472 B.R. 714
Bankr. E.D. Va.2012Background
- Plaintiff, as Chapter 7 Trustee, seeks avoidance of transfers by the Debtor to the Defendants and recovery under §550.
- Defendants were served but failed to timely respond; they failed to appear at the Default Motion Hearing.
- The State Court orders in California and subsequent judgments against the Debtor established creditors and insolvency concerns.
- The transfers occurred within two years before the Debtor’s petition and involved assets of the Debtor.
- The Court adopted a Rule 1006 Evidence Summary to support the factual record and calculated adjusted judgments.
- Plaintiff proceeded under §548(a)(1)(B) and §550(a) for avoidance and recovery.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether transfers are avoidable under §548(a)(1)(B). | Ryan. | Ryan. | Yes; transfers avoidable under §548(a)(1)(B). |
| Whether Debtor was insolvent at transfer times. | retrojection rule shows insolvency at transfers. | schedules insufficient alone. | Insolvent at transfer times under retrojection and balance-sheet test. |
| What recovery is permitted under §550(a) after avoidance. | initial transferee or benefitee liable for value. | defendants not liable for value. | Recovery allocated jointly and severally against Defendants and against Mrs. Ryan as specified. |
| Whether the Court had proper basis for default judgment. | Defendants unresponsive; default appropriate. | — | Default judgment appropriate under Rule 55/7055; liability established by well-pleaded facts. |
Key Cases Cited
- DIRECTV, Inc. v. Rawlins, 523 F.3d 318 (4th Cir. 2008) (default judgment standards; admitted facts on liability)
- In re Ducate, 369 B.R. 251 (Bankr.D.S.C.2007) (burden to prove §548 elements by preponderance)
- In re Bay Vista of Va., Inc., 428 B.R. 197 (Bankr.E.D.Va.2010) (insolvency and §548 analysis; retrojection considerations)
- In re Summit Place, LLC, 298 B.R. 62 (Bankr.W.D.N.C.2002) (balance sheet test for insolvency under §548)
- In re Strickland, 230 B.R. 276 (Bankr.E.D.Va.1999) (retrojection rule viability; insolvency timing)