Source: https://law.justia.com/cases/federal/appellate-courts/F3/137/748/606155/
Timestamp: 2020-04-02 17:16:52
Document Index: 274364174

Matched Legal Cases: ['§ 101', '§ 522', '§ 548', '§ 522', '§ 522', '§ 548', '§ 548', '§ 548', '§ 548', '§ 548', '§ 522']

In Re Susanne Gutpelet, Debtor,susanne Gutpelet, Appellant, 137 F.3d 748 (3d Cir. 1998) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › Third Circuit › 1998 › In Re Susanne Gutpelet, Debtor,susanne Gutpelet, Appellant
In Re Susanne Gutpelet, Debtor,susanne Gutpelet, Appellant, 137 F.3d 748 (3d Cir. 1998)
US Court of Appeals for the Third Circuit - 137 F.3d 748 (3d Cir. 1998) Argued Dec. 12, 1997. Decided March 3, 1998
Andrew O. Schiff (Argued), Peter E. Meltzer, Fellheimer, Braverman & Kaskey, P.C., Philadelphia, PA, for Susanne Gutpelet.
Michael H. Kaliner (Argued), Pennsylvania, PA, for Arthur Liebersohn.
Before: NYGAARD and ALITO, Circuit Judges and DEBEVOISE, Senior District Judge.*
On October 27, 1994 the Debtor filed a petition for relief under Chapter 7 of the Bankruptcy Code, 11 U.S.C. § 101, et seq. Her indebtedness for principal and interest to her former husband amounted at that time to $206,308, about 95% of her total indebtedness. Amended schedules filed on June 20, 1995 disclosed the existence of an account in Corestates Bank and two accounts in PNC Bank. None of these accounts had been disclosed in the Debtor's original schedules. The PNC Bank accounts contained the balance of the proceeds of the sale of the Evans Road Property.
The Debtor claimed an exemption of all three accounts under 11 U.S.C. § 522(b) (2) and applicable Pennsylvania law. The Trustee filed an objection to the exemption of the PNC Bank accounts, asserting that the March 4, 1994 transfer of the Evans Road Property was an avoidable transfer under 11 U.S.C. § 548(a), and therefore the proceeds of its sale were the property of the Debtor's estate.1 The bankruptcy court sustained the Trustee's objection. The district court affirmed, and this appeal followed.
The Debtor's exemption claim is based upon 11 U.S.C. § 522(b) (2) (B) which provides that an individual debtor may exempt from property of the estate "any interest in property in which the debtor had, immediately before the commencement of the case, an interest as tenant by the entirety or joint tenant to the extent that such interest as a tenant by the entirety or joint tenant is exempt from process under applicable nonbankruptcy law." The Debtor notes that under Pennsylvania law property which is held as tenants by the entirety, whether real property or personal property, is exempt from process. In re Balber, 112 B.R. 6 (Bankr.W.D. Pa. 1990). The funds in the two joint accounts at PNC Bank were the proceeds of the sale of the Evans Road Property which had been held by the Debtor and her husband as tenants by the entirety since the March 4, 1994 transfer. Therefore, the Debtor contends, the funds were immune from process under Pennsylvania law and are exempt under § 522(b) of the Bankruptcy Code.
The Trustee asserted before the bankruptcy court that the March 4, 1994 transfer was avoidable under § 548(a) (2) which provides:
(a) The trustee may avoid any transfer of an interest of the debtor in property, or any obligation incurred by the debtor, that was made or incurred on or within one year before the date of the filing of the petition, if the debtor voluntarily or involuntarily...
(2) (A) received less than a reasonably equivalent value in exchange for such transfer or obligation; and (B) (i) was insolvent on the date that such transfer was made or such obligation was incurred, or became insolvent as a result of such transfer or obligation.
Thus to avoid a transfer under § 548(a) (2) the Trustee must establish that: (1) the Debtor had an interest in the property; (2) the interest was transferred within one year of the filing of the bankruptcy petition; (3) the Debtor was insolvent at the time of the transfer or became insolvent as a result thereof; and (4) the Debtor received less than a reasonably equivalent value in exchange for such transfer. BFP v. Resolution Trust Corp., 511 U.S. 531, 535, 114 S. Ct. 1757, 1760, 128 L. Ed. 2d 556, reh'g denied, 512 U.S. 1247, 114 S. Ct. 2771, 129 L. Ed. 2d 884 (1994).
The bankruptcy court found, and it is undisputed, that the Trustee established elements 2, 3 and 4 of an avoidable transfer. The disputed issue was whether the Debtor had an "interest" in the Evans Road Property. The Debtor advances two theories to support her contention that she did not have an interest in the property even though for five months she held legal title. First, she contends that she paid no consideration for the transfer from Gutpelet to herself and therefore had no interest. Second, she contends that "the two transfers should be viewed as two indivisible parts of one integrated transaction in which the Evans Road Property was essentially converted by Mr. Gutpelet from solely owned property directly to entireties property." (Debtor's Brief at 18.)
It is unnecessary, however, to find consideration in order to conclude that the Debtor acquired an interest in the Evans Road Property for § 548(a) (2) purposes. Her extended and extensive dealings with the real estate were sufficient to establish such an interest.
There can be no doubt that the Debtor had legal title to the Evans Road Property from October 1993 until March 1994. She argues, however, that the bankruptcy court should have looked beyond the bare passage of title to the reality of the transactions in their entirety, finding that the Debtor did not have the requisite control over the Evans Road Property to give her an "interest" in the property. The Debtor relies upon In Re Chase & Sanborn Corp., 813 F.2d 1177 (11th Cir. 1987).
In that case a person referred to as Duque caused $660,000 to be transferred to an account of the debtor, Chase & Sanborn. Of this amount $350,000 was gratuitously transferred to Duque's secretary who used it and other funds to pay a bank loan upon which Duque was obligated. The Chase & Sanborn account was opened days before it received the $660,000 and closed days after the $350,000 payment. Thereafter Chase & Sanborn filed a petition under Chapter 11. The Trustee sought to avoid the transfer under § 548. The Court of Appeals held that " [a]lthough the debtor corporation had possession of the funds in controversy by virtue of the transfer to the account, the record demonstrates that the debtor corporation did not have sufficient control over the funds to warrant a finding that the funds were the debtor corporation's property." Id. at 1180.
In Chase & Sanborn the court stated that " [i]n determining whether the debtor had control of funds transferred to a non-creditor, the court must look beyond the particular transfers in question to the entire circumstance of the transactions." Id. at 1181-82. The court found that the Chase & Sanborn account was a mere conduit of funds from and to other parties; that "the actual connection between the funds and the debtor was quite tangential: a two-day layover in a special account then only recently opened and soon thereafter closed." Id. at 1182.
Matter of Zedda, 103 F.3d 1195 (5th Cir. 1997) does not require a different result. There the Court considered a pre-petition transfer of real estate to the debtor for the sole purpose of enabling her to obtain a loan secured by the real estate. Four years later the transferror-debtor executed and there was recorded a "counter letter" which recited that (i) by virtue of the deed she had acquired record title to the property; (ii) record title had been placed in her name for convenience only; (iii) the property actually belonged to another person; (iv) she had paid no cash consideration for the property and (v) the other person had made all the monthly mortgage payments. Four months later the debtor deeded the property back to the original owner and recited in an addendum to the deed the essential facts set forth in the counter letter. Within a year after the last transfer the debtor filed her petition for relief under Chapter 7 of the Bankruptcy Code. The trustee challenged the re-transfer of the property in part on § 548(a) (2) grounds. The Court of Appeals held that the debtor did not have an interest in the property and rejected the trustee's challenge.
The Trustee also objected to the exemption for all three banks accounts on the ground that the Debtor was precluded from exempting those moneys pursuant to 11 U.S.C. § 522(g), because she intentionally concealed the existence of the accounts. The bankruptcy court ruled against the Trustee on that objection, and the Trustee has not appealed that ruling