Matter of Kaczorowski
| Decision Date | 14 June 1988 |
| Docket Number | Adv. No. 2-87-0129.,Bankruptcy No. 2-87-00854 |
| Court | United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — District of Connecticut |
| Parties | In the Matter of Robert J. KACZOROWSKI, Debtor. Thomas M. GERMAIN, Trustee, Plaintiff, v. Judy KACZOROWSKI, Defendant. |
Thomas M. Germain, Hartford, Conn., plaintiff, Trustee.
JoAnn Paul, Beck and Eldergill, Manchester, Conn., for defendant.
In this core proceeding, see 28 U.S.C. § 157(b)(2)(H) (Supp.III 1985), the plaintiff-trustee, Thomas M. Germain, contends that a debtor's pre-petition conveyance to his wife of his one-half interest in the family residence constituted a fraudulent transfer. Judy Kaczorowski, the defendant-transferee, defends on the ground that she gave the debtor reasonably equivalent value in exchange for the transfer. The following facts, elicited at a short trial held on May 11, 1988, are not disputed in any significant way by either party.
Robert J. Kaczorowski, the debtor in this voluntary chapter 7 case, and the defendant intermarried in 1972. The Kaczorowski's in 1978 jointly purchased as tenants-in-common property known as 279 Three Mile Road, Glastonbury, Connecticut (the residence). Two children of the marriage were born in 1979. Marital difficulties arising out of many factors, but including the debtor's mounting financial difficulties, reached a peak in the summer of 1986. The defendant at that time was employed as a high school teacher, and the plaintiff was operating a failing financial services business.
The defendant, on August 6, 1986, retained an attorney to institute a marriage dissolution action and to obtain for her the debtor's interest in the residence. The debtor's debts then exceeded $700,000.00; a 1978 automobile and his interest in the residence were his sole assets. The residence, in August, 1986, had a market value of $153,000.00 and was subject to two mortgage liens totaling $75,000.00. The defendant's divorce lawyer, concerned about the possibility of the debtor filing a bankruptcy petition, contacted an attorney experienced in bankruptcy law for advice on how to structure a conveyance of the debtor's interest in the residence to the defendant. The bankruptcy attorney advised the defendant that she should pay to the debtor $37,500.00 in cash or cash equivalent as consideration for the debtor's approximate equity in the residence.
The defendant raised $10,000.00 from relatives, and the following events then occurred. On or about August 20, 1986, the defendant served a complaint on the debtor claiming a dissolution of marriage, custody of and support for minor children, alimony, counsel fees and a conveyance of the debtor's one-half interest in the residence. The complaint was returnable to the Connecticut Superior Court on September 2, 1986. On August 26, 1986, the debtor and the defendant executed a "Marital Settlement Agreement" (Agreement) which stated in the preamble that an action for dissolution of the marriage was pending and that the parties had reached certain agreements "in an effort to minimize the disputes and stress that often arise during the dissolution of a marriage". Paragraph 14 of the Agreement reads as follows:
The debtor, by deed dated and recorded on September 8, 1986, quitclaimed his one-half interest in the residence to the defendant and thereafter received from her $10,000.00 in cash. The debtor used this money to pay certain of his creditors.
The Agreement stated that the parties were then "living separate and apart from each other." In fact, the debtor never moved out of the residence — during the next several months, and prior to January 1, 1987 according to the debtor, the parties reconciled, and the marriage dissolution action was withdrawn from state court. The debtor and defendant have since continued to live as husband and wife in the residence. The debtor secured new employment with a bank in January, 1987, at an annual salary of $45,000.00.
The debtor filed his bankruptcy petition on August 12, 1987. His schedules list $728,709.90 in liabilities and no non-exempt assets.
Section 548(a) of the Bankruptcy Code provides that a trustee may avoid a transfer of an interest of the debtor in property made within one year of the date before the filing of the petition if the debtor was insolvent on the date of the transfer and he received "less than a reasonably equivalent value in exchange for such transfer." 11 U.S.C. § 548(a)(Supp. IV 1986). As noted, the only element of § 548(a) in dispute between the parties is whether the debtor received reasonably equivalent value for the transfer.
This court has previously held that a pre-petition lis pendens recorded by a wife against realty of the debtor at the commencement of a marriage dissolution action did not constitute a fraudulent transfer when the state divorce court, for sufficient...
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