Opinion ID: 200761
Heading Depth: 1
Heading Rank: 7

Heading: the transfer to essex

Text: 54 We come now to the order setting aside the post-trial transfer of Romano's well-traveled shares to Essex. 5 In response to Federal's motion to annul that transfer, the district court held a status conference on June 17, 2002. Although the court set the matter down for hearing eight days hence, it was vague as to how that hearing would proceed. When the appointed date arrived, the court declined to take testimony, instead inviting oral argument and telling the parties that it was treating the hearing functionally as a motion for summary judgment. 55 After listening to the lawyers' arguments, the court reserved decision. It subsequently filed a written rescript in which it ruled, as a matter of law, that the transfer must be rescinded. Fed. Refin., 229 F.Supp.2d at 28.
56 In view of the court's explicit statement at the June 25 hearing, we invoke our familiar summary judgment jurisprudence. Under that rubric, we, like the district court, must accept the facts most favorable to the nonmoving party (here, Romano) and draw all reasonable inferences to that party's behoof. Garside v. Osco Drug, Inc., 895 F.2d 46, 48 (1st Cir.1990). We review the district court's entry of summary judgment de novo. Id. We will affirm only if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. Fed.R.Civ.P. 56(c). 57 When a party moves for summary judgment and suggests that no trialworthy issues exist, that party ordinarily must support the motion with affidavits or other materials of evidentiary quality. Plumley v. S. Container, Inc., 303 F.3d 364, 368 (1st Cir.2002). The burden of production then shifts to the nonmovant to show that a genuine issue looms. Garside, 895 F.2d at 48. The protocol differs, however, as to issues on which the nonmovant bears the burden of proof. As to such issues, the movant is not obliged to make an initial evidentiary showing. Rather, it is incumbent upon the nonmovant to demonstrate, in the first instance, that specific facts exist sufficient to create an authentic dispute. Id.
58 As said, the UFTA controls with respect to Federal's claim that a preferential transfer occurred. See supra Part III. That statute empowers a court to set aside a transfer as preferential if (i) the creditor's claim arose before the transfer occurred, (ii) the transfer was made to an insider on account of an antecedent debt, (iii) the debtor was insolvent at the time of the transfer, and (iv) the transferee had reasonable cause to believe that the debtor was insolvent. Mass. Gen. Laws ch. 109A, § 6(b). 59 Romano first posits that a genuine issue of material fact existed vis-à-vis his solvency at the time Essex redeemed his stock. As the moving party, Federal bore the initial burden of producing evidence of Romano's insolvency. Plumley, 303 F.3d at 368. 60 A finding of insolvency requires proof of both liabilities and assets. See First Fed. Sav. & Loan, 701 N.E.2d at 353-55. The papers before the district court contained evidence tending to show that Romano's debts exceeded $17,000,000 at the time of the transfer. But Federal provided next to no evidence on the asset side of the ledger. It merely asked the court to take judicial notice of the prior ruling that Romano's only significant asset was the Essex stock and pointed out that Romano had purportedly sold the stock to Essex for an $85,000 credit on an antecedent debt and a ten-year forbearance agreement as to the balance of that debt. 61 We agree with Romano that this evidence was insufficient to permit a reasoned calculation of the value of his assets (and, thus, of his financial condition). A finding of insolvency requires more than a showing of formidable debt; it also requires a corresponding showing as to the debtor's assets. The fact that Romano had no assets besides the Essex shares in 1988 — some fourteen years before the date of the transfer in question — told the court very little about the extent of his holdings in 2002. While it may be likely that the value of Romano's assets was less than the amount of his liabilities, summary judgment cannot be granted on the basis of informed intuitions. The precincts patrolled by Rule 56 admit of ... no room for the judge to superimpose his own ideas of probability and likelihood (no matter how reasonable those ideas may be) upon the carapace of the cold record. Greenburg v. P.R. Marit. Shipping Auth., 835 F.2d 932, 936 (1st Cir.1987). A court considering a summary judgment motion cannot simply presume that plaintiffs will win cases that seem open and shut. See Leyva v. On the Beach, Inc., 171 F.3d 717, 720 (1st Cir.1999). 62 In granting summary judgment, the court below glossed over this evidentiary defect. It noted the mountain of debt facing Romano and then suggested that it was undisputed that this debt exceeded the dollar value of Romano's assets. Fed. Refin., 229 F.Supp.2d at 28. We have been over the record with a fine-tooth comb and cannot find any such concession. During the June 25 hearing, Romano's counsel acknowledged that the court earlier had found Romano insolvent, but then reminded the court that the situation had changed. Counsel stated: 63 There has to be a valuation hearing and a trial on the merits to find out if the items that were conveyed by Mr. Romano to Essex were conveyed by someone who was then insolvent.... That's a factual issue that can't be glossed over and can't be determined in this kind of proceeding. (Emphasis supplied.) 64 That statement squarely raised the insolvency question. Thus, the district court erred in treating the fact as undisputed. 65 That error undermines the order for summary judgment. On this record, Federal simply did not carry its burden of production anent the insolvency question. Whatever the evidence eventually may show regarding the ratio of Romano's assets to his liabilities — a matter on which we take no view — we are constrained at this stage to rule that summary judgment was improvidently granted. 66 Romano also argues that other genuine issues of material fact remained unresolved at the time that the district court granted summary judgment. To this end, he points us to a series of defenses available under UFTA § 9. For the sake of completeness, we examine this argument as well. We use UFTA § 9(f)(2) as an exemplar. 67 The UFTA provides that even if a transfer meets the criteria for avoidance set out in UFTA § 6, a court may not set it aside so long as it was made in the ordinary course of business or financial affairs of the debtor and the insider. Mass. Gen. Laws ch. 109(a), § 9(f)(2). That provision constitutes an affirmative defense, and, thus, the burden of proof falls on the party asserting it. See Prairie Lakes Health Care Sys., Inc. v. Wookey, 583 N.W.2d 405, 414 & n. 7 (S.D.1998) (concluding that the burden of proving section 9 defenses falls on the party asserting them). In order to avoid summary judgment, therefore, Romano typically would have to shoulder the burden of adducing specific facts tending to show that his transfer of shares to Essex was a transaction undertaken in the ordinary course of business. 68 Romano asserted the section 9(f)(2) defense at the June 25 hearing. He did not, however, adduce any evidence in support of it. In the usual case, mere assertions of counsel are not enough to block summary judgment. See Dow v. United Bhd. of Carpenters and Joiners, 1 F.3d 56, 58 (1st Cir.1993); Brennan v. Hendrigan, 888 F.2d 189, 191 (1st Cir.1989). Federal urges us to apply that rule here. 69 Federal's argument overlooks the atypical procedural posture in which this question arose. Federal's motion to set aside the post-trial transfer was not couched as a motion for summary judgment. At the June 17 status conference — the first time the district court addressed Federal's motion — the court set the matter down for hearing on June 25, stating that it would attempt to resolve the motion as a matter of law and that if it could not do so it would try the matter. 70 These comments were imprecise. Although the court may have intended all along to hold a summary judgment hearing, it did not say so. No motion for summary judgment had been made, and the docket entry reveals that the clerk scheduled June 25 as the first day for a jury-waived trial. To confuse matters further, the court neither specifically mentioned summary judgment nor asked the parties to prepare affidavits or other evidentiary submissions before the June 25 hearing. 71 Courts have recognized that summary judgment is strong medicine, and the rules provide that parties must be given adequate notice of summary judgment proceedings and a reasonable time within which to proffer supporting documents. See, e.g., Rogan v. Menino, 175 F.3d 75, 80 (1st Cir.1999); Stella v. Town of Tewksbury, 4 F.3d 53, 55 (1st Cir.1993). Indeed, Rule 56(a) anticipates that a party opposing summary judgment will have a ten-day window within which to prepare and present evidence in opposition. We have taken special pains to emphasize the importance of this temporal window in cases — analogous to this one — involving sua sponte grants of summary judgment. The district court must first give[ ] the targeted party notice and a chance to present its evidence on the essential elements of the claim or defense. Berkovitz v. Home Box Office, Inc., 89 F.3d 24, 29 (1st Cir.1996); accord Leyva, 171 F.3d at 720; Stella, 4 F.3d at 55-56. 72 Viewed against this backdrop, the district court's ruling cannot withstand scrutiny. No motion for summary judgment had been filed, and nothing in the court's instructions prior to June 25 alerted Romano to the need to produce evidentiary support for his affirmative defenses. 6 Accordingly, the first real notice that the court would treat the matter under the framework applicable to summary judgment motions came on the day of the hearing: June 25. Thus, the procedure followed in this case flouted the imperatives of Rule 56. See Berkovitz, 89 F.3d at 30. The result was that Romano had neither advance notice of the district court's intentions nor an adequate opportunity to proffer evidence. 73 We need go no further. By its very nature, a section 9(f)(2) defense requires a fact-specific inquiry into the workings of the transferor and the transferee and the specific nature of the transactions between them. Federal's proffers do not conclusively demonstrate the futility of a section 9(f)(2) defense and, in the peculiar circumstances of this case, we cannot hold Romano's failure to lay a solid factual foundation for that defense against him. Consequently, the issue remains open, and the entry of summary judgment must be vacated. 7