Wallace et al v. McFarland et al

Filing 12

ORDER affirming the Bankruptcy Court's September 30, 2013 Order, denying as moot 8 Motion for Oral Argument. The Clerk shall terminate all deadlines and motions, and close this case. Signed by Judge J. Randal Hall on 08/08/2014. (thb) Modified on 8/8/2014 (thb).

IN THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF GEORGIA
AUGUSTA DIVISION
IN RE

THOMAS J.

Chapter 7 Case No. 11-10218

McFARLAND,

Debtor.

THOMAS J.
SHERRY H.

McFARLAND,
MCFARLAND,

and

Appellants,
Adversary Case No.
Appeal Case No.

v,

11—01021

CV 113—210

A. STEPHENSON WALLACE,
Trustee,

Appellee.

ORDER

Thomas

McFarland

("Debtor")

and

his

appeal the Bankruptcy Court's September 30,

wife

("Mrs.

McFarland")

2013 Order determining

that Debtor's transfer of a half interest in certain real property
to Mrs.

McFarland was a fraudulent conveyance subject to avoidance

under 11 U.S.C.

§

54 8.

As

there

is an abundance of

circumstantial

evidence supporting the Bankruptcy Court's findings that Debtor (1)
made the transfer with actual intent to hinder,
creditor,

and (2)

delay,

or defraud a

received less than reasonably equivalent value in

exchange for the transfer while believing that he would incur debts
beyond

his

ability

to

pay,

this

Court

AFFIRMS the Bankruptcy Court's Order.

finds

no

clear

error

and

I.

JURISDICTION AND

STANDARD OF REVIEW

This Court has appellate jurisdiction pursuant to 28 U.S.C.

158(a) and Bankruptcy Rules 8001 et seq.
court's

decision,

findings of

fact,

erroneous."

Consol.

1228

fact

are

Court

which

Fed.

Capital

1223,

the

R.

must

Realty

P.

evidence,

clearly

erroneous

[the court is]

(In re

Cir.

The

factual findings.
895

bankruptcy

set aside
see

re

also

Club

unless,

court's

unless
Club

clearly

Assocs.

Assocs.),

951

v.

F.2d

in

light

of

all

the

left with the definite and firm conviction

Westgate Vacation Villas,

Int' 1 Pharmacy & Disc.

2005) .

Sublett),

(In

the

"The bankruptcy court's findings of

that a mistake has been made."
Tabas

accept

8013;

Investors

(11th Cir. 1992).
not

In reviewing a bankruptcy

"shall not be

Bankr.

§

Court

is not

II,

Inc.),

authorized

443

to

Ltd.

F.3d 767

make

1384

(11th Cir.

1990).

(11th

independent

Equitable Life Assurance Soc'y v. Sublett

F.2d 1381,

v.

(In re

In contrast,

the

Court reviews legal conclusions by the bankruptcy court de novo.
In re Club Assocs.,

951 F.2d at 1228.

II.

DISCUSSION

The overarching issue is whether Debtor's

transfer of

a half

interest in three lots of real property located in Chatham County
("Property")
U.S.C.

the

to his

wife

was

a fraudulent

conveyance.

Under

11

§ 54 8, the trustee may avoid any transfer of an interest of

debtor

in

property

that

was

made

within

two

years

prior

filing the bankruptcy petition if the debtor:
(A)

made

such

hinder,

transfer

delay,

or

.

.

defraud
2

.

with

any

actual

entity

to

intent

which

to

the

to

debtor was or became, on or after the date that such
transfer was made
. . ., indebted; or

(B)

(i) received less than a reasonably equivalent value
in exchange for such transfer . . . ; and
(ii)

. . . (Ill) intended to incur,

or believed that

the debtor would incur, debts that would be beyond
the debtor's ability to pay as such debts matured[.]
11 U.S.C.

§ 548(a)(1)

questions:

(1)

(emphasis added).

The appeal presents three

whether Debtor actually transferred a half interest

in the Property to Mrs. McFarland or whether she already equitably
owned a half interest in the Property,

(2)

whether Debtor made the

transfer with actual intent to hinder, delay, or defraud a current
or

future

creditor

under

§

548(a)(1)(A),

and

(3)

whether

Debtor

received less than a reasonably equivalent value in exchange for
the

transfer and believed

that

he

would

incur debts

that

would be

beyond his ability to pay under § 548(a) (1) (B) (i)-(ii) (III).

First,
transferred

the
a

Court

half

must

interest

determine
in

the

Property

through a Deed of Gift in November 2009.

argue that Mrs.

they

to

Debtor
Mrs.

actually
McFarland

Debtor and Mrs.

McFarland

McFarland already equitably owned a half

in the Property by virtue
Therefore,

whether

contend

of a purchase money

the

Deed

of

Gift

did

interest

resulting
not

trust.

convey

any

equitable interest in the Property but "merely corrected" the legal
records

to

reflect

her

previously

vested

half

interest

in

the

Property.

"A purchase money resulting trust is a resulting trust implied

for the benefit of the person paying consideration for the transfer
to

another

person

of

legal

title

to

real

or

personal

property."

O.C.G.A.

§

53-12-131(a).

determined
purchase

that

Mrs.

money

Here,

McFarland

resulting

the

was

trust

Bankruptcy

not

Court

entitled

because

to

she

correctly

an

did

implied
not

pay

consideration for the Property to be transferred to Debtor when he

initially acquired it.

In 1968,

warranty deed for $15,000.

Debtor acquired the Property by

He financed the purchase with a $10,000

loan from Atlantic Savings & Trust,

McFarland's

father,

Noel

Co. and a $5,000 loan from Mrs.

Harrison.1

Only

Debtor

signed

the

promissory notes and security deeds, and only Debtor was listed on
the warranty deed.
to

pay

off

account

these

were

terms.

de

the

loans,

minimis

Moreover,

certainty

Although Appellants used a joint bank account
Mrs,

McFarland's

over

the

course

Appellants

did

not

amount

contributed

contributions

of

show

by

Mrs.

the
with

loan
any

to

the

repayment
of

This

McFarland.

degree

is

insufficient to establish a purchase money resulting trust in the
Property.
party

See Brown v.

seeks

to

Leggitt,

establish

a

226 Ga.

beneficial

366,

368

interest

(1970)
in

("Where a

certain

real

estate on the theory that he has paid a part of the purchase money,

he must show with certainty what part of the total purchase price
he paid.").

As

the

Bankruptcy

Court

correctly

determined

that

Mrs.

McFarland did not own a half interest in the Property by virtue of
a

purchase

money

resulting

trust

or

1 It is of little importance that Mr.
$5,000 to
education.

otherwise,

Harrison,

the

Trustee

had

prior to loaning the

Debtor, had set aside the $5,000 for Mrs. McFarland's college
Mr. Harrison never delivered and Mrs. McFarland never accepted

the $5,000 as a gift.
The $5,000 was never otherwise transferred to Mrs.
McFarland.
Thus, it cannot constitute property of Mrs. McFarland that was
transferred by her as consideration for Debtor's purchase of the Property.

power to avoid the November 2009 transfer if

the Trustee satisfied

his burden to prove that the transfer was fraudulent under either §
548(a)(1)(A)

statutory

or § 548(a) (1) (B) (i)- (ii) (III) .

prongs

entails

Bankruptcy Court's
erroneous.
99-60517,

questions

findings

fact

and,

therefore,

should be set aside

See Wessinger v.
2002 WL 34721371,

of

Satisfaction of these

Spivey
at

*3

(In re

(Bankr.

only

Galbreath),
S.D.

Ga.

the

if clearly
Bankr.

Dec.

16,

No.

2002)

(actual intent under § 548(a)(1)(A) is a "classic fact question");
Senior

Transeastern

Creditors

2012)

(In re

Lenders

TOUSA,

(reviewing

v.

Inc.),

bankruptcy

Official

680

Comm.

court

Unsecured

1310-11

F.3d 1298,

of

(11th Cir.

determination

under

§

548(a) (1) (B) for clear error) .

The Bankruptcy Court determined that the Trustee satisfied his
burden to prove that Debtor made the transfer with actual intent to

hinder,

delay,

548(a)(1)(A).

or

defraud

a

current

or

future

creditor

under

§

In doing so, the Bankruptcy Court carefully reviewed

the circumstantial evidence surrounding the November 2009 Deed of

Gift.

Specifically, the Court found that Debtor held the Property

in his name for forty years prior to transferring a half interest
to Mrs. McFarland as a reaction to a pending law suit against him.

In April 2008, Joylynn Hagen filed suit against Debtor for personal
injuries sustained in a car accident with Debtor.
Ms.

Hagen

suffered

serious

of wages as a result of

and Ms.

injuries

and lost

the accident.

Hagen attempted and failed to

days later,

Debtor transferred a half

a

Debtor knew that
substantial

On October 29,

mediate

the

2009,

claim.

amount
Debtor

Eleven

interest in the Property to

Mrs.

McFarland

by

the

Deed

of

Gift.

Debtor

received

no

consideration in exchange for the half interest at the time of the
transfer.

And

Debtor,

at

trial,

Hagen's attorney would try to

Gift

to protect

Property.

Mrs.

admitted

"ruin him"

McFarland's

that

feared

Ms.

and executed the Deed of

purported

In light of these facts,

he

half

interest

in the

the Court finds no clear error

in the Bankruptcy Court's finding that Debtor transferred the half
interest
Hagen,

with

a

"actual

person

to

intent

whom

to

Debtor

hinder,

delay,

eventually

or

became

defraud"
indebted

Ms.
as

a

result of a substantial judgment in the personal injury action.
The

Bankruptcy

satisfied

his

reasonably

Court

burden

equivalent

believed he

would

to

also

prove

value

transferred

Debtor

to

Mrs.

received

no

equivalent value,
was executed.

Debtor

exchange

The

value

half

was

in

that

Debtor

beyond his

McFarland

real

that

in

incur debts

548(a) (1) (B) (i)- (ii) (III).

determined

received

for

the

less

in

let

than
and

pay under

the

alone

§

Property

approximately

exchange,

Trustee

transfer

ability to

interest

worth

the

$350,000.

reasonably

from Mrs. McFarland at the time the Deed of Gift

The Court finds no clear error in the finding that

received

less

than

a

reasonably

equivalent

value

for

the

transfer.

Likewise,
Court's

the

finding

Court

that

his ability to pay.

finds

no

clear

Debtor believed

he

error
would

in

the

incur

debts

that

Ms.

Hagen

beyond

Debtor executed the Deed of Gift shortly after

a failed mediation of Ms. Hagen's personal injury claim,
knew

Bankruptcy

sought

substantial

damages.

and Debtor

Further,

Debtor

was

admittedly

motivated

to

transfer

Property because he believed that Ms.

to ruin him.
Court's

half

interest

in

the

Hagen's attorney was trying

This evidence is sufficient to support the Bankruptcy

finding

satisfy an

a

that

Debtor

anticipated

believed

he

would

not

judgment in the personal

be

able

to

injury action.

There is no clear error.

III.

For the reasons

set forth,

30, 2013 Order is AFFIRMED.
(doc.

no.

8)

is

CONCLUSION

DENIED

AS

the Bankruptcy Court's

September

The Trustee's Motion for Oral Argument
MOOT.

The

Clerk

shall

terminate

all

deadlines and motions and CLOSE this case.

ORDER ENTERED at Augusta,

Georgia,

this

pd day

of August,

2014.

HQiTORMBL^ J. RANDAL HALL
UNITED STATES DISTRICT JUDGE

SOUTHERN DISTRICT OF GEORGIA