- Case No. 12-2465 (4th Cir. April 17, 2014)
- In a published decision, the Fourth Circuit reversed the decision of the District Court of South Carolina which had reversed the bankruptcy court's decision that the debtor's transfer of her interest in property seven months before filing Chapter 7 to a company wholly owned by her husband was a fraudulent conveyance. The District Court had held that, at the time a debtor had acquired title to real property, a resulting trust had been created in favor of the company that paid for and used the property. The Court of Appeals determined that, under South Carolina law, the bankruptcy court's conclusion was not clearly erroneous that the company failed to overcome the presumption of a gift by clear and convincing evidence that, (1) on the date of the purchase, (2) the company paid for the property (3) with the intent to own it. The Fourth Circuit remanded the case back to the District Court for further proceedings consistent with the opinion.
- Procedural context:
- Seven months before filing for bankruptcy, the debtor had transferred her interest in real property to a corporation wholly owned by her husband. The Chapter 7 Trustee sought to avoid the transfer under Section 548(a)(1)(B) and 544(b). The Bankruptcy Court held that the Debtor had transferred the property for less than reasonably equivalent value and ordered the company to "reimburse" the bankruptcy estate $43,500. The company appealed and the District Court reversed the Bankruptcy Court and concluded that the facts in evidence established a resulting trust in favor of the company and that the Debtor held only bare legal title. The Chapter 7 Trustee appealed to the Fourth Circuit.
- In 2001, Architectural Glass Construction, Inc. (AGC) contracted to purchase undeveloped real property. On the advice of his accountant, AGC's sole owner buy the land himself and lease it to his company. He then jointly titled the land in his and his wife's names. AGC made the loan payments to the bank. The owner and a loan officer for the bank testified that AGC signed the purchase money note. The property was refinanced over the years with different lenders and AGC built two buildings on the property and made other improvements. AGC made all loan payments and never paid rent to the owner and his wife. In 2008, AGC obtained another loan secured by the building. The lender required that AGC be the mortgagor and the owner and his wife deeded the property to AGC. Seven months later, the owner's wife filed bankruptcy under Chapter 7.
- Before Circuit Judges Motz, King and Shedd. Judge Motz wrote the majority opinion, in which Judge King joined. Judge Shedd wrote a dissenting opinion.
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