Cardiello v. Arbogast
479 B.R. 661
| W.D. Pa. | 2012Background
- This bankruptcy dispute centers on a PUFTA fraudulent transfer claim against Thomas Arbogast arising from his deposits into a joint tenancy account after Titus & McConomy dissolved.
- Trizec obtained a large judgment against Arbogast and other former T&M partners, leading to the Fraudulent Transfer Action filed in 2007 to enforce the judgment.
- Arbogast’s salary deposits were allegedly transfers from the debtor’s assets into the joint account, claimed to be fraudulent under PUFTA.
- After interposing multiple state and federal proceedings, the case was removed to bankruptcy court and subsumed under adversary proceedings, with Judge McCullough presiding until his death.
- Judge Markovitz conducted retrial proceedings in 2011 and issued a 74-page Memorandum Opinion and Order on February 7, 2012, addressing look-back, burdens of proof, and the recoverability of various expenditures.
- The district court affirmed the bankruptcy court’s rulings, denying the trustee’s and Arbogasts’ appeals and concluding the decision was thorough and properly reasoned.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Look-back period for transfers | Trustee sought seven-year scope from 2003–2010 | Arbogasts urged 2006–2010 scope | Look-back limited to 2003–2007; four-year period affirmed |
| Burden of proof for use of funds | Trustee bears burden to prove improper transfers | Arbogasts contend burden-shifting applies | Trustee bears ultimate burden of persuasion; arbo-gasts bear burden to prove expenditures were for necessities |
| Luxuries vs. necessities test | Deposits may be fraudulent except when spent on necessities | Only luxury purchases would be fraudulent; broader rule urged | Following In re Meinen; deposits may be fraudulent unless spent on necessities; standard adopted by Markovitz affirmed |
| Country club memberships recoverability | Memberships were recoverable as improper transfers | Expenditures may have been for personal benefit and require remand | Country club memberships not within the exception; affirmed without remand |
| Florida second-home expenses | Remand required to resolve disputed expenditures | No remand needed; detailed findings adequate | No remand; findings of fact affirmed; damages resolved on record |
Key Cases Cited
- In re Meinen, 232 B.R. 842 (Bankr. W.D. Pa. 1999) (depositor funds into entireties may be used for reasonable and necessary expenses; burden stayed with trustee)
- In re Alexo, 436 B.R. 44 (N.D. Ohio Bankr. 2010) (supports view that deposits into joint account can be fraudulent unless used for necessities)
- Fidelity Bond & Mortgage Co. v. Brand, 371 B.R. 708 (E.D. Pa. 2007) (rejected burden-shifting approach in PUFTA constructive fraud)