470 B.R. 234
Bankr. D. Mass.2012Background
- Patts and Debtor owned the residence at 47 Big Rock Lane as tenants by the entirety until January 9, 2009, when they conveyed it to Patts individually via a Transfer Deed.
- In June 2011, after Debtor faced mounting medical debts, they re-transferred the property back to Patts and Debtor as tenants by the entirety via a Retransfer Deed, accompanied by a new Declaration of Homestead.
- Two days after the Retransfer Deed, Debtor filed for Chapter 7 bankruptcy (June 16, 2011); Debtor listed a 50% estate interest in the Property and claimed a Massachusetts homestead exemption.
- Trustee filed an amended complaint in December 2011 seeking avoidance under 11 U.S.C. § 544(b) and UFTA, and recovery under § 550 against Patts (Counts I–IV) and against Debtor and Patts (Count V).
- The court allowed the amendment; Patts moved for summary judgment in December 2011; Trustee opposed in February 2012, attaching Barletta’s title affidavit and earlier deeds.
- Court held the transfers had no net loss to the estate and that Debtor’s homestead exemption barred recovery, granting summary judgment for Patts on all counts.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Transfer Deed is avoidable and recoverable against Patts. | Trustee argues the Transfer Deed harmed the estate and is recoverable under § 544/550. | Patts asserts reconveyance prepetition nullified any avoidable transfer and § 550 cannot apply. | Patts wins; no avoidable transfer or recoverable value. |
| Whether Hill governs applicability of homestead exemptions in this context to bar recovery. | Trustee relies on Hill to deny Patts’ effect on Debtor’s homestead and allow recovery. | Patts argues Hill controls, prohibiting denial of Debtor’s homestead exemption for prepetition reconveyance. | Hill does not allow Trustee relief; homestead remains viable and defeats recovery. |
| Whether 11 U.S.C. § 522(g) applies to prepetition voluntary transfers to Patts to permit exemptions or bar recovery. | Trustee contends § 522(g) preserves estate interests despite voluntary transfer. | Patts contends § 522(g) is inapplicable where the debtor voluntarily conveyed and reconveyed, so no exemption issue here. | Inapplicable; § 522(g) does not affect Patts here; court need not rely on it. |
| Whether the estate sustained actual loss from the Transfer and Retransfer Deeds requiring § 550 relief. | Trustee claims loss occurred and § 550 allows recovery from Patts and others. | Patts argues the Retransfer restored the estate’s value; no net loss occurred. | No loss; recovery not available; § 550 relief denied. |
| Whether § 550(a) recovery is proper where the estate has already recovered value via the retransfer. | Trustee seeks value from Patts in Count IV/Ⅴ as initial/mediate transferee. | Retransfer restored Debtor’s and Patts’ interests; no remaining recoverable value. | Count IV and Count V dismissed; summary judgment granted for Patts. |
Key Cases Cited
- In re Hill, 562 F.3d 29 (1st Cir. 2009) (reconveyance after fraudulent transfer is curative and permits homestead exemption)
- McCord v. Agard (In re Bean), 252 F.3d 113 (2d Cir. 2001) (trustee cannot recover value from transferee if equity recovered from debtor)
- Bakst v. Wetzel (In re Kingsley), 518 F.3d 874 (11th Cir. 2008) (bankruptcy court may limit recovery to avoid double recovery)
- Northborough Nat'l Bank v. Risley, 384 Mass. 348, 424 N.E.2d 522 (1981) (transferee liability limited where no harm to creditors)
- Richman v. Leiser, 18 Mass.App.Ct. 308, 465 N.E.2d 796 (1984) (fraudulent conveyance requires diminution of assets available to creditors)
- In re Gustie, 32 B.R. 466 (Bankr. D. Mass. 1983) (reconveyance of trust property not necessarily fraudulent transfer)
- In re Kingsley, 2007 WL 1491188 (Bankr. S.D. Fla. 2007) (double recovery concerns under § 550(d) considered)