493 B.R. 597
Bankr. D.N.M.2013Background
- Judith Wagner, Chapter 11 Trustee, sues Vaughan Company Realtors’ promissory note program transfers in an adversary proceeding.
- Defendants moved for summary judgment; Trustee opposed; Court grants summary judgment on turnover (Count 1) and denies on Counts 2–9.
- Trustee seeks avoidance of transfers under 11 U.S.C. § 548 and state UFTA equivalents; ERISA considerations arise due to Ultima Plan involvement.
- Undisputed facts concern Ultima Homes, Ultima Plan, their separate accounts, and investments into VCR’s note program totaling $100,000 by the Ultima Plan; Ultima Plan received at least $79,342.37 and Ultima Homes did not receive VCR funds.
- Court concludes Trustee has standing to pursue fraudulent transfer claims against the Ultima Plan under § 544/548 and state law; ERISA preemption arguments do not bar the claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing of Trustee under ERISA | Trustee may sue ERISA plan despite not being participant/beneficiary. | Trustee lacks ERISA standing unless within enumerated categories. | Trustee has standing to pursue fraudulent transfers under §544/548 and state law; ERISA status does not bar claims. |
| ERISA anti-alienation barrier | Anti-alienation does not prevent avoidance of fraudulent transfers to the Ultima Plan. | ERISA §206 bars transfer recovery if it constitutes alienation of plan benefits. | Anti-alienation does not preclude Bankruptcy Code avoidance; not an assignment/alienation under ERISA. |
| ERISA exclusive benefit rule | Exclusive benefit rule does not bar fraudulent-transfer avoidance against the plan. | Rule could preclude reliance on third-party access to plan assets. | Exclusive benefit rule does not preclude Trustee’s avoidance claims; not within its scope. |
| Good faith defense under NM UFTA § 56-10-22(A) and §548(c) | Transfers were avoidable; good faith defense should not apply to defeat avoidance. | Defendants acted in good faith and for reasonably equivalent value; defense should apply. | Defendants failed to establish good faith; summary judgment on good faith defense denied; merits of value not reached. |
| Proper parties to the suit | Hightower (trustee) and Ultima Homes are proper parties; plan assets at issue. | Hightower and Ultima Homes may not be proper parties if not receivers of transfers. | Hightower properly sued as plan trustee; Ultima Homes remains subject to further fact development before dismissal. |
Key Cases Cited
- Guidry v. Sheet Metal Workers Nat. Pension Fund, 493 U.S. 365 (U.S. 1990) (ERISA anti-alienation generally protects plan benefits from creditors)
- Patterson v. Shumate, 504 U.S. 753 (U.S. 1992) (ERISA anti-alienation and bankruptcy interplay; pension benefits excluded from estate)
- In re Goldschein, 241 B.R. 370 (Bankr. D. Md. 1999) (anti-alienation does not preclude avoidance of fraudulent transfers)
- In re M & L Business Mach. Co., Inc., 84 F.3d 1330 (10th Cir. 1996) (good faith defense under §548(c) requires objective inquiry into investor conduct)
- In re Bayou Group, LLC, 439 B.R. 284 (S.D.N.Y. 2010) (two-step good faith analysis under §548(c) with inquiry notice and diligence)
- In re Hannover Corp., 310 F.3d 796 (5th Cir. 2002) (good faith factors and investor sophistication weigh on §548(c) defense)