490 B.R. 687
Bankr. W.D. Pa.2013Background
- Titus & McConomy, LLP debtors and related parties involved in a chain of litigation culminating in a joint Lease Litigation judgment against T&M and partners.
- This Oberdick fraudulent transfer action targets the Debtor David Oberdick and his wife for transfers of his earnings to an entireties account after July 2000 lease litigation began.
- Trizec Gateway, L.L.C. (TRZ/Trizee) and later TRZ Holdings filed the Oberdick FTA and exhaustion of the bankruptcy estate sought to recover transfers and challenge exemptions.
- Judge Markovitz conducted trials in Titus-related cases; upon retirement, this court issued findings based on the pleadings, trial transcript and exhibits.
- The court applies Meinen-based and related authority to determine whether deposits into an entireties account constitute transfers and whether exemptions stand, with the Trustee seeking recovery and Trizec challenging exemptions.
- The court ultimately rules against the Trustee on fraud counts, limits or nullifies recovery under PaUFTA, and resolves exemptions in favor of the Debtor/Defendant to specific items.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Oberdick FTA: whether deposits into the Entireties Account were transfers under PaUFTA | Trustee: deposits were transfers of debtor’s wages into entireties property. | Debtor/Defendants: deposits were not transfers unless used for non-necessities and, per controlling law, are not fraudulent. | No liability: expenditures did not prove constructive fraud; four-count FTA denied. |
| Allocation of burden for proving transfers under PaUFTA | Trustee bears burden to prove deposits as transfers and their use. | Defendants supposed burden to show expenditures from other sources; Meinen-based framework adopted. | Court adopts Meinen/Arbogast framework; Trustee met burden only to limited extent; overall denied. |
| Debtor’s discharge effect on Oberdick FTA claims | Trustee may proceed post-petition; discharge does not extinguish claims under 544(b). | Discharge extinguishes pre-petition claims; however, trustee’s action is bankruptcy-related. | Discharge did not extinguish liability; trustee could pursue as bankruptcy cause of action. |
| Counts II/III: extent of liability for constructive transfers and offset by other deposits | Trustee seeks damages for non-necessary expenditures; offset allowed for other deposits. | Offset applies; other deposits reduce recoverable amount. | Offset applied; total PaUFTA recovery reduced to zero; trustee obtains no recovery. |
| Objections to exemptions: MUS 401(k) contributions and MUS partnership wages | Trizec objects to exemptions as improper transfers; seeks to recover or deny exemptions. | 401(k) is not property of the estate; partnership wages not protected by 8127(a). | 401(k) exemption overruled (remains exempt); MUS partnership account wages not exempt (sustained). |
Key Cases Cited
- In re Meinen, 232 B.R. 827 (W.D. Pa. 1999) (direct deposits into entireties accounts may be transfers under PaUFTA unless spent on necessities)
- In re Arbogast, 466 B.R. 287 (W.D. Pa. 2011) (Meinen and direct-deposit theory applied; disputes over law-of-the-case limits)
- In re Titus, 467 B.R. 592 (W.D. Pa. 2012) (extension of Meinen/Arbogast reach in Titus cases; fiduciary/partitioning concerns)
- Cohen v. Sikirica, 487 B.R. 615 (W.D. Pa. 2013) (district affirmed Cohen; continued application of PaUFTA burden framework)
- In re Paul H. Titus, Not provided in text () (cited as context for Titus/Meinen framework and law-of-the-case considerations)