Matter of Dennis
| Decision Date | 27 November 1996 |
| Docket Number | Bankruptcy No. 93-40713,Adversary No. 93-4147. |
| Citation | 209 BR 20 |
| Parties | In the Matter of Larry Allen DENNIS, Debtor. James L. DRAKE, Jr., Trustee, Plaintiff, v. Larry DENNIS II, Tammy Ann Dennis, Defendants. |
| Court | U.S. Bankruptcy Court — Southern District of Georgia |
COPYRIGHT MATERIAL OMITTED
R. Kenny Stone, Statesboro, GA, for plaintiff.
Larry Dennis III, Tammy Ann Dennis, pro se.
MEMORANDUM AND ORDER ON DEFENDANTS' AND DEBTOR'S MOTION FOR RELIEF FROM ORDER ENTERED ON OCTOBER 4, 1994.
MOTION TO STAY SALE OF FARM (93-40713) AND MOTION TO STAY SALE OF FARM (93-4147)
The above Motions were filed by Defendants, Tammy Ann Dennis and Larry Dennis, II, and Debtor, Larry Allen Dennis, on November 14, 1996, and November 18, 1996, and raise a number of arguments as to why this Court's Order of October 4, 1994, should be set aside pursuant to Fed.R.Civ.P. 60(b) which is incorporated in the Bankruptcy Rules by Bankruptcy Rule 9024. This Court's October 4, 1994, Order and subsequent September 1, 1995, Order, denying a previous, similar motion, are incorporated fully herein, but are summarized below for convenience of the reader.
Debtor, Larry Allen Dennis, filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code on April 27, 1993. Defendant, Larry Dennis, II, is the minor son of Debtor, Larry Allen Dennis, and Defendant, Tammy Ann Dennis. Larry Dennis, II, was born in 1981. Defendant, Tammy Ann Dennis, is Debtor's wife and is the mother of Larry Dennis, II. On or about January 26, 1990, Debtor entered into a contract with PRH Enterprises for the purchase of real property in Jenkins County, Georgia, for the sum of $235,000.00. Debtor paid Seller a deposit of $15,000.00 after signing the contract and an additional $10,000.00 at the time of closing.
In the contract, Debtor directed that title to the Property be placed in the name of "Larry Dennis, II." Debtor made no disclosure, at or prior to the closing, to either the Seller, the real estate agents involved, or the closing attorney, that Larry Dennis, II, was someone other than the Debtor. Accordingly, PRH Enterprises conveyed the Property to Larry Dennis, II, by Warranty Deed dated February 20, 1990, recorded in Deed Book 3-C, Pages 254-256, Jenkins County Records. At the time of the conveyance, Larry Dennis, II, was nine (9) years old.
At or prior to the closing, Debtor executed and delivered to Seller two promissory notes in the amount of $110,000.00 and $100,000.00, representing the balance of the purchase price for the Property. Debtor also executed a Deed to Secure Debt to Seller to secure payment of the these notes. On or about May 8, 1990, Debtor paid off the first note. On or about December 15, 1990, Debtor paid off the second note. Debtor paid the entire $235,000.00 purchase price for the Property from the liquidation of other assets owned by the Debtor and from income earned by the Debtor. No portion of the purchase price was paid by either of the Defendants. On September 27, 1993, the above-captioned adversary proceeding was filed by the Trustee seeking to avoid the conveyance to Larry Dennis, II, and to vest title to the real estate in Debtor's estate.
In the October 4, 1994, Order, this Court found from the evidence presented that, as of July 3, 1990, when Debtor prepared a personal financial statement, Debtor had total assets of $250,600.00 and total liabilities of $288,488.32, computed as follows:
ASSETS
Cash $16,000.00
Accounts Receivable $73,000.00
Less: Uncollectible Accounts (9,000.00) $64,000.00
Motor Vehicles $32,100.00
Livestock $65,000.00
Fencing Equipment $46,500.00
Fencing Material $27,000.00
___________
TOTAL ASSETS $250,600.00
LIABILITIES
Note Payable - Bourbon Bank $66,129.00
Account Payable
E.S. Robbins Corporation $61,361.01
Mortgage Payable —
PRH Enterprises $100,000.00
Taxes Payable $17,200.00
Judgment Payable —
Mr. and Mrs. George Barnett $43,798.31
___________
TOTAL LIABILITIES $288,488.32
Thus, on July 3, 1990, Debtor was insolvent in that his liabilities exceeded his assets by $37,888.32. Working backwards in time to February 20, 1990, the date that the Property was transferred, this Court determined that Debtor had total assets of $323,293.86 and total liabilities of $389,210.41, computed as follows:
ASSETS
Cash $7,869.36
Accounts Receivable $73,000.00
Less: Uncollectible Accounts (59,524.10) $149,824.50
Motor Vehicles $32,100.00
Livestock $60,000.00
Fencing Equipment $46,500.00
Fencing Material $27,000.00
___________
TOTAL ASSETS $323,293.86
LIABILITIES
Note Payable - Bourbon Bank $84,751.00
Account Payable —
E.S. Robbins Corporation1 $33,461.10
Mortgage Payable —
PRH Enterprises $210,000.00
Taxes Payable2 $17,200.00
Judgment Payable —
Mr. and Mrs. George Barnett3 $43,798.31
___________
TOTAL LIABILITIES $389,210.41
Accordingly, the transfer of the Property to his minor son on February 20, 1990, rendered Debtor insolvent in that his liabilities exceeded his assets by $65,916.55, following the transfer.
In reaching this conclusion, I found that Debtor's fencing business had no goodwill value on February 20, 1990, or July 3, 1990.4 I also found that Debtor did not have a cognizable claim against E.S. Robbins Corporation on either February 20, 1990, or July 3, 1990.5 Furthermore, I found that Debtor was unable to meet his obligations as they matured on February 20, 1990 — evidenced by the fact that as of February 20, 1990, Debtor owed outstanding tax obligations to the State of Kentucky in excess of $17,000.00,6 dating from 1985, and an outstanding judgment to Mr. and Mrs. George Barnett in excess of $30,000.00, dating from 1987.
Based upon this evidence, I held that the Chapter 7 Trustee was entitled to recover the property for the benefit of the bankruptcy estate under section 544(b) of the Code because the transfer by Debtor to his minor son was voluntary, without valuable consideration, and rendered the Debtor insolvent. "Section 544(b) of the Bankruptcy Code confers upon the trustee the power to avoid any of the debtor's transfers or obligations that are voidable for fraud or any other reason under applicable state or federal law." The transfer in this case was voidable under Subsection (3) of O.C.G.A. Section 18-2-22, which code section provides as follows:
Paragraph 3 of O.C.G.A. Section 18-2-22 voids a voluntary conveyance which renders the Debtor insolvent without proof of fraudulent intent. Mercantile National Bank v. Aldridge, 233 Ga. 318, 210 S.E.2d 791, 793 (1974); accord Chambers v. Citizens & Southern National Bank, 242 Ga. 498, 249 S.E.2d 214, 217 (1978). "This rule of law is mandatory, and is based upon the moral and legal principle that one should be just before he is generous." Mercantile, supra at 793.
I, therefore, concluded by Order dated October 4, 1994, that the transfer of the Property to the Defendant, Larry Dennis, II, on February 20, 1990, was void under O.C.G.A. Section 18-2-22(3) and avoidable by the Chapter 7 Trustee pursuant to 11 U.S.C. Section 544(b), resulting in the 904.67 acres of land being deemed property of the Debtor's estate.
On July 21, 1995, Defendants, Tammy Ann Dennis and Larry Dennis II, filed a Motion for Relief from the October 4, 1994, Order. That Motion alleged (1) that the Court lacked subject matter jurisdiction, (2) that a necessary party, Larry Allen Dennis, was not named as a defendant in the adversary, and (3) that there was newly discovered evidence which justified that the judgment be set aside. After considering the Defendant's assertions, I denied the Motion by Order dated September 1, 1995.
Of the three contentions, only the third has any relevance to the current proceeding. Specifically, in their Motion of July 21, 1995, Defendants alleged that newly discovered evidence, which demonstrated that Larry Allen Dennis was not insolvent at the time of the property transfer, justified the setting aside of Trustee's judgment and the granting of Defendants' Motion for a New Trial. Defendants attached an affidavit from Division of Tax Administration for the State of Kentucky which stated that an indebtedness in the amount of $17,200.00 was not in fact owed to the State. Defendants also provided documentation which facially supported a finding that an indebtedness owed by Debtor, Larry Allen Dennis, to one George Barnett may have been entitled to partial credit.
Without addressing the merits of Defendan...
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