Novak v. Rogers (In re Rogers)

• Decision Date: 05 January 2021
• Docket Number: CASE NO. 18-20833 (JJT),ADV. PRO. NO. 19-02018 (JJT)
• Court: U.S. Bankruptcy Court — District of Connecticut
• Parties: IN RE: THERESA A. ROGERS, DEBTOR. ANTHONY S. NOVAK, TRUSTEE, PLAINTIFF v. STANLEY J. ROGERS, JR., DEFENDANTS.

IN RE: THERESA A. ROGERS, DEBTOR.ANTHONY S. NOVAK, TRUSTEE, PLAINTIFF v. STANLEY J. ROGERS, JR., DEFENDANTS.

CASE NO. 18-20833 (JJT)

ADV. PRO. NO. 19-02018 (JJT)

UNITED STATES BANKRUPTCY COURT DISTRICT OF CONNECTICUT HARTFORD DIVISION

January 5, 2021

CHAPTER 7

RE: ECF NOS. 1, 7, 24, 29, 43 66, 67

POST-TRIAL MEMORANDUM OF DECISION

I. INTRODUCTION

Anthony S. Novak, the Chapter 7 Trustee (the "Trustee"), brings this Adversary Proceeding seeking to avoid the transfer of certain real property located at 29 Yale Street, West Hartford, Connecticut (the "Property"), which was transferred from Theresa A. Rogers (the "Debtor") to Stanley Rogers, Jr. (the "Defendant") within two years of the Debtor's bankruptcy, because the conveyance was made with either actual intent to defraud the Debtor's creditors, or alternatively, was made for less than reasonably equivalent value. The Trustee initially filed his four-count Complaint on August 13, 2019 (ECF No. 1, the "Complaint") asserting claims for recovery of actual and constructive fraudulent transfers under 11 U.S.C. §§ 548(a)(1)(A) and (B), and Conn. Gen. Stat. §§ 52-552e and f. Following the voluntary dismissal of Counts II and IV, which sought avoidance of the transfer under Conn. Gen. Stat. §§ 52-552e and f, the parties proceeded to trial on the Trustee's remaining actual and constructive fraudulent transfer claims (the "Operative Complaint"), which were brought solely under 11 U.S.C. § 548.

The Operative Complaint seeks the avoid the Transfer to the Defendant; award damages to the Trustee in an amount equal to the value of the Transferred Interest; in addition to an award for costs and prejudgment interest and post-judgment interest.¹ In response to the Operative Complaint, the Defendant contends that there was no actual intent to defraud because the Property was transferred in satisfaction of an antecedent debt for reasonably equivalent value. The Defendant further argues that, in the event the Court finds for the Trustee with respect to his fraudulent transfer claim, the Court should allow the Defendant's proof of claim, which was filed in the Debtor's main case (Case No. 18-20833, Claim 13-1; the "Proof of Claim"). In response to the Defendant's Proof of Claim, the Trustee filed an objection (Id., ECF No. 31; the "Objection"), which raised both procedural and substantive objections to the $235,159.60 Proof of Claim for services rendered to the Debtor, in addition to post-transfer improvements to the transferred Property.² The Trustee's Objection to the Defendant's Proof of Claim was consolidated with this Adversary Proceeding for trial.

Over the course of the two-day trial held on June 16 and 17, 2020 (ECF Nos. 59, 62; the "Trial"), the Court heard witness testimony and was presented with other evidence relating to the direct and indirect value provided by the Defendant, the circumstances surrounding the transfer of the Property and the nature of the Defendant's post-transfer improvements to the Property. At the conclusion of the Trial, the Court ordered post-trial briefing and took the matter under advisement. The Court heard post-trial oral argument on October 8 and 16, 2020 (ECF Nos. 80, 87). After due consideration of the above, and for the reasons stated herein, the Court hereby GRANTS the relief sought in the Operative Complaint as to Count III for constructive fraudulenttransfer, but DENIES the relief sought as to Count I for actual fraudulent transfer. The Court further hereby sustains the Trustee's Objection to the Defendant's Proof of Claim and thereby DISALLOWS the Defendant's Proof of Claim in its entirety.

II. JURISDICTION

The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334(b) and derives its authority to hear and determine this matter on reference from the District Court pursuant to 28 U.S.C. §§ 157(a) and (b)(1). This is a core proceeding under 28 U.S.C. §§ 157(b)(2)(A), (H) and (O). Venue is proper in this District pursuant to 28 U.S.C. §§ 1408 and 1409.

III. BACKGROUND AND STATEMENT OF FACTS

Beginning in 2000, the Defendant was frequently called upon to assist with various types of home care for his father, Stanley J. Rogers ("Stanley, Sr.") after he suffered a medical episode. The home care that Stanley, Sr. required included the regular application of feeding tubes, washing and cleaning, standing him up and moving him throughout the home. At some point in 2002, the Debtor and Stanley, Sr. decided to enlist the assistance of an attorney for estate planning purposes. On November 12, 2002, with the assistance of Attorney John G. Tunila ("Attorney Tunila"), the Debtor and Stanley, Sr. executed reciprocal wills that left their respective estates to each other first, and then divided it into thirds between the Defendant, the Defendant's brother, Matthew Rogers, and their grandchild Jacob Rogers.

According to the Defendant, at some point in 2003, despite having just executed wills the previous year assigning only a 1/3 interest to the Defendant, Stanley, Sr. and the Debtor had a conversation with the Defendant where they decided that, due to the amount of ongoing care provided by the Defendant, they would compensate him by leaving him the entire Property.According to the Defendant, partly due to that promise, he continued to provide care to Stanley, Sr. until sometime in 2008, at which point he was no longer able to do so.³

According to the Defendant, he nevertheless continued to provide significant improvements to the Property after his father passed away. Years later, in 2016, the Debtor, then age 72, again met with Attorney Tunila. This time, she was concerned that if she herself needed to be placed into an assisted living facility, the State would be able to liquidate the Property to pay for her nursing home care, and indicated to Attorney Tunila that she wanted to protect her home from this possible outcome. Attorney Tunila advised the Debtor that, under Connecticut State regulations, because the Defendant, her adult son, is disabled and receives Social Security Disability Income benefits, she could transfer the Property to the Defendant without affecting her eligibility for Medicaid, and that the State would not be able to later liquidate the Property to pay for her nursing home care. Soon thereafter, the Debtor conveyed the Property to the Defendant, reserving for herself a life use in the Property.

Approximately 1 year and 9 months later, in May of 2018, the Debtor filed a Chapter 7 petition in this Court. The Transfer was not disclosed on the Debtor's bankruptcy schedules. After the Transfer was discovered by the Trustee, the Trustee sent a demand letter to the Defendant and later initiated this Adversary Proceeding.

In accordance with Fed. R. Civ. P. 52 and Fed. R. Bankr. P. 7052, this Court makes the following additional Findings of Fact to supplement those previously advanced in the Introduction and Background of this Memorandum of Decision:

1. The Debtor filed a voluntary petition under Chapter 7 of the United States Bankruptcy Code (the "Code") on May 25, 2018, Case Number 18-20833 (JJT), which remains pending before this Court.

2. The subject Property is the Debtor's principal residence.

3. The Defendant is the Debtor's son.

4. In the Debtor's bankruptcy schedules, she failed to disclose any ownership interest in the Property.⁴

5. On or about August 30, 2016, the Debtor transferred her interest in the Property to the Defendant (the "Transfer"), reserving for herself a life use, by virtue of a Quit Claim Deed that bears the same date, and recorded in the Land Records of the Town of West Hartford on September 6, 2016, at Volume 5011, Page 344 (the "Deed").

6. At the time of the Transfer, the Debtor was the record owner of the Property.

7. Attorney Tunila advised the Debtor with respect to the Transfer.

8. Attorney Tunila or his office drafted the Deed and Attorney Tunila signed and filed a conveyance tax return.

9. The Deed states that the Transfer of the Property was for no consideration.

10. The conveyance tax return provides (under penalty of perjury) that the Transfer was for no consideration or less than $2,000.00, and no conveyance tax was paid in connection with the Transfer.

11. After the Transfer, the Debtor filed no gift tax return and the Defendant filed, or caused to be filed, a 2016 United States Income Tax Return, that did not reflect the tax consequences of the Transfer.

12. As a result of the Transfer, the Defendant acquired a fee simple interest in the Property, subject to the Debtor's life use.

13. The Transfer was made within two years of the Petition Date.

14. On the date of the Transfer, the Debtor was insolvent.⁵

15. At the time of the Transfer, the Property was encumbered by the following interests:

a. A mortgage originally in the name of FT Mortgage Companies, and subsequently assigned to Metlife Bank, National Association, and further assigned to JPMorgan Chase Bank, National Association, with a balance of $39,374.67 owed on the date of the Transfer, recorded on the West Hartford Land Records on May 3, 1999, at Volume 2436, Page 87.

b. A Lien Notice to the Town of West Hartford, with a balance of $0 owed on the date of the Transfer, recorded on the West Hartford Land Records on July 22, 1999, at Volume 2466, Page 212.

c. A mortgage to the Town of West Hartford, with a balance of $21,872.22 owed on the date of the Transfer, recorded on the West Hartford Land Records on September 15, 1999, at Volume 2485, Page 294.

d. A mortgage to Sovereign Bank, n/k/a Santander Bank, with a balance of $7,252.73 owed on the date of the Transfer, recorded on the West Hartford Land Records on April 3, 2003, at Volume 3153, Page 328.

16. According to an appraisal of the Property, at the time of the Transfer, the value of the Property was $145,000, with the equity in the Property being $76,511.40. Pl's Ex. 22, p. 11; the "Appraisal").

17. The life estate was valued at approximately $22,329. Id.

18. The stipulated value of the interest

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