T h e H on or abl e Ja mes S. G wi n , U n i t ed St at es D i s t r i ct J u dg e f or t h e N o rt her n D i s t r i ct of O h i o, s i t t i n g by * d esi gnat i o n. -1-

NO T R EC OM M EN DE D F OR F UL L- TEX T P UB LIC AT ION F ile Nam e: 08a0485n.06 F iled: August 12, 2008 No. 07-1259 UN ITED STA TES C OU RT OF AP P EA LS F OR THE SI XT H C IR CU IT
IN RE: DARRIN F ELS NER, Debtor

--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- SHE ILA SOL OMON, P laintif f-App ellee,
v. ROBERT FELLMY, ET AL., De fend ant s- App e lla nt s. ) ) ) ) ) ) ) ) ) ) ) ON AP P EA L F RO M THE UNITED STAT ES DIS TRICT CO UR T F OR

THE EA STER

N D ISTRIC T OF MICHIG AN (No. 06-C V-13922)

BEF ORE: DAUGH TREY, MCKEAGUE, Circ uit J udg es; and GWI N, District J udg e. * GWI N, District J udg e: Def endants-A

ppellants Robert F ellm y (“Fellmy ”) a nd Michelle Middleton (“ Middleton”)
a pp e a l an o rd e r o f t

he dis tr ic t c ourt

g ra nti ngsummary judg me nt t o Pl a int if f- Ap pe lle e She ila Solomon (“ Trustee ”), the trustee of the Chapter 7 ba nkruptcy estate of Dar rin Fe lsner (“ Fe lsner”)
. For the reasons that follow, we RE VE RSE the orde r of the district c ourt g rantingsummary judgme nt to the Trustee a nd RE IN STA TE the dec ision of the bankruptc y court. I. Bac kgr oundNo. 07-1259

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-2-

A. Sub sta nti ve F a c ts I n th e s p r i n g o f 2 0 0 1 , M i c h e l l e M i d d l e t o n an d h e r th e n - f i an c é , D ar

r i n F e l s n e r , d e c i d e d

to
move from Michig an to Flor ida. [J .A. 339 .] On J uly 18, 2001, Middleton sold her home in Mount Clemens, Mic h ig a

n , w h e r e b o th

p arti e s h a d

p r e v io u s ly

r e s id e d , an d

r e c e iv e d n e t p r o c e e d s of $ 1 3 7,221.40 from the sa le. Id. Wi th th e h e lp o f

Pr u d e n ti a l r e a l e s tate a g e n t L is a Wats on (“Watson”) , Middleton fo und and soug ht to purchase for $177,500 r esidential prope rty that was located at 1173 Prescott Blvd., De ltona, Florida
. Id. Middleton planned to u s e t h e proc eeds f rom the sale of her Michig an home towards a 50% down pay ment on the Florida proper ty and to financ e the r em ai n i n g b alanc e. Id. When Middleton applied for c redit, howe ver, he r low cr edit score preve nted her

from qualify

ing fo r a mortg ag e. [J .A. 339-40 .] Mi dd le ton and F e lsn e r t he n jo int ly applied for

cre dit and wer e turne d down. [J .A. 367-68
. ] Re a l e state a g e nt Watso n th e n s ug g e ste d th a t F e lsn e r a pp ly a lon e fo r t

he mor tg a g e be c a

us e he had a highe r cr edit score than Middleton, even though F elsner did not have the money neede d for the down pay

ment and did not wish to purchase the home. [J .A. 340 .] To accomplish this goal, the
rea l estate a g ent devised a plan. She sug g ested that Middleton execute a “g ift letter,” g iving F elsner the $90,000 nee ded for

the down pay

ment on the house, a

nd that Fe lsner, af

t er o b t ai n i n g the mortg ag e and c losing on the pr operty , then transf er title to the prope rty

to Middleton through a quitclaim deed. [J .A. 340 , 368
. ] On J uly 11, 2001, Middleton ex ecute d a boilerplate “g ift letter” to F elsner. [J .A. 338 .] The g if t le tte r s tate s, in r e le va

nt p art , a s f

oll ow s: I , Michelle Middleton, am the f ian cé o f Darrin Fe lsner. I will give the sum ofNo. 07-1259

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D uri ng hi s d ep o si t i o n, Fe l sner t est i f i ed t hat he d i d no t execute t he q ui t cl ai m d eed unt i l t wo da y s af t er cl o si ng. 1 [J .A
. 408 .] T h e no to riz e d q u itcla im d e e d it se lf, ho w e v e r, is d a te d J u ly 1 9 , 2 0 0 1 . [J .A
. 435
. ]

T h e l ow e r c ou r t s a n d p a r t i e s s i mp l y r e f e r t o t hi s a mo u n t a s $9 0, 00 0. 00
. Thi s Cou r t w i l l do t h e s a me 2 t hrougho ut t he res t of t he o p i ni o n. -3- $90,000.00 as a g ift to D arr in F elsner towa rds the purc hase of

the prope rty

located at 1173 Prescott Blvd., Deltona, F L , 32738. Icer tify that the above g ift will be g iven in good f aith and re pay

ment of such g ift is not required to be pa id back. Id. Middleton then wrote a chec k for $90,000 dire ctly to the title company . [J .A. 400 , 408
. ] On July 19 , 200 1, F e lsn e r cl os e d on the pr op e rt y . Us ing the $9 0, 00 0 f

ro m Mi dd le ton

a s a down pay ment, Fe lsner obtained a

n $88,000 mortg ag e on the property in his name. [J .A. 319-34 .] Fe lsner thus beca

me t he mortgag or and owner of t he property
. [J .A. 335-37 .] The closing ag ent from the title company

and the rea l estate a g ent wer e both pre sent at the c losing a nd alleg edly

knew that Fe lsner intended to tra

nsfer owner ship in the home to Middleton. [ J .A. 387
. ] Th a t sa me da y , F e lsn e r e xec ute d a

qu itc la im d e e d, c on ve yingthe F lor ida pr op e rt y to Middleton. [ J .A. 435 .] Th e qu itc la im d e e d s tate d th a t F e lsn er re c e ive d $ 90 ,5 89 .5 9 in 1 2 consideration for his transfe r of the pr operty to Middleton. [J .A. 435 .] Felsner, how ever , denies that he re ceive d any money from Middleton othe r than the orig inal $90,000 for the down pay ment on the house. [J .A. 368 ; 377-78 .] In October 2001, afte r l iving togethe r i n the Florida house for sever al months, Middleton and Fe lsner ende d their re lationship and eac h independe ntly moved bac k to Michiga

n. [J .A. 3 7 2-73 , 390 .] The Florida pr operty rema ined i n Fe lsner’s name because Middleton had not y et re corde d the quitclai m d ee d
. [J .A. 391
. ] F e l s n e r a l s o r e m a i n e d

l i a b l e o nt h e m o rt g a g e f

o r t h e F l o r i d a

p r o p e rty, so he re nted out the house a nd used this income to make the mortg ag e pay ments over the followingNo. 07-1259

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-4- y ear . [J .A. 375-77 .] On September

6, 2002, Middleton recor ded the quitclaim deed for the Florida proper ty . [J .A. 391 .] At t his point, Felsner stopp ed m ak i n g mortg ag e pay ments on the proper

ty . [J .A. 376 .] Mid dle ton tr ans fe rr e d the pr op e rt y to he r fathe r, Rob e rt F e llmy , in ord e r to av oid fo re c los ur e du e to a later lack of pay ments. [J .A. 369-71 , 375-76 .] Fe llmy also assumed Fe lsner’s obligation on the mortg ag e upon obtainingtitle to the property . I n Dec ember 2002 or January

2003, the mortg ag ee, Oh i o S av i n gs Ban k , o ra l l y i n fo rm edFe l s n er

th ath e w as n o l o n ger

re s p o n s i b l e f

o r t h e m o rt gage pay ments. [J .A. 369-71 , 398
. ] On Dece mb e r

3 0 , 2 0 0 2 , F e ls n e r

f il e d a v o lu n ta r y p e ti ti o nf o r Ch a p te r 7 b an kr u p tc y in the U
. S. B an kr

u p tc y Co urt f o r th e E a s te r

nD is tr ic t o f

M ic h ig an . [J. A
. 4
. ] B. Proc edura l History On Dec ember

14, 2004, S h ei l a S o l o m o n , th e t ru s t ee o f D arri nFe l s n er ’s C h ap t er 7 b an kruptcy
es t at e, filed an adve rsar

y proce edingunder 11 U .S.C. § 544(b)(1) a g a ins t D e fe nd ants -A pp e lla nts Robert Fe llmy

and Miche lle Middleton in the U.S. Ba n k ru p t cy Court for the Ea stern District of M ic h ig an . [J. A
. 9
. ] Wi th th e a c ti o n , th e T r u s te e s o u g h t to av o id F e ls n e r ’ s tr an s f e r of the F lorida proper ty to Middleton, saying that it was a fr audulent tra nsfer under F lorida law an d askingthe bankruptc y

court to orde r that the prope rty held b y Fe llmy

and Middleton be turne d over to the bankruptc y

estate. [J .A. 20-24 .] On Octobe r 27, 2005, the parties filed cross-motions for summary judgme nt. [ J .A. 25-37 , 60- 73 .] O n Augus t 22 , 2 00 6, the ba nk ru ptc y c ourt de te rm ine d th a t F e lsn e r’ s tran sfe r of th e pr op e rt y was not fr audulent and g rante d summary judgme nt in favor of F ellmy and Middleton. [J .A. 190-96 .]No. 07-1259

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-5- On S e p t e mb e r

5 , 2 0 0 6 , th e T r

u s t e e a p p e a l e d t h e b an kr

u p t c y c o urt ’ s d e c i s i o nt o t h e U. S. District Court for the Easter n District of Michig an. [J .A. 197-98 .] Af te r a llo wi ng bo th pa

rt ie s to fi le briefs a nd conductingoral a

rguments in the case , the district cour t re v ersed the dec ision of the bankruptc y

court on January

18, 2007. [J .A. 241-55 .] The di s t rict cour t remande d the ca se for

an entry of judg ment in favor of

the Trustee
. Id. On Janu ary 26 , 2 00 7, F e llmy

and Mid dle ton

fi le d a tim e ly no tic e of a pp e a l. II. Legal Stand ard We have pr eviously held that “[i] n a ca se which c omes to us from the bankr uptcy court by way of an a ppeal f rom a de cision of a district c ourt, we revie w direc tly the decision of the ba nkruptcy court.” T a u n t v . H

u r ta d o (In r e H

u r ta d o ), 342 F.3d 528, 531 ( 6th Cir. 2003) (interna l citation omi tte d) . U nd e r t

his sta nd ard of re vie w, we a c c or d no de fe re nc e to the de c isi on of the dis tr ic t c ourt
. Id. We revi ew t h e b an k ru ptcy court’s f indings of f

act f or cle ar e rror , and we conduct a de novo revie w of the bankruptc y court’s conclusions of law
. Id. ; se e als o De ry v . Cu mb e rla nd

Cas . &Su r. C o . (In r e 5 9 0 0A s s o ci a t es , In c. ), 468 F.3d 326, 329 ( 6th Cir. 2006) (citing Stamper v. U nited States ( In re Gardne r) , 360 F.3d 551, 557 ( 6th Cir. 2004)). Summary judgme nt is proper if “ the pleading s, the discover y and disclosure materia ls on file,
and any a ff ida vit s sh owtha

t th e re is n o g e nu ine iss ue a s to any mate ri a l f

a c t and that th e mov ant i s entitled to judgment as a matter of law.” Fe d. R. Civ. P . 56(c) ; accord Int’l Union v. Cummins, Inc ., 434 F.3d 478, 483 ( 6th Cir. 2006) ; T urner v. City of Taylor , 412 F.3d 629, 637 ( 6th Cir. 2005)
. Whe n de c idi ng a mot ion fo r summa ry jud g me nt, the c ourt mus t vie w the e vid e nc e and dr aw all
rea sonable infe renc es in favor of the nonmoving party
. Ma tsu sh ita El e c . In du s. Co. v . Ze nit h R ad ioNo. 07-1259

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.

-6- Cor p ., 475 U.S. 574, 587 (1986) ; H a r b in

- B e yv . Rutter , 4 2 0 F.3d 571, 575 ( 6th Cir. 2005)
. Ultimately

the C ourt must decide “whe ther the evidenc e pre sents sufficie nt disag ree ment to require submissi on to a jury

or wh et h er it i s so one-sided that one party must prevail as a

matter of la

w.” Terry Barr Sales Agency, Inc . v. All-Lock Co., 96 F.3d 174, 178 ( 6th Cir. 1996) (interna l quotations omitted). III. Discussion 11 U.S.C. § 544(b)(1) provides that a “ trustee may avoid any

transfe r o f an interest of the debtor in prope rty

or any obligation incur

red by the debtor that is voida ble under a

pplicable law

by
a cr editor holding an unsec ured c laim that is allowable under section 502 of this title or that is not
a ll o w a b le o n ly un d e r s e c ti o n 5 0 2 ( e ) o f th is ti tle .” 1 1 U. S
. C . § 544(b)( 1) . I f a truste e ca n avoid a transfe r of pr operty

under this statute, then the trustee can recove r t he property for the be nefit of the bankruptc y

estate unde r 11 U.S.C. § 550(a) . “Essentially , this provision permits the trustee to ‘ stand in the shoes’ of a

n unsecur ed cr editor and a ssert cause s of action under state fra udulent conveyance laws for the benef it of all cre ditors.” L

yo n v. E i s em a n (In r e F

o r b es ), 37 2 B .R. 32 1, 33 0 ( B .A .P. 6 t h C i r. 2007)
. In o r d e r t o nu l l i f y a tr an s f

e r un d e r § 5 4 4 ( b ) ( 1 ) , th e tr u s t e e m u s t p r o v e b y a preponde ranc e of the evidenc e th at there is “(1) [a] creditor, ( 2) holding an allowa ble unsec ured
c la im; and

(3 ) a tr ans fe r o f a

n inte re st of

the de bto r i n p ro pe rt

y , ( 4) that is vo ida

ble un de r a

pp lic a ble [st ate] law.” Id. (interna l citation omitt ed). In th is c a se , th e Tr

us te e wa nts to n ull if y F e lsn e r’ s tr ans fe r o f t

he F lori da pro pe rt

y to Middle t o n u n d er § 544( b)(1) and to re cover the prope rty

for the be nefit of F elsner’ s Chapter 7 bankruptc y

estate unde r § 550(a ). We must there fore first examine whether the Trustee is entitledNo. 07-1259

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-7- to avoid Fe lsner’s tra

nsfer to the proper

ty to Middleton and, if she i s so entitled, whether the Trustee may rec over the proper

ty for F elsner’ s bankruptcy estate. A. The Ability

to Avoid the Transf

er Under 11 U .S.C. § 544(b)(1) 1. The Existenceof a Creditor Holdi ng an Allowable Unsecured Claim an d th e Tra ns

fe r o f an In te re

st o f th e De bto r in Pr op e rty In o rd e r fo r a tr

us te e to have sta

nd ingto a

vo id a tr ans fe r u

nd e r § 54 4( b) , “ the tr

us te e mus t first establish that at the time of the transac tion ther e was, in f act, a cr editor in exist ence who was holding a n unsecur ed cla im that is allowable under 11 U .S.C. § 502.” In reFo rb es, 372 B.R. at 335 (interna l citation omitt ed). The trustee need not “plea d the ex istence of [an] unsecur ed cr editor by name, though the trustee must ultimately prove such a c reditor e x ists.” W elt v. Jacobson (

In re Aqua Cl ea r T ec h

. , In c. ), 361 B.R. 567, 583 n.18 (B ankr. S.D. F la. 2007)
. On J uly 19, 2001, when F elsner transfe rre d the property to Middleton, numerous cre ditors held unsec ured c laims ag ainst him. P rior to moving to F lorida, F elsner fi lled out a Uniform Residential L oan Application (“URLA”) . [J .A. 316-18 .] I n this application, Fe ls ner listed that he owed de bts to Ford Motor L ease , Dodg e C hry sler Credit, Citibank Masterc ard, A ria Visa, Citizens Ba nk, and Visa. [J .A. 317
. ] F ur the r, the pa

rt ie s do no t dis pute the fa c t that F e lsn e r’ s tr ans fe r o f t he F lor ida

pr op e rt y to Middleton constitutes a “transf er of an intere st of the debtor in prope rty .” We t here fore conclude that th e fi rs t thr e e e le me nts of the § 5 44 (b )( 1) te st h ave be e n s a tis fi e d a nd no w t ur n o ur a tte nti on toNo. 07-1259

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A l t ho ugh t he p art i es vaguel y q u e st i o n i n t hei r bri ef s whether Flori d a o r M i chi gan st at e l aw ap p l i es t o t he 3 p rese nt d i sp ute, b o t h lo w er c o urts and t he p arti es a ssum ed t hro ug ho ut t his l i t i ga t i o n t ha t F l o rida law g o ve rns t his case b ecause t he p rop erty a t issu e is l o cat ed i n Flori d a. W e t heref o re anal y ze t he t rans act i o n unde r Fl o ri d a’ s f raudulent t r ans f er s t at ut e. E ven i f M i chi gan ’ s l aw was appl i cabl e, our an al y s i s woul d be s ubs t ant i al l y t he s ame becau s e bot h s t at es h a v e a d o p te d the U n ifo rm F ra u d u le n t T ra n sfe r A c t. -8- the dispositive issue of whether Fe lsner’s tra

nsfer of the prope rty

was fr audulent under

state law. 3 2. TheAp pli c ab ili ty

of F lor ida ’s Frau du le nt T

ra ns fe r S tatute De fe nd ants -A

pp e lla nts F e llmy

and Mid dle ton

argue that F e lsn e r’ s tr ans fe r o f t he pr op e rt

y to Middleton was not fra

udulent under Florida law. The bankruptcy court ag ree d and concluded that the transf er w as not fra

udulent beca

use Middleton did not intend the $90,000 that she g ave F elsner to be a g ratuitous g ift; r ather Middleton g ave him the money in c onsideration for hi s n ea rsimult aneous tra

nsfer of the title to her. The ba nkruptcy court thus conc luded that Fe lsner re ceive d
su ff ic ie nt co ns ide ratio n for the tr ans fe r an d de nie d the Tr us te e ’s summa

ry jud g me nt m oti on . In th is
a pp e a l, t he Tr us te e argue s tha t F e lsn e r’ s tr ans fe r o f t he F lor ida

pr op e rt y wa s f ra ud ule nt b e c a

us e F e lsn e r d id n ot re c e ive a re a so na bly e qu iva le nt va lue in exc ha ng e fo r g ivi ngtit le of

the pr op e rt

y to Mid dle ton

and the tr ans fe r o f t

he pr op e rt

y re nd e re d F e lsn e r i ns olv e nt. Fl o ri d a’ s fr au d

u l en ttra n s fe r s t at u t e s t at es , i nre l ev an tp art , th e f o l l o wi n g: (1) A tr ansfe r made or oblig ation incurre d by a debtor is fra

udulent as to a c reditor, whether the cr editor’s c laim arose be fore or af ter the tra

nsfer was made or the obligation was incurr ed, if the de btor made the transfe r or incur red the obligation:

. . . . (b) Without rece iving a rea sonably equivalent va lue in exchang e for the transf

er or obligation, and the debtor:

. . . . 2. Intended to incur , or believe d or re asonably should have be l i ev ed that he or she would incur, de bts bey ond his or her a bility to pay as they beca me due. F LA . S TAT . § 726.105(1)( b)(2) . In order for a trustee to null ify

a prope rty

transfe r on the g roundsNo. 07-1259

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-9- that it constitut es construc tive fra ud under this statute, the trustee must thus demonstrate (1) that the de bto r m a de the tr ans fe r “ wi tho ut r e c e ivi nga re a so na bly e qu iva le nt v a lue in e xch ange” fo r h is tr ans fe r, and (2 ) that the de bto r ei the r int e nd e d to inc ur de bts be y on d his a bil ity to p ay or “ re a so na bly should have be lieved” that he would incur suc h debts. Id. The Court will analy

ze whether the Trustee has proven by a prepondera nce of the evidenc e
eac h element of

the fra udulent transfe r statute in turn. i. Existenceof a Reasonably Equivale nt Value Th e F lor ida

fr a ud ule nt t ra ns fe r s tatut e do e s n ot e xplic itl y de fi ne the ph ra se “ reas on a bly equivalent va lue,” but F lorida cour ts “g ener ally consider many fac tors, including the ‘g ood faith of the par ties, the disparity betwee n the fair value of the property and what the debtor a ctually rec eived, and whether the tra

nsaction wa s at arm’ s leng th.’” Me nc his e v . Cla rk ( In re De ale rs Age nc

ySe rv ic es, In c. ), 380 B.R. 608, 619 (Bankr . M.D. Fla . 2007) (c i t i n g Bakst v. O’ Connor & Taylor Dev. Corp., ( In re Vilsack

) , 35 6 B .R. 54 6, 55 3 (B ank r. S.D . Fl a . 2 00 6) ). Cou

rt s mu st c omp are “ wh a t w e nt o ut” and “what was r ece ived” in eva luating whether t h e d eb t o r re ceive d a re asonably equivalent va lue in exchang e for

his property

transfe r. Id. (interna l citation omitt ed). In this case, the T rustee a sserts t hat Darrin Felsner did not rec eive a rea sonably

equivalent
v al u e i nex ch an ge f

o r t ra n s fe rr i n g t i t l e o f t h e Fl o ri d a pr o p erty t o M i ch el l e Mi d d l et o n . E v en th o u gh the qui tclaim deed states that Fe lsner re ceive d $90,000 in consideration for the tra nsfer , the Trustee
say s th a t F e lsn e r i n re a lity re c e ive d no thi ng of va lue fr om M idd le ton . T he De fe nd ants -A pp e lla nts
c la im, and

the ba nk ru ptc y c ourt fo und, th at Fe lsn e r d id i nd e e d r e c e ive su ff ic ie nt v a lue fo r h is proper ty transfe r bec ause the $90,000 that he re ceive d from Middleton was not a g ratuitous transfe rNo. 07-1259

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-10- as stated in the “g ift letter,” but r ather was c onsideration for

his subsequent execution of the quitclaim deed tra

nsfer ringtitle to Mi ddleton. In this appeal, F ellmy and Middleton must show that the $9 0, 00 0 w a s inte nd e d t o be con sid e ratio n f or the late r e xch ang e and

no t a tr ue g if t in or de r t o prove that Felsne r re ceive d sufficie nt value for his transfer

of the prope rty

to Middleton. In o rd e r to pr ov e tha

t a tr ans fe r i s a

va lid int e r v ivo s g if

t un de r F lor ida

law, a pla int if f m us t show that there was “ (1) a n intention of the donor to transf er a pres en t interest, (2) delivery by
surre nder of

dominion and control to the donee, and (3) acc eptanc e of the g ift by the donee .” Gree n v. Gre en, 314 So.2d 801, 802 (F la. Dist. Ct. App. 1975)
. See also U.S. v. Viomar Co., 616 F.Supp. 24, 26 (S.D. Fla . 1985)
. A don or mus t poss e ss the int e nt to tra ns fe r a pr e se nt int e re st to a don e e in order f o r th e tr an s f

e r to b e c o n s id e r e d

a v a li d inte r v iv o s g if t u n d e r F lo r id a la w . H e r e , M iddle ton admittedly

did execute, under

the guidance of her

rea l estate a g ent, a “ g ift letter” in which she stated that she intended to g ive Fe lsner $90,000 an d t h at t h i s g ift “will be g iven in g ood faith and repa y ment of such g ift is not require d to be paid back.” [J .A. 338 .] The T rustee pla ces sig nificant emphasis on this lang uag e of the g ift letter a nd argues that Middleton made a valid inter vivos g ift to her then- fianc é F elsner. In consideringthe totality of the c ircumstance s, howeve r, we find that Middleton lacked the do nativ e int e nt t o g ive F e lsn e r a n unc on dit ion a l g if

t of $9 0, 00 0. B oth Mid dle ton and F e lsn e r a dmi t that neither of

them intended that F elsner ke ep the money . In descr ibing his under standing of the g ift letter, F elsner te stified duringhis deposition: Q: And [the gift letter ] was to est ablish that y ou wer e now the owner of the $90,000.00? A: I t w a s to e sta

bli shwh e re the $9 0, 00 0. 00 c ame fr om.No. 07-1259

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-11- Q: Okay
. But, it

w a s a g if t f r o m t r an s f e r r in g h e r inte r e s t t o y o u , a s f

ar a s th e g ift letter? A: Ye s. Q: So, it was portray ed that she w as literally beinga wonde rful human be ing -

- A: And g iving me 90 grand. Q: – a nd g ivi ngy ou

90 g ra nd , a nd pr ob a bly g ivi ngup any

int e re st i n it ? A: Ye s. Q: And that was he r under st an d i n g and your under standing of what the g ift letter say s? A: As l o n g as Iwa s wi l l i n g t o s i gnth e Q u i tC l ai mDe edaf t er th e c l o s i n g. [J .A. 385-86
. ] Middleton also states in he r aff idavit that she signe d the g ift letter “ with the understanding that I wo uld g if t the do wn

pa y me nt t o F e lsn e r, and

F e lsn e r w ou ld q

uit c la im the pr op e rt

y to m e simult aneously

with closing.” [J .A. 340 .] F elsner repe atedly testified as to his role a s a strawman in the tr an s a c ti o n ; h e me r e ly inte n d e d to s e r v e a s a c o n d

u it f o r M id d le to n to o b ta in th e h ome she
wa nte d in F lor ida . F e lsn e r t e sti fi e d th a t he wa s “ju st a pig in a b lank e t ju st h e lpi ng[Mid dle ton ] out ” duringthis series of e vents. [J .A. 379
. ] Th e re c or d r e fl e c ts that th e pa rt ie s in te nde d a

sin g le tr ans a c tio n w ithtw o p art s: f ir st, Middleton would pr ovide Fe lsner with the money require d for the down pay ment, and, sec ond, upon
c los ing , F e lsn e r w ou ld q

uit c la im the pr op e rt

y to M idd le ton . T he la

ngua g e of the g if t le tte r a c tua lly ref ere nces the singula

r nature of the t ransa ction that the parties intended as we ll. Middl eton’s g ift letter expli citly states that she “will g ive the sum of $90,000.00 as a g ift to Darr in Felsne r towards the pur chase of the prope rty . . .” [J .A. 338
. ] (e mp h as i s ad d ed ). T h e q u al i fy i n g co n d i t i o n al l an gu age of the g ift letter indicate s that Middleton di d n ot intend for the “ g ift” of $90,000 to be a n
un c on dit ion a l tr ans fe r o f h e r pr e se nt int e re st in the mon e y to h e r f ianc é ; r a the r, the g if

t le tte r r e fl e c tsNo. 07-1259

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E v e n if w e w e re to im p ro b a b ly c o n sid e r M id d le to n ’s tra n sfe r o f th e $ 9 0 ,0 0 0 to F e lsn e r a g ift , w e a g re e w ith 4 the D e fen d a n ts-A p p e llan ts tha t t h e gift wa s c o n d iti o n a l. B y the e x p re ss t e rm s o f the gift l e tter , F e lsn e r w a s e x p e c te d to use t he $ 9 0 , 0 0 0 t o ward s t he d o wn p ayment o n t he ho use. I f he f ai l ed t o do s o , he wo ul d presum ab l y be requi red t o gi ve the $ 9 0 ,0 0 0 b a c k to M id d le to n .

T h e T ru ste e re p e a te d ly cite s F e lsn e r’s te stim o n y tha t t h e tra n sa c tio n “w a s b a sic a lly this w o n d e rfu l i d e a to 5 c o e rc e th e m o rtg a g e c o m p a n y” to g ive M id d le to n th e h o u se tha t she w a n te d . [J .A
. 386
. ] A l t ho ugh not ess ent i al t o our ho l d i ng t o d ay, we no t e o ur conf usi o n as t o how t he t rans f er betwe e n F el sner and M i d d l et o n “ co erced ” o r har m ed t he l ender i n a ny way s i nce Fel s ner was s t i l l obl i gat ed on t he not e, wh i ch was s ecu r ed by t he mo r t gag e, wh en he t r ans f er r ed t i t l e t o M i d d l et o n. -12- Mid dle ton ’s de sire fo r F e lsn e r t o u se the mon e y in f ur the ra nc e of the ir pla n b y wh ic h s he wo uld obtain title to the house. 4 In fac t, Felsne r neve r eve n rec eived the mone y by which he was to make the down pa y ment on the Flor ida prope rty . In his deposition, Felsner te stified that Middleton “had the ch ec k overnighte d from Michig an to Flor ida. So, me actually ever seeingthe che ck, I

don’t rec all ever

seeing the che ck.” [J .A. 400 .] Fels ner a lso stated that he did not rec all signingor endor sing the chec k at closing
. Id. L a te r in h is d e po sit ion , F e lsn e r s tate d th a t Mi c he lle ’s c he c k w a s se nt d ir e c tly to t he tit le company and was pay able to the title company . [J .A. 407
. ] F e l s n e r ’ s t e s t i m o n y i s c o n f i r m e d b y a Janu ary 20 , 20 05 le tte r f ro m Jer ry Gi or e lla , a

br ok e r m ana g e r at Pr

ud e nti a l F lor ida

Re a l E state Center. [J .A. 433.] I n his letter, Giorella states that “L isa Watson had Michelle Middleton wire the money for the down pay

ment direc tly

to the title company

from Miche lle’s ac count.” Id. Th e pa rt ie s inte nd e d th e ir

a c tio ns to b e on e sin g le tr ans a c tio n by wh ic h Fe lsn e r wo uld ob ta in the c re dit tha t Mi dd le ton

c ou ld n ot, and

Mid dle ton

wo uld pa y fo r t he ho us e that F e lsn e r c ou ld n ot. We theref ore c onclude that Middleton’s $90,000 transfe r to F elsner was not a g ift. Rather, the pa rties intended that the m oney , along with Middleton’s willingness to let F elsner live in the house with her,
serve as consider ation for Fe lsner’s later execution of the quitclaim deed to Middleton. We find that 5No. 07-1259

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-13- Fe lsner re ceive d a re asonably equivalent va lue for his tra nsfer of the F lorida prope rty

to Middleton. ii. The Tr ansfer Did Not Render Felsne r Insolvent Fur ther, e ven if we wer e to conc lude that Fe lsner did not re ceive a re asonably equivalent
va lue fo r h is tra

ns fe r o f t he F lor ida

pr op e rt y to M idd le ton , th e tr ans a c tio n still fa ils to qua lif y a s a fra udulent transfe r bec ause the transfe r did not rende r F elsner insolvent. A transf er c an only

be conside red f

raudule nt if the debtor “ [i ]nt ended to incur, or believe d
or re asonably

should have be lieved that he or she would incur, debts beyond his or her a bility to pay as they beca me due.” F LA . S TAT . § 726.105
. Florida courts often use a “bala nce she et” test by

which a debtor is considere d insolvent if the “sum of the debtor’s debts is g reater than a ll of the debtor’ s assets at a fair va luation.” Pa ra gon H e alt h S e rv ., In c . v . Ce nt. Pa lm Be ac h Cm ty . M e nta l H e alt h Ctr., Inc., 859 So.2d 1233, 1236-37 (Fla . Dist. Ct. App. 2003) (citing F LA . S TAT . § 726.103(1))
. I mportantly

in this case, the bankruptc y court never determined that Felsner was insolvent
as a r esult of his transfe r of the pr operty to Middleton. [ J .A. 190-94 .] W ithout thi s finding by the tr ie r o f f a c t, w e c ann ot co nc lud e a t the a pp e llate le ve l th a t th e tr ans fe r r e nd e re d F e lsn e r i ns olv e nt. See C o r z i n v. F o rd u (In r e F o rd u ), 201 F.3d 693, 710 ( 6th Cir. 1999)
. Fur ther, the r ecor d does not support th e co nclusion that Fe lsner re asonably should have believed that he would i ncur debts beyond his ability to pay as a r esult of his transfe r of the F lorida pro per ty to h is f or me r f ianc é e . T he Tr

us te e c la ims that be fo re F e lsn e r t ra ns fe rr e d th e pr op e rt

y to Middleton, he had ti tle to the property and $90,000 in equity , as we ll as the $88,000 mortg ag e. The Tr us te e say s th a t w he n F e lsn e r t ra ns fe rr e d ti tle in t

he pr op e rt

y to M idd le ton , h e los t th e $9 0, 00 0 in equity but retain ed the $88,000 mortg ag e, thus resulting in his li abilities ex cee ding his a ssets byNo. 07-1259

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-14- $118,000. Putti ng aside the issue that the bankr uptcy court ne ver ma de this fac tual deter mination, we f ind no evidence that the transf er r ender ed F elsner insolvent. On J uly 19, 2001, Fe lsner gaine d $90,000 in equity as a r esult of makingthe down pay ment on the Flor ida prope rty

and then lost the $90,000 by transfe rringtitle in the house to Middleton. He inc ur re d a lia bil ity in t he amou nt o f $ 88 ,0 00 by

takin g out a

mor tg a g e on the pr op e rt

y , b ut h e a lso g ained in c o me b y

r e n ti n g o u t t

h e p r o p e rty , a

f a c t o v e r lo o k e d

b y b o th th e T r u s te e an d th e d is tr ic t court. The monthly renta l inc ome was deposited direc tly into F elsner’ s own ac count. [J .A. 375-77 , 390-91
. ] Fe l s n er

testified that t h e a m o un to f r en t al i n co m e h e r ec ei v edco v er edh i s m o n th l y m o rt gage pa y me nts thr ou g ho ut t

he pe ri od tha t he wa s r e sp on sib le fo r t he mort g a g e , e xce pt f

or tw o ti me s in which Mi ddleton used her own money to supplement the mortg ag e pay ments. [J .A. 375-77
. ] When Middleton r ecor ded the proper ty deed and Fe lsner stopped makingmortg ag e pay ments in late 2002, Fe llmy stepped in and assumed the mortg ag e for F elsner. T hus, the transfe r did not rende r F elsner insolvent beca

u s e h e tr u ly “ n e it h e r g a in e d n o r lo s t m o n e y

a s a r e s u lt o f th e tr an s a c ti o n. . .” [Appellant Br. 20.] We conclude that the Trustee has fa iled to pr ove by a preponde ranc e of the evidenc e that she is entitled to avoid the tra nsfer of prope rty

from F elsner to Middleton under 11 U.S.C. § 544(b)(1)
. Be cause we f

ind that the Trustee has failed to c arr y her bur den of pr oof in this case, the Trustee ’s
argume nt t

hat the De fe nd ants -A

pp e lla nts are no t e nti tle d to e qu ita ble re lie f du e to “ un c le an h and s” is ina pp lic a ble
. We fi nd that the tr ans a c tio n w a s n ot a fr a ud ule nt t ra ns fe r u nd e r F lor ida

law b e c a us e F e lsn e r r e c e ive d a

re a so na bly e qu iva le nt v a lue in exc ha ng e fo r his tr ans fe r an d th e tr ans a c tio n d id not, and was not likely

to, rende r him insolvent.No. 07-1259

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-15-

IV. Conclusion For the re asons stated a

bove, we RE VE RSE the order of the district cour t gr anting summary judgme nt to the Appellee a nd RE IN STA TE the dec ision of the bankruptc y court.No. 07-1259

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-16- McK EAGU E, Circuit Ju dge, dissentin g. B y pe rm itt ingun sc ru pu lou s h ome -b uy e rs to l ie and dec eive in orde r to rec eiv e m o rtg ag es they could not obtain honestly , the majority place s the imprimatur of this court on conduc t that is clearly fr audulent and possibly criminal. Ther efor e, I respe ctfully

dissent. B y ho ldi ngtha

t th e $9 0, 00 0 g ive n to F e lsn e r b y Mid dle ton

wa s n ot a c tua lly

a g if t—d e sp ite the unambig uous languag e of the g ift letter to the contra ry —the majority opinion unde rcuts the expectations of lender s who rely on these lett er s ev er y day when makinglending decisions. I f the $90,000 was not a g ift, as t he letter signe d by both Fe lsner and Middleton c lear ly say s it was, then F e lsn e r an d Midd le ton kn ow ing ly su bmi tte d a fa lse do c ume nt to a le nd ingins tit uti on fo r t he purp os e of g aining a loan in violation of both fede ral a nd state law. See 18 U. S.C. § 1 34 4; see also F la . St a t. § 817.03. In fac t, as the district court noted, nume rous individuals are se rving time in feder al prisons fo r e ng a g ingin c on du c t th a t is su bs tanti a lly

sim ila r t o th e c on du c t th a t th e ma jor ity ha s b le sse d in this case. See U

nited States v. Paul , 57 F. App’ x 597, 605-06 (6th Cir. 2003) (pe r cur iam) (a ffirming the bank f raud c onviction of an individual who subm itted a fraudulent gift l etter to a mortgag e broke r for the pur

pose of se curinga loan)
. Under the majority ’s re asoning , individuals interested in pur chasinga home ne ed not be
co n ce rn edwi thth e v er ac i ty o f t h e r e p r es en t at i o n s o r d o cu m en t at i o nt h at t h ey s u b m i tt o m o rt gage lender s. I t is of no conseque nce that a rea l e state ag ent and a title c ompany em p l o y ee m ay have kn ow n o f M idd le ton

and F e lsn e r’ s sc he me be c a us e ne ith e r o f t

he m r e pr e se nte d th e le nd e r; the re is
no e vid e nce that th e le nd e r i tse lf wa s a wa re that th e g if

t le tte r w a s a

sh am. A s F e lsn e r h ims e lf te sti fi e d, he and

Mid dle ton

did no t a dv ise the mor

tg a g e lende r o f t

he ir sc he me be c a

us e “ itNo. 07-1259

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-17- specific ally

states in the contra ct to the mortgage t h at [t he prope rty ] can not be transf err ed to a second pa

rty or third par

ty at all.” JA at 384. This statement demonstrates that Fe l s n erand Mid dle ton

kn e w the y

we re e ng a g ingin d e c e itf

ul c on du c t and

kn e w t he y wo uld have be e n una

ble to obtain the prope rty

if the lende r wa s awa

re of their sche me. A. Reasonably Eq uivalent Valu e Re qui rem ent Unlike the majority , Iam unable to see how the $90,000 g ift from Mi ddleton to Felsne r— wh ic h a llo we d F e lsn e r t o o bta in t he mor tg a g e and

g a in t itl e to t

he pr op e rt

y in t he fi rs t pla c e —c on sti tut e s th e same tr ans a c tio n a s th e late r t ra ns fe r of the tit le to Mid dle ton via qu itc la im de e d. Simp le log ic dic tate s th a t th e re we re tw o s e pa rate and dis tin c t tr ans a c tio ns in t

his c a se . F ir st, Fe lsner re c e iv e d

th e $ 9 0 , 0 0 0 f

r o m M id d le to nan d

g a in e d ti tl e to th e p r o p e rty
. Se c o n d , F e lsner quitclaimed the prope rty to Midd l eton and r ece ived nothing of value in re turn. By

holding otherwise, the majority is e ssentially saying that in the same tr ans a c tio n Fe lsn e r bot h g a ine d ti tle to the prope rty

and tra nsfer red that same title to Middleton. I do not see how that is possi ble. Viewingthe eve nts in thi s case as t wo t ra n s actions, lea ds me to the conc lusion that the transfe r of the pr operty

from F elsner to Middleto n v i a t h e quitclaim dee d was not supported by
rea sonably

equivalent va lue as i s re q u i red by Florida ’s fra

udulent transfe r statute, F la. Stat. § 72 6. 10 5. At

the mom e nt Mid dle ton re c e ive d the qu itc la im d e e d, sh e pr ov ide d n oth ingof va lue to F e lsn e r, or

a s F e lsn e r h ims e lf

put it , he re c e ive d “ zer o” in r e tur n f or de e din g the pr op e rt

y to Middleton. J A at 368. The $90,000 that Middleton pre viously g ave to F elsner c annot serve as
re a so na bly e qu iva le nt v a lue fo r t

he qu itc la im deed becau se tha t mo ne y wa s n o lo ng e r i n th e ir possession; rather, it wa s in an ac count belong ing to t h e t i t le company . L ooking to F lorida’sNo. 07-1259

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-18- d ef i n i t i o n of re asonably

equivalent va lue, title to the property “we nt out” to Middleton via the quitclaim deed a

nd nothing “ was re ceive d” by Fe lsner. See ge nerally Bakst v . O’Connor &Taylor Dev

. Corp. (

In re Vilsack) , 356 B.R. 546, 553 (B ankr. S.D. Fla. 2006). There fore , Iag ree with the district court’s conclusion that the bankr uptcy court e rre d in holding that the tra nsfer was supporte d by rea sonably

equivalent va lue. B. I nso lve nc y R e quir e m e nt Wit h reg ard to the insolvency require ment found i n Fla. Stat. § 726.105, the majority holds that the transf

er f rom Fe lsner to Middleton did not render Fe lsner insolvent bec ause se vera l months afte r the tra

nsfer a tena nt temporar ily assisted Fe lsner with the m ortg ag e pay ments. I disag ree . The fo c a l po int

of the ins olv e nc y

re qu ir e me nt i s o n th e fi na nc ia l r e su lt o f t

he tr ans fe r at th e ti me it
occur red or immediately

there afte r. I

can f ind no support for the majori t y ’s conclusion t hat what
occur red se vera l months after the pr operty was d ee d ed to M iddleton has any bear ing on the de te rm inatio n o f wh e the r F e lsn e r wa s r e nd e re d in so lve nt at th e mom e nt o f t ra ns fe r o r i mme diate ly the re a ft e r. Un de r t

he ma jor ity ’s re a so nin g , if

a tr ans fe r o f p ro pe rt

y re su lte d in

an in div idu a l’ s d e bts exceedinghis assets, the transf er w ould not have rende red the individual insolvent for purposes of fra udulent transfe r law if the individual hit the lottery sever al months a fter the transfe r. That is not the law. It is al s o important to note that the majority ’s statement that F elsner w as not rende red insolvent beca

use he “ neither g ained nor lost money

as a r esult of the transaction,” lacks merit. As
a re sult of the transfe r to Middleton, Felsne r re tained mortga ge i n debtedne ss and lost tit le to a
su bs tanti a l a sse t ( i.e ., the pr op e rt y ). Thus , it

is i nc or re c t to sa y that the tr ans fe r did no t ne g a tiv e ly impact Fe lsner’s f

inancial c ondition.No. 07-1259

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-19- For the re asons stated a

bove, I respe ctfully

dissent.