Premier Capital, Inc. v. Hand, C.A. No. K.C. 2005-677 (R.I. Super 12/27/2006)
| Decision Date | 27 December 2006 |
| Docket Number | C.A. No. K.C. 2005-677 |
| Parties | PREMIER CAPITAL, INC., v. JANE GROSVENOR HAND and GILBERT C. HAND. |
| Court | Rhode Island Superior Court |
The motion before the court is one for summary judgment. Plaintiff Premier Capital, Inc. ("Creditor") alleges that the Defendants, Jane Grosvenor Hand ("Debtor") and her husband, Gilbert C. Hand, violated the Rhode Island Uniform Fraudulent Transfer Act ("UFTA"), G.L. 1956 § 6-16-1, et seq., by transferring approximately $200,000 of the Debtor's inheritance into a joint bank account and thereafter into real property, located in Kent County, Rhode Island and held by the couple as a tenancy by the entirety. In Count I of its Complaint, the Creditor seeks to invalidate the conveyance of the Debtor's inheritance into the joint bank account, whereas, in Count II of its Complaint, the Creditor seeks to invalidate the Debtor's creation of a tenancy by the entirety. The narrow issue presented to the Court in this Motion for Summary Judgment on Count II of the Creditor's Complaint is whether by funneling her inheritance into a tenancy by the entirety, the Debtor made a transfer without receiving a reasonably equivalent value in exchange, and the Debtor was insolvent at the time of the transfer or became insolvent as a result of it.
The Court holds that there is no material issue of fact as to whether Defendants did violate the UFTA, as creation of the tenancy in the entirety constitutes a "transfer" under the statute, and that the transfer was made for no reasonably equivalent value when the Debtor was insolvent. Therefore, the Court invalidates the transfer, thereby reducing the Defendants' tenancy by the entirety interest in their property into a tenancy in common. The Creditor may now attach the Debtor's rights in this property to satisfy its judgment.
On April 5, 1990, Debtor and her husband took out an equity line of credit for $55,000 from the Attleboro Pawtucket Savings Bank secured by their real property located at 68 Phillips Hill Road in Coventry, Rhode Island. Subsequently, the Debtor and her husband defaulted on the loan and the bank initiated a suit against them. See Federal Deposition Insurance Corporation v. Gilbert C. Hand and Jane Grosvenor Hand, C.A. No. PC 92-5805. While that suit was pending, the Creditor acquired the note and was substituted on August 12, 2003, by stipulation of the parties, as plaintiff in the matter. Shortly thereafter, Mr. Hand filed for bankruptcy and received a discharge that encompassed the debt in question; however, the Debtor did not join her husband in the bankruptcy filing.
On July 21, 1993, a Judgment entered against Debtor in the amount of $57,239.05 plus interests, costs and attorneys' fees. The Creditor thereafter pursued unsuccessful efforts to collect the judgment owed by Debtor.
During a deposition on November 17, 2003, the Creditor learned that the Debtor was the contingent beneficiary of multiple trusts containing millions of dollars, and further, that her mother, Lucy Pitts Grosvenor, had recently passed away, leaving an estate pending in the Probate Court of North Kingstown. See C.A. No. 5873. When the Debtor's deposition was reconvened on May 10, 2005, the Creditor learned that the Debtor had received from her mother's estate, as proceeds from the sale of certain real estate, approximately $300,000, along with an undisclosed amount of money from the William Grosvenor, Jr. Trust, Fleet National Bank, Account No. 3680902. (J. Hand Dep., 05/10/05, at 15.) The Debtor admits that she deposited these funds into a joint checking account with a Connecticut branch of the Chelsea Groton Bank. Id. The Debtor further acknowledges that she used $200,000 of this money to purchase real estate in Warwick, Rhode Island. Id. This property, located at 4325 Post Road, Warwick, Rhode Island, was conveyed to the Debtor and her husband as tenants by the entirety at a total sale price of $465,000 (the "Transfer"). Id. (). The Debtor used the remainder of the money she received from her mother's estate and the dissolution of the William Grosvenor, Jr. Trust to pay "unpaid taxes and various bills and things." Id.
Immediately prior to the Transfer, the Debtor listed her assets—including various joint bank accounts, two cars, and the present value of her future contingent trust distributions—at a total of approximately $565,572, offset by approximately $148,558 in liabilities—including the debt owed to the Creditor. Immediately following the Transfer, the Debtor listed her assets—including various joint bank accounts, two cars, her equitable interest in her newly acquired property, and the present value of her future contingent trust distributions—at a total of approximately $587,782, offset by approximately $157,300 in liabilities—including the debt owed to the Creditor, but not including any mortgage payments due. The debt to the Creditor remains wholly unsatisfied at this time.
"Summary judgment is a proceeding in which the proponent must demonstrate by affidavits, depositions, pleading sand other documentary matter . . . that he or she is entitled to judgment as a matter of law and that there are no genuine issues of material fact." Palmisciano v. Burrillville Racing Assoc., 603 A.2d 317, 320 (R.I. 1992) (citing Steinberg v. State, 427 A.2d 338 (R.I. 1981); Ludwig v. Kowal, 419 A.2d 297 (R.I. 1980)); Super. Cy. R. Civ. P. 56(c). "Summary judgment is appropriate if, viewing the evidence in the light most favorable to the nonmoving party, no material questions of fact exist and the moving party is entitled to judgment as a matter of law." Konar v. PFL Life Ins. Co., 840 A.2d 1115, 1117 (R.I. 2004). Furthermore, the party opposing the motion for summary judgment carries "the burden of proving by competent evidence the existence of a disputed issue of material fact and cannot rest upon mere allegations or denials in the pleadings, mere conclusions or mere legal opinions." Tanner v. Town Council of East Greenwich, 880 A.2d 784, 791 (R.I. 2005) (quoting Lucier v. Impact Recreation, Ltd., 864 A.2d 635, 638 (R.I. 2005)). "When an examination of the pleadings, affidavits, admissions, answers to interrogatories and other similar matters, viewed in light most favorable to the party opposing the motion, reveals no such [disputed material issue of fact, then] the suit is ripe for summary judgment." Industrial National Bank v. Peloso, 121 R.I. 305, 306, 397 A.2d 1312, 1313 (1979).
The purpose of the UFTA is to "prevent [a] debtor from transferring away valuable assets in exchange for less than adequate value, if [the] transfer leaves insufficient assets to compensate honest creditors." In re Bay Plastics, Inc., 187 B.R. 315, 322 (Cal. 1995); 7A(II) U.L.A. Uniform Fraudulent Transfers Act §1(1), n.6 (1999). Under Rhode Island law, "a conveyance is fraudulent in regard to creditors, without regard to the transferor's actual intent," if the transfer was made "without receiving a reasonably equivalent value in exchange," and the debtor was insolvent at the time of the transfer or became insolvent as a result of it. Rhode Island General Laws 1956 §6-16-5(a) (2006); Rhode Island Depositors' Economic Protection Corp. v. Mollicone, 677 A.2d 1337,1339 (R.I. 1996). "In this state, a determination that a conveyance made without consideration is fraudulent as to creditors does not require proof of actual fraud." Oury v. Annotti, 113 R.I. 506, 508, 324 A.2d 325, 327 (1974) (citing Tanner v. Whitney, 52 R.I. 391, 394, 161 A. 122, 123-24 (1932)). Thus, "the decisive question in [UFTA cases] is whether such a conveyance had the effect of depriving [the creditor] of a right which would have been legally effective had the conveyance not been made." Warwick Mun. Employees Credit Union v. Higham, 106 R.I. 363, 368-369, 259 A.2d 852, 855 (1969); see also Supreme Bakery, Inc. v. Bagley, 742 A.2d 1202, 1204 (R.I. 2000) () (quoting Tanner v. Whitney, 52 R.I. 391, 394, 161 A. 122, 124 (1932)). If the debtor's transfer is found to be a fraud, the creditor can seek to have the court set aside the transfer. Sec. 6-16-5(a) (2006).
The Purchase of Real Estate as a Tenancy by the Entirety Is a UFTA "Transfer"
For purposes of the UFTA, a "transfer" includes "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." Sec. 6-16-1(a)(12) (emphasis added). This broad definition covers the creation of a tenancy by the entirety between a debtor-spouse and a non-debtor-spouse, but does not cover the depositing of the debtor-spouse's funds into a joint checking account.
When the creditor of one debtor among multiple owners of a joint bank account attempts to attach or otherwise acquire by legal process the funds in the account, the issue then becomes "what portion of the account, if any, should be available to the creditor." Martha A. Churchill, Joint Bank Account as Subject to Attachment, Garnishment, or Execution by Creditor of One Joint Depositor, 86 A.L.R.5th 527 (2006). Some jurisdictions hold that, "since the debtor is in effect the owner of all the funds in such account and may withdraw any of them for the debtor's own use, the judgment creditor stands in no worse position vis-á-vis the account than the debtor and may garnish up to the entire amount of the funds in the account to satisfy the debt." Id. (citing Fleet Bank Connecticut, N.A. v. Carillo, 691 A.2d 1068 (Conn. 1997)). Still...
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