Titus v. Shearer
498 B.R. 508
W.D. Pa.2013Background
- Two appeals from the bankruptcy court’s Feb. 29, 2012 order in adversary No. 10-2838 (Bohm v. Titus) involving constructive fraudulent transfers from wages deposited into a joint tenancy by the entireties account.
- Bankruptcy court held the Tituses liable for $281,006.18 on PUFTA constructive claims; actual fraudulent transfer claim found in their favor.
- The dissolution of Titus & McConomy in 1999 led to a large state judgment against Titus & other partners; later wage deposits continued July 2002 onward.
- Trizec (and its successor) filed fraudulent transfer actions; the Trustee substituted as plaintiff under 11 U.S.C. § 544(b)(1) after an involuntary Chapter 7 against Titus.
- The district court reviews de novo legal conclusions and reviews factual findings for clear error; discovery decisions are reviewed for abuse of discretion.
- On remand, questions include the look-back period for recoveries, the burden of proof/production regarding expenditures, and whether equity permits extending recoveries past the initial four-year window.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Look-back period for recoveries under PUFTA | Trustee: recoveries may extend beyond filing; four-year look-back is incorrect | Tituses: PUFTA repose and case law limit look-back to 2003–2007 | Limited look-back improper; remand to consider 2007–2010 with equity considerations |
| Burden of proof on expenditures as to necessities | Trustee bears burden to show funds not used for necessities | Tituses: burden on plaintiff or misapplied shift; Meinen not controlling | Burden on Trustee to prove non-necessities; burden-shifting on production appropriate; remand to allow evidence on unknown deposits |
| Transfers and transferee liability under PUFTA in entireties accounts | Direct wage deposits into entireties account constitute transfers; both spouses transferees | Dispute over whether Titus can be both transferor and transferee; insubstantial authority cited | Direct deposits into an entireties account are transfers; both spouses liable as transferees |
| Effect of Titus’s bankruptcy discharge on liability | Discharge does not bar recovery under §550(a) | Discharge could bar claims not pleaded under §550 | Discharge does not bar §550 recovery; §550 allows trustee to recover transferred value |
Key Cases Cited
- Cardiello v. Arbogast (In re Arbogast), 466 B.R. 287 (Bankr.W.D.Pa.2012) (comparable look-back and burden issues; supports broader recovery period)
- Arbogast, 479 B.R. 661, 479 B.R. 661 (W.D.Pa.2012) (affirmed Meinen-based approach to burdens; discusses equity)
- Cohen v. Cohen, 487 B.R. 631 (W.D.Pa.2013) (affirms Meinen-based burden and transfer analysis; discusses exclusion of exemptions)
- In re Meinen, 232 B.R. 827 (Bankr.W.D.Pa.1999) (burden on defendant to prove expenditures were for necessities; supports shifted burden)
- Arbogast (In re Arbogast), 466 B.R. 287 (Bankr.W.D.Pa.2012) (discusses look-back period and burden principles; supports broader view)
- Goody’s Family Clothing, Inc. v. Goody’s, 610 F.3d 812 (3d Cir.2010) (statutory interpretation of look-back period in PUFTA context)
- In re Holmes, 200 A.2d 745 (Pa. 1964) (trusts/entireties presumption relevance to transferee status)
- Shapiro v. Shapiro, 224 A.2d 164 (Pa. 1966) (entireties presumption in earnings/deposits context)
- Butler v. Butler, 347 A.2d 477 (Pa. 1975) (equitable considerations in entireties property)