JPMorgan Chase Bank, N.A. v. Larry Winget
- Case Type:
- Case Status:
- Affirmed in part and Reversed in part
- Case No 21-1568, 2022 WL 2389287 (6th Circuit, Jul 01,2022) Published
- Revocation of Trust (whether voluntary or involuntary) constitutes fraudulent transfer as to creditors of Trust as revocation removes assets from reach of creditors of Trust.
- Procedural context:
- In what can only be considered a tortured path, this appeal represents the 9th appeal to the Circuit arising out of related litigation with more than 40 others emanating form the District Court.. This particular opinion is the consolidation of three separate appeals form the District Court. The Circuit Court affirmed one and affirmed in part and reversed in part the remaining two.
- More than 15 years ago, Larry Winget ("Winget") and his revocable Trust (the "Trust") borrowed money form Chase and for the past 15 years, Chase has been trying to recover on that loan. Chase made the loan to a company controlled by Winget. The loan was personally guaranteed by Winget up to $50 million, and was guaranteed by the Trust in an unlimited amount. After the loan went bad, Chase sued. Winget personally paid $50 million and satified his personal obligation, leaving only the Trust as a target for collection. After 6 years of litigation, Winget secretly revoked the Trust which automatically reverted the assets to Winget personally. A year later, Winget filed a Declaratory Relief action to establish that given the revocation, Chase no longer had recourse against the Trust. Chase counterclaimed alleging that the revocation was a faulted transfer. In a lengthy opinion, the court concluded (1) revocation of the Trust constituted a fraudulent transfer under State Fraudulent Transfer laws as against creditors of the Trust, as revocation removed assets from the Trust would otherwise have been available to the creditors and the transfer was for less than reasonably equivalent value; (2) Winget was unjustly enriched by the value of the assets he received on revocation of the Trust, less the taxes paid on those distributions, for which Winget was personally liable to creditors of the Trust; and (3) Chase was entitled to a constructive trust on assets that the Trust transferred to Winget at revocation, less money paid by Winget for taxes on the revocation.
The dissent argued that the Circuit Court erred 7 years earlier in finding that there was a binding contract between Chase and the Trust without which Chase would not have a claim against the Trust and so none of the transfers resulting from the revocation of the Trust could support any remedy for Chase. The dissent argued that under Trust law, a revocable Trust has no separate legal status independent form the Settlor, Holding that the Trust was independently liable for the loan, the dissent argued, effectively converted a revocable trust into an irrevocable trust and converted Winget's rights under trust law revoke the Trust into some fraudulent transfer. The majority declined to revisit its prior opinion where (a) Winget did not ask it to and (b) many of the following decisions were based on that 7-yer-old opinion.
- Thapar, and Sutton (Majority); Batchelder (Dissenting)
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