566 B.R. 624
Bankr. S.D. Ga.2017Background
- Debtor Dr. Leslie Dunston paid Skidmore College three tuition-related sums within two years before her Chapter 7 filing: July 25, 2013 ($29,233.00), December 20, 2013 ($28,603.00), and September 2, 2014 ($29,971.00), totaling $87,807.00.
- In 2004 Debtor established separate 529 plans for two children; substantial withdrawals were made on December 10, 2013 (about $71,149) and August 18, 2014 (about $27,571), deposited to her personal checking account.
- Trustee sued under 11 U.S.C. §§ 548(a)(1)(B) and 550 to avoid and recover the three transfers as constructively fraudulent transfers.
- Skidmore moved for summary judgment arguing (1) the transferred funds were traceable to excluded 529-plan funds (thus not property of the estate), (2) Debtor received reasonably equivalent value, and (3) Debtor was solvent at transfer times.
- Court analyzed three elements separately for each transfer: interest of the debtor in property (traceability to 529 plans / §541(b)(6) exclusion), reasonably equivalent value (economic benefit to Debtor), and insolvency at transfer date.
- Court granted summary judgment to Skidmore as to the July 25, 2013 and December 20, 2013 transfers (Trustee failed to raise genuine issue on insolvency) but denied summary judgment as to the September 2, 2014 transfer (genuine dispute on insolvency and other elements remain).
Issues
| Issue | Plaintiff's Argument (Trustee) | Defendant's Argument (Skidmore) | Held |
|---|---|---|---|
| Were the transfers "an interest of the debtor in property" (traceable to excluded 529 funds)? | Trustee: Commingling destroyed exclusion; transfers from checking are estate property. | Skidmore: Funds actually came from 529 withdrawals; §541(b)(6) exclusion applies if funds can be traced. | Court: Traceability required; genuine issues remain for all three transfers—Skidmore failed to show no dispute. |
| Did Debtor receive "reasonably equivalent value" for tuition payments? | Trustee: Payments conferred no economic, quantifiable benefit to Debtor. | Skidmore: Paying for child's education yields indirect economic benefit (future financial independence). | Court: Moral/parental benefit not economic; no evidence of quantifiable economic benefit—Skidmore not entitled to summary judgment on this element. |
| Was Debtor insolvent when each transfer occurred or rendered insolvent by it? | Trustee: Decline in income and petition-date schedules show insolvency within two-year lookback. | Skidmore: PFS dated Nov 13, 2013 shows significant net worth; Trustee's income evidence insufficient. | Court: For July and Dec 2013 transfers Trustee failed to raise a genuine issue on insolvency; for Sept 2, 2014 transfer there is a genuine dispute (petition date 56 days after transfer shows insolvency). |
| Entitlement to summary judgment on each transfer? | Trustee: All three transfers avoidable. | Skidmore: Entitled to summary judgment on all three. | Court: Summary judgment GRANTED to Skidmore as to July 25, 2013 and Dec 20, 2013 transfers; DENIED as to Sept 2, 2014 transfer. |
Key Cases Cited
- Begier v. Internal Revenue Serv., 496 U.S. 53 (interpretation of "interest of the debtor in property" and relation to §541)
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment burdens and standards)
- United States v. Four Parcels of Real Prop., 941 F.2d 1428 (11th Cir.) (moving party's initial summary judgment responsibilities)
- In re Rodriguez, 895 F.2d 725 (11th Cir.) (test for "reasonably equivalent value")
- In re Cannon, 277 F.3d 838 (6th Cir.) (application of Begier in fraudulent-transfer context)