THE LOVERING TUBBS TRUST, ET AL V. TIMOTHY W. HOFFMAN
- Summarized by Michael Myers , Ballard Spahr LLP
- 1 year 5 months ago
- Case Type:
- Business
- Case Status:
- Affirmed
- Citation:
- 23-60005 (9th Circuit, Sep 09,2024) Published
- Tag(s):
-
- Ruling:
- The Ninth Circuit Court of Appeals affirmed the Bankruptcy Appellate Panel (BAP) and bankruptcy court decisions granting summary judgment in favor of the chapter 7 trustee on his 11 USC 548(a)(1)(A) fraudulent transfer claim.
The Ninth Circuit also held that the trustee had standing to pursue the fraudulent transfer claim. The court held that the estate suffered an injury-in-fact redressable by the avoidance action, because the transfer of the property at issue depleted assets of the estate.
- Procedural context:
- The chapter 7 trustee brought claims under 11 USC 548(a)(1)(A), 11 USC 548(a)(1)(B), and 11 USC 547 against the recipients of an interest in the debtor's real property. The trustee filed a motion for summary judgment on the 11 USC 548(a)(1)(A) claim based on a declaration from the debtor. The defendants filed an opposition to the motion but they did not file a supporting affidavit. They also requested additional time to conduct discovery under Rule 56(d), but they did not file a supporting affidavit and did not specify the facts on which they needed discovery. The bankruptcy court granted the summary judgment motion, and the BAP and Ninth Circuit both affirmed. Appellants raised the standing issue for the first time with the Ninth Circuit.
- Facts:
- In 2010, Debtor had granted a second deed of trust against her property, a 30-acre parcel of land on which she resided in Calistoga, CA, to Reynolds, an attorney who had provided services for the debtor on matters unrelated to this dispute. Debtor was in default on her senior mortgage by 2019, so Reynolds cured the default by advancing mortgage payments to the first lienholder. In 2020, Reynolds initiated a nonjudicial foreclosure on the property.
An attorney, Utnehmer, offered to save Debtor's property by transferring it into an irrevocable land trust. Utnehmer created three entities: the Lovering Tubbs Trust; Pacific Equities, LLC; and CLC Compliance (the trustee of the trust). Utnehmer held an interest in Pacific Equities and was an officer of CLC Compliance. Pacific Equities held an 80% beneficial interest in the trust while Debtor held a 20% interest. Debtor transferred the property to the trust on January 7, 2021 for no consideration. Debtor believed the property was worth $2.5 million at the time of the transfer.
Debtor terminated her relationship with Utnehmer in August 2021 and filed a chapter 7 bankruptcy. The chapter 7 trustee filed the adversary proceeding against the Trust, CLC, and Pacific Equities (Appellants) seeking to avoid the transfer in November 2021. Trustee moved for partial summary judgment five weeks after the defendants filed their answer. The summary judgment motion was on the 548(a)(1)(A) claim for actual fraud based on a declaration from Debtor that she made the transfer to "prevent or delay" Reynolds from foreclosing on the property and that she received no consideration for the transfer. Appellants filed an opposition to the motion and asked for more time to conduct discovery under Rule 56(d), but they provided no supporting declarations. The bankruptcy court denied the Rule 56(d) request because there was no supporting declaration as required under the rule, and granted summary judgment in favor of the trustee.
- Judge(s):
- Bea, Hamilton, and Christen
ABI Membership is required to access the full summary. Please Sign In using your ABI Member credentials. Not a Member yet? Join ABI now - it is absolutely worth it!
