Wagner v. Pruett (In re Vaughan Co.), Bankruptcy No. 11–10–10759 SA.

CourtUnited States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — District of New Mexico
Writing for the CourtROBERT H. JACOBVITZ
Citation477 B.R. 206,56 Bankr.Ct.Dec. 253
PartiesIn re VAUGHAN COMPANY, REALTORS, Debtor. Judith A. Wagner, Chapter 11 Trustee of the bankruptcy estate of the Vaughan Company, Realtors, Plaintiff, v. Patricia Pruett, individually, and Patricia Pruett, as personal representative of the estate of William E. Pruett, Defendants.
Decision Date02 August 2012
Docket NumberBankruptcy No. 11–10–10759 SA.,Adversary No. 11–1185 J.

477 B.R. 206
56 Bankr.Ct.Dec.
253

In re VAUGHAN COMPANY, REALTORS, Debtor.
Judith A. Wagner, Chapter 11 Trustee of the bankruptcy estate of the Vaughan Company, Realtors, Plaintiff,
v.
Patricia Pruett, individually, and Patricia Pruett, as personal representative of the estate of William E. Pruett, Defendants.

Bankruptcy No. 11–10–10759 SA.
Adversary No. 11–1185 J.

United States Bankruptcy Court,
D. New Mexico.

Aug. 2, 2012.


[477 B.R. 210]


James A. Askew, Edward A. Mazel, Aletheia Vadin Pamela Allen, Arland & Associates, LLC, Albuquerque, NM, for Plaintiff.

R. Trey Arvizu, III, Las Cruces, NM, for Defendant.


MEMORANDUM OPINION

ROBERT H. JACOBVITZ, Bankruptcy Judge.

THIS MATTER is before the Court on the Defendants' Motion to Dismiss Pursuant to Fed.R.Civ.P. 12(b)(1) and (6) (“Motion to Dismiss”). Plaintiff filed a response and a supplemental response in opposition to the Motion to Dismiss. See Docket Nos. 10 and 19. This adversary proceeding is one of many adversary proceedings initiated by the Chapter 11 Trustee seeking to recover payments made by Vaughan Company Realtors (“VCR”) to parties who invested in VCR's promissory note program. Plaintiff Judith Wagner, Chapter 11 Trustee of the bankruptcy estate of the Vaughan Company Realtors (hereinafter “Plaintiff” or “Trustee”) asserts that VCR operated as a Ponzi scheme. The Plaintiff seeks to recover certain transfers made to Patricia Pruett and William E. Pruett 1 under several theories, including avoidance of preferential transfers under § 547, and avoidance of transfers under the actual fraud and constructive fraud provisions of 11 U.S.C. § 548 and applicable state law. After consideration of the Motion to Dismiss and the responses thereto, and being otherwise sufficiently informed, the Court finds that the Motion to Dismiss should be granted, in part, and denied, in part.

APPLICABLE STANDARDS FOR EVALUATING A MOTION TO DISMISS

A motion to dismiss for failure to state a claim is governed by Rule 12(b)(6), Fed.R.Civ.P., made applicable to adversary proceedings by Rule 7012, Fed.R.Bankr.P. In considering a motion to dismiss under Rule 12(b)(6), the Court accepts as true all well pleaded facts and evaluates those facts in the light most favorable to the plaintiff. Moore v. Guthrie, 438 F.3d 1036, 1039 (10th Cir.2006). The applicable standard for assessing a motion to dismiss for failure to state a claim under Rule 12(b), Fed.R.Civ.P. is found in Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) and Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). Under Twombly, in order to survive a motion to dismiss under Rule 12(b)(6), Fed.R.Civ.P., the complaint must contain enough facts to state a cause of

[477 B.R. 211]

action that is “plausible on its face.” Twombly, 550 U.S. at 570, 127 S.Ct. 1955. In other words, the plaintiff must “nudge [his] claims across the line from conceivable to plausible.” Id. “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.” Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955). A pleading that contains only “ ‘labels and conclusions,’ ” a “ ‘formulaic recitation of the elements of a cause of action’ ” or “ ‘naked assertions' devoid of ‘further factual enhancement’ ” is insufficient to withstand a motion to dismiss. Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (quoting Twombly, 550 U.S. at 555 and 557, 127 S.Ct. 1955). Under this standard, “the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions.” Id. The Court thus takes a two-step approach in evaluating a motion to dismiss: first, the Court accepts as true all well-pled factual allegations, disregarding legal conclusions “ ‘clothed in factual garb’ ”; second, the Court determines whether the well-pled factual allegations state a plausible claim for relief. See In re Tronox, Inc., 429 B.R. 73, 90 (Bankr.S.D.N.Y.2010) (quoting McHale v. Citibank (In re 1031 Tax Group, LLC), 420 B.R. 178, 190 (Bankr.S.D.N.Y.2009) and citing Iqbal, 129 S.Ct. at 1950) (stating that “Twombly illustrates the two-pronged approach.”). With these principles in mind, the Court will evaluate the sufficiency of the Complaint in light of the Motion to Dismiss.

THE CLAIMS CONTAINED IN THE COMPLAINT

The Complaint contains one-hundred fifty-eight numbered paragraphs and consists of twenty separate counts. Paragraphs 1 through 68 include allegations regarding the nature of the proceeding, jurisdiction and venue, the actions of William Pruett and Patricia Pruett, the alleged transfers, and the fraudulent Ponzi scheme allegedly perpetrated by Douglas Vaughan and his company, VCR. Paragraphs 69 through 158 incorporate paragraphs 1 through 68 by reference and set forth each claim as a separate count. The counts are:

Count 1 Turnover and Accounting under 11 U.S.C. § 542

Count 2 Preferential Transfer under 11 U.S.C. § 547(b) based on alleged transfers to Patricia Pruett made within the 90 day period prior to the filing of the VCR bankruptcy case

Count 3 Actual Fraud under 11 U.S.C. § 548(a)(1) based on alleged transfers to William Pruett made within two years of the date of the filing of the VCR bankruptcy case

Count 4 Actual Fraud under 11 U.S.C. § 548(a)(1) based on alleged transfers to Patricia Pruett made within two years of the date of the filing of the VCR bankruptcy case

Count 5 Constructive Fraud under 11 U.S.C. § 548(a)(1)(B) based on alleged transfers to Patricia Pruett made within two years of the date of the filing of the VCR bankruptcy case

Count 6 Constructive Fraud under 11 U.S.C. § 548(a)(1)(B) based on alleged transfers to William Pruett made within two years of the date of the filing of the VCR bankruptcy case

Count 7 Actual Fraud under state law, N.M.S.A. § 56–10–18(A)(1) based on alleged transfers to Patricia Pruett made within four years of the date of the filing of the VCR bankruptcy case

Count 8 Actual Fraud under state law, N.M.S.A. § 56–10–18(A)(1) based on

[477 B.R. 212]

alleged transfers to William Pruett made within four years of the date of the filing of the VCR bankruptcy case

Count 9 Actual Fraud under state law, N.M.S.A. § 56–10–18(A)(1) based on alleged transfers to William Pruett made as commissions on referrals

Count 10 Constructive Fraud under state law, N.M.S.A. § 56–10–18(A)(2) based on alleged transfers to Patricia Pruett made within four years of the date of the filing of the VCR bankruptcy case

Count 11 Constructive Fraud under state law, N.M.S.A. § 56–10–18(A)(2) based on alleged transfers to William Pruett made within four years of the date of the filing of the VCR bankruptcy case

Count 12 Constructive Fraud under state law, N.M.S.A. § 56–10–18(A)(2) based on alleged transfers to William Pruett made as commissions on referrals

Count 13 Fraudulent transfer (present creditors) under state law, N.M.S.A. § 56–10–19(A) as to Patricia Pruett

Count 14 Fraudulent transfer (present creditors) under state law, N.M.S.A. § 56–10–19(A) as to William Pruett

Count 15 Fraudulent transfer (present creditors) under state law, N.M.S.A. § 56–10–19(A) as to the commissions on referrals paid to William Pruett

Count 16 Fraudulent transfer under state law, N.M.S.A. § 56–10–19(B) as to alleged transfers to Patricia Pruett as an insider

Count 17 Fraudulent transfer under state law, N.M.S.A. § 56–10–19(B) as to alleged transfers to William Pruett as an insider

Count 18 Fraudulent transfer under state law, N.M.S.A. § 56–10–19(B) as to alleged the commissions for referrals paid to William Pruett as an insider

Count 19 Undiscovered fraudulent transfers based on state law

Count 20 Disallowance of Defendants' Claims under 11 U.S.C. § 502(d), or, alternatively, Equitable Subordination of Defendants' Claims under 11 U.S.C. § 510(c)

DISCUSSION

The Trustee consents to the dismissal, without prejudice, of her claim for turnover based on 11 U.S.C. § 5422, and consents to dismissal of her claims for recovery

[477 B.R. 213]

of fraudulent transfers under state law based on the transferee's insider status. Accordingly, the Court will dismiss Counts 1, 16, 17, and 18.3

Whether Plaintiff's Claims against Patricia Pruett, as Personal Representative of the Estate of William E. Pruett are time-barred by application of the New Mexico Uniform Probate Code (Counts 3, 6, 8, 9, 11, 12, 14, 15, 17, 18, 19 and 20)

Defendants assert that Plaintiff's claims against the Estate of William E. Pruett are time-barred under N.M.S.A.1978 § 45–3–803 (Repl. Pamp. 2008) of the New Mexico probate statutes. That section provides:

All claims against a decedent's estate that arose before the death of the decedent, including claims of the state and any subdivision of the state, whether due or to become due, absolute or contingent, liquidated or unliquidated or founded on contract, tort, or other legal basis, if not barred earlier by another statute of limitations or non-claims statute, are barred against the estate, the personal representative and the heirs and devisees of the decedent unless presented within the earlier of the following:

(1) one year after the decedent's death; or

(2) the time provided by Subsection A of Subsection B of Section 45–3–801 NMSA 1978 for all creditors barred by publication.

N.M.S.A.1978 § 45–3–803 (Repl. Pamp. 2008).

Section 45–3–803(A)(1) serves as a statute of limitations to bar claims against a decedent's estate or the personal representative of the estate that arise before the death of the decedent unless such claims are filed within one year after the decedent's death. See Macias v. Jaramillo, 129 N.M. 578, 583, 11 P.3d 153, 158 (Ct.App.2000) (stating that “[u]nder Section 45–3–803(A)(1), a tort claim against a decedent's estate that arose before the death of the decedent is barred against the estate or the...

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23 practice notes
  • Wagner v. Wilson (In re Vaughan Co.), No. 11-10-10759 JA
    • United States
    • United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — District of New Mexico
    • March 11, 2013
    ...the requisite fraudulent intent with respect to each transfer sought to be avoided. In Wagner v. Pruett (In re Vaughan Co., Realtors), 477 B.R. 206, 218 (Bankr.D.N.M. 2012), this Court adopted the "Ponzi scheme presumption." Under that rule, "it is presumed that any transfers made in the co......
  • Spradlin v. Khouri (In re Bruner), No. 15–8031
    • United States
    • Bankruptcy Appellate Panels. U.S. Bankruptcy Appellate Panel, Sixth Circuit
    • January 4, 2017
    ...Trust v. Baker (In re Amcast Industrial Corp.) , 365 B.R. 91, 122 (Bankr. S.D. Ohio 2007) ; Wagner v. Pruett (In re Vaughan Co .), 477 B.R. 206, 212 n.2 (Bankr. D.N.M. 2012). It is not until the transfer is avoided under § 549(a) that the property becomes property of the estate. Westphal v.......
  • Wagner v. Oliva (In re Vaughan Co.), Bankruptcy No. 10–10759.
    • United States
    • United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — District of New Mexico
    • October 23, 2013
    ...under either § 548(a)(1)(A) or applicable state law can be established based on a “Ponzi scheme presumption.” See Wagner v. Pruett, 477 B.R. 206, 218 (Bankr.D.N.M.2012) (citing Perkins v. Haines, 661 F.3d 623, 626 (11th Cir.2011) (“With respect to Ponzi schemes, transfers made in furtheranc......
  • Wagner v. Oliva (In re Vaughan Co.), Case No. 10-10759
    • United States
    • United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — District of New Mexico
    • October 23, 2013
    ...under either § 548(a)(1)(A) or applicable state law can be established based on a "Ponzi scheme presumption." See Wagner v. Pruett, 477 B.R. 206, 218 (Bankr. D.N.M. 2012) (citing Perkins v. Haines, 661 F.3d 623, 626 (11th Cir. 2011) ("With respect to Ponzi schemes, transfers made in further......
  • Request a trial to view additional results
23 cases
  • Wagner v. Wilson (In re Vaughan Co.), No. 11-10-10759 JA
    • United States
    • United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — District of New Mexico
    • March 11, 2013
    ...the requisite fraudulent intent with respect to each transfer sought to be avoided. In Wagner v. Pruett (In re Vaughan Co., Realtors), 477 B.R. 206, 218 (Bankr.D.N.M. 2012), this Court adopted the "Ponzi scheme presumption." Under that rule, "it is presumed that any transfers made in the co......
  • Spradlin v. Khouri (In re Bruner), No. 15–8031
    • United States
    • Bankruptcy Appellate Panels. U.S. Bankruptcy Appellate Panel, Sixth Circuit
    • January 4, 2017
    ...Trust v. Baker (In re Amcast Industrial Corp.) , 365 B.R. 91, 122 (Bankr. S.D. Ohio 2007) ; Wagner v. Pruett (In re Vaughan Co .), 477 B.R. 206, 212 n.2 (Bankr. D.N.M. 2012). It is not until the transfer is avoided under § 549(a) that the property becomes property of the estate. Westphal v.......
  • Wagner v. Oliva (In re Vaughan Co.), Bankruptcy No. 10–10759.
    • United States
    • United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — District of New Mexico
    • October 23, 2013
    ...under either § 548(a)(1)(A) or applicable state law can be established based on a “Ponzi scheme presumption.” See Wagner v. Pruett, 477 B.R. 206, 218 (Bankr.D.N.M.2012) (citing Perkins v. Haines, 661 F.3d 623, 626 (11th Cir.2011) (“With respect to Ponzi schemes, transfers made in furtheranc......
  • Wagner v. Oliva (In re Vaughan Co.), Case No. 10-10759
    • United States
    • United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — District of New Mexico
    • October 23, 2013
    ...under either § 548(a)(1)(A) or applicable state law can be established based on a "Ponzi scheme presumption." See Wagner v. Pruett, 477 B.R. 206, 218 (Bankr. D.N.M. 2012) (citing Perkins v. Haines, 661 F.3d 623, 626 (11th Cir. 2011) ("With respect to Ponzi schemes, transfers made in further......
  • Request a trial to view additional results

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