Cardiello v. Arbogast (In re Arbogast)
466 B.R. 287
| Bankr. W.D. Pa. | 2012Background
- Adversary and related bankruptcy cases target Debtor and Mrs. Arbogast for fraudulent transfers arising from deposit of Debtor’s wages into an entireties account.
- Trustee pursues Pennsylvania UFTA claims under 11 U.S.C. §544(b)(1) seeking avoidance and recovery of transfers.
- Lookback period contested: Trustee argues 4 years (4/23/2003–4/23/2007); Debtor argues 4 years ending 1/15/2010.
- Court declines actual fraud finding; focuses on constructive fraud and value received and insolvency during lookback.
- Court adopts Meinen framework on whether deposits into an entireties account can be constructively fraudulent transfers, and determines Debtor was insolvent during the lookback period.
- Court addresses exemptions objections (retirement accounts) and sanctions; Stern v. Marshall invoked to discuss finality/constitutional authority in bankruptcy court
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Lookback period for 544(b)(1) action | Trustee may pursue 4/23/2003–4/23/2007 lookback | Debtor argues lookback ends 1/15/2010 | Trustee permitted to pursue 4/23/2003–4/23/2007 lookback |
| Are direct deposits into the Entireties Checking Account transfers by the Debtor | Deposits are indirect transfers funded by Debtor’s wages | Deposits were not transfers by Debtor | Direct deposits constitute transfers by the Debtor (indirectly) under 5101(b) |
| Whether deposits into the account constitute actual or constructive fraud | Deposits not spent on necessities or used for non-entireties assets. | Some deposits were for necessities; others not | Constructive fraud proven for $143,389.10; actual fraud not proven |
| Whether Debtor was insolvent during lookback | Debtor insolvent due to indebtedness to Trizec | Solvency disputed | Debtor insolvent for purposes of §5102(a) throughout lookback |
| Which law governs—Titus Decisions vs Meinen; law of the case | Titus should control | Meinen should control; Titus not law of the case | Meinen governs; Titus Decisions not followed |
| Exemption of Retirement Account Contributions | Contributions may be fraudulent transfers | Exemptions permitted under §522(b)(3)(C) | Retirement Accounts exempt; Trustee’s objection overruled for exemptions; contributions themselves may be scrutinized separately |
| Sanctions and Stern v. Marshall | Sanctions warranted for misstatements | Court should sanction; Stern limits unsettled | Sanctions denied; court notes Stern issues affect final judgment status |
Key Cases Cited
- In re Meinen, 232 B.R. 827 (W.D. Pa. 1999) (Supports constructive fraud unless funds used for necessities or exempt assets)
- In re Craig, 144 F.3d 587 (8th Cir. 1998) (Indirect transfers can constitute transfers under 5101(b))
- In re Broadview Lumber Co., Inc., 168 B.R. 941 (W.D. Mo. 1994) (Joint account transfers treated as transfers for purposes of insolvency and fraud rules)
- In re Nam, 257 B.R. 749 (Bankr. E.D. Pa. 2000) (Joint accounts and tenancy by the entirety impact ownership and transfer rules)