Marasciullo v. BoydMarasciullo v. Boyd
This matter came before the court on (a) plaintiffs’ motion for summary judgment,2
For the reasons set forth below, this court will deny plaintiffs’ motion for summary judgment and grant defendants’ cross-motions for summary judgment.
Standard for Summary Judgment
The court shall grant summary judgment if the moving party shows that there is no genuine dispute of material fact and the moving party is entitled to judgment as a matter of law.9 All facts and inferences must be viewed in the light most favorable to the nonmoving party.10
In this case, the material facts are undisputed. The parties differ regarding what legal conclusions should be drawn from those facts. Accordingly, this case is well suited for disposition on summary judgment.
The court will set forth the material facts and procedural history chronologically, as that is useful to determining the rights of the parties at various specific points in time.
On October 16, 2012, a Statutory Warranty Deed was recorded in the real property records of Jackson County, Oregon, conveying certain real property (the “Tamarack Property“) from grantors Jerry E. Watkins and Marilyn K. Watkins to grantee Mr. Boyd.11 At all relevant times since then, Mr. Boyd and Mr. Grove have resided at the Tamarack Property.12
On February 14, 2022, Allen Thomashefsky, as trustee of the David W. Doner, Jr. Separate Property Trust (the “Doner Trust“),13 filed a complaint to collect a debt against Mr. Boyd and B&G Property Investments, LLC, in the Circuit Court for the State of Oregon in Jackson County.14 After service, Mr. Thomashefsky, as trustee of the Doner Trust, promptly filed a motion for summary judgment, which was set for hearing on April 25, 2022.15
On April 11, 2022, a Bargain and Sale Deed was recorded in the real property records of Jackson County, Oregon, conveying the Tamarack Property from Mr. Boyd to “Donald E. Grove, Trustee, The Donald E. Grove II, Irrevocable Living Trust.”16
Mr. Thomashefsky, as trustee of the Doner Trust, prevailed on his summary judgment motion. On April 29, 2022, the Jackson County Circuit Court entered a judgment in the amount of $320,522, plus interests, costs, and attorney fees, in favor of the Doner Trust and against Keith Y. Boyd and B&G Property Investments, LLC.17
On August 23, 2022, Mr. Thomashefsky, as trustee of the Doner Trust, and the Forge Trust recorded a Notice of Pendency of an Action (Lis Pendens) in the real property records of Jackson County, Oregon, identifying the Tamarack Property as the property affected.20
On September 9, 2022, a Correction Deed was recorded in the real property records of Jackson County, Oregon, conveying the Tamarack Property from Mr. Boyd to “Keith Y. Boyd, Trustee, The Keith Y. Boyd Living Trust dated December 18, 2012 and Donald E. Grove, Trustee, The Donald E. Grove II Irrevocable Living Trust.”21
The Jackson County Circuit Court scheduled a hearing on a motion for summary judgment in the fraudulent conveyance action for May 30, 2023.22
On May 26, 2023, Mr. Boyd filed his voluntary chapter 7 bankruptcy case.23 At that time, the fraudulent conveyance action in the Jackson County Circuit Court was unresolved and became subject to the automatic stay of
On May 31, 2023, Mr. Thomashefsky, as trustee of the Doner Trust, and the Forge Trust filed a motion for relief from the automatic stay in Mr. Boyd‘s bankruptcy case.24 In their motion, they sought relief from stay to continue to pursue the fraudulent transfer claim in Jackson County Circuit Court.25 Ms. Amborn, as bankruptcy trustee, opposed that motion.26
On June 27, 2023, this court denied the motion for relief from stay at the hearing, and the ruling was memorialized in a minute order.27 In the record of proceeding and minute order, this court summarized the proceeding and this court‘s ruling as follows:
Counsel for creditor and trustee argued their respective positions on whether relief from stay should be granted. The fraudulent conveyance claims involve an alleged transfer by the debtor of the debtor‘s interest in property while creditor litigation was pending. The court found persuasive the rule discussed in World Fuel Servs., Inc. v. Martin, No. 3:16-CV-02303-MO, 2018 WL 847243 (D. Or. Feb. 13, 2018), rev‘d and remanded, 770 F. App‘x 359 (9th Cir. 2019), that in bankruptcy, where both a creditor and the trustee have fraudulent conveyance claims relating to property transferred by the debtor, the trustee has the exclusive right to pursue the action and the creditor may not. Although World Fuel was reversed and remanded, the reversal was based on facts not present in this record (specifically, that the property was transferred by a third party and not the debtor) and the general rule applies here (where debtor himself allegedly transferred the property).28
This order was not appealed.29
On November 6, 2023, Mr. Boyd and Mr. Grove, as trustee of the Grove Trust, filed an adversary proceeding complaint against Ms. Amborn, as bankruptcy trustee, seeking declaratory relief regarding the ownership of the Tamarack Property.30 On December 6, 2023, Ms. Amborn, as bankruptcy trustee, filed an answer and counterclaims, asserting fraudulent transfer claims
On July 29, 2024, Steve Marasciullo and Stephanie Marasciullo, as co-trustees of the Doner Trust, filed this adversary proceeding against Mr. Boyd, Mr. Grove, individually and as trustee of the Grove Trust, and Ms. Amborn, as bankruptcy trustee, asserting claims for fraudulent conveyance against Mr. Boyd and Mr. Grove, individually and as trustee of the Grove Trust, and for declaratory judgment against all defendants.32 The complaint was later amended.33
On August 29, 2024, Ms. Amborn, as bankruptcy trustee, filed an answer and counterclaims for declaratory judgment and attorney fees and costs in this adversary proceeding.34 On September 19, 2024, Steve Marasciullo and Stephanie Marasciullo, as co-trustees of the Doner Trust, answered the counterclaims.35
On September 20, 2024, Mr. Boyd filed his answer and affirmative defenses to the first amended complaint in this adversary proceeding.36 A few days later, on September 23, 2024, Mr. Grove, individually and as trustee of the Grove Trust, filed his answer and affirmative defenses to the first amended complaint in this adversary proceeding.37
On November 7, 2024, Ms. Amborn, as bankruptcy trustee, filed a motion in Mr. Boyd‘s bankruptcy case to approve a settlement of all claims between the bankruptcy estate, on one hand, and Mr. Boyd and Mr. Grove, individually and as trustee of the Grove Trust, on the other hand.38 That proposed settlement included a negotiated resolution of the bankruptcy estate‘s fraudulent transfer claims against Mr. Boyd and Mr. Grove, individually and as trustee of the
Analysis
I. The Doner Trust Cannot Pursue Fraudulent Transfer Claims Against Mr. Boyd, Mr. Grove, and the Grove Trust.
The Doner Trust provides evidence and asks this court to determine in this proceeding that Mr. Boyd‘s transfer of the Tamarack Property to the Grove Trust was a fraudulent transfer. This court declines to do so. For the reasons set forth in this court‘s June 27, 2023, order denying relief from stay, the Doner Trust no longer has the right to pursue these fraudulent transfer claims after Mr. Boyd filed bankruptcy. The order denying relief from stay was a final appealable order.42 The Doner Trust did not appeal that order. That holding is now law of the case.43 The Doner Trust cannot pursue the fraudulent transfer claims.
The Doner Trust argues that the court‘s decision on the motion for relief from stay is not preclusive because relief from stay proceedings are summary proceedings with limited effect that do not determine the merits of a creditor‘s underlying claim.44 However, to the extent the authorities the Doner Trust relies upon address the effect of a decision made in a ruling on relief from stay (and not all of them do), they discussed issue preclusion, not the law of the case doctrine. And, while a relief from stay proceeding may be limited, it is not meaningless.
Even if the court were to reconsider the question of whether the Doner Trust could pursue its fraudulent transfer claim, this court would still apply the rule discussed in World Fuel Servs., Inc. v. Martin.46 World Fuel held that in bankruptcy, where both a creditor and the trustee have fraudulent transfer claims relating to property transferred by the debtor, the trustee has the exclusive right to pursue the fraudulent transfer claims and the creditor may not.47 This rule makes sense. Bankruptcy is a collective proceeding where the bankruptcy trustee has fiduciary duties to all creditors.48 Where multiple creditors may have fraudulent transfer claims, the trustee ought to be able to assert those claims on behalf of all creditors. This avoids duplicative litigation and races among creditors to the courthouse. Allowing the trustee to pursue fraudulent transfers results in each creditor receiving its pro rata share of any recovery, which is an equitable result consistent with the Bankruptcy Code.
The Doner Trust attempts to distinguish World Fuel on the basis that World Fuel addressed the fraudulent transfer claims of unsecured creditors and the Doner Trust is a secured creditor. The Doner Trust previously asserted in its motion for relief from stay that the Doner Trust was a secured creditor.49 The court was aware of that assertion when it ruled on the motion
The Doner Trust also asserts that it should be able to pursue its fraudulent transfer claims, because it believes there are some claims under state law the Doner Trust can pursue that the bankruptcy trustee cannot. This is incorrect. Using the strong-arm powers, the bankruptcy trustee can pursue any avoidance action that is avoidable by a creditor under state or other applicable non-bankruptcy law.50 The bankruptcy trustee specifically can step into the shoes of the Donor Trust and avoid any claim the Doner Trust could avoid.51 The bankruptcy trustee has, in fact, brought fraudulent conveyance claims against Mr. Boyd and the Grove Trust as part of her counterclaims in adversary proceeding case no. 23-6049.
II. The Doner Trust Does Not Have a Lien or Property Interest in the Tamarack Property.
At all relevant times before April 11, 2022, title to the Tamarack Property was in Mr. Boyd‘s name. The Doner Trust did not have any property interest in the Tamarack Property. There is no evidence in the record that the Doner Trust held a trust deed, mortgage, or contract right giving it any interest in the Tamarack Property. The Doner Trust‘s claim against Mr. Boyd was a simple action for the collection of a debt, unrelated to the Tamarack Property.
On April 11, 2022, Mr. Boyd conveyed the Tamarack Property to the Grove Trust. Upon transfer, Mr. Boyd no longer held any legal interest in the Tamarack Property. Although Mr. Boyd‘s conveyance of the Tamarack Property may have been a voidable transaction, it was not a void transaction. Prior to 1986, Oregon adopted the Uniform Fraudulent Conveyance Act (“UFCA“).52 The UFCA expressly provided that “[e]very conveyance or assignment in writing
When the Doner Trust obtained its judgment against Mr. Boyd and B&G Property Investments, LLC, on April 29, 2022, that judgment became a lien on all real property that Mr. Boyd owned in Jackson County on that date, and acquired in Jackson County thereafter.58 However, on the date the judgment in favor of the Doner Trust was entered, Mr. Boyd no longer owned the Tamarack Property—Mr. Boyd had already conveyed the property to the Grove Trust. Therefore, the Doner Trust‘s judgment lien did not attach to the Tamarack Property.
Even though Mr. Boyd transferred the Tamarack Property before the Doner Trust obtained its judgment lien, the Doner Trust asserts various reasons why it believes its judgment lien has attached to the Tamarack Property anyway. None are correct.
The Doner Trust asserts that because it filed a complaint to set aside Mr. Boyd‘s transfer of the Tamarack Property to the Grove Trust, and recorded a lis pendens on August 23, 2022, identifying the Tamarack Property as the property affected, it obtained a lien interest or other property rights in the Tamarack Property. This assertion raises two issues: (1) was the lis pendens properly filed under Oregon law, or was it an ineffective slander of title, and (2) if the lis pendens was properly filed, exactly what interest, if any, did it give the plaintiffs in the Tamarack Property?
The first issue is an open question of Oregon law: although lower courts in Oregon have provided guidance relevant to whether plaintiffs in a fraudulent transfer case may file a lis pendens, the Oregon Supreme Court has not yet ruled on the issue. As a general matter, to have a valid lis pendens, the Oregon Court of Appeals has held that “the subject of the suit must be an actual interest in real property, not merely a speculative future one.”59 In Doughty, the Oregon Court of Appeals applied this rule and held that a creditor had no right to file a lis pendens when it had asserted its claim with the Construction Contractor‘s Board for money damages on which it might eventually prevail and that might eventually become a lien on real property, but where the creditor had no claim to an interest in the real property itself.60
This court has found only one decision from the Oregon Court of Appeals specifically addressing whether a plaintiff may file a lis pendens for a fraudulent transfer claim.61 However, the facts in that case arose when the UFCA was in effect, and Oregon law specified that fraudulent transfers were void, not voidable. In Pedro, the Oregon Court of Appeals was careful to point that fact out in its opinion, specifically stating that ”former
There is one interlocutory trial court decision from the Multnomah County Circuit Court holding that a plaintiff could file a lis pendens if it was asserting a fraudulent transfer claim in the state circuit court, even before judgment was entered.64 In reaching that decision, the Multnomah County Circuit Court relied on another opinion from the Oregon Court of Appeals, Indian Ridge, which held that a plaintiff could file a lis pendens when its writ of review proceeding “involved” an interest in the real property, reading the term “involved” broadly.65
This court does not find the Multnomah County Circuit Court‘s reasoning or reliance on Indian Ridge to be persuasive. In Hotchalk, the Multnomah County Circuit Court did not acknowledge or address the rule in Doughty that a speculative future interest is an insufficient basis for a plaintiff to file a lis pendens. Similarly, Indian Ridge, unlike Doughty, did not address whether a plaintiff could file a lis pendens in the context of a case involving allegedly fraudulent transfers. Instead, the plaintiff in Indian Ridge opposed an application to partition neighboring property and filed a lis pendens because he was concerned that the partition would affect the easements he held on that property.66 The plaintiff had an actual interest—an easement—on the property to be partitioned,67 and if the property were partitioned it would adversely affect plaintiff‘s easement, so it was not a stretch for the Oregon Court of Appeals to conclude that the partition proceeding “involved” plaintiff‘s interest in the real property. Indian
The Doner Trust relies upon two cases involving plaintiffs who filed lis pendens after they filed lawsuits for specific performance of their contracts to purchase real property.68 These cases did not discuss the Doughty rule at all and are not applicable here. In those cases, the claimants asserted contract rights to the specific property identified in the lis pendens.69 In this case, the Doner Trust does not have any contract rights specific to the Tamarack Property.
Based on the requirement in Doughty, that a plaintiff must have an actual and not merely speculative interest in the real property to file a lis pendens, this court concludes that the Doner Trust‘s lis pendens is not valid under Oregon law. Here, the Doner Trust had no actual interest in the Tamarack Property, and would not, unless and until the transfer was avoided, the title to the Tamarack Property was returned to Mr. Boyd‘s name, and the judgment lien attached—events that never occurred. No court has yet determined that Mr. Boyd‘s transfer of the Tamarack Property to the Grove Trust was a fraudulent transfer.70 When the Doner Trust filed the lis pendens, it was speculative whether those events would ever occur. Similarly, when Mr. Boyd filed his bankruptcy, at most the Doner Trust had a speculative future interest in the Tamarack Property, not an actual present interest. This was not enough for plaintiffs to file a valid lis pendens.
However, it does not really make any difference to the outcome of this case how the first issue is decided, because, on the second issue, even if the lis pendens was valid, the lis pendens did not give the Doner Trust a property right or a lien right in the Tamarack Property. The Oregon Supreme Court has specifically addressed the legal effect of a lis pendens and held that it
In this case, the plaintiffs have not prevailed, and cannot prevail, on their fraudulent transfer claims. At the time Mr. Boyd filed bankruptcy, the Doner Trust‘s claim to avoid Mr. Boyd‘s transfer as fraudulent was still pending. Once the bankruptcy was filed, the trustee
B. The Correction Deed Had No Effect on Title to the Tamarack Property.
To the extent that the Doner Trust relies on the Correction Deed to show that Mr. Boyd had an interest in the Tamarack Property, this reliance is misplaced. In the Bargain and Sale Deed recorded on April 11, 2022, Mr. Boyd conveyed his entire interest in the Tamarack Property to the Grove Trust. When the Correction Deed was later recorded on September 9, 2022, Mr. Boyd had no interest in the property to convey. A grantor cannot unilaterally use a correction deed to alter or revoke property interests that the grantor previously conveyed.77 Instead, the Correction Deed is simply a “wild deed“—a deed executed by a grantor that does not own property.78 The Correction Deed was legally ineffective and did not convey any interest in the Tamarack Property to anyone.79 Thus, the Doner Trust‘s judgment did not attach to the Tamarack Property after the Correction Deed was recorded.
It is worth noting that Oregon has a statute regarding re-recording of corrected instruments. It provides that “[a]n instrument that has been previously recorded may be rerecorded to make corrections in the original instrument.”80 There is no evidence that the Correction Deed was a re-recording of any prior instrument. Thus, this statute is inapplicable.
The Doner Trust asserts that its lien attached to Mr. Boyd‘s equitable interest in the Tamarack Property. This assertion raises two issues: (1) does a judgment lien attach to a judgment debtor‘s equitable interest in real property under Oregon law, and (2) did Mr. Boyd have an equitable interest in the Tamarack Property?
Here, pre-existing common law provides useful context for interpreting
In the interest of the debtor, and to afford purchasers of real property at an enforced sale thereof an equal opportunity with the judgment creditor, the rule adverted to has been adopted, requiring the latter first to establish the fact in a court of equity, in a suit instituted for that purpose, that the debtor‘s equitable estate in real property is subject to the payment of his demand, before such interest can be divested by a sale thereof upon execution. So long, therefore, as any substantial thing remains to be done by the debtor before his equitable estate in real property ripens into the legal title, such interest cannot be reached under an execution issued on a judgment in a law action, but to subject such estate to the payment of the creditor‘s demand, resort must be had to a court of equity to establish the right.87
This rule applied in Oregon even in the context of a fraudulent conveyance.88
The purpose of a judgment lien is to allow a creditor to execute on the property subject to the lien to collect its judgment. It would make no sense for the Oregon legislature to provide for a judgment creditor to have a lien on a judgment debtor‘s mere equitable interest in real property (not yet established in any other court) if the judgment creditor legally could not execute on that lien. To the extent a statute is ambiguous, the court should not choose an interpretation that would be absurd.89 Therefore, this court concludes that
Because no court had established that Mr. Boyd held an equitable interest in the Tamarack Property before the Doner Trust obtained its judgment lien, the Doner Trust did not obtain a judgment lien on the Tamarack Property when its judgment was entered.
This court cannot conclude on these facts on summary judgment, taking all inferences in favor of the non-moving party, that Mr. Boyd has an enforceable equitable interest in the Tamarack Property under Oregon law. The mere fact that Mr. Boyd lives at the Tamarack Property does not establish that he has an equitable ownership interest in the property. Many people live in property they do not own—residency does not signify ownership, but only occupancy. For the reasons set forth in Section B above, the Correction Deed has no legal effect. And the fact that Mr. Boyd and Mr. Grove have claimed various interests in the Tamarack Property at various times is not particularly meaningful. Under the limited facts proven on this record, it would be entirely possible to conclude that title to the Tamarack Property was a matter of convenience between Mr. Boyd and Mr. Grove—it was in Mr. Boyd‘s name when it was necessary to obtain credit to purchase the property, but in Mr. Grove or the Grove Trust‘s name when creditors were pursuing Mr. Boyd—and not an actual reflection of whether Mr. Boyd or Mr. Grove, or either of their trusts, owned the Tamarack Property.92
For the reasons set forth above, the Doner Trust cannot pursue fraudulent transfer claims arising from Mr. Boyd‘s transfer of the Tamarack Property to the Grove Trust. The Doner Trust‘s judgment lien has never attached to the Tamarack Property, and the lis pendens did not give the Doner Trust a security interest in the Tamarack Property. Therefore, the court will grant summary judgment to defendants on plaintiff‘s fraudulent conveyance and declaratory judgment claims. The court will grant declaratory judgment to Ms. Amborn, as bankruptcy trustee, that she has the sole right to pursue the fraudulent transfer claims, and the plaintiffs have no interest in the Tamarack Property.
Although Ms. Amborn, as bankruptcy trustee, is the prevailing party, the court will deny her request for attorney fees and costs, because she has not identified any factual or legal basis on which the court could make such an award.
Counsel for Ms. Amborn, as bankruptcy trustee, should submit an appropriate form of judgment in accordance with LBR 9021-1.
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