454 B.R. 262
Bankr. D. Mass.2011Background
- Crawford and Kamphaus formed Kampford LLC to develop three Boston properties but held title to the properties as joint tenants in their individual capacities, not in the LLC.
- They financed the project with a $1,000,000 ICU loan secured by a mortgage on the properties; Kamphaus funded the $61,264 down payment.
- Kampford Operating Agreement provided capital accounts and distributions upon liquidation, with Crawford and Kamphaus listed as managers; title to assets remained in their names.
- In 2006-2007, substantial transfers and loans occurred between the two, with tax filings showing imbalanced capital contributions and distributions reflecting a large disparity.
- On April 1, 2008, Crawford conveyed 339 Poplar Street to Kamphaus for $1 and other consideration; the property was unencumbered at transfer.
- Crawford filed for Chapter 7 bankruptcy on November 18, 2008; the Trustee seeks avoidance of the transfer as fraudulent under §548(a)(1)(B) or, alternatively, as a preferential transfer under §547(b).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the transfer was an interest of the debtor in property | Trustee: transfer of Crawford's half-interest in 339 Poplar was debtor's property. | Kamphaus: Crawford held only bare legal title; no economic interest due to partnership-like arrangement. | Transferred interest was an interest of the debtor (equal 1/2 of 339 Poplar Street). |
| Whether Crawford was insolvent at the time of transfer | Trustee: insolvency proven by later schedules and lack of change before transfer; insolvency inferred at April 1, 2008. | Kamphaus: no competing evidence; solvent condition not proven otherwise. | Crawford was insolvent on April 1, 2008. |
| Whether Crawford received reasonably equivalent value for the transfer | Trustee: value received less than value transferred, making transfer avoidable. | Kamphaus: value received in exchange equaled or exceeded the transferred value due to offsets for Crawford's obligations. | Crawford received more than reasonably equivalent value; §548(a)(1)(B) not satisfied. |
| Whether the transfer was a preferential transfer under §547(b) | Trustee: transfer to insider Kamphaus within the look-back period and on account of antecedent debt, insolvent debtor, resulting in more for Kamphaus than in a Chapter 7 liquidation. | Kamphaus: insider status acknowledged; argue no preferential result or improper timing. | Transfer avoided under §547(b) as a preferential transfer to an insider. |
| Whether Kamphaus holds an equitable lien under §550(e)(1) | Trustee: lien rights depend on recovery; not clearly recognized under §550(e)(1). | Kamphaus: seeks lien for improvements post-transfer and capital contributions. | No equitable lien under §550(e)(1) arises. |
Key Cases Cited
- In re Arrowhead Gardens, Inc., 32 B.R. 296 (Bankr.D.Mass.1983) (retrojection insolvency is used to infer insolvency at an earlier date)
- Hassan v. Middlesex County National Bank, 333 F.2d 838 (1st Cir.1964) (insolvency and timing concepts in avoidance actions)
- Braunstein v. Massachusetts Bank & Trust Company, 443 F.2d 1281 (1st Cir.1971) (relevant to insolvency and avoidance timing)
- In re Craig Systems Corp., 244 B.R. 529 (Bankr.D.Mass.2000) (insider status inquiry and close-relationship scrutiny)
- Donahue v. Rodd Electrotype Company of New England, Inc., 367 Mass. 578 (Mass. 1975) (fiduciary duties among close corporate actors and insiders)