Baumgartner-Novak v. Gualdoni, 17-03041

Background

Debtor Kelly A. VanDervort filed Chapter 7 on November 12, 2016; trustee Patti Baumgartner-Novak brought an adversary complaint to avoid and recover a $2,500 payment to Patricia Gualdoni as a preferential transfer under 11 U.S.C. §§ 547 and 550.
The complaint alleges the $2,500 was paid by personal check dated September 13, 2016, on account of an antecedent debt owed to Defendant. (Exhibit A).
Summons and complaint were timely served by mail; Defendant did not timely file an answer and the Clerk entered default.
Defendant submitted documents to Plaintiff before the response deadline but did not file them with the court within a reasonable time; a letter and attachments were docketed only on the day of the default-judgment hearing.
The Trustee moved for default judgment; court found service adequate, deemed well-pleaded allegations admitted by default, concluded the elements of §547(b) were satisfied, and granted default judgment ordering avoidance and recovery under §§ 547 and 550.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Valid service and default	Service by mail was proper; Defendant failed to appear or timely file, so default is appropriate	Defendant contends she provided information and documents to Plaintiff before deadline and disputes some allegations	Service was proper; Clerk’s default stands; late filings were not timely and do not excuse default
Whether payment is a preferential transfer under §547(b)	Payment of $2,500 on Sept. 13, 2016 was: a transfer of debtor’s property, to a creditor on account of antecedent debt, while debtor was insolvent, within 90 days of petition, enabling Defendant to receive more than in bankruptcy	Defendant does not dispute debt or payment timing; asserts relationship facts and context but offers no affirmative defense	All §547(b) elements satisfied; well-pleaded allegations deemed admitted; transfer avoided
Insider status (affects 90-day vs 1-year lookback)	Defendant alleged as relative (mother) and thus insider; alternatively, 90-day period applies regardless	Defendant disputes being mother, claims to be sister	Even if sister, still an insider; outcome unchanged because transfer falls within 90 days regardless
Sufficiency of Defendant’s opposition / relief from default	Plaintiff seeks default judgment; alternatively seeks judgment on the pleadings or summary judgment if papers treated as an answer	Defendant argued via late submission and contested some factual assertions	Late materials do not establish good cause to set aside default; judgment entered for Trustee; amount liquidated without further proof

Key Cases Cited

None cited with an official reporter citation in the opinion.