action; and (iii) that the Defendant's two asserted defenses—new value and ordinary course—fail as a matter of law. At the Defendant's request, the Court held a hearing on these motions.

I. Summary Judgment Standard.
Pursuant to Rule 56

, a party moving for summary judgment is entitled to prevail (as to whatever claims or defenses, or parts of claims or defenses, on which the movant seeks judgment) if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law as to such claims, defenses, or parts thereof. Fed. R. Civ. P. 56(a). The movant bears the initial burden to show from the record the absence of a genuine dispute as to material facts. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ; Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir.1991) ("The moving party bears the initial burden to show the district court, by reference to materials on file, that there are no genuine issues of material fact that should be decided at trial."). The movant can show the absence of genuine dispute as to a claim or defense (or part thereof) by demonstrating that either: (i) the nonmovant cannot, from the record, meet a burden imposed on him by applicable law to prove facts establishing such claim, defense, or part thereof, Celotex Corp., 477 U.S. at 323, 106 S.Ct. 2548 ; or (ii) the record establishes facts with a level of certainty that the trier of fact (employing the evidentiary standard that would be applicable at trial) could not return a verdict in favor of the nonmovant as to that matter, Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). See also Clark, 929 F.2d at 608. Once the moving party has met his burden, the burden shifts to the nonmovant to point to specific parts of the record that demonstrate a genuine dispute as to facts material to the claim, defense, or part thereof, at issue. Dawkins v. Fulton Cty. Gov't, 733 F.3d 1084, 1089 (11th Cir.2013). "The evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor." Liberty Lobby, Inc., 477 U.S. at 255, 106 S.Ct. 2505. Moreover, "[c]redibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts" are to be reserved for trial. Id.

Although the court is required to consider any part of the record cited by the parties, it may consider any part of the record. Fed. R. Civ. P. 56(c)(3)

. The court may not, however, consider "statements of facts presented in motions, memoranda of law, or other papers." Meyers v. Town of Putney (In re Corp. of Windham Coll.), 34 B.R. 408, 410 (Bankr.D.Vt.1983).

Affidavits submitted in support of or opposition to "a motion must be made on personal knowledge, set out facts that would be admissible in evidence, and show that the affiant ... is competent to testify on the matters stated." Fed. R. Civ. P. 56(c)(4)

. Rule 56(c)(2) provides that a party may object to any material cited by an opposing party that cannot be reduced to admissible evidence. Fed. R. Civ. P. 56(c)(2). Inadmissible documents or defective affidavits attached to an opposing party's motion, if not timely objected to, may be considered as part of the record unless doing so would constitute a gross miscarriage of justice. McDaniel v. Waits (In re Nat'l Buy–Rite, Inc.), 7 B.R. 407, 409 (Bankr.N.D.Ga.1982) (citing 10B Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure § 2738 (3d ed.) ); see also Wiley v. United States, 20 F.3d 222, 226 (6th Cir.1994) (collecting cases).

"A trial court is permitted, in its discretion, to deny even a well-supported motion for summary judgment, if it believes the case would benefit from a full hearing." United States v. Certain Real & Pers. Prop. Belonging to Hayes, 943 F.2d 1292, 1297 (11th Cir.1991)

; see also Liberty Lobby, Inc., 477 U.S. at 255, 106 S.Ct. 2505. However, it is generally in the interests of justice and judicial economy for the Court to grant summary judgment where Rule 56 has been satisfied. See Celotex Corp., 477 U.S. at 323, 106 S.Ct. 2548 ; see also Fed. R. Civ. P. 1 (stating that rules "should be construed, administered, and employed by the court and the parties to secure the just, speedy, and inexpensive determination of every action and proceeding").

II. Issues Raised for Summary Judgment.
A. Transfer of an Interest of the Debtor in Property

The Defendant's primary argument challenges the "threshold requirement" of avoidance actions under §§ 547(b)

or 548(a) —the transfer of an interest of the debtor in property.9 11 U.S.C. § 547(b) ("[T]he trustee may avoid any transfer of an interest of the debtor in property ...."), § 548(a) ("The trustee may avoid any transfer ... of an interest of the debtor in property ...."); see also Begier v. I.R.S., 496 U.S. 53, 58, 110 S.Ct. 2258, 110 L.Ed.2d 46 (1990) ("The reach of § 547(b)'s avoidance power is ... limited to transfers of ‘property of the debtor.’ "); Bank of Am., N.A. v. Mukamai (In re Egidi), 571 F.3d 1156, 1160 (11th Cir.2009...

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