595 B.R. 274
Bankr. E.D. Ark.2018Background
- Debtor (a physician) and Buch (long-term boyfriend, real-estate investor) purchased 2645 Prince St. in May 2013; loan was in debtor’s name but Buch funded the down payment, mortgage payments, taxes, insurance, renovations, and managed the property. Title was deeded to both Buch and debtor by the seller.
- Buch intended to own the property alone; when he later discovered the debtor’s name on the deed he requested a quitclaim; the debtor executed a quitclaim on April 6, 2015 (recorded April 8, 2015).
- Debtor filed chapter 7 on August 31, 2015. Her original SOFA/schedules did not disclose (1) the April 2015 quitclaim transfer, (2) the correct balance of her PLLC bank account, and (3) a Tag Heuer watch and some jewelry (later amended).
- Trustee Wetzel alleged the April 2015 deed transfer was a fraudulent transfer under 11 U.S.C. § 548 and sought avoidance/turnover; both the UST and Wetzel sought denial of debtor’s discharge under § 727(a)(2)(A) and § 727(a)(4)(A).
- Trial evidence established Buch paid all economic costs and received rents; the court found a resulting trust in Buch’s favor such that the debtor held only bare legal title when she quitclaimed.
- The court concluded Wetzel could not avoid the transfer under § 548 (debtor held only valueless bare legal title) and denied the trustees’ requests to deny discharge under § 727(a)(2) and (a)(4)(A).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Fraudulent transfer under § 548 — April 2015 quitclaim | Wetzel: transfer within 2 years; transfer of debtor’s interest should be avoided because it defrauded creditors | Debtor/Buch: debtor held only bare legal title; Buch paid purchase/improvements and intended to own property; quitclaim merely corrected title | Court: No avoidance — under Arkansas law a resulting trust existed for Buch; debtor had only bare legal title (valueless), so § 548 avoidance fails |
| Denial of discharge under § 727(a)(2) — concealment/transfer to hinder creditors | Trustees: debtor transferred property within one year and concealed it on SOFA with intent to hinder creditors | Debtor: transfer corrected title; no actual intent to hinder or defraud; omissions were not made with requisite fraudulent intent | Court: Elements 1–3 met but trustees failed to prove actual intent; discharge denial under § 727(a)(2) denied |
| Denial of discharge under § 727(a)(4)(A) — false oaths on schedules/SOFA | Trustees: debtor made false sworn statements (omitting transfer, jewelry, correct PLLC balance) with knowledge and fraudulent intent | Debtor: omissions were inadvertent or based on honest belief (didn’t consider the quitclaim a material transfer; watch not "jewelry"; PLLC account not material) | Court: False statements and materiality (transfer, jewelry) established, but trustees failed to prove debtor acted knowingly and fraudulently; discharge denial under § 727(a)(4)(A) denied |
Key Cases Cited
- Begier v. Internal Revenue Serv., 496 U.S. 53 (Sup. Ct.) (standing and scope of property of the estate principles)
- Butner v. United States, 440 U.S. 48 (Sup. Ct.) (property rights in bankruptcy are defined by state law)
- N.S. Garrott & Sons v. Union Planters Nat'l Bank, 772 F.2d 462 (8th Cir.) (debtor holding bare legal title gives estate only bare legal title)
- Walker v. Hooker, 282 Ark. 61 (Ark.) (presumption of gift when family member is titled but another pays; rebuttable by intent evidence)
- Cowden v. Ramsay (In re Cowden), 154 B.R. 531 (Bankr. E.D. Ark.) (resulting trust arises when purchase made in name of one with funds of another)
- Mertz v. Rott, 955 F.2d 596 (8th Cir.) (materiality standard for false oaths in bankruptcy)
- In re Korte, 262 B.R. 464 (8th Cir. BAP) (intent and burdens in § 727 proceedings)
- In re Freese, 460 B.R. 733 (8th Cir. BAP) (omission of asset may be material regardless of value)
- In re Sholdra, 249 F.3d 380 (5th Cir.) (pattern of falsehoods can show reckless indifference supporting fraudulent intent)