671 B.R. 926
Bankr. E.D. Va.2025Background
- Teresita Tiongson, the debtor, transferred her home to her granddaughters and later filed for Chapter 7 bankruptcy.
- The Chapter 7 Trustee sought to (i) declare Tiongson the sole beneficial owner of the property at the time of transfer and (ii) avoid the transfer as constructively fraudulent under Virginia law.
- The Court granted summary judgment to the Trustee, finding the transfer constructively fraudulent due to insolvency and lack of consideration.
- Defendants (the granddaughters) appealed and initially obtained a stay pending appeal, contingent upon specific payments/conditions that were not met.
- Defendants moved for a second stay pending appeal, and Tiongson moved to convert her case to Chapter 13, asserting increased income and contributions from the granddaughters.
- The Court denied both motions, determining the defendants/family failed to comply with prior orders and that Tiongson acted in bad faith.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Stay Pending Appeal (Second Motion) | No likelihood of success; estate harmed by further delay | Likelihood of success; risk of irreparable injury (loss of home) | Denied; elements not met; conditions of prior stay not satisfied |
| Constructive Fraudulent Transfer | Transfer rendered debtor insolvent, no consideration | Court erred in insolvency and asset calculations | Trustee is correct; transfer avoided as constructively fraudulent |
| Inclusion of Asset Values | Business worth zero; stock account unproven | Business/value underestimated; stock account should count | No sufficient evidence; Court's calculation stands |
| Sham Affidavit Rule | Inconsistent depo/declaration; declaration excluded | Debtor confused during depo, exclusion unjust | Declaration properly excluded as conflicting with deposition |
| Motion to Convert to Chapter 13 | Conversion sought in bad faith to hinder creditors | Debtor may convert absent bad faith; plan feasible | Denied; found atypical bad faith and procedural abuse |
Key Cases Cited
- Barwick v. Celotex Corp., 736 F.2d 946 (4th Cir. 1984) (sham affidavit rule: affidavits contradicting prior deposition testimony do not create genuine issues of fact)
- Marrama v. Citizens Bank of Massachusetts, 549 U.S. 365 (2007) (bad faith may justify denial of a Chapter 13 conversion)
- Tavenner v. Smoot, 257 F.3d 401 (4th Cir. 2001) (close scrutiny required in insider transfers; presumption of fraud without consideration)
- Long v. Robinson, 432 F.2d 977 (4th Cir. 1970) (standards for stay pending appeal: likelihood of success, irreparable harm, etc.)