Levine, In re
| Decision Date | 03 February 1998 |
| Docket Number | No. 96-2803,96-2803 |
| Citation | 134 F.3d 1046 |
| Parties | Bankr. L. Rep. P 77,625, 11 Fla. L. Weekly Fed. C 1025 In Re: Myron LEVINE, a.k.a. Mike Levine; Jacquelyn P. Levine, a.k.a. Jackie Levine, Debtors. Myron LEVINE, a.k.a. Mike Levine; Jacquelyn Levine, a.k.a. Jackie Levine, Plaintiffs-Appellants, v. Charles WEISSING, Trustee, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
John Allen Yanchunis, Sr., St. Petersburg, FL, for Plaintiffs-Appellants.
Bernard Jay Morse, IV, Tampa, FL, for Defendant-Appellee.
Appeal from the United States District Court for the Middle District of Florida.
Before BIRCH, Circuit Judge, RONEY, Senior Circuit Judge, and O'KELLEY *, Senior District Judge.
This appeal requires that we examine and resolve several issues relating to bankruptcy law as applied in Florida. Specifically, we must decide whether (1) the conversion of funds from non-exempt to exempt status through the purchase of annuities constitutes a "transfer" for purposes of state law pertaining to fraudulent transfers; (2) the act of converting or "transferring" funds from non-exempt to exempt status can be isolated analytically from the result of that transfer; and (3) Florida law provided for an action to set aside fraudulent conveyances otherwise deemed exempt from the reach of creditors prior to 1993. In addition, we must decide whether, under the facts of this particular case, the trustee's action to set aside a fraudulent transfer is barred by the Bankruptcy Code's statute of limitations and whether the bankruptcy court's factual determinations are clearly erroneous. For the reasons that follow, we conclude that the district court properly affirmed the bankruptcy court's order.
The debtors in this action, Myron and Jacquelyn Levine (the "Levines"), filed a voluntary petition for relief under Chapter 7 of the United States Bankruptcy Code in 1991. Charles Weissing (the "trustee") was appointed trustee of the bankruptcy estate and, shortly thereafter, filed a complaint pursuant to Fla. Stat. § 726.105 to set aside as fraudulent the transfer of approximately $440,000.00 of non-exempt assets to several insurance companies for the purchase of annuities which are exempt from the claims of creditors under Florida law. The trustee alleged that these transfers were effected with the intent to hinder, delay, or defraud a known creditor, James A. Miller. It is undisputed that, several years prior to the Levines' declaration of bankruptcy, Miller had instituted an action for fraud against the Levines in the state of California relating to the sale of property by the Levines to Miller. The precise request for relief as articulated in the trustee's complaint is critical to our disposition of this case and, therefore, is reproduced in relevant part:
Pursuant to the provisions of Florida Statute Section 726.108 entitled remedies of creditors, the Court may avoid a transfer found to be fraudulent pursuant to the provisions of Florida Statutes Section 726.105 to the extent necessary to satisfy a creditor's claim. In addition, subject to applicable principles of equity and in accordance with applicable Rules of Civil Procedure, a creditor may obtain an injunction against further disposition by the Debtor or a transferee, or both, of the assets transferred, or may obtain any other relief the circumstances may require....
....
WHEREFORE, the Trustee prays that this Court enter a preliminary and permanent injunction preventing FINANCIAL BENEFIT LIFE INSURANCE COMPANY ... [et al.] from making further distributions to or for the Debtors, and further preventing the Debtors from accepting any distributions from FINANCIAL BENEFIT LIFE INSURANCE COMPANY ... [et al.].
The bankruptcy court initially dismissed the complaint on the ground that, in defining the parameters of a "transfer" of funds, both the Bankruptcy Code and Florida law contemplated that the transferor and the transferee necessarily be two distinct, identifiable parties; as a result, according to the bankruptcy court's reasoning, there had been no transfer of funds that could be set aside as fraudulent in this instance. More specifically, the bankruptcy court determined that a transfer had not occurred "because the Debtors still retain control and ownership of the assets acquired with funds they obtained from disposition of their nonexempt assets, and the fact that this conversion effectively removed the former assets from the reach of the creditors is of no consequence." In re Levine, 139 B.R. 551, 553 (Bankr.M.D.Fla.1992). The district court, however, reversed the bankruptcy court's order dismissing the case and concluded not only that there had been a transfer but, in addition, that the trustee had stated a cause of action for fraudulent transfer of funds. See R1-13 at Exh. 1.
On remand, the bankruptcy court held an evidentiary hearing to ascertain whether the challenged annuities had been purchased with fraudulent intent. In a memorandum order, the bankruptcy court found that three of the named insurance companies had actually repaid to the debtors the full amount of the funds transferred according to the annuity contracts, Exh. B at 16, and thus could not be held legally liable for the amounts received pursuant to the purchase of those contracts. In addition, the court rejected any personal liability on behalf of Financial Benefit Life Insurance Company ("Financial") regarding annuity contracts purchased by the debtors from that institution. The court further determined, however, that the purchase of annuities from Financial between June 1990 and September 1990 was motivated by "the specific intent to remove non-exempt properties from the reach of creditors by converting the proceeds of the sale to exempt properties." Exh. B at 14. The court noted that the Levines had discussed the exempt status of annuities with an estate-planning lawyer knowing that Miller likely would obtain a judgment against them 1 and, within a short period of time, liquidated their stock portfolio and purchased an annuity contract from Financial. Consistent with this determination, the court set aside the annuities purchased from Financial, ordered that the balance of funds in the annuity contracts be transferred back into the bankruptcy estate, and enjoined any further distributions to the Levines from these particular transferred funds. This decision was affirmed summarily by the district court.
On appeal, the Levines ask that we reverse the district court's order affirming the bankruptcy court's decision to set aside as fraudulent those transfers that occurred between June and September of 1990 to Financial. The Levines base their challenge to the bankruptcy court's decision on several contentions: First, they reassert their argument, presented previously to the bankruptcy court and the district court, that the conversion of funds from non-exempt to exempt status does not constitute a transfer and, thus, cannot be attacked under Florida law. Second, they posit that, even if the conversion in question was a transfer, the funds currently are exempt under Florida law and Fla. Stat. 726.105 cannot be used to collaterally challenge the exempt status of these annuities. Third, they suggest that specific non-retroactive statutory amendments to Florida law enacted in 1993 address precisely the circumstances presented in this case; consequently, we can infer that the Florida legislature had not provided a remedy for the alleged violation at issue prior to the enactment of these amendments. Fourth, they contend that the trustee did not contest the exempt status of the annuities within the applicable statute of limitations time period. Fifth, they argue that the bankruptcy court's factual determinations are clearly erroneous. We address in turn each of the Levines' arguments.
We review the bankruptcy court's factual findings under the clearly erroneous standard. General Trading v. Yale Materials Handling Corp., 119 F.3d 1485, 1494 (11th Cir.1997). We review determinations of law, whether from the bankruptcy court or the district court, de novo. Id.
As noted, the Levines argue that, because they essentially transferred money to themselves by altering the status and form of their own assets, there was no transfer for purposes of the applicable Florida law.
We disagree. Florida law provides the following definition of a "transfer":
"Transfer" means every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an asset or an interest in an asset, and includes payment of money, release, lease, and creation of a lien or other encumbrance.
Fla. Stat. § 726.102(12). Although the Florida legislature has never explicitly defined an "annuity," the Florida Supreme Court, in a case certified by our court, has looked to various decisions of bankruptcy courts to provide a useful definitional guide in the absence of a clear legislative directive; to this end, that court has defined an annuity as, inter alia, "a form of investment which pays periodically during the life of the annuitant or during a term fixed by contract rather than on the occurrence of a future contingency...." In re McCollam, 986 F.2d 436, 438 (11th Cir.1993) (emphasis added). Borrowing directly from Florida's statutory language regarding the scope of the term "transfer," we readily conclude that, in purchasing an annuity, the purchaser voluntarily parts with an interest in an asset in exchange for a guaranteed monetary return on his investment; indeed, the purchase of an annuity is a contractual arrangement whereby each party is bound by specific rights and obligations. Although the record does not reveal the precise terms of the annuities at issue here, virtually all annuity contracts provide that the annuitant will be permitted to withdraw amounts of money in...
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