Rupp v. Moffo
| Decision Date | 14 August 2015 |
| Docket Number | No. 20130377.,20130377. |
| Court | Utah Supreme Court |
| Parties | Stephen W. RUPP, Trustee, Appellee, v. Angie MOFFO, Appellant. |
Stephen W. Rupp, Reid Tateoka, Layton, for appellee.
L. Miles LeBaron, Tyler J. Jensen, Salt Lake City, for appellant.
Due to his retirement, Justice NEHRING did not participate herein; Court of Appeals Judge KATE A. TOOMEY sat.
Justice DENO G. HIMONAS became a member of the Court on February 13, 2014, after oral argument in this matter, and accordingly did not participate.
INTRODUCTION
¶ 1 Angie Moffo lived rent free for eight years in a home that belonged to her brother-in-law, Doug Rich. After Mr. Rich filed for Chapter 7 bankruptcy, the trustee, Stephen Rupp, sued Ms. Moffo for back rent under Utah's Uniform Fraudulent Transfer Act (the Act), sections 25–6–1 to –14 of the Utah Code. The district court, concluding that Ms. Moffo was the recipient of a fraudulent transfer, granted Mr. Rupp summary judgment and entered a $34,200 judgment against Ms. Moffo. On appeal, Ms. Moffo argues that Mr. Rupp lacks statutory standing under the Act and, in the alternative, that Mr. Rich did not transfer an asset within the scope of the Act.1 We hold that Mr. Rupp has statutory standing because, as a bankruptcy trustee, he is a creditor of Mr. Rich. But we hold that Mr. Rich did not transfer an asset to Ms. Moffo because the home was fully encumbered by a mortgage. We therefore vacate the judgment entered against Ms. Moffo and remand the case to the district court with instructions to enter summary judgment in favor of Ms. Moffo.
¶ 2 The material facts in this matter are not in dispute. In 2003, Mr. Rich invited Ms. Moffo to move into his newly-acquired investment property. At the time, Ms. Moffo, a single mother of eight, was in serious financial trouble as the sole provider for herself and her children. Ms. Moffo and Mr. Rich agreed that she would not pay any rent, but would help out if she were able. Ms. Moffo lived in the house for eight years and never paid any rent.
¶ 3 In 2006, Mr. Rich obtained a mortgage on the home and signed a trust deed in favor of Bayrock Mortgage Company, which included a rent assignment provision. Three years later, Mr. Rich, who had suffered financial setback, became insolvent and stopped making payments on the mortgage. In October 2009, Bayrock served Mr. Rich with a notice of default, which triggered the rent assignment to Bayrock. In 2011, Mr. Rich filed for bankruptcy. At that time, the mortgage on the home was more than double the home's fair market value.
¶ 4 In 2012, Mr. Rupp, the appointed Chapter 7 bankruptcy trustee, filed suit against Ms. Moffo under Utah's Uniform Fraudulent Transfer Act. Mr. Rupp sought $1,300 per month in back rent from Ms. Moffo, asserting that Mr. Rich had defrauded his creditors by allowing her to live in the house rent free after he became insolvent in October 2009. On cross-motions for summary judgment, the district court ruled that Ms. Moffo was the recipient of a fraudulent transfer and ordered her to pay the bankruptcy estate $34,200. Ms. Moffo appealed.
We have jurisdiction pursuant to Utah Code section 78A–3–102(3)(j).
¶ 5 This case comes to us on summary judgment. Because a district court's ruling on summary judgment is a question of law, we review it for correctness.2 Moreover, we give no deference to a lower court's determination on an issue of statutory construction.3
On the basis of this provision, Mr. Rupp secured a $34,200 judgment against Ms. Moffo for back rent.
¶ 7 Ms. Moffo raises two questions of statutory interpretation on appeal. The first question is one of statutory standing—is Mr. Rupp a “creditor” entitled to file suit under the statute? The second is whether the house in which she lived constitutes an “asset.”
¶ 8 Our well-established rules of statutory interpretation dictate that, when interpreting any statute, “our primary goal is to effectuate the intent of the Legislature.”5 And the “best evidence” of that intent is the “plain language” of the provision read in context with the whole statute and related sections of the Code.6 We begin with the question of standing.
¶ 9 Ms. Moffo asserts that Mr. Rupp lacks statutory standing. To resolve this issue, we must determine to what class of plaintiffs the Act grants a right to sue and whether Mr. Rupp is within that class.7 Ms. Moffo argues that only those with an actual interest in the property transferred are within the class of parties with standing. Because Bayrock held the trust deed for the home, had priority over Mr. Rupp, and because the first mortgage exceeded the home's value, Ms. Moffo reasons that Bayrock is the only creditor with standing to assert a claim against her under the Act. Mr. Rupp argues that the Act does not limit standing to those with an actual interest in the property transferred. Rather, he asserts that his status as a creditor of Mr. Rich pursuant to the United States Bankruptcy Code is sufficient to confer standing. We agree with Mr. Rupp.
Notably absent is any indication that a creditor's standing is contingent on any actual interest in the property at issue. Instead, the Act gives standing to anyone with a “right to payment” from the debtor.
¶ 11 Our conclusion that all creditors have standing under the Act is buttressed by other provisions. For example, the Act provides that “[a] transfer made ... is fraudulent as to a creditor ... if the debtor made the transfer ... with actual intent to hinder, delay, or defraud any creditor of the debtor.”11 The use of the word any is significant. It triggers standing for all of the debtor's creditors if the debtor has actual intent to defraud any single creditor.
¶ 12 Accordingly, we hold that a party has standing as a creditor under the Act if the party has a right to payment from the debtor. And a creditor has that standing regardless of whether the creditor has any actual interest in the transferred property.
¶ 13 In this case, Mr. Rupp, as the trustee for Mr. Rich's bankruptcy, qualifies as a creditor under the Act. Pursuant to the United States Bankruptcy Code, a “trustee ... [has], as of the commencement of the case, ... the rights and powers of ... a creditor. ”12 The Bankruptcy Code defines “creditor” as an “entity that has a claim against the debtor.”13 And a “claim” is a “right to payment.”14 These definitions are strikingly similar to those provided by the Act.15 Accordingly, we hold that Mr. Rupp, as the bankruptcy trustee, has standing as a creditor under the Act.16 We therefore proceed to the second issue: What is a “transfer” under the Act?
¶ 14 Ms. Moffo argues that even if Mr. Rupp has standing to sue, he is not entitled to recovery because Mr. Rich's agreement to let Ms. Moffo reside in the home did not constitute a transfer of an “asset” pursuant to the Act's definition of that term. Specifically, Ms. Moffo reasons that the Act's definition of an “asset” excludes property to the extent that it is fully encumbered, as was the case with the home in which Ms. Moffo lived. In response, Mr. Rupp argues that despite the plain language of the Act the intent of the encumbered-asset exception, on which Ms. Moffo relies, “was never to suggest that if an asset is encumbered by a valid lien, it is somehow no longer an asset.” We agree with Ms. Moffo because her reading is dictated by the plain language of the Act.
While the Act broadly defines “transfer,” it specifically excludes from that definition the transfer of property “to the extent it is encumbered by a valid lien.” Thus, the plain language of the Act dictates that property that is fully encumbered is not an “asset” within the Act's reach.
¶ 16 Mr. Rupp urges us to ignore this plain language, arguing that the Act cannot mean what it says. Instead, he asks us to derive a definition for the word asset from our opinion in Zuniga v. Evans, which considered the Uniform Fraudulent Conveyances Act not the Uniform Fraudulent Transfer Act.20 But Mr. Rupp makes no effort to tie his proposed definition to the current statutory text. Further, his only case citation is to a court of appeals opinion dealing with a different issue.21 Mr. Rupp's reasoning fails because it is unfounded in the Act's language or...
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