Soule v. Galaz (In re Galaz)
| Decision Date | 20 October 2021 |
| Docket Number | 19-11098-R,Adv. 21-1016-R |
| Parties | IN RE: GALAZ, Alfredo Carlos Paul and GALAZ, Lois May, Debtors. v. RAUL GALAZ, Defendant. STEVEN W. SOULE, Trustee, Plaintiff, |
| Court | U.S. Bankruptcy Court — Northern District of Oklahoma |
ORDER DENYING MOTION TO DISMISS
Before the Court is the Motion to Dismiss with Supporting Brief (Adv. Doc. 6) ("Motion") filed by Defendant Raul Galaz; Trustee's Response in Opposition to Defendant's Motion to Dismiss (Adv. Doc. 7) ("Response") filed by Plaintiff Steven W. Soule Trustee; and Defendant's Reply in Support of Motion to Dismiss (Adv. Doc. 8) ("Reply").
The Court has jurisdiction of this proceeding pursuant to 28 U.S.C. §' 1334, 157(a), 157(b)(1), and 157(b)(2)(E) and (H), and Local Civil Rule 84.1(a) of the United States District Court for the Northern District of Oklahoma.
The Motion seeks dismissal of this adversary proceeding under Rule 12(b)(6) of the Federal Rules of Civil Procedure (). Rule 12(b)(6) permits dismissal of a complaint at the pleading stage if it fails "to state a claim upon which relief can be granted."[1]
Under Rule 8(a)(2) of the Federal Rules of Civil Procedure (), a complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief."[2] "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'"[3] "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged."[4] The Court must "accept as true all well-pleaded factual allegations in the complaint and view them in the light most favorable to the plaintiff," and all reasonable inferences from the facts must be drawn in favor of the plaintiff.[5]
On May 27, 2021, Steven W. Soule, Chapter 7 Trustee ("Trustee") for the bankruptcy estate of Alfredo Carlos Paul Galaz (sometimes referred to as "Alfredo") and Lois May Galaz (collectively, "Debtors") filed the Adversary Complaint ("Complaint") (Adv. Doc. 1) against Defendant Raul Galaz ("Raul") seeking to avoid and recover, pursuant to the Oklahoma Uniform Fraudulent Transfer Act ("OUFTA") ( §§ 116, 119 and 120 of title 24 of the Oklahoma Statutes) and §§ 544(b) and 550 of the Bankruptcy Code, [6] an alleged fraudulent transfer made by Debtors to Raul. In the alternative, Trustee seeks turnover under § 542 of an alleged matured and payable on demand loan that is property of the estate.
Raul contends that Trustee's claims are barred by the relevant statutes of limitations, and that extinguishment of the claims is apparent on the face of the Complaint. Thus, Raul argues, this adversary proceeding should not proceed because no relief may be granted to Trustee.
Trustee contends that he has stated sufficient facts concerning Debtors' failure or refusal to provide Trustee with information about the alleged transfer or loan to raise an inference of concealment of the transaction. Trustee states that he was not advised of a financial document evidencing the Transfer until shortly before he filed the Complaint. Thus, Trustee argues, the statute of limitations clock did not begin ticking until Trustee discovered, or could have with reasonable diligence discovered, the transaction, and therefore the deadline for asserting such claims had not yet expired when he filed the Complaint.
As required under Rule 12(b)(6), the Court accepts all well-pleaded allegations as true and draws all reasonable inferences in favor of Trustee. In addition, to provide context for Trustee's discovery rule and tolling arguments, the Court takes judicial notice of prior statements made by Debtors and by Trustee in documents filed in Debtors' bankruptcy case, [7] and as well as judicial notice of events memorialized on the bankruptcy docket.[8]Accordingly, the following facts, events, and inferences have been considered in determining whether Trustee plausibly states a redressable claim.
On May 28, 2019, Debtors filed for relief under Chapter 7 of the Bankruptcy Code and Trustee was appointed to administer Debtors' bankruptcy estate.[9] More than four years earlier, in March of 2015, Debtors transferred $150, 000 to Raul ("Transfer") and did not receive any consideration in exchange for the Transfer.[10] Raul is the son of one of the Debtors, and thus is an "insider" of Debtors as that term is used in the Bankruptcy Code.[11] The Transfer was "identified as a personal loan" and Debtors have not received any payments on the loan.[12] Debtors did not disclose the Transfer in their original or amended Statement of Financial Affairs ("SOFA").[13] Nor did Debtors disclose an unpaid loan or receivable as an asset in their original or amended Schedules.[14]
The bankruptcy was administered as a no-asset case. On June 27, 2019, Trustee filed a Report of No Distribution, stating that he made "a diligent inquiry into the financial affairs of the [Debtors] and the location of the property belonging to the estate; and that there is no property available for distribution from the estate over and above that exempted by law."[15] Debtors obtained a Chapter 7 discharge of their unsecured debts.[16] Their bankruptcy case was closed on September 19, 2019.[17]
Six months later, on March 23, 2020, the United States Trustee filed a motion to reopen Debtors' bankruptcy case so a trustee could investigate possible unreported assets.[18]The motion was granted and Trustee was reappointed as Chapter 7 Trustee.[19] On March 31, 2020, Trustee filed a Report of Asset Case and Interim Report, wherein he identified an interest in copyright royalties as an unscheduled asset that he intended to administer.[20]
The Court notes that in their original SOFA, Debtors disclosed a prepetition transfer to Alfredo's ex-wife, Ruth Galaz, of an "inactive" business, Worldwide Subsidy, that "[c]ollected royalties from TV programs and copyrights."[21] Debtors also disclosed, in the section of the SOFA that calls for a list of current and former businesses, Segundo Suenos LLC, a "[r]oyalty holding/collecting company[, ] [i]nactive since 2010, closed in 2018."[22]
After the bankruptcy case was reopened, Debtors filed amended Schedules and an amended SOFA.[23] For the first time, Debtors disclosed Segundo Suenos, LLC as an asset on Schedule B, and reported that the LLC possessed an uncollected judgment.[24] Debtors also amended their SOFA to disclose that Segundo Suenos, LLC was a "[c]ontinuing, but inactive" business that was the "[o]wner of music royalties."[25] In addition, Debtors disclosed, for the first time, that within the two years prior to their bankruptcy, they had transferred interests in three businesses to a grandson, Ryan Galaz, and represented that the fair market value of such businesses was "$0.00 as of date of transfer."[26] At some point after the case was reopened, Trustee was "advised of a financial document evidencing the Transfer" of $150, 000 to Raul.[27] After learning of the Transfer, Trustee communicated with counsel for Debtors and Raul in an effort to recover the funds for the benefit of the estate.[28] Debtors and Raul denied the existence of the Transfer.[29]Trustee also became aware that Alfredo had previously acted as a "straw man" for Raul. Specifically, Segundo Suenos, LLC, an entity owned by Alfredo, was the recipient of a fraudulent transfer made by Raul, as found by a judge overseeing the bankruptcy case of Raul's ex-wife (Lisa Galaz).[30]
The Transfer was not disclosed on Debtors' original or amended Schedules or SOFA. No transactions between Debtors and Raul appear in either sets of documents.
First, the Court finds that Trustee has satisfied his burden under Rule 9(b) of the Federal Rules of Civil Procedure to plead the fraudulent transfer claim with particularity. Rule 9(b), states that [33]
Trustee clearly defined the allegedly fraudulent transaction as a transfer of money - $150, 000 - from Debtors to Raul in March of 2015 without an exchange of consideration. Trustee has pled intent generally and also provided some factual basis to allow an inference that Debtors transferred money to Raul with an intent to hinder, delay or defraud creditors. Trustee points out that another bankruptcy judge has found that Alfredo and Raul participated in a scheme to hinder creditors in the past. In addition, Debtors have made transfers to other family members without consideration (as shown in their Schedules), and have been inconsistent...
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