The Honorable Michael J. Melloy, Chief Judge, United States

1

District Court for the District of Northern Iowa, sitting by

designation.

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 96-1838

___________

In re: Stanley Bargfrede; *

Pamela Bargfrede, *

 *

Debtors. *

 *

------------------------- *

 *

Michael S. Dietz, Trustee of *

the Bankruptcy Estate of * Appeal from the United States

Stanley and Pamela Bargfrede, * District Court for the

 * District of Minnesota.

Appellant, *

 *

v. *

 *

St. Edward's Catholic Church; *

Diocese of Dubuque, *

 *

Appellees. *

___________

 Submitted: February 14, 1997

 Filed: June 27, 1997

___________

Before HANSEN and MORRIS SHEPPARD ARNOLD, Circuit Judges, and

MELLOY, District Judge. 1

___________

PER CURIAM.

Bankruptcy Trustee Michael Dietz (Trustee) appeals the
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district court's affirmance of the bankruptcy court's entry of summary

judgment in favor of St. Edward's Catholic Church and the Diocese of

Dubuque (Church) in his proceeding to recover three pre-filing transfers.

We reverse in part and remand.

In 1989, Pamela Bargfrede pleaded guilty to felony theft after she

embezzled over $200,000 from the Church at which she was employed as a

bookkeeper. The Church was awarded a civil judgment, which was satisfied

by agreement after the three separate payments which are at issue in this

matter were received by the Church. The first payment, made in 1991,

represented the proceeds from the sale of the Bargfredes’ homestead. The

second payment, also made in 1991, represented the proceeds from an auction

sale of their personal property and household items. The third payment was

made by Pamela's husband, Stanley Bargfrede, in July 1992, and represented

a lump sum withdrawal from his pension and profit sharing accounts. 

On April 19, 1993, less than one year after the last payment, the

Bargfredes filed a Chapter 7 bankruptcy petition. As relevant to this

appeal, the Trustee commenced an adversary proceeding to recover the 1992

transfer of Stanley's pension funds as fraudulent under 11 U.S.C. §

548(a)(2)(A),(B)(i); alternatively, the Trustee claimed the transfer was

preferential because the Church was an insider pursuant to 11 U.S.C. § 547.

The trustee also sought to recover Stanley's one-half interest in the 1991

transfers of the proceeds from the sales of the homestead and personalty

as fraudulent under Iowa law pursuant to 11 U.S.C. § 544(b). 

The bankruptcy court granted the Church summary judgment with respect

to all three transfers, finding the release of a possible burden on the

marital relationship and the preservation of the family relationship

constituted reasonably equivalent value and
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consideration to Stanley. The bankruptcy court alternatively concluded

that the homestead proceeds were exempt. The bankruptcy court also

rejected the Trustee's claim that the pension funds transfer was

preferential. The district court affirmed. 

We review de novo a grant of summary judgment, determining whether

the record, when viewed in the light most favorable to the non-moving

party, shows that there is no genuine issue as to any material fact and

that the moving party is entitled to judgment as a matter of law. See Fed.

R. Civ. P. 56(c); In re Young, 82 F.3d 1407, 1413 (8th Cir. 1996).

As to the transfer of Stanley's pension funds, the provision under

which the Trustee is proceeding allows him to void the transfer as

fraudulent if Stanley did not receive reasonably equivalent value for the

transfer and if he was insolvent at the time of, or made insolvent by, the

transfer. See 11 U.S.C. § 548(a)(2)(A), (B)(i). 

We conclude the bankruptcy court erred in holding that Stanley

received reasonably equivalent value for the transfer of his pension funds.

The transfer directly benefitted Stanley's wife, not him, by discharging

her debt to the Church. See In re Jolly's, Inc., 188 B.R. 832, 842 (Bankr.

D. Minn. 1995) (transfers made solely for benefit of third party do not

furnish reasonably equivalent value); Biggs v. United States Nat'l Bank,

11 B.R. 524, 527 (D. Neb. 1980) (same). To the extent Stanley received

indirect, non-economic benefits in the form of a release of a possible

burden on the marital relationship and the preservation of the family

relationship, we find these sufficiently analogous to other intangible,

psychological benefits to conclude that they do not constitute reasonably

equivalent value. See In re Young, 152 B.R. 939, 948 (D. Minn. 1993)

(moral obligations not reasonably
Iowa's Uniform Fraudulent Transfer Act does not apply to this 2

matter, as the Act, which was effective January 1, 1995, is not

retroactive. See Iowa Code Ann. §§ 684.1-684.12 (West Supp. 1996).

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equivalent value), rev'd on other grounds, 82 F.3d 1407 (8th Cir. 1996);

see also In re Treadwell, 699 F.2d 1050, 1051 (11th Cir. 1983) (love and

affection not reasonably equivalent value); Zahra Spiritual Trust v. United

States, 910 F.2d 240, 249 (5th Cir. 1990) (spiritual fulfillment not

reasonably equivalent value).

The transfers of Stanley's one-half interest in the homestead and

personalty proceeds are not voidable under section 548(a), as they were

made more than a year before the Chapter 7 filing. See 11 U.S.C. § 548(a).

However, the Trustee may still void these transfers if they are voidable

under Iowa law. See 11 U.S.C. § 544(b); Iowa Code Ann. § 614.1(4) (West

Supp. 1996) (five year statute of limitations). Under Iowa law applicable

at the time this action was filed, the Trustee may set aside the transfers 2

in question if they were fraudulent; the transfers are presumed to be

fraudulent if Stanley did not receive consideration, unless the Church

proves that Stanley remained solvent after the transfers. See Regal Ins.

Co. v. Summit Guar. Corp., 324 N.W.2d 697, 703 (Iowa 1982).

The bankruptcy court concluded that the release of a possible burden

on the marital relationship and the preservation of the family relationship

also constituted consideration for the transfers of the homestead and

personalty sale proceeds. As the Supreme Court of Iowa has not addressed

this precise issue, we must attempt to predict what that Court would decide

if faced with the issue, considering "relevant state precedent, analogous

decisions, considered dicta, . . . and any other reliable data". See

Ventura v. Titan Sports, Inc., 65 F.3d 725, 729 (8th Cir. 1995), cert.
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denied, 116 S. Ct. 1268 (1996). We believe that the Supreme Court of Iowa

would conclude that the benefits Stanley received to his marital and

family relationships do not constitute consideration. Cf. First Nat'l Bank

v. Frescoln Farms, Ltd., 430 N.W.2d 432, 435 (Iowa 1988) (transfer of stock

"in consideration of love and affection" is not consideration for purposes

of Iowa fraudulent transfer law). 

Because the bankruptcy court erroneously concluded that Stanley

received reasonably equivalent value and consideration for the disputed

transfers, it did not consider whether the Trustee also showed that Stanley

was insolvent at the time of, or rendered insolvent because of, the pension

funds transfer, see In re Hemphill, 18 B.R. 38, 48 (Bankr. S.D. Iowa 1982)

(burden on party seeking to void transfer to prove elements of § 548), nor

or whether the Church proved that Stanley remained solvent after the

transfers of the homestead and personalty proceeds, see Regal Ins. Co., 324

N.W.2d at 703 (burden on transferee to prove transferor remained solvent).

Thus, we remand for the bankruptcy court to consider those issues.

As to the homestead proceeds, we also disagree with the bankruptcy

court's alternative conclusion that such proceeds were exempt; we disagree

because the Bargfredes did not invest the proceeds in a new home; instead,

they intended to, and did, use the proceeds to satisfy Pamela's debt to the

Church. See Iowa Code Ann. § 561.20 (West 1992) (new home acquired with

proceeds from old home exempt to value of old); Millsap v. Faulkes, 20

N.W.2d 40 (Iowa 1945) (proceeds of homestead exempt only for purpose of

reinvesting in new home). As to the proceeds from the sale of the

Bargfredes' personalty, the bankruptcy court stated that the record was

insufficient to determine whether the personalty items, and
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thus the proceeds therefrom, were exempt. On remand, should the bankruptcy

court conclude the transfer of the personalty proceeds was fraudulent, it

may need to further consider whether any of the personalty was exempt. 

A true copy.

Attest:

CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.