Petition for Writ of Certiorari — Gurley v. Mills, 121 S. Ct. 1736 (2001) (No. 00-1403)
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Q01A403 WAR 6 2001
No. 00-
OFFICE OF THE - wl at
IN THE
Supreme Court of the Anited States
BETTY JEAN GURLEY,
Petitioner,
v.
GEORGE E. MILLS, JR.,
CHAPTER 7 TRUSTEE,
Respondent.
On Petition for a Writ of Certiorari
to the United States Court of Appeals
for the Eleventh Circuit
PETITION FOR A WRIT OF CERTIORARI
JOHN R. DUNLAP CARTER G. PHILLIPS*
JAMES E. BAILEY III VIRGINIA A. SEITZ
HUMPHREYS, DUNLAP, SIDLEY & AUSTIN
WELLFORD, ACUFF & 1722 Eye Street, N.W.
STANTON, P.C. Washington, D.C. 20006
2200 First Tennessee Building (202) 736-8000
Memphis, TN 38103
(901) 523-8088
Counsel for Petitioner
March 6, 2001 * Counsel of Record
ee
WILSON-EPES PRINTING CO., INC. — (202) 789-0096 -— WASHINGTON, D. C. 20001
QUESTION PRESENTED
Whether a state may define a debtor’s “equitable interest[]”
in property to include property fraudulently transferred which
renders that property part of the bankruptcy estate “as of the
commencement of the case” under federal bankruptcy law, 11
U.S.C. § 541(a)(1), and thereby deprives the debtor of the
statute of limitations governing actions to void fraudulent
transfers.
il
PARTIES TO THE PROCEEDING
There are no parties other than the ones named in the
caption. There were no other parties in the proceedings
below, but the United States of America and William M.
Gurley were plaintiff and defendant, respectively, in a
separate but related adversarial case in the bankruptcy court
proceeding.
ee Atria a tas ea
TABLE OF CONTENTS
Page
QUESTION PRESENTED... i
PARTIES TO THE PROCEEDING... il
TABLE OF AUTHORITIES... iv |
OPINIONS BELOW... dae | l
JURISDICTION Soles Laer SERE 2
STATUTORY PROVISIONS INVOLVED 2
STATEMENT OF THE CASE | 2
REASONS FOR GRANTING THE PETITION 7
A. The Decision Is Wrong And Broadens A
Conflict Among The Courts Of Appeals 9
B. The Question Is Recurring And Important. 16
CONCLUSION 18
(111)
iV
TABLE OF AUTHORITIES
CASES Page
In re Allnutt, 1995 WL 222067 (D. Md. Apr. 10,
Am. Nat'l Bank v. MortgageAmerica Corp. (In re
MortgageAmerica Corp.), 714 F.2d 1266 (Sth
> Ae WIR peas Benny oe nee pean RAPP URNA 8, 14, 15
BFP vy. Resolution Trust Corp., 511 U.S. 531
Le SOS Les A RNIN ES ARERR, P01 MERE cloe OMI LE 10, 16
Beach v. Ocwen Fed. Bank, 523 US. 410
REREAD Bre oR ora ROMA E ad Ae oem 16
Beshears v. Schieffler (In re Beshears), 182 B.R.
235 (Bankr. E.D. Ark. 1995) 0c. 14
Butner v. United States, 440 U.S. 48 (1979).. 7, 9, 10, 16
Cent. Heating & Air Conditioning, Inc. v.
Famous Supply Co. (In re Cent. Heating & Air
Conditioning, Inc.), 64 B.R. 733 (N.D. Ohio
oe Sep NITES atc eee Hi woe 15
Charles R. Hall Motors, Inc. v. Lewis (In re
Lewis), 137 F.3d 1280 (3d Cir. 1998) ................ 7,9
Cleveland Trust Co. v. Foster, 93 So. 2d 112 (Fla.
2, Re Oe NE IO Sein 12
Crysen/Montenay Energy Co. v. Esselen Assocs.
(In re Crysen/Montenay Energy Co.), 902 F.2d
Pee ee cscs ceca oasconatenccecs 7
Cullen Ctr. Bank & Trust v. Hensley (Matter of
Criswell), 102 F.3d 1411 (Sth Cir. 1997) ........... 14
FDIC v. Hirsch (In re Colonial Realty Co.), 980
i get > ap, : RANCeenem einen 8, 13, 14
Grant v. Benjamin (In re Benjamin), 210 B.R.
203 (Bankr. M_D. Fla. 1997) 2.000000... 12
Grossman v. Murray (In re Murray), 214 B.R.
rege mg es ; ne 13
Koch Ref. v. Farmers Union Cent. Exch., Inc.,
ie ee Bee ey enon 7
‘.
Aw
Vv
TABLE OF AUTHORITIES
Page
Leon County Educ. Facilities Auth. v. Hartsfield,
698 So. 2d 526 (Fla. 1997) 00 10
In re Lofton, 246 B.R. 604 (Bankr. E.D. Ark.
PE saccsstniascaseciccieii cae ee 13
McGowan vy. Ciccone (In re Ciccone), 171 B.R. 4
(Bankr. D.R1 1996)...............ccccecccocs-s............. 15
i TROT OM abe Te 10
S.J. Acquisition, Inc. v. Eastway Delivery Serv.,
Inc. (Matter of S.I. Acquisition, Inc.), 817 F.2d
SBOE CSUR, FOG T Dai nccccccccesecoenceccayecssos-.., 15
Salomon v. Kaiser (In re Kaiser), 722 F.2d 1574
CAGE, TOR eric ee 13
In re Saunders, 101 B.R. 303 (Bankr. N.D. Fla.
NII ssh nestaodsanaga castilep tecnica 13
In re Swallen’s, Inc., 205 B.R. 879 (Bankr. S.D.
NY TOO icinctsns ee Sirsaska sete aie eared 15
Taylor v. Rupp (In re Taylor), 133 F.3d 1336
(RUNGE: SO eee 13
Towerhouse Condominium, Inc. v. Millman, 475
So. 2d 674 (Fla. 1985) ooo. 10
White v. Brosseau, 566 So. 2d 832 (Fla. Dist. Ct.
A: soe ee 10
Williams v. Dep't of Health & Rehab. Servs., 522
So. 2d 951 (Fla. Dist. Ct. App. 1988)................. 10
XL/Datacomp v. Wilson (In re Omegas Group,
Inc.), 16 F.3d 1443 (6th Cir. 1994) 00. 7, 11
CONSTITUTION AND STATUTES
U.S. Const. art. 1, § 8, cl. 4.000000. 9
i VSL. Sees... ee 4
E.R atea eI TTI eS passim
BREE name ash sscPANe 2, 4,8
vi
TABLE OF AUTHORITIES
Fla. Stat. ch. 726.105(2)
OTHER AUTHORITY
24 Am. Jur. Fraudulent Conveyances (1939)
Page
Ce ee ee ee
IN THE
Supreme Court of the Gnited States
No. 00-
BETTY JEAN GURLEY,
Petitioner,
Vv
GEORGE E. MILLS, JrR.,
CHAPTER 7 TRUSTEE,
Respondent.
On Petition for a Writ of Certiorari
to the United States Court of Appeals
for the Eleventh Circuit
PETITION FOR A WRIT OF CERTIORARI
Petitioner Betty Jean Gurley (“Betty Gurley”) respectfully
petitions for a writ of certiorari to review the judgment of the
United States Court of Appeals for the Eleventh Circuit in this
case
OPINIONS BELOW
The opinion of the court of appeals (App. la-3a) was
entered on September 20, 2000, and is not reported. The
order denying the petition for rehearing and rehearing en banc
(App. 43a-44a) was entered on November 7, 2000, and is not
reported. The order of the United States District Court for the
Middle District of Florida (App. 4a-lla) was entered on
August 9, 1999, and is not reported. The Memorandum
Opinion and Judgment of the United States Bankruptcy Court
for the Middle District of Florida (App. 15a-42a) were
entered on August 15, 1997, and an Amended Judgment of
2
that court (App. 12a-14a) was entered on September 16, 1997;
neither is reported.
JURISDICTION
The opinion and final judgment of the court of appeals were
entered on September 20, 2000. The court of appeals denied
Betty Gurley’s petition for rehearing and sugg¢stion for
rehearing en banc on November 7, 2000. On January 23,
2001, Betty Gurley filed a timely application for extension of
time to file the petition for certiorari in this case; Justice
Kennedy granted the application and allowed petitioner until
March 7, 2001, to file the petition. This Court has jurisdiction
pursuant to 28 U.S.C. § 1254(1).
._ STATUTORY PROVISIONS INVOLVED
The relevant provisions of the Bankruptcy Code, 11 U.S.C.
§§ 541 and 544, are reprinted in App. 45a-S0a.
STATEMENT OF THE CASE
1. On November 18, 1987, the United States brought a
civil action against William Gurley and others, including his
wife of 40 years, Betty Gurley, under the Comprehensive
Environmental Response Compensation and Liability Act of
1980 (“CERCLA”) for environmental contamination at a site
located in Edmonson, Arkansas. App. 17a. Betty Gurley was
dismissed as a defendant in June 1990. /d
As the Bankruptcy Court found, prior to Betty Gurley’s
June 1990 dismissal from the CERCLA action and after
experiencing health problems, William Gurley transferred to
his wife (a) assets valued at approximately $17 million,
including real property conveyed by properly recorded deeds,
and (b) a deed of gift of personal property related to the
— —
3
Moltan Company. App. 17a-20a.' William Gurley testified
that he had done so for “estate planning” purposes. /d. at 24a.
The court, however, found that William Gurley somehow
knew 18 months in advance that Betty Gurley would be
dimissed from the CERCLA action and that two years hence
judgment would be entered against him such that he “retained
complete control of the property transferred after the transfers
occurred” and “received no consideration.” Jd. Accordingly,
the court concluded that his intent in making the transfers was
“to hinder, delay and defraud the United States.” /d Finally,
William Gurley also transferred substantial additional assets
to Betty Gurley after April 25, 1990. Jd at 20a-22a?
At the end of the Edmonson site trial, on September 13,
1990, the United States’ attorney, Craig Johnson, “raised
concerns regarding the sale and rumored transfers from
[William Gurley] to his wife, Mrs. Gurley.” App. 20a
Although “[t]he District Court instructed Mr. Johnson to file a
' In 1989, when the transfers at issue commenced, Betty Gurley
personally held between $7 and $8 million in her own assets. App. 5a.
Indeed, the lower courts simply ignored that Betty Gurley had purchased a
Florida condominium with her own funds and ordered this property,
which had never been transferred to her, to be transferred back to the
bankruptcy estate. /d at 14a. The courts also failed to address that
virtually all of the real estate transferred had been held by the Gurleys as
tenants by the entirety, so that William Gurley transferred to Betty Gurley
only his right of survivorship in most of the real property at issue. See,
e.g., id. at 19a-20a. Finally, the courts have not acknowledged that
William Gurley lost any right to sign checks or withdraw funds from
accounts transferred to Betty Gurley in 1989. In their eagerness to add to
the bankruptcy estate, the lower courts ignored both the applicable statute
of limitations, see infra, and Betty Gurley’s substantial real and personal
property rights.
? Betty Gurley does not challenge the lower courts’ decision that
transfers to her after April 25, 1990 may be avoided, because those
transfers fall within the six-year limitations period applicable to the
trustee’s action seeking to avoid William Gurley’s fraudulent transfers.
This petition addresses only the voiding of the transfers made prior to
April 25, 1990.
4
Motion and Affidavit in support of the allegations that there
were conveyances of property which needed to be set aside,”
it refused to permit discovery and Mr. Johnson did not file a
Motion or Affidavit. Jd. The court entered judgment in favor
of the United States on March 26, 1992, holding defendants
including the Debtor jointly and severally liable in the amount
of $1,786,502.95, and for future costs incurred. /d.
Thereafter, the United States sent letters to the Debtor to
discover his personal financial information but “did not (1)
take depositions in aid of execution, (2) obtain an issuance of
a writ of execution, (3) review public property records, (4)
review corporate records, or (5) issue subpoenas for banks
and other record keepers.” App. 21a. As the Bankruptcy
Court ultimately found, “[t]he United States failed to exercise
reasonable due diligence in discovering the transfers to Mrs.
Gurley.” Jd.
2. William Gurley (“the Debtor”) filed a voluntary chapter
7 petition under the United States Bankruptcy Code on July
26, 1995. See 11 U.S.C. § 101 et seg. On April 26, 1996, the
Trustee in bankruptcy commenced an Adversary Proceeding,
seeking to recover certain allegedly fraudulent conveyances
under the Florida Uniform Fraudulent Transfer Act
(“FUFTA”), the Federal Debt Collection Procedures Act
(“FDCPA”), and the Bankruptcy Code, 11 U.S.C. § 544(b).
In ruling in that proceeding, the Bankruptcy Court observed
that a trustee in bankruptcy “may avoid any transfer of an
interest of the debtor in property . . . that is voidable under
applicable law by a creditor holding an unsecured claim... .”
Id. The trustee has only the rights of the creditor; thus, if the
creditor’s claim is time barred, so, too, is the claim of the
trustee. App. 29a-30a. And, the court further recognized that
under Florida law, the prohibition of fraudulent transfers has a
limitations period of four years, and that the FDCPA
authorizes the United States to avoid fraudulent transfers
made in the six years prior to the filing of the claim. Jd. at
30a-33a. Accordingly, the trustee, acting on behalf of the
5
United States, was entitled to avoid any fraudulent transfers
made on or after April 25, 1990. See id at 33a (the trustee’s
claim was “timely only against property fraudulently
transferred on or after April 25, 1990, six years before the
adversary proceeding was filed in 1996”). As set forth supra
at n.2, petitioner does not challenge this decision.
But the Bankruptcy Court also included within the Debtor’s
estate both (a) the assets transferred prior to April 25, 1990,
valued at approximately $17 million, including real property
conveyed by properly recorded deeds, and (b) the February 2,
1989 deed of gift of personal property related to the Moltan
Company. App. 13a-14a. The court first noted that under
section 541(a) of the Bankruptcy Code, a debtor’s legal and
equitable interests in property are property of the estate at the
commencement of the bankruptcy case. Jd. at 36a. The court
then noted that “[a]n equitable owner is one who is
recognized in equity as the owner of property, because real
and beneficial use and title belong to him, even though bare
legal title is invested in another.” /d. at 37a (citing Black’s
Law Dictionary 539 (6th ed. 1990)). According to the court,
“Florida law recognizes that true ownership or an ownership
interest may rest with a party who is not the titleholder of
record.” /d From this, the court concluded, the Debtor had
an equitable interest in the property he had transferred to
Betty Gurley, because he had a close family relationship with
her, because he exercised continued control and dominance
over the assets, and because he fully managed all of the
property and assets. /d. Thus, the court held that “fall
property transferred by the Debtor to his wife is property of
the estate pursuant to 11 U.S.C. § 541(a)(1).” Jd at 38a.
* In the alternative, as to the Moltan gift, the Bankruptcy Court also
found that William Gurley’s deed of gift to Betty Gurley was not
effective, because he did not deliver the deed to her or have a donative
intent. App. 29a.
1a
6
3. Betty Gurley appealed to the district court from the
portion of this order “includ{ing] in the bankruptcy estate
approximately $17 million in assets that Mrs. Gurley claims
were effectively transferred to her by William Gurley” prior
to April 25, 1990. App. 4a. The district court first found that,
under Florida law, William Gurley retained “equitable
ownership” of the transferred assets. Jd. at 8a-9a. The court
then rejected Betty Gurley’s argument that the FDCPA’s
statute of limitations nonetheless applied to the transfers that
occurred before April 25, 1990. The court maintained that
“Mr. Gurley retained an equitable ownership in the assets,
and that interest was never transferred.” /d. at 9a. In other
words, the court refused to treat Florida’s concept of “retained
equitable ownership” as simply another way of stating the
legal conclusion that a particular transfer was fraudulent and
could therefore be avoided. Finally, the court held that
“fa]lthough Mr. Gurley may have executed a deed [of gift of
the Moltan property] and Mrs. Gurley testified she knew of
the gift, this evidence is overshadowed by evidence that Mr.
Gurley continued to exercise control over Moltan Co.” /d. at
lla.
4. The Eleventh Circuit affirmed. It first agreed with the
lower courts’ conclusion that “[t]he concept of equitable
ownership has long been recognized by the Florida courts.”
App. 2a. It then stated that the although the Debtor
“precipitously undertook to transfer certain assets and real
property to his wife, the appellant, and to purchase other
assets in her name,” he remained the equitable owner of this
property because he “continued to exercise dominion and
control over [and to benefit from] the property and assets now
held in [Betty Gurley’s] name, including certain assets he
purportedly had made as a gift to her.” /d. at 3a. As a result,
according to the court, the transferred property was the
property of the bankruptcy estate from its inception and was
not subject to the six-year statute of limitations applicable to
the trustee’s filing of claims against fraudulent transfers. See
iecidselbsienadeniainieeeianneneedimaniimenintaannasiiisenamanaiidaedtainiapaimemmetinmenienen demnihe
OO er ee TR EE ee ee Nh ee
7
id. (“[t]he statute of limitations applies where a party is
seeking to set aside fraudulent transfers not, as here, where
there was no valid transfer in the first place”).
REASONS FOR GRANTING THE PETITION
The Bankruptcy Code defines the “property” of the
bankruptcy estate to include “all legal or equitable interests of
the debtor in property as of the commencement of the case.”
11 U.S.C. §541(a)(1). Although “[p]roperty interests are
created and defined by state law,” Butner v. United States,
440 U.S. 48. 55 (1979), federal law — the Bankruptcy Code —
defines what is property of the bankruptcy estate. 11 U.S.C.
§ 541(a). See Charles R. Hall Motors, Inc. v. Lewis (In re
Lewis), 137 F.3d 1280 (3d Cir. 1998); XL/Datacomp v.
Wilson (In re Omegas Group, Inc.), 16 F.3d 1443 (6th Cir.
1994); Crysen/Montenay Energy Co. v. Esselen Assocs. (In re
Crysen/Montenay Energy Co.), 902 F.2d 1098 (2d Cir. 1990);
Koch Ref. v. Farmers Union Cent. Exch., Inc., 831 F.2d 1339
(7th Cir. 1987).
In this case, the court of appeals held that under Florida
law, a debtor retains an “equitable interest[]” in property
fraudulently transferred to another, and that such property is
property of the bankruptcy estate “as of the commencement
of the case” under federal law. 11 U.S.C. § 541(a)(1). By
this sleight of hand — defining a debtor’s interest in
fraudulently transferred property as an “equitable interest[]”
in property and thus property of the bankruptcy estate at its
inception — the court of appeals entirely eliminated any statute
of limitations on claims of fraudulent transfer. Here, the
transfers at issue occurred in 1989 and 1990, and the debt at
issue was reduced to judgment in 1992: yet the action to set
aside the transfer was not commenced until April of 1996.
On the court of appeals’ theory, however, a trustee may claim
transferred property for a bankruptcy estate at any time, and
the inconvenience of compliance with the already generous
8
federal limitations periods is avoided simply by defining the
transfers away.
There is a conflict among the courts of appeals, however,
concerning whether the Bankruptcy Code even allows
fraudulently transferred property to be included in a
bankruptcy estate at its inception. Compare FDIC v. Hirsch _
(In re Colonial Realty Co.), 980 F.2d 125, 131 (2d Cir. 1992)
(fraudulently transferred property is not in the estate at its
inception), with Am. Nat'l Bank v. MortgageAmerica Corp.
(In re MortgageAmerica Corp.), 714 F.2d 1266, 1275 (Sth
Cir. 1983) (a debtor “continu[es] to have a ‘legal or equitable
interest[]’ in the property fraudulently transferred within the
meaning of § 541(a)(1) of the Bankruptcy Code”). The better
interpretation is the Colonial Realty Co. interpretation — that
fraudulently transferred property may not be treated as
property of the bankruptcy estate. The Code specifies that
such property becomes property of the estate only after the
trustee “recovers” it, and that the trustee’s right to recovery is
subject to the limitations periods governing the claims of
creditors. See 11 U.S.C. § 541(a)(3) (including in the estate
“[a]ny interest in property that the trustee recovers” under
specified sections authorizing the voiding of fraudulent
transfers) (emphasis supplied)); id § 544(b) (incorporating
the applicable limitations period). The MortgageAmerica
Corp. interpretation — that a debtor may have an equitable
interest in fraudulently transferred property such that it is
property of the estate at its inception — impermissibly writes
these provisions (§§ 541(a)(3) and 544) out of the Bankruptcy
Code.
The Eleventh Circuit wrongly joined the MortgageAmerica
Corp. camp in this case. It first held that Florida defines an
“equitable interest[]” in property to encompass property
fraudulently transferred and then included such property in
the bankruptcy estate at its inception under federal law. By
doing so, the court of appeals impermissibly allowed state law
to trump the federal law’s definition of the bankruptcy estate
Siieeneeneiieiiieasieeaea ea
9
at “the commencement of the case” as excluding fraudulently
transferred property. 11 U.S.C. § 541(a), (c). A state may not
circumvent federal law in this way, particularly since the
consequence of doing so is the elimination of any limitations
period for claims of fraudulent transfer. See Butner, 440 U‘S.
at 55 (state law defines property interests of the debtor
“[ujnless some federal interest requires a different result )
(emphasis supplied).
This question is both recurring and important. One of the
initial and central questions in every bankruptcy is what is
property of the bankruptcy estate, and many bankruptcy cases
involve claims that the debtor has fraudulently transferred
assets. If states may avoid the federal law excluding
fraudulently transferred property from the estate at its
inception and imposing limitations periods on its recovery by
the simple mechanism of deciding that a debtor has equitable
ownership of fraudulently transferred property, these
provisions effectively become null and void. Congress’ intent
will be doubly thwarted, because state law will have displaced
federal law in an area of primary and preemptive federal
control and because litigation that Congress has deemed stale
will occupy the federal bankruptcy courts. In addition, the
continued conflict among the federal courts concerning
whether fraudulently transferred property is property of the
bankruptcy estate ab initio will create a fundamentally unfair
lack of uniformity in federal bankruptcy law. See U.S. Const.
art. I, § 8, cl. 4.
For these reasons, this Court should grant the petition.
A. The Decision Is Wrong And Broadens A Conflict
Among The Courts Of Appeals.
“The nature and existence of the debtor’s right to property
is determined by looking at state law,” but the question
whether that property is included in the property of the
bankruptcy estate is governed by federal law. Jn re Lewis,
137 F.3d at 1283. Where a state defines a “legal or equitable
10
interest . . . in property” in a way that conflicts with federal
bankruptcy law’s definition of the property of the estate “as of
the commencement of the [bankruptcy] case,” the latter
prevails. See Butner, 440 U.S. at 55 (state law defines
property “[u]nless federal law requires a different result”).
Cf. BFP v. Resolution Trust Corp., 511 U.S. 531, 546 (1994)
(“where the ‘meaning of the Bankruptcy Code’s text is itself
clear,’ .. . its operation is unimpeded by contrary state law or
practice”).
In this case, the lower courts held that under Florida law, a
debtor retains equitable ownership of fraudulently transferred
property. As the court of appeals stated, the Debtor
“In the Florida cases relied on by the lower courts, the court
determined whether it was appropriate to impose legal responsibilities on,
or to grant legal rights to, an individual or entity that was not the legal
titleholder of an asset; when it was appropriate to do so, that party was
deemed the equitable owner of an asset for the particular legal purpose at
issue. See, e.g., Leon County Educ. Facilities Auth. y. Hartsfield, 698 So.
2d 526 (Fla. 1997) (holding that the educational authority owned the
property being used for student activities for purposes of a tax exemption
even though the property was leased to another entity that was conducting
the activities); Towerhouse Condominium, Inc. vy. Millman, 475 So. 2d
674 (Fla. 1985) (holding that condominium association members who
provided the funds for the purchase of a parking lot were the equitable
owners of the property, not the condominium association which held the
legal title); Metro. Dade County v. Bros. of Good Shephard, Inc., 714 So.
2d 573 (Fla. Dist. Ct. App. 1998) (holding that a charitable group was not
the equitable owner of a property that it was leasing for purposes of
obtaining a tax exemption for the property); White v. Brosseau, 566 So. 2d
832 (Fla. Dist. Ct. App. 1990) (holding that purchaser of land was the
equitable owner even though the mortgage holder retained the legal title
until all installment payments on the purchase were made); Williams v.
Dep't of Health & Rehab. Servs., 522 So. 2d 951, 954 (Fla. Dist. Ct. App.
1988) (holding that an individual who supplied the fund for a mobile
home purchase was the equitable owner of the home for purposes of
determining eligibility for federal benefits). Analogizing the instant case
to these cases, the lower courts determined that it is appropriate to impose
legal responsibilities on a debtor who has fraudulently transferred title to
an asset to a close relative for inadequate consideration and maintained
ee aS
1]
“precipitously undertook to transfer certain assets and real
property to his wife, . . . and to purchase other assets in her
name.” App. 3a (emphasis supplied). Yet, the court
continued, because under Florida law the Debtor retained
“equitable ownership” of such property, it is treated not as a
fraudulent transfer but as if “there was no valid transfer in the
first place.” Id (emphasis supplied). Based on that
reasoning and employing that state law label of equitable
Ownership, the lower courts concluded that fraudulently
transferred assets are not transferred assets after all; instead,
they are the property of the bankruptcy estate “as of the
commencement of the case.” 11 U.S.C. § 541(aX(1). But the
label of equitable ownership, like the label of constructive
trust,” is simply an equitable device or remedy for the
fraudulent transfer of property; it does not alter the fact that a
fraudulent transfer has occurred® and most certainly should
full possession and control over that asset. The court thus labeled the
debtor the “equitable owner” of such fraudulently transferred assets.
> See XL/Datacomp v. Wilson (Jn re Omegas Group, Inc.), 16 F.3d
1443, 1451 (6th Cir. 1994) (hoiding that a constructive trust is a remedy
following a judicial decision and therefore that “a creditor’s claim of
entitlement to a constructive trust is not an ‘equitable interest’ in the
debtor's estate existing prepetition”).
* It is well established under Florida law and generally that where, as
here, a debtor has transferred title to a close relative for inadequate
consideration while retaining possession and control, he has made a
fraudulent transfer. See Fla. Stat. ch. 726.105(2) (stating that a debtor’s
transfer of title to a close relative for inadequate consideration while
“retain[ing] possession or control of the property transferred” are badges
of fraud), 24 Am. Jur. Fraudulent Conveyances § 14 ( 1939) (“[t}he facts
which are recognized indicia of fraud are numerous, the most important
being the insolvency or indebtedness of the transferrer, lack of
consideration for the conveyance, retention by the debtor of possession of
the property, relationship between the transferrer and the transferee,
reservation of benefit to the transferrer, the pendency or threat of
litigation, secrecy or concealment, and the transfer of the debtor’s entire
estate”) (emphasis supplied) (footnotes omitted). Put differently, the
conclusion that a debtor is an equitable owner of transferred property is
12
not eliminate the application of the relevant statute of
limitations.
The court of appeals’ holding — that a debtor has an
equitable interest in fraudulently transferred property such
that it is property of the estate at its commencement -— is
wrong. Whatever state law provides, federal law, in the form
of section 541(a) of the Bankruptcy Code, excludes
fraudulently transferred assets from the bankruptcy estate at
its inception.
As noted above, property of the estate includes “all legal or
equitable interests of the debtor in property as of
commencement of the [bankruptcy] case.” 11 U.S.C.
§ 541(a)(1). This broad language might have encompassed a
debtor’s equitable interest in property fraudulently
transferred, but for subsection 541(a)(3), which provides that
the property of the bankruptcy estate also includes “[a]ny
interest in property that the trustee recovers” under specified
Bankruptcy Code provisions, including sections 544 and 550.
Id. § 541(a)(3) (emphasis supplied). The latter provisions
authorize the trustee to recover transferred property for the
benefit of the estate to the extent a transfer is avoided as
fraudulent, and the necessary implication is that such property
is not included in the estate at the commencement of the case.
As the Second Circuit has explained:
“If property that has been fraudulently transferred is
included in the §541(a)(1) definition of property of the
estate, then §541(a)(3) is rendered meaningless with
respect to property recovered pursuant to fraudulent
the legal equivalent of the conclusion that the debtor has fraudulently
transferred that property. Cf Cleveland Trust Co. v. Foster, 93 So. 2d
112, 114 (Fla. 1957) (finding fraudulent a transfer of real property without
consideration where the debtor continued in full use and possession);
Grant v. Benjamin (in re Benjamin), 210 B.R. 203 (Bankr. M.D. Fla.
1997) (holding that husband fraudulently transferred used car lot business
because it was transferred to his spouse without consideration and he
continued to work for and receive benefits from the business).
eve
13
transfer actions.” Further, “the inclusion of property
recovered by the trustee pursuant to his avoidance
powers in a separate definitional subparagraph clearly
reflects the congressional intent that such property is not
to be considered property of the estate until it is
recovered.” [/n re Colonial Realty Co., 980 F.2d at 13]
(citation omitted) (quoting Jn re Saunders, 101 B.R. 303,
305 (Bankr. N.D. Fla. 1989)).}
Equally to the point, as courts have recognized, “[i]f
[fraudulently transferred property] were [property of the
estate at its commencement], the trustee could simply use a
turnover action under 11 U.S.C. § 542, and the two (2) year
statute of limitations of § 546(a) for actions under $$ 544 and
548 could be avoided” In re Saunders, 101 B.R. 303, 305
(Bankr. N.D. Fla. 1989) (emphasis supplied). See also
Grossman v. Murray (In re Murray), 214 B.R. 271, 278
(Bankr. D. Mass. 1997) (“find[ing] the reasoning of Mort-
gageAmerica unconvincing” and describing Jn re Saunders as
taking the “better approach”); Jn re Lofton, 246 B.R. 604, 605
(Bankr. E.D. Ark. 2000) (same); Jn re Allnutt, 1995 WL
222067, at *4 (D. Md. Apr. 10, 1995) (same). Accordingly,
federal law forbids the courts from labeling fraudulently
transferred property as property of the estate at its inception,
and a state may not circumvent this prohibition by defining a
debtor’s interest in fraudulently transferred property as an
“equitable interest in property as of the commencement of the
[bankruptcy] case.” 11 US.C. § 541(a)(1). The court of
appeals’ contrary conclusion is plainly wrong.’
” Certainly, the usual practice in bankruptcy law is to treat a debtor’s
Prepetition transfers of title to an asset to a family member for inadequate
consideration as fraudulent transfers, particularly if the debtor maintains
possession and control of the asset. See, e.g., Taylor v. Rupp (In re
Taylor), 133 F.3d 1336, 1338 (10th Cir. 1998) (prepetition transfer of title
of vehicle to spouse was fraudulent); Salomon v. Kaiser (/n re Kaiser),
722 F.2d 1574, 1583 (2d Cir. 1983) (“[t}he transfer of property by the
debtor to his spouse while insolvent, while retaining the use and
14
The decision deepens an acknowledged conflict in the
federal courts. In holding that fraudulently transferred
property is not part of the bankruptcy estate as of its
commencement, the Second Circuit, in Jn re Colonial Realty
Co., 980 F.2¢ at 131, expressly rejected the contrary holding
of the Fifth Circuit set forth in /n re MortgageAmerica Corp.,
714 F.2d at 1275.
In that case, the Fifth Circuit held that a fraudulent
transferor had an interest in the transferred property that is
immediately part of the bankruptcy estate and can be reached
by his creditors. /d. The court thought that
[aJn action under the Fraudulent Transfers Act is
essentially one for property that properly belongs to the
debtor and which the debtor has fraudulently transferred
in an effort to put it out of reach of creditors. ... The
transferee may have colorable title to the property, but
the equitable interest — at least as far as the creditors (but
not the debtor) are concerned — is considered to remain
in the debtor so that the creditors may attach or execute
judgment upon it as though the debtor had never
transferred it. We think that when such a debtor is
forced into bankruptcy, it makes the most sense to
consider the debtor as continuing to have a ‘legal or
equitable interest{]’ in the property fraudulently
transferred within the meaning of § 541(a)(1) of the
Bankruptcy Code. [/d. (emphasis supplied). ]
See also Cullen Cir. Bank & Trust v. Hensley (Matter of
Criswell), 102 F.3d 1411, 1417 (Sth Cir. 1997) (“what we
recognized in MortgageAmerica is that when a soon-to-be-
enjoyment of the property, is a classic badge of fraud”, “[hje continued to
retain the possession, benefit and use of the properties and treated them as
his own”), Beshears vy. Schieffler (in re Beshears), 182 B.R. 235, 239
(Bankr. E.D. Ark. 1995) (finding a fraudulent transfer where the “debtor
transferred her largest asset . . . to close relatives near in time to the filing
of her petition in bankruptcy” and “retained control over the property and
treated it as her own”).
1S
bankrupt debtor __ . fraudulently transfers property to shield it
from his creditors, that debtor/transferor should be considered
to have retained an equitable interest in the property so that it
will continue to be considered ‘property of the estate”): S.J.
Acquisition, Inc. vy. Eastway Delivery Serv. (Matter of S.1.
Acquisition, Inc.), 817 F.2d } 142, 1150 (Sth Cir. 1987); In re
Swallen’s, Inc., 205 B.R. 879, 882 (Bankr. S.D. Ohio 1997);
McGowan v. Ciccone (In re Ciccone), 171 BR. 4,5 n2
(Bankr. D.R.I. 1994): Cent. Heating & Air Conditioning, Inc.
v. Famous Supply Co. (In re Cent Heating & Air
Conditioning, Inc.), 64 B.R. 733, 736 (N_D. Ohio 1986). The
Eleventh Circuit reached precisely the same conclusion in this
case: It held that under Florida law, a debtor retains equitable
ownership of fraudulently transferred property, and further
determined that “it makes the most sense to consider the
debtor as continuing to have a ‘legal or equitable interest[]’ in
the property fraudulently transferred within the meaning of
section 541(a)(1) of the Bankruptcy Code.” Jn re Mortgage-
America Corp., 714 F.2d at 1275. This holding renders the
limitations periods governing actions to avoid fraudulent
transfers inapplicable.
In sum, by holding that Florida defines an “equitable
interest[]” in property to encompass property fraudulently
transferred and including such property in the bankruptcy
estate at its inception, the court of appeals has embraced the
erroneous MortgageAmerica Corp. interpretation of the
Bankruptcy Code; elevated state law Over the federal
definition of the bankruptcy estate at “the commencement of
the case” as excluding fraudulently transferred property (11
U.S.C. §541(a)); rendered the statutes of limitations
governing actions to avoid fraudulent transfers meaningless:
and increased the mature conflict among the federal courts on
this issue. The magnitude of the delay authorized here Starkly
illustrates the harmful effect of the decision below. The
Court should grant the petition to resolve the conflict on this
important question of federal bankruptcy law.
16
B. The Question Is Recurring And Important.
This question is both recurring and important. The first
step, and one of the most critical steps, in every bankruptcy is
determining the content of the bankruptcy estate. Numerous
bankruptcy cases involve claims that the debtor has
fraudulently transferred assets, and so the question whether a
debtor has a property interest in such assets “as of the
commencement of the [bankruptcy] case” (id. § 541(a)(1))
will often arise, as evinced by the cases addressing the issue
cited above. The issue will most certainly and frequently
recur in cases whether the applicable federal limitations
period for avoiding fraudulent transfers has run, since, on the
Eleventh Circuit’s theory — and that of other courts sharing
the MortgageAmerica approach — there may be no statute of
limitations on such claims.
The resolution of the question is also critical to the
maintenance of the proper federal role in bankruptcy law.
Congress carefully delineated that federal role in bankruptcy
proceedings, and, notably here, provided that federal law
determines the content of the bankruptcy estate and the
applicable limitations periods. Although Congress preserved
the states’ right to define property interests for the most part,
it is clear that that right must give way to any conflicting
provision in federal bankruptcy law. See, e.g., BFP, 511 US.
at 546; Butner, 440 U.S. at 55. But, if a state can define a
debtor’s “equitable interest[] in property” to include his or her
interest in fraudulently transferred property, the state can
easily do away with the federal provisions excluding
fraudulently transferred property from the estate at its
inception and imposing limitations periods on its recovery.
Congress clearly did not contemplate this result — that a state
could render federal law and limitations periods irrelevant
with a word trick. And, Congress explicitly regarded certain
litigation to recover fraudulently transferred property as
“stale,” and its intent should not be disregarded or
circumvented, as has been done here. Beach v. Ocwen Fed.
17
Bank, 523 U.S. 410, 415 (1998) (“the object of a statute of
limitations [is] keeping ‘stale litigation out of the courts’”’).
Here a very lenient six-year limitations period has been
rendered immaterial.
Finally, there is a strong federal interest in the uniform
interpretation of important federal statutes, such as the
Bankruptcy Code, and the need for a uniform rule on this oft-
recurring question is unusually compelling. It is funda-
mentally unfair for debtors and creditors to be subject to
different sets of federal rules based on nothing more than the
fact that their bankruptcy cases are being litigated in different
circuits. More specifically, there may be no statute of
limitations on trustees or creditors seeking to avoid fraudulent
transfers in the Eleventh and Fifth Circuits and certain other
lower courts, while such claims are governed by the
incorporated limitations periods in the Second Circuit and stil]
other courts. Moreover, endless further litigation on this issue
in bankruptcy proceedings is unquestionably a waste of
limited resources, and only this Court can put an end to the
dispute. Accordingly, this Court should grant review of this
case and resolve the meaning of section 541(a).
18
CONCLUSION
The petition for a writ of certiorari should be granted.
Respectfully submitted,
JOHN R. DUNLAP CARTER G. PHILLIPS*
JAMES E. BAILEY III VIRGINIA A. SEITZ
HUMPHREYS, DUNLAP, SIDLEY & AUSTIN
WELLFORD, ACUFF & 1722 Eye Street, N.W.
STANTON, P.C. Washington, D.C. 20006
2200 First Tennessee Building (202) 736-8000
Memphis, TN 38103
(901) 523-8088
Counsel for Petitioner
March 6, 2001 * Counsel of Record
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APPENDIX A
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
No. 99-13416
D.C. Docket No. 98-01 169-CIV-ORL-18
95-00293A
IN RE: WILLIAM M. GURLEY,
Debtor.
BETTY JEAN GURLEY,
Plaintiff-Appeilant,
versus
GEORGE E. MILLS, JR.,
Trustee, Chapter 7 Trustee,
Defendant-Appellee.
Appeal from the United States District Court
for the Middle District of Florida
(September 20, 2000)
Before TJOFLAT, WILSON and B. FLETCHER’, Circuit
Judges.
PER CURIAM:
Betty Jean Gurley appeals the district court order affirming
the bankruptcy court’s decision that certain property held in
her name is actually the equitable property of her husband,
* Honorable Betty B. Fletcher, U.S. Circuit Judge for the Ninth Circuit,
sitting by designation.
2a
the debtor, and is therefore property of the bankruptcy estate.
We affirm.
The concept of equitable ownership has long been
recognized by the Florida courts. See Leon County
Educational Facilities Authority v. Hartsfield, 698 So.2d 526,
528 (Fla. 1997) (“the concept of equitable ownership in ad
valorem taxation has long been a part of Florida law”);
Towerhouse Condominium, Inc. v. Millman, 475 So.2d 674,
677 (Fla. 1985) (“As a matter of law, where property is
acquired in the name of one person or entity with
consideration provided by others, the transferee is presumed
to hold title on a resulting trust for those who provided the
consideration.”). The courts have recognized and enforced the
principle of equitable ownership where, as here, bare legal
title cannot be said to confer ownership. In /n re: Charnock,
97 B.R. 619, 628 (Bankr. M.D. Fla. 1989), the bankruptcy
court found that Mr. Charnock, not his wife, owned property
held by a corporation of which Mrs. Charnock was the sole
shareholder, finding that the “exercise of dominion and
control of the assets and affairs of these entities and the total
lack of involvement in the affairs by the president and sole
stockholder Susan Charnock” were controlling factors. The
court also found pertinent the “fact that when the entities
were formed, the Debtor knew that he must shield his assets,
otherwise they will be subjected to a tax claim of the
Government.” /d. In addition, the court pointed to the fact
that the debtor “repeatedly and consistently held out to the
public at large that the assets are in fact owned by him and he
is in the sole control of these two entities.” /d.; see also
LiButti v. United States, 107 F.3d 110 (2d. Cir. 1997)
(holding that a delinquent taxpayer was the equitable owner
of assets even though his daughter held the title to those
assets where the taxpayer controlled the assets, used the
proceeds for his personal use, and daughter was uninvolved in
the running of the business).
3a
The facts of the case at hand lead us to conclude that the
debtor maintained equitable ownership of all the assets and
properties at issue here. The debtor was aware that a
judgment against him (and not his wife) was imminent. He
precipitously undertook to transfer certain assets and real
property to his wife, the appellant, and to purchase other
assets in her name. However, he continued to exercise
dominion and control over all the property and assets now
held in the appellant’s name, including certain assets he
purportedly had made as a gift to her. Moreover, he continued
to benefit from the proceeds of all the properties and assets
held in the appellant’s name. Although the appellant signed
her name to several documents, it was done at debtor’s
direction and did not evidence control of decision making on
her part. Indeed, the debtor held himself out to the public as
the owner of certain properties long after he had purportedly
transferred them to the appellant.
The appellant’s arguments that the instant action is barred
by a statute of limitations is unavailing. The statute of
limitations applies where a party is seeking to set aside
fraudulent transfers not, as here, where there was no valid
transfer in the first place.
AFFIRMED
4a
APPENDIX B
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
ORLANDO DIVISION
[Filed Aug. 9, 1999]
Case No. 98-1 169-CIV-ORL-1I8A
IN RE: WILLIAM M. GURLEY,
Debtor.
BETTY JEAN GURLEY,
Appellant,
Vv.
GEORGE E. MILLS, JR.,
Appellee.
ORDER
Betty Jean Gurley appeals a final judgment entered by the
United States Bankruptcy Court for the Middle District of
Florida and challenges the bankruptcy court’s decision to
include in the bankruptcy estate approximately $17 million in
assets that Mrs. Gurley claims were effectively transferred to
her by William Gurley, who is Mrs. Gurley’s husband and the
debtor in this action. The bankruptcy court found that Mr.
Gurley attempted to transfer the assets to his wife for the
purpose of shielding those assets from a CERCLA judgment
and that Mr. Gurley failed to do so effectively because he
retained an equitable ownership interest in the assets. Mrs.
Gurley argues that this finding was in error because (1) the
limitations period governing fraudulent transfers had expired,
(2) the equitable ownership theory relied upon by the court is
inapplicable to this case, and (3) Mr. Gurley effectively
Sa
transferred the assets under the applicable state law. Because
the issues raised on appeal turn on questions of fact and the
bankruptcy court wholly discredited the testimony of Mr. and
Mrs. Gurley, the bankruptcy court did not clearly err, and the
bankruptcy court’s entry of final judgment must be affirmed.
I, Background
In 1982, the Environmental Protection Agency (EPA)
discovered spent sulphuric acid and Clay residue during an
inspection of a site located near Edmonson, Arkansas. The
EPA determined that Mr. and Mrs. Gurley, among others,
were responsible for dumping the hazardous substances. After
Mr. Gurley refused to clean the property in accordance with
the EPA’s remediation plan, the United States filed a civil
action on November 18, 1987 before the United States
District Court in the Eastern District of Arkansas to recover
past and future clean-up costs from Mr. and Mrs. Gurley and
several others pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act (“CERCLA”), 42
U.S.C. § 9601, et seq.
In 1988, it appeared that the government’s multimillion
dollar lawsuit against Mr. Gurley would succeed and that the
action against Mrs. Gurley would be dismissed. With the help
of one of Mr. Gurley’s employees, Bedford Heath, Jr., Mr.
Gurley began attempting to transfer to Mrs. Gurley various
assets including Moltan Co., a sole proprietorship organized
and operated by Mr. Gurley. Over the period beginning
December 1988 and ending December 1989, Mr. Gurley’s
assets dwindled from $15,730,342 to $1,791,370 while Mrs.
Gurley’s assets jumped from $7,005,700 to $24,369,568.
The United States ultimately dismissed Mrs. Gurley from
the civil action in June 1990 and obtained a judgment against
Mr. Gurley in 1992 for $1,786,503 plus any future costs
which might be incurred for clean-up of the Edmonson site.
See U.S. v. Gurley Refining Co., 788 F. Supp. 1473 (E.D.
6a
Ark. 1992), aff'd in part and rev'd in part by U.S. v. Gurley,
43 F.3d 1188 (8th Cir. 1994), cert. denied 116 S.Ct. 73
(1995). The United States also initiated a second CERCLA
action against Mr. Gurley in September 1993 to recover any
past and future costs associated with the clean-up of a
contaminated site located in West Memphis, Arkansas.
On July 26, 1995, Mr. Gurley filed a voluntary Chapter 7
petition for bankruptcy seeking a discharge of his debts. At
that time, Mr. Gurley’s assets totaled $258,459, and Mrs.
Gurley’s assets totaled approximately $23,305,307.
As part of the bankruptcy proceedings, the United States
filed a proof of claim seeking approximately $25,000,000 in
past and future clean-up costs for the Edmonson and West
Memphis sites. Also, the United States brought Adversary
Proceeding 95-293 objecting to Mr. Gurley’s bankruptcy
discharge. Furthermore, the bankruptcy trustee instituted
Adversary Proceeding 96-159 seeking to recover certain
allegedly fraudulent conveyances.
Following a final evidentiary hearing regarding the
adversary proceedings, the bankruptcy court issued a
memorandum opinion setting forth findings of fact and
conclusions of law. In the memorandum opinion, the court
wholly discredited Mr. and Mrs. Gurléy’s testimony and
found that Mr. Gurley “transferred his assets with the actual
intent to hinder, delay and defraud the United States.”
(August 15, 1997 Mem. Op. at 11, R. at 3.) The court stated
that:
The facts reveal a pattern of numerous omissions which
certainly warrants the inference of reckless and cavalier
disregard for the truth . . . The Debtor attempted to take
advantage of a system available to benefit the honest, but
unfortunate debtor. The Debtor’s actions and attitude
reflect disrespect and disregard for the Court.
(/d. at 14.) The court also found that, while the applicable
statute of limitations prevented the United States from
Ta
recovering any property fraudulently transferred prior to
April 1990, Mr. Gurley had not effectively transferred to his
wife approximately $17 million worth of assets, including
Moltan Co., because Mr. Gurley had retained control over,
and thus an equitable ownership interest in, the assets. (/d. at
15, 16, 23-25.)
Based upon these findings, the court concluded that (1) the
debtor's discharge was due to be denied, (2) the debtor’s gift
of Moltan Co. to Mrs. Gurley was ineffective, (3) the Trustee
could recover any property fraudulently transferred prior to
April 1990, and (4) the bankruptcy estate included the
approximately $17 million worth of assets, including Moltan
Co., that Mr. Gurley supposedly transferred to Mrs. Gurley.
(Id. at 26.) On appea!, Mrs. Gurley challenges the bankruptcy
court’s conclusions that the gift of Moltan Co. was ineffective
and that Mr. Gurley retained an equitable ownership interest
in the assets that he supposedly transferred.
II. Discussion
A. Legal Standard
“On an appeal the district court or bankruptcy appellate
panel may affirm, modify, or reverse a bankruptcy judge's
judgment, order, or decree or remand with instructions for
further proceedings.” Fed. R. Bankr. P. 8013. When
reviewing a bankruptcy judge’s judgment, order, or decree, a
district court must give due regard to the opportunity of the
bankruptcy court to judge the credibility of the witnesses and
must accept the bankruptcy court’s findings of fact unless
those findings are clearly erroneous. See id.; Englander vy.
Mills (In re Englander), 95 F.3d 1028, 1030 (11th Cir. 1996).
In contrast, the district court need not defer to the bankruptcy
court’s conclusions of law and must review those conclusions
de novo. See In re Englander, 95 F.3d at 1030.
8a
B. Whether Mr. Gurley Retained an Equitable Ownership
Interest in the Assets
The appellant first challenges the bankruptcy court’s
finding that Mr. Gurley retained an equitable ownership
interest in the approximately $17 million worth of assets that
he supposedly transferred to Mrs. Gurley. The appellant
argues that the bankruptcy court’s nominee theory of
equitable ownership is not recognized in Florida and that it
does not apply outside the context of tax collection cases.
Further, the appellant contends that the statute of limitations
regarding fraudulent transfers prevents the trustee from
recovering any interest in the transferred property. In the
alternative, the appellant asserts that the bankruptcy court
failed to properly quantify any equitable ownership interests
that Mr. Gurley retained. The court will address each of these
arguments in turn.
The appellant first argues ‘hat the bankruptcy court
improperly relied upon a nominee theory because Florida law
does not recognize a nominee theory and because the
nominee theory only applies in tax collection cases brought
by the Internal Revenue Service. These arguments are
unpersuasive. Florida law recognizes equitable ownership
outside of the context of tax collection cases. See, e.g., White
v. Brousseau, 566 So. 2d 832, 835-36 (Fla. Dist. Ct. App.
1990) (equitable title and equity or redemption recognized in
quiet title action); Williams v. Department of Health and
Rehabilitative Servs., 522 So. 2d 951, 954 (Fla. Dist. Ct. App.
1988) (equitable ownership of a mobile home relevant to
eligibility for public assistance); Walton v. Tomax Corp., 632
So. 2d 178, 180, 181 n. 2 (Fla. Dist. Ct. App. 1994)
(recognizing that a husband who ran the daily operation of a
construction business and held the contractor’s license could
be personally liable for the corporation’s contract liabilities
even though his wife was the sole stockholder in the
corporation). Moreover, the bankruptcy court’s factual
9a
findings clearly show that Mr. Gurley retained an equitable
interest in the assets. In particular, the bankruptcy court
found, as a matter of fact, that a close family relationship
existed between Mr. and Mrs. Gurley, that Mr. Gurley
retained complete control of all property supposedly
transferred to Mrs. Gurley, that Mr. Gurley received no
consideration for the value of the assets, and that Mr. Gurley
continued to manage all of Mrs. Gurley’s accounts,
investments, and interests. (August 15, 1997 Mem. Op. at 24,
R. at 3.) All of these findings support the conclusion that Mr.
Gurley retained ownership of the assets. Because Florida law
recognizes equitable ownership outside the context of tax
collection cases and because the bankruptcy court’s factual
findings show that Mr. Gurley retained ownership of the
assets, the bankruptcy court did not err in finding that Mr.
Gurley retained an equitable ownership interest in the assets.
The appellant further argues that the bankruptcy court erred
because Section 3307(b) of the Federal Debt Collection
Procedures Act, 28 U.S.C. §8§ 3001-3308 (“FDCPA”)
extinguishes after six years the cause of action for avoidance
of a transfer.: This argument is also unpersuasive. The
FDCPA’s statute of limitations does not apply to the transfers
because Mr. Gurley retained an equitable ownership interest
in the assets and that interest was never transferred. By its
own terms, Section 3307 only applies to actions where a
plaintiff seeks to avoid a transfer, and Mr. Gurley had an
ongoing, equitable interest in the assets that was never
transferred.
The appellant argues in the alternative that, even if an
equitable interest exists and the statute of limitations does not
apply, the bankruptcy court failed to quantify Mr. Gurley’s
equitable interest because the court did not account for Mrs.
Gurey’s 49% equitable interest in the assets used by Moltan
Co. and because the bankruptcy court did not define which
assets constituted Moltan Co. Contrary to the appellant’s
10a
assertions, the bankruptcy court did quantify Mr. Gurley’s
equitable ownership interest. The court found that Mrs.
Gurley did not have any equitable ownership interest in the
Moltan Co. assets, and the court did not have to define which
assets constituted Moltan Co. because nothing was ever
transferred.
C. Whether Mr. Gurley Made an Effective Gift of Moltan
Co.
The appellant also challenges the bankruptcy court’s
finding that Mr. Gurley did not make a valid gift of Moltan
Co. to Mrs. Gurley. A donor makes a valid gift when (1) the
donor intends to make a gift, (2) the donor actually or
constructively delivers the gift to the donee, and (3) the donee
accepts the gift. See Fuller v. Fuller, 215 So. 2d 507, 510
(Fla. Dist. Ct. App. 1968). The bankruptcy court found that
Mr. Gurley neither intended to make a gift nor effectively
delivered the gift to Mrs. Gurley. (August 15, 1997 Mem. Op.
at 4-5, 15, R. at 3.)
The appellant argues that there is ample evidence to show
that Mr. Gurley not only intended to make a gift but that he
also delivered the gift. In support, the appellant directs this
court’s attention to the fact that Mr. Gurley prepared a deed to
give Moltan Co. to Mrs. Gurley; that Mr. Heath, supposedly
as Mrs. Gurley’s agent, received the deed and put it in Mrs.
Gurley’s file in the office; that Mrs. Gurley testified that she
knew of the gift even though she had not seen the deed; and
that Mrs. Gurley filed permits, licenses, applications, business
documents, and tax returns showing her as the sole owner of
Moltan Co.
Although evidence may exist in the record to show that Mr.
Gurley made a gift of Moltan Co. to Mrs. Gurley, this court’s
task is not to second-guess the bankruptcy court judge who
had the opportunity to evaluate the credibility of the
witnesses first hand. The issue of whether a valid gift was
made is an issue of fact because, to determine whether a gift
lla
was made, the bankruptcy court had to examine how Mr.
Gurley, Mrs. Gurley, and Mr. Heath treated the supposed gift
and, in doing so, had to weigh their credibility.
Substantial evidence supports the bankruptcy court’s
finding that Mr. Gurley did not effect a gift. Although Mr.
Gurley may have executed a deed and Mrs. Gurley testified
that she knew of the gift, this evidence is overshadowed by
evidence that Mr. Gurley continued to exercise control over
Moltan Co. by representing that he was the owner of Moltan
Co., that Mrs. Gurley signed documents and checks when
requested to without knowledge of the purpose and direction
of the funds, and that the deed of gift was never in the
possession of Mrs. Gurley but instead remained at Moltan Co.
where Mr. Gurley could have access to it. Moreover, the
bankruptcy court plainly discredited the testimony of Mr. and
Mrs. Gurley as evidenced by the court’s statement that “I can
tell you very honestly, except for the last witness [James
Gentry], your witnesses did not reach the credibility that I
think you would have liked for the defendants, and that’s
almost to a person . . .” (May 16, 1997 Tr. at 87, R. at 21N.)
Because there is substantial evidence to Support the
bankruptcy court’s factual finding, the bankruptcy court did
not clearly err when it found that Mr. Gurley did not make an
effective gift of Moltan Co. to Mrs. Gurley.
Ill. Conclusion
Based upon the foregoing, the bankruptcy court’s entry of
final judgment is AFFIRMED. The court directs the clerk of
court to close the case.
It is SO ORDERED in Orlando, Florida this 9th day of
August 1999,
/s/ [illegible]
G. KENDALL SHARP
United States District Judge
12a
APPENDIX C
UNITED STATES BANKRUPTCY COURT
MIDDLE DISTRICT OF FLORIDA
ORLANDO DIVISION
[Filed Sep. 16, 1997]
Case No. 95-03833-6B7
X-S-97-00085-N/A (N/A)
IN RE: WILLIAM M. GURLEY,
Debtor.
Adv. Case No. 95-00293
UNITED STATES OF AMERICA,
Plaintiff,
vi
WILLIAM M. GURLEY,
Defendant.
Adv. Case No. 96-00159
GEORGE E. MILLS JR.,
CHAPTER 7 TRUSTEE,
Plaintiff,
Ve
BETTY JEAN GURLEY,
Defendant.
AMENDED JUDGMENT
The United States of America’s Complaint To Object
To Or Revoke A Discharge Pursuant to 11 U.S.C.
§ 727(a)(2)(A), (a)(2)(B), (a)(4)(A), (a)(4)(D), (a)(5), (a)(7),
and (c) and George E. Mills Jr.’s, Chapter 7 Trustee,
Complaint Seeking To Recover Property of the Estate
Pursuant to 11 U.S.C. §§ 544(b), 550, Fla. Stat. Sec.
726.105(1)(a) and (b), and 28 U.S.C. § 3304(a) and (b),
13a
having been tried before the Court, and in conformity with
and pursuant to the MEMORANDUM OPINION entered on
August 15, 1997, and the findings of fact and conclusions of
law stated orally and recorded in open court on September | 1,
1997, it is
ORDERED, ADJUDGED, and DECREED that judgment
sought in the Plaintiff's, United States of America’s
Complaint to Object To Or Revoke A Discharge is entered in
favor of Plaintiff, the United States of America and against
Defendant/Debtor, William M. Gurley pursuant to 11 U.S.C.
§ 727(a)(4); it is further
ORDERED, ADJUDGED, and DECREED that the
Defendant’s/Debtor’s, William M. Gurley, discharge is
DENIED pursuant to 11 U.S.C. § 727(a)(4); it is further
ORDERED, ADJUDGED, and DECREE [sic] that
judgment sought in Plaintiff's, George E. Mills Jr., Chapter 7
trustee, Complaint Seeking To Recover Property of the Estate
is entered in part in favor of Plaintiff, George E. Mills Jr.,
Chapter 7 Trustee, and in part against Defendant, Betty Jean
Gurley with respect to property fraudulently transferred as set
out in the Memorandum Opinion and the findings of fact and
conclusions of law stated orally and recorded in open court on
September 11, 1997, pursuant to 11 U.S.C. § 544(b) and Fla.
Stat. Sec. 726.105(1)(a), and 28 U.S.C. § 3304 (a)(1) and
§ 3304(b)(1)(A) ; and it is further
ORDERED, ADJUDGED, and DECREED that the
Plaintiff, George E. Mills, Jr., Chapter 7 Trustee, may recover
any and all property transferred by the Defendant/Debtor,
William M. Gurley, to his wife, Betty Jean Gurley, pursuant
to 11 U.S.C. § 544(b) and 11 U.S.C. § 541(a)(1), including the
following property and its proceeds:
I. Coastal Unilube non-compete payments totaling
$2,300,000.00 (consisting of an_ initial payment of
$1,020,000.00 plus periodic payments thereafter totaling
$1,280,000.00);
l4a
2. Moltan Co.;
3. $2,099,143.00 in commercial paper held at Union
Planters Bank;
4. $1,550,000.00 held at First Tennessee National Bank;
5. $7,500.00 from Memphis stockyard payments;
6. The survivorship interest of William Martin Gurley
a/k/a W. M. Gurley in the real property located in Hardeman
and Shelby Counties, State of Tennessee, as described in
P.Ex. #57-83 attached;
7. Condominium located in Lake County, Florida;
8. $389,235.00 held at Union Planters National Bank;
9. $63,626.00 in proceeds from the Mulvaney Note;
10. $27,450.00 in proceeds from sale of real property
located at lot 1, Gurley Subdivision, Desoto County, State of
Mississippi;
11. Nevada real property located at Mount Diablo
Meridian, Nevada, Township 23 N., Range 27 E., sections 28,
32 (lots 8, 11, 12), and 33 as more specifically described in
P.Ex. #47-52 attached;
12. Tennessee real property located in Hardeman County
and Nevada real property located in Churchill County related
to the Moltan Company as more specifically described in
P.Ex. #45-46, 53-56, 117 attached; and
13. $4,633,333.00 from the proceeds from the sale to
Coastal Unilube.
Dated this 16th day of September, 1997.
/s/ Arthur B. Briskman
ARTHUR B. BRISKMAN
United States Bankruptcy Judge
|
15a
APPENDIX D
UNITED STATES BANKRUPTCY COURT
MIDDLE DISTRICT OF FLORIDA
ORLANDO DIVISION
[Filed Aug. 15, 1997]
.. , *
|
Case No. 95-03833-6B7
IN RE: WILLIAM M. GURLEY,
Debtor.
Adv. Case No. 95-00293
UNITED STATES OF AMERICA,
Plaintiff,
Vs
WILLIAM M. GURLEY,
Defendant.
Adv. Case No. 96-00159
GEORGE E. MILLS JR.,
CHAPTER 7 TRUSTEE,
Plaintiff,
we
BETTY JEAN GURLEY,
Defendant.
MEMORANDUM OPINION
At Orlando, in said District on May 7-9, 12-16, and June
12, 1997, before Arthur B. Briskman, Bankruptcy Judge.
This matter came before the Court on Final Evidentiary
Hearing on the Plaintiffs’, United States of America.
Complaint To Object To Or Revoke A Discharge Pursuant to
l6a
11 U.S.C. § 727 (a)(2)(A), (a)(2)(B), (a4)(A), (a)(4)(D),
(a)(5), (a)(7), and (c) and George E. Mills Jr., Chapter 7
Trustee, Complaint Seeking To Recover Property of the
Estate Pursuant to 11 U.S.C. §§ 544(b), Fla. Stat. sec.
726.105(1)(a) and (b), and 28 U.S.C. § 3304(a) and (b).
Appearing before the Court were Robert L. Young, counsel
for the Debtor, William M. Gurley; Richard M. Gladstein,
counsel for the United States of America; James E. Foster,
counsel for George E. Mills Jr., Chapter 7 Trustee; and
Michael Williamson, counsel for Betty Jean Gurley. After
reviewing the pleadings, exhibits, evidence, receiving live
testimony from William M. Gurley, Betty Jean Gurley,
Robert Harris, Cathy Toller, Jim D. Dorris, Dr. Mitchell
Albert, Keith Papke, George E. Mills, Jr., David Weeks,
Robert Pflueger, Ed Tillman, Bill Kimmel, Bedford Forest
Heath, Ray Rotella, Dr. Charles Brandon, and Jim Gentry,
and arguments of counsel, the Court makes the following
Findings of Fact and Conclusions of Law.
FINDINGS OF FACT
The Debtor, William M. Gurley, formed Gurley Refining
Company (“GRC Co.”), a partnership, with his wife and son
to refine used oils. The Debtor and Betty Jean Gurley (“Mrs.
Gurley”) formed Gurley Refining Corporation (“GRC
Corp.”) in 1963 which accepted waste oil from GRC Co. and
reprocessed it into usable oils. GRC Co. and GRC Corp.
dumped spent sulfuric acid and clay residue from a refining
process into a pit one eighth of a mile upgradient in
Edmonson, Arkansas (“Edmonson site”) in Spring 1979. The
Environmental Protection Agency (“EPA”) conducted site
inspections beginning in 1982 and detected the hazardous
substances. The EPA determined that the Debtor, along with
others, was responsible for the disposal of hazardous wastes
at the Edmonson site. The Debtor refused to clean the
Edmonson site in accordance with the EPA plan of
remediation pursuant to the Comprehensive Environmental
onthe atts ska Unter ae ord Aca
Bt oe PRA ee oe
17a
Response, Compensation and Liability Act (“CERCLA”), 42
U.S.C. § 9601, et seq.
The EPA brought a civil action, concerning the Edmonson
site, in the United States District Court, Eastern District of
Arkansas (“District Court”) against the Debtor and others,
including Mrs. Gurley, Larry Gurley, GRC Co., and GRC
Corp. on November 18, 1987 to recover costs incurred and to
be incurred in the clean-up. The EPA dismissed Mrs. Gurley
as a defendant in June 1990.
The United States of America (“United States”), as part of
pre-trial discovery, filed interrogatories, requests for pro-
duction, motions to compel and conducted a deposition with
the Debtor, seeking information regarding the Debtor’s and
his companies’ liability and financial ability. The Debtor
refused to provide the United States with personal financial
information.
According to financial records, the Debtor’s assets totaled
approximately $15,730,342.00 and Mrs. Gurley’s assets
totaled approximately $7,005,700.00 in December 1988.
GRC Co. was sold to Coastal Unilube, Inc. (“Coastal”) for
$13,900,000.00, plus $2,300,00.00 [sic] in the form of a
consulting agreement and a covenant not to compete in 1988.
A portion of the sum was to be paid in installments.
$4,600,000.00 was deposited in the Debtor’s and Mrs.
Gurley’s joint account at Union Planters Bank (“Union”) and
later into Mrs. Gurley’s account at Union in 1990. The Debtor
maintains access to and control over these funds.
Bedford Forest Heath (“Mr. Heath”) is a trusted employee
of the Debtor’s who has worked for him for many years. Mr.
Heath assisted the Debtor in effecting monetary and property
transfers to Mrs. Gurley. Mr. Heath acts at the Debtor’s
direction and continues to aid him in access and control of the
assets transferred. The Debtor instructed Mr. Heath to de-
posit future installment payments, through 1993, totalling
Perce
18a
$1,280,000.00, into Mrs. Gurley’s account at Union. The
Debtor has an equitable interest in these monies transferred to
Mrs. Gurley.
The Debtor purported to transfer Moltan Co. to Mrs.
Gurley by deed of gift on February 2, 1989. The Debtor
formed Moltan Co. (“Moltan’’) in the 1980’s doing business
as a sole-proprietorship in Tennessee and Nevada to continue
a business previously known as Maltan, Inc. Moltan
manufactures diatomaceotis earth, an oil absorbent material
used in cat litter and other products. The Debtor drew up and
signed a deed of gift on February 2, 1989. It was given to Mr.
Heath, and at the direction of the Debtor was placed in a
filing cabinet located at Moltan. The Debtor did not tell Mrs.
Gurley about the deed of gift. No other documents were ever
executed to reflect Mrs. Gurley as the new owner. The
Nevada and Tennessee employment and revenue agencies
were not notified of Mrs. Gurley’s status as “owner” of
Mofltan until April 1990. The Internal Revenue Service
(“IRS”) was initially notified in March 1991.
The gift of Moltan was not validly effected. The gift of
deed was never delivered to Mrs. Gurley. The gift of Moltan
never came within the power and control of Mrs. Gurley.
Also, there was no true donative intent by the Debtor to divest
himself of all dominion and control over Moltan. The Debtor
continues to control Moltan and intended to from the time of
execution of the alleged gift. The gift of deed has no effect.
Moltan is property of the Debtor’s, and is therefore, property
of the estate.
Even if the deed of gift was effective, the Debtor has an
equitable interest in Moltan, causing it to be property of the
estate. The Debtor continues to own and run Moltan. All
agents and employees of Moltan receive instruction from and
look to the Debtor as boss. The Debtor takes no compensation
from Moltan. Minutes taken from Moltan management
meetings notice his presence and absence. The minutes do
ee
19a
not reflect Mrs. Gurley’s absence or presence. He continued
for years to represent to the Governors of Nevada and others
that he was the owner of Moltan. He is continuously involved
in the manufacturing, pricing, and shipping of products and
the acquisition of assets at Moltan. The Debtor is the only
authorized signatory on the Moltan Mastercard which he has
used for both business and personal expenses between
January 1990 and November 1995. Mrs. Gurley has no input
in the management and control of Moltan. She signs Moltan
checks, but has no knowledge as to the purpose or direction
of such funds. The Debtor is the true owner of Moltan and all
of its assets, real and personal.
The Debtor transferred $2,999, 143.00 in commercial paper
in a Tax Free Trust account at Union to Mrs. Gurley’s
account at Union in 1989. The Debtor effected this transfer
through the aid of Mr. Heath. The Debtor has access to these
funds through Mr. Heath, and therefore, maintains an
equitable interest in these funds. The Debtor transferred
$1,550,00.00 [sic] from the Debtor’s and Mrs. Gurley’s joint
account at First Tennessee Bank (“First Tennessee”) to an
individual account of Mrs. Gurley’s in 1989. The Debtor
transferred $7,500.00 from Memphis stockyard payments to
Mrs. Gurley between December 1989 and January 1990. The
Debtor transferred his interest in numerous tracts of real
property located in the 4th and 5th Civil District of Hardeman
County, State of Tennessee to Mrs. Gurley on July 7, 1989
and August 9, 1989, respectively. (See P.Ex. #57-83).
Deposits of approximately $2,000,000.00 were made into
the Debtor’s and Mrs. Gurley’s joint account at SunTrust
Bank (“SunTrust”) between July 1989 and April 1992. Funds
from this account were used to purchase a condominium in
Mrs. Gurley’s name in [sic] located in Lake County, Florida
in 1989. Deposits of approximately $2,200,000.00 were made
into the Debtor’s and Mrs. Gurley’s joint account at Union
Planters National Bank (“Union”), in addition to the funds
20a
from the sale of GRC Co. to Coastal. The Debtor withdrew
$389,235.00 from their joint account at Union and deposited
the funds into Mrs. Gurley’s account at Union. These funds
originated from a joint federal income tax refund payable to
the Debtor and Mrs. Gurley.
Financial records reflect that the Debtor’s assets totaled
approximately $1,791,370.00 and Mrs. Gurley’s assets totaled
approximately $24,369,568.00 in December 1989.
The United State’s attorney, Craig Johnson (“Mr.
Johnson’), at the conclusion of the Edmonson site trial, on
September 13, 1990, raised concerns regarding the sale and
rumored transfers from the Debtor to his wife, Mrs. Gurley.
The District Court instructed Mr. Johnson to file a Motion
and Affidavit in support of the allegations that there were
conveyances of property which needed to be set aside. The
District Court refused to permit Mr. Johnson to conduct
discovery on the issue at that time. Mr. Johnson did not file a
Motion or Affidavit, stating that he had no direct evidence or
knowledge of the fact that the Debtor had transferred the
proceeds from the sale to Coastal to Mrs. Gurley.
The Debtor transferred $63,626.00, proceeds of the
Mulvaney Promissory Note, to Mrs. Gurley on September 19,
1990. The Debtor transferred proceeds of the sale of property
located at lot 1, Gurley Subdivision, Desoto County, State of
Mississippi to Mrs. Gurley on December 6, 1990. (See P.Ex.
#3 19-320).
The District Court entered judgment in favor of the United
States of America on March 26, 1992, holding the Debtor,
GRC Corp., GRC Co., and Larry Gurley jointly and severally
liable for clean-up costs in the amount of $1,786,502.95. The
District Court also entered a declaratory judgment in favor of
the EPA for future costs to be incurred at the Edmonson site.
2la
U.S. v. Gurley Refining Co., 788 F. Supp. 1473 (E.D. Ark.
1992),
The Debtor transferred to Mrs. Gurley $59,714.00 of
annuity payments he received from Great West Life Annuity
and Insurance Company and interest payments on certificates
of deposit from 1991 to 1994. The Debtor transferred Nevada
real property located at Mount Diablo Meridian, Nevada,
Township 23 N., Range 27 E, section 32, lots 8, 11, and 12 to
Mrs. Gurley in December 1992. (See P.Ex. #47-52).
The United States, through the Financial Litigation Unit of
the United States Attorney's Office of the Eastern District of
Arkansas, sent demand letters to the Debtor and continued
attempts to discover personal financial information from the
Debtor, concerning the Edmonson site. These attempts were
unsuccessful. The United States did not (1) take depositions
in aid of execution, (2) obtain an issuance of a writ of
execution, (3) review public property records, (4) review
corporate records, or (5) issue subpoenas for banks and other
record keepers. The United States failed to exer-
cise reasonable due diligence in discovering the transfers to
Mrs. Gurley. The Debtor refuses to pay the judgment,
today totaling approximately twelve million dollars
($12,000,000.00).
The EPA discovered waste residues in West Memphis,
Arkansas (“South 8th Street site”) and held GRC Co., GRC
Corp. and the Debtor responsible. The EPA initiated an action
pursuant to § 104(e) of CERCLA against the Debtor in
September 1993, seeking to require the Debtor to provide
information as to his potential liability for the cost of
' The Eight Circuit Court of Appeals affirmed the judgment of the
District Court on December 28, 1994. U.S. v. Gurley, 43 F.3d 1188 (8th
Cir. 1994). The Debtor’s petition for writ of certiorari was denied by the
United States Supreme Court on October 2, 1995. William M. Gurley v.
U.S., 116 S.Ct. 73, 133 L.Ed.2d 33 (1995).
22a
remediation and his ability to pay those costs. This action was
pursued independent of the Edmonson site case.
The United States, through a Remedial Project Manager,
David Weeks (“Mr. Weeks’), investigated and sought to
obtain personal financial information from the Debtor in
accordance with § 104(e) of CERCLA, 42 U.S.C. § 9604(e).
The Debtor evaded service and refused to reveal personal
financial information with respect to the South 8th Street site
case. At no time did the attorneys and investigators of the
Edmonson and South 8th Street sites come into contact to
combine investigative efforts or to exchange informational
requests and responses. The EPA did not (1) review public
records, (2) review corporate records, or (3) issue subpoenas
for banks and other record keepers.
Financial records reflect that the Debtor’s assets totaled
approximately $258,459.00 and Mrs. Gurley’s assets totaled
approximately $23,305,307.00 in July 1995.
The Debtor filed for relief under Chapter 7 of the
Bankruptcy Code on July 26, 1995. 11 U.S.C. § 101, et seq.
The United States is listed in the Debtor’s Schedule F as an
unsecured, non-priority creditor with a claim in an
“unknown” amount and “disputed.” The United States
initiated an adversary proceeding by filing a Complaint To
Object To Or Revoke A Discharge Pursuant to 11 U.S.C.
§ 727(a)(2)(A), (a)(2)(B), (a)(4)(A), (a)(4)(D), (a)(5), (a)(7),
and (c) on October 24, 1995. The Chapter 7 Trustee, George
E. Mills (“Trustee”) initiated an adversary proceeding by
filing a Complaint Seeking To Recover Property of the Estate
Pursuant to 11 U.S.C. §§ 544(b), Fla. Stat. sec. 726.105(1)(a)
and (b), and 28 U.S.C. § 3304(a) and (b) on April 25, 1996.
The United States filed a proof of claim in this bankruptcy
case, asserting that the Debtor owes it approximately twenty-
five million dollars ($25,000,000.00) in past and future clean-
up costs at the Edmonson and South 8th Street sites.
a
23a
The Debtor in his bankruptcy petition, Statement of
Financial Affairs and schedules filed with the Court falsely
listed that he had no assets with the exception of $800.00 of
exempt property in his bankruptcy petition. He did not
accurately reflect his liabilities and did not disclose the
existence of the Edmonson site judgment. The Debtor signed
all provisions, Swearing under penalty of perjury, that he read
the information contained in his petition, Statements of
Financial Affairs and schedules. He failed to disclose the
following information: (1) he had a certificate of deposit
titled in his name which he transferred post-petition to Mrs.
Gurley on November 3, 1995; (2) he received approximately
$60,000.00 from Greatwest Life and Annuity Insurance Co.
between 1992 and 1994; (3) he is a managing executive at
Moltan; (4) he received $700,000.00 in non-compete income
from Coastal Unilube in 1992 and 1993; (5) he was an
officer/director in five corporations within the two years
before he filed his petition; and (6) he used Jim Dorris as an
accountant. The Debtor filed subsequent amendments to
disclose that he had received $700,000.00 in non-compete
income from Coastal Unilube in 1992 and 1993; he was an
officer/director in five corporations within the two years
before he filed his petition; and that he used Jim Dorris as an
accountant.
The Debtor is a highly sophisticated businessperson. He
met with his attorney in July 1995 to discuss his filing of a
petition in bankruptcy. He was represented by competent
counsel. He wanted to file immediately, time was of the
essence. The Debtor provided his attorney with the
information to complete the Chapter 7 petition, Statement of
Financial Affairs and all other sworn Statements in support of
his petition. He reviewed all sworn Statements with his
attorney before they were filed with the Court. He did not
question his attorney. He did not exercise due care in
completing, reviewing and executing the documents.
24a
The Debtor filed a petition in bankruptcy in order to obtain
the protection of the Court. His omissions and carelessness
demonstrate a blatant disregard for the objectives and
provisions of the Bankruptcy Code. The Debtor attempted to
take advantage of a system created to benefit him. The
Debtor’s actions and attitude reflected disrespect and
disregard for the law. The Debtor’s failure to disclose his past
and present interests in property, cash and businesses was
intentional, knowing, fraudulent and material when omitted
from his sworn Statements filed with the Court. The Debtor
made false oaths in connection with this case.
The Debtor testified at the § 341 meeting of the creditors in
February 1989 that he had previously transferred all of his
assets, including Moltan Company (“Moltan”), real estate,
cash and securities to Mrs. Gurley by 1989. The Debtor’s
reasons for the transfer include estate planning and health
concerns. The Debtor began to transfer his assets at a time
when the United States’ multimillion dollar-suit against him
in the Edmonson site case seemed to be succeeding and when
it appeared that the case against Mrs. Gurley was going to be
dismissed. The Debtor made all transfers to an-insider. He
retained complete control of all property transferred after the
transfers occurred. The Debtor transferred substantially all of
his assets. He received no consideration. He became insolvent
as a direct result of the transfers. The Debtor transferred his
assets with the actual intent to hinder, delay and defraud the
United States.
Mrs. Gurley pays for all of the Debtor’s living expenses.
She has no knowledge of the numerous accounts, investments
and interests in her name. Mrs. Gurley signs documents and
checks when requested to without knowledge of the purpose
and direction of such funds. The Debtor has use of credit
cards in her name. Mr. Heath facilitated numerous transfers to
Mrs. Gurley, at the Debtor’s direction. The Debtor has access
to the transferred assets through Mr. Heath. All banking
25a
documents and instructions with respect to them refer to “per
Forest”, Mr. Heath. Through Mr. Heath, the Debtor continues
to manage and control all accounts, investments and interests
of Mrs. Gurley. The dominion and control he exerts makes
him the true owner of ali assets transferred to Mrs. Gurley.
Additionally, a close family relationship exists between the
Debtor and the titleholder of all of the disputed property, Mrs.
Gurley. The Debtor held himself out to the public in general
that he was the “owner” of Moltan. He is a significant force
in its corporate decision making. Moltan lacked any
involvement by Mrs. Gurley, she never interfered with the
Debtor’s use and control. The Debtor exercises complete
control and total domination over all assets transferred to his
wife.
The Debtor is the effective owner of all property
transferred to his wife. The Debior at all time exercises a de
facto ownership as he exercises plenary control for his own
benefit over all property and funds transferred. The Debtor
received no consideration for any of the assets transferred.
The Debtor became insolvent as a direct result of the transfers
to Mrs. Gurley. All assets transferred to Mrs. Gurley are
property of the Debtor; and therefore, property of the estate.
CONCLUSIONS OF LAW
I.
The first issue before the Court is whether the Debtor’s
discharge should be denied pursuant to 11 U.S.C. § 727(a)(4).
Section 727(a)(4) provides:
(a) The court shall grant the debtor a discharge,
unless—
(4) the debtor knowingly and fraudulently, in or in
connection with the case—
(A) made false oath or account; .. .
11 U.S.C. § 727(a)(4). A discharge may be denied where the
debtor makes deliberate omissions. A discharge can also be
26a
denied where the debtor’s omission is fraudulent and
material. The subject matter of a false oath is “ material” , and
thus sufficient to bar discharge, if it bears a relationship to the
bankrupt’s business transactions or estate, or concerns the
discovery of assets, business dealings, or the existence and
disposition of his property. Chalik v. Moorefield (In re
Chalik), 748 F.2d 616 (11th Cir. 1984); Windmiller v. Evans
(In re Evans), 106 B.R. 722 (Bankr. M.D. Fla. 1989). It
makes no difference that he does not intend to injure his
creditors when he makes a false statement. The creditors are
entitled to judge for themselves what will benefit and what
- will prejudice them. The debtor’s veracity is essential to the
successful administration of the Bankruptcy Code. /n re
Chalik, 748 F.2d 616 (1lth Cir. 1984); L.P. Govaert v.
Southern National Bank of North Carolina (In re Caserta),
182 B.R. 599 (Bankr. S.D. Fla. 1995). Omissions signed
under penalty of perjury constitute false oath. Phillips v.
Nipper (in re Nipper), 186 B.R. 284 (Bankr. M.D. Fla. 1995).
The Debtor signed all provisions, swearing under penalty
of perjury, that he read the information contained in his
petition, Statements of Financial Affairs, and schedules. He
falsely listed that he had no assets with the exception of
$800.00 of exempt property in his bankruptcy petition. He did
not accurately reflect his liabilities and did not disclose the
existence of the Edmonson site judgment. He failed to
disclose the following information: (1) he had a certificates
of deposit titled in his name which he transferred post-
petition to Mrs. Gurley on November 3, 1995; (2) he received
approximately $60,000.00 from Greatwest Life and Annuity
Insurance Co. between 1992 and 1994; (3) he is a managing
executive at Moltan; (4) he had received $700,000.00 in non-
compete income from Coastal Unilube in 1992 and 1993; (5)
he was an officer/director in five corporations within the two
years before he filed his petition; and (6) he used Jim Dorris
as an accountant. The Debtor filed subsequent amendments to
disclose that he had received $700,000.00 in non-compete
27a
income from Coastal Unilube in 1992 and 1993; he was an
officer/director in five corporations within the two years
before he filed his petition; and he used Jim Dorris as an
accountant.
The Debtor is a highly sophisticated businessperson. The
Debtor met with his attorney in July 1995 to discuss his filing
of a petition in bankruptcy. He was represented by competent
counsel. He wanted to file immediately, time was of the
essence. The Debtor, alone, was the one who provided his
attorney with the information to complete the Chapter 7
petition, Statement of Financial Affairs and all other sworn
Statements in support of his petition. He did not exercise due
care in executing the documents. He reviewed all sworn
Statements with his attorney before they were filed with the
Court. If he was uncertain as to any question he could
question his attorney; he did not. He understood what inquiry
was being made in the petition, Statement of Affairs and
schedules. He had the ability to consult his attorney. The facts
support the allegation that the Debtor made false oaths in
connection with this case.
The facts reveal a pattern of numerous omissions which
certainly warrants the inference of reckless and cavalier
disregard for the truth. Jn re Sausser, 159 B.R. 352 (Bankr.
M.D. Fla. 1993); In re Evans, 106 B.R. 722 (Bankr. M.D. Fla.
1989). The Debtor filed a petition in bankruptcy in order to
obtain the protection of the Court. His omissions and
carelessness display a blatant disregard for the provisions of
the Bankruptcy Code. The Debtor attempted to take
advantage of a system available to benefit the honest, but
unfortunate debtor. The Debtor’s actions and attitude reflect
disrespect and disregard for the Court. The Debtor offered no
plausible explanation at trial for his omissions. Jn re Nipper,
186 B.R. 284, 289 (Bankr. M.D. Fla. 1995). The absent
responses would have been material to discovering what, if
any, assets the Debtor may have had. Jn re Chalik, 748 F.2d
28a
616 (11th Cir. 1984). The Debtor’s failure to disclose his
past and presents [sic] interest in property, cash and
businesses was intentional, knowing, fraudulent and material
when omitted from his sworn Statements filed with the Court.
The Debtor’s discharge is due to be denied pursuant to 11
U.S.C. § 727(a)(4).
II.
The second issue is whether the Debtor’s alleged gift of
Moltan to Mrs. Gurley was effective under Florida law.
The gift of Moltan was not validly effected. The essential
elements of a gift between husband and wife are (1) delivery,
actual or constructive; (2) donative intent of the donor to
divest himself of all dominion and control; and (3) acceptance
by the donee, which may be presumed. Fuller v. Fuller, 215
S.2d 507, 510 (Fla. Dist. Ct. App. 1968). Delivery is an
essential element of any gift and this requirement is directly
applicable to asserted gifts between spouses. Jones v.
Ferguson, 150 Fla. 313, 7 So.2d 464 (1942); Winner v.
Winner, 370 So.2d 845 (Fla. Dist. Ct. App. 1979). Delivery of
a deed is essential to the passing of title to the property
intended to be conveyed to the grantee and is indispensable
between members of a family as between persons unrelated.
Janes v. Janes, 15 Fla. 716, 15 So.2d 677 (Fla. 1943); United
States v. Viomar Co., 616 F.Supp. 24 (Fla. Dist. Ct. App.
1985).
? The parties have not disputed the application of Florida law to this
case. The same result would be obtained under Tennessee law. An
undelivered deed cannot effectively pass title from the grantor to the
grantee. Miller v. Morelock, 185 Tenn. 466, 473, 206 S.W.2d 427, 430-31
(1948); State of Tennessee v. Home Indemnity Company, 442 S.W.2d 276
(Tenn. Ct. App. 1967). Additionally, the deed must be beyond the
grantor’s control. Traders National Bank, 142 Tenn. 229, 234, 217 SW.
977, 978 (1919); Estate of Atkinson v. Allied Fence & Improvement Co.,
746 S.W.2d 709, 711-12 (Tenn. Ct. App. 1987).
4
29a
The facts fail to establish the existence of either actual or
constructive delivery of the property at issue. All transfers by
written instrument must pass beyond the dominion and
control of the donor and come within the power and control
of the donee. 38 Am.Jur.2d, Gifts, § 31. The alleged gift of
deed was delivered by the Debtor to his trusted employee,
Mr. Heath. The gift of deed was filed and remains filed at
Moltan at the Debtor’s direction and never came into Mrs.
Gurley’s possession. There was no evidence that the gift of
Moltan came within the power and control of Mrs. Gurley.
At the time of the alleged transfer, there was no evidence that
there had even been a symbolic change in title or control of
Moltan. Mrs. Gurley does not exert control at Moltan nor
was she aware of the alleged gift for years after it was
executed. Additionally, there was no true donative intent by
the Debtor to divest himself of all dominion and control over
the gifted property, Moltan. The Debtor continues to control
Moltan and intended to from the time of execution of the
alleged gift. The gift of deed has no effect, as a result Moltan
is property of the Debtor and, is therefore, property of the
estate pursuant to 11 U.S.C. § 541(a)(1).
I.
The third issue before the Court is whether the Chapter 7
trustee can recover a judgment pursuant to 11 U.S.C. § 544(b)
for fraudulent transfers pursuant to Florida Statutes § 726.105
and /or 28 U.S.C. § 3304.
The trustee in bankruptcy “may avoid any transfer of an
interest of the debtor in property . . . that is voidable under
applicable law by a creditor holding an unsecured claim . . .”
11 U.S.C. §544(b); In re Davis, 785 F.2d 926 (11th Cir.
1986). The trustee acting under § 544 represents the
unsecured creditor, the United States. The general rule is that
§ 544(b) confers upon the trustee no greater rights of
avoidance than the creditor would have to assert invalidity on
his own behalf. If the creditor is barred from recovery
30a
because of the running of a statute of limitations prior to the
petition date, the trustee is likewise rendered impotent. /n re
Kaufman & Roberts, Inc., 188 B.R. 309 (Bankr. S.D. 1995).
A transfer is fraudulent under Florida Statutes § 726.105,
Florida Fraudulent Transfer Act (“FUFTA”), regarding
transfers which are fraudulent as to present and future
creditors if:
(1) A transfer made or obligation incurred by a debtor is
fraudulent as to a creditor, whether the creditor’s claim
arose before or after the transfer was made or the
obligation was incurred, if the debtor made the transfer
or incurred the obligation: (A) With actual intent to
hinder, delay, or defraud any creditor of the debtor; . . .
Fla. Stat. § 726.105 (1977). A cause of action with respect to
a fraudulent transfer under § 726.105(1)(a) is extinguished,
unless an action is brought within four years after the transfer
was made, or if later, within one year after the transfer was or
could have been reasonably been discovered by the claimant.
Fla. Stat. § 726.110(1) (1997).
The trustee may only bring a claim to recover property
transferred on or after April 25, 1992, four years before
initiating the adversary proceeding on April 25, 1996. The
United States with the exercise of reasonable due iligence
could have reasonably discovered that the transfers to Mrs.
Gurley occurred. The United States could have discovered
the transfers in 1992 at the time the judgment was entered.
Its sole reliance on the Debtor’s refusal to respond to its
requests for financial information was not reasonable. The
United States had until March 1993 to bring a claim against
the Debtor pursuant to Fla. Stat. § 726.105(1)(a). The trustee
may only bring this claim under § 726.105(1)(a) to recover
the property transferred on or after April 25, 1992.
The facts leave no doubt that the Debtor made transfers
with actual intent to hinder, delay and defraud his creditor,
3la
the United States.’ The transfers were to Mrs. Gurley, an
insider.* The Debtor retained complete control of all property
transferred after the transfers occurred. A multimillion dollar
suit had been filed against the Debtor prior to the time the
transfers were made. The transfers made to Mrs. Gurley were
of substantially all of the Debtor’s assets. The Debtor
received no consideration for the value of the assets he
transferred to his wife. The Debtor became insolvent as a
direct result of the transfers to his wife. The Debtor began to
transfer significant assets to his wife before the United States
obtained judgment against him and was completely insolvent
after the United States obtained the judgment in March 1992.
*(1) the transfer or obligation was to an insider;
(2) the debtor retained possession or control of the property
transferred after the transfer;
(3) the transfer or obligation was disclosed or concealed:
(4) before the transfer was made or obligation incurred, the debtor
had been sued or threatened with suit:
(5) the transfer was of substantially all the debtor’s assets:
(6) the debtor absconded;
(7) the debtor removed or concealed assets:
(8) the value of the consideration received by the debtor was
reasonably equivalent to the value of the asset transferred or the
amount of the obligation incurred;
(9) the debtor was insolvent or became insolvent Shortly after the
transfer was made or the obligation was incurred;
(10) the transfer occurred shortly before or shortly after a substantial
debt was incurred; and
(11) the debtor transfers the essential assets of the business to a
lienor who transferred the assets to an insider of the debtor.
Fla. Stat. § 726. 105(2).
* An “insider” includes:
1. a relative of the debtor. . .
Fla. Stat. § 726-102(7).
32a
The trustee, standing in the shoes of the United States, may
recover the following property fraudulently transferred by the
Debtor on or after April 25, 1992 pursuant to Florida Statutes
§ 726.105(1)(a) and 11 U.S.C. § 544(b):
(1) Coastal Unilube payments transferred to Mrs.
Gurley on or after April 25, 1992,
(2) Annuity payments transferred to Mrs. Gurley on or
after April 25, 1992, and
(3) Any funds deposited by the Debtor into Mrs.
Gurley’s account at Union on or after April 25, 1992.
The Federal Debt Collection Procedures Act (“FDCPA’’)
provides substantive federal fraudulent conveyance law for
the United States. 28 U.S.C. §§ 3301-3308; United States v.
Moore, 968 F.2d 1099, 1100 (11th Cir. 1992). The FDCPA
arose to provide a single process by which the United States
could collect debts owing to it, thereby circumventing the
fifty distinct state debt collection procedures under which it
had formerly been compelled to proceed. The United States
may recover under both the FDCPA and FUFTA. United
States v. Maryans, 1994 WL 681146 (N.D. Ind. 1994); United
States v. Carney, 796 F.Supp. 700, 703 (E.D. N.Y. 1992).
Section 3304 provides:
(a) Debt arising before transfer-Except as provided in
section 3307, a transfer made or obligation incurred by a
debtor is fraudulent as to a debtor to the United States
which arises before the transfer is made or the obligation
is incurred if-
(1)(A) the debtor makes the transfer or incurs the
obligation without receiving reasonably equivalent value
in exchange for the transfer or obligation; and
(B) the debtor is insolvent at that time or the debtor
becomes insolvent as a result of the transfer or
obligation; ...
33a
(b) Transfers without regard to date of judgment-(1)
Except as provided in section 3307, a transfer made or
obligation incurred by a debtor is fraudulent as to a debt
to the United States, whether such debt arises before or
after the transfer is made or the obligation is incurred, if
the debtor makes the transfer or incurs the obligation—
(A) with actual intent to hinder, delay, or defraud a
creditor; or [sic]
28 U.S.C. § 3304.
The United States may, without regard to the date of
judgment, bring a claim for relief under § 3304(b)(1)(A)
within six years after the transfer was made or if later, within
two years after the transfer was or could have been
reasonably discovered. 28 U.S.C. § 3306(b). The United
States may, when a debt arises before the transfer is made,
bring a claim for relief under § 3304(a)(1) within six years
after the transfer was made. 28 U.S.C. § 3306(b).
The debt for which the government through the trustee,
seeks satisfaction arose in this case in March 1992 upon the
entry of judgment against the Debtor. The statute of
limitations applicable, without regard to the date of judgment,
§ 3304(b)(1)(A), provides that this claim for relief is
extinguished unless it was brought six years after the transfer
was made. This claim is timely only against property
fraudulently transferred on or after April 25, 1990, six years
before the adversary proceeding was filed in 1996. The
United States could have reasonably discovered the transfers
in 1992 through reasonable due diligence. The present action
under § 3304(b)(1)(A) is timely only as to fraudulent
transfers made on or after April 25, 1990.
The Debtors transfers of property and cash to Mrs. Gurley
was made with actual intent to hinder, delay and defraud a
34a
creditor, the United States.” The transfers were to Mrs.
Gurley, an insider.° The Debtor retained complete control of
all property transferred after the transfers occurred. A
multimillion dollar suit had been filed against the Debtor
prior to the time the transfers were made. The transfers made
to Mrs. Gurley were of substantially all of the Debtor's assets.
The Debtor received no consideration for the value of the
assets he transferred to his wife. The Debtor became insolvent
as a direct result of the transfers to his wife. The Debtor
began to transfer significant assets to his wife before this
United States obtained judgment against him and was
> Actual intent may be determined by whether:
(1) the transfer or obligation was to an insider;
(2) the debtor retained possession or control of the property
transferred after the transfer;
(3) the transfer or obligation was disclosed or concealed;
(4) before the transfer was made or obligation incurred, the debtor
had been sued or threatened with suit;
(5) the transfer was of substantially all the debtor's assets;
(6) the debtor absconded;
(7) the debtor removed or concealed assets;
(8) the value of the consideration received by the debtor was
reasonably equivalent to the value of the asset transferred or the
amount of the obligation incurred;
(9) the debtor was insolvent or became insolvent shortly after the
transfer was made or the obligation was incurred;
(i0) the transfer occurred shortly before or shortly after a substantial
debt was incurred; and
(11) the debtor transfers the essential assets of the business to a
lienor who transferred the assets to an insider of the debtor.
28 U.S.C. § 3304(b)(2); In re Ford, 25 F.3d 1039, 1994 WL 242156 (4th
Cir. 1994).
6 “, 4 ”_
An “insider” includes:
1. arelative of the debtor...
Fla. Stat. § 726.102(7).
35a
completely insolvent after the United States obtained the
judgment in March 1992. The trustee may recover the
following property fraudulently transferred by the Debtor
on or after April 25, 1990 pursuant to 28 U/S.C.
§ 3304(b)(1)(A) and 11 U.S.C. § 544(b):
(1) Nevada real property transferred to Mrs. Gurley on
April 8, 1992,
(2) Coastal Unilube payments transferred to Mrs.
Gurley on or after April 25, 1990,
(3) Mulvaney note proceeds transferred to Mrs. Gurley
on September 19, 1990,
(4) Annuity payments transferred to Mrs. Gurley on or
after April 25, 1990,
(5) Any funds deposited by the Debtor into Mrs.
Gurley’s account at Union on or after April 25, 1990,
and
(6) Proceeds from the sale of Mississippi property
transferred to Mrs. Gurley on December 6, 1990.
The statute of limitations applicable, when a debt arises
before the transfer is made, § 3304(a)(1), provides that this
claim must be brought by the United States six years after the
transfer was made. 28 U.S.C. § 3306(b). The present action is
timely filed as to fraudulent transfers made on or after March
26, 1992, when the debt obtained by the United States arose.
28 U.S.C. § 3302(3); United States v. Gelb, 783 F.Supp. 748,
755 (E.D. N.Y. 1991); United States v. Lombardi, 924
F.Supp. 361, 363 (D. R.I. 1996). The Debtor received less
than reasonable equivalent value for the transfers made
because he received no consideration. Further, the Debtor
became insolvent as a result of the transfers.
The trustee, standing in the shoes of the United States, may
recover the following property fraudulently transferred by the
Debtor on or after March 26, 1992 pursuant to 28 U.S.C.
§ 3304(a)(1) and 11 U.S.C. § 544(b):
36a
(1) Nevada real property transferred to Mrs. Gurley on
April 8, 1992,
(2) Coastal Unilube payments transferred to Mrs. Gurley
on or after March 26, 1992.
(3) Annuity payments transferred to Mrs. Gurley on or
after March 26, 1992, and
(4) Any funds deposited by the Debtor into Mrs. Gurley’s
account at Union on or after March 26, 1992.
lV.
The fourth issue before the Court is whether the property
transferred by the Debtor is property of the estate pursuant to
11 U.S.C. § 541(a)(1).
Section 541(a)(1) of the Bankruptcy Code provides, with
certain exceptions, that all legal and equitable interests of a
debtor in property as of the commencement of the case,
wherever located or by whomever held, become property of
the estate. 11 U.S.C.A. § 541(a)(1) (West 1993). The
underlying theory of § 541(a)(1) is to bring into the estate all
interests of the debtor in property as of the date the case is
commenced. The term “property” must be construed
generously. United States v. Whiting Pools. Inc., 462 U.S.
198, 204-05, 103 S.Ct. 2309, 2313-14, 76 L.Ed.2d 515
(1983); Segal v. Rochelle, 382 U.S. 375, 379, 86 S.Ct. 511,
514, 15 L.Ed.2d 428 (1966). The estate will include all legal
or equitable interests of the debtor in property, both tangible
and intangible. 5 LAWRENCE P. KING, COLLIER ON
BANKRUPTCY 4 541.04 (15th ed. 1997). Applicable state
property law determines whether a debtor had a legal or
equitable interest in property as of the Bankruptcy petition
date. Butner v. United States, 440 U.S. 48, 55, 99 S.Ct. 914,
918, 59 L.Ed.2d 136 (1979); In re Health Products, Inc., 159
B.R. 332, 337 (M.D. Fla. 1993).
37a
An equitable owner is one who is recognized in equity as
the owner of property, because real and beneficial use and
title belong to hirn, even though bare legal title is invested in
another. BLACK’S LAW DICTIONARY 539 (6th ed. 1990);
Levin v. Carney, 161 Ohio St. 513, 120 N.E.2d 92 (1954).
The estate acquires the equitable interest of the debtor who
holds an equitable interest in property without legal title.
At the time of the petition, the Debtor had an equitable
interest in all of the property, real property, and cash
transferred to Mrs. Gurley. Bare legal’ title is not
determinative of all property rights; Florida law recognizes
that true ownership or an ownership interest may rest with a
party who is not the titleholder of record. Towerhouse
Condominium, Inc. v. Millman, 475 So.2d 674 (Fla. 1985);
Simpson v. United States v. Woodard, 1989 WL 732112
(M.D. Fla. 1989). An ultimate equitable owner “means a
natural person who, directly or indirectly, owns or controls
and [sic] ownership interest in a corporation, . . . regardless of
whether such natural person owns or controls such ownership
interest through one or other natural persons... .” Fla. Stat.
§§ 607.0505 and 517.161 (1997).
A close family relationship exists between the Debtor and
the titleholder of all of the disputed property, Mrs. Gurley.
The Debtor exercises control and dominance over all assets
transferred to his wife. Through his trusted employee, Mr.
Heath, the Debtor has access to all assets transferred. With
respect to Moitan, the Debtor repeatedly held himself out to
the public in general that he was the “owner’’. Additionally,
he is the dominant force in its corporate decision making,
producing and pricing. Moltan lacked any involvement by
Mrs. Gurley; she never interfered with the Debtor’s use and
control. Besides his control over Moltan, he continues to
manage all accounts, investments and interests of Mrs.
Gurley. Mr. Heath facilitated numerous transfers between the
Debtor and Mrs. Gurley. As a trusted employee of the
38a
Debtor’s, he abets the Debtor in obtaining access to these
assets. The Debtor is the effective owner of all property
transferred to his wife and in an effort to secrete his
ownership he made his wife his nominee. Libutti v. United
States, 107 F.3d 110 (2nd Cir. 1997). The Debtor at all time
exercises a de facto ownership as he exercises plenary control
for his own benefit over all property and funds transferred.
All property transferred by the Debtor to his wife is property
of the estate pursuant to 11 U.S.C. § 541(a)(1).
V. Conclusion
The Debtor’s discharge is due to be denied pursuant to 11
U.S.C. § 727(a)(4). The Debtor is a highly sophisticated
businessperson who consulted a competent attorney in order
to obtain protection in the bankruptcy court. The Debtor
carelessly and deliberately omitted significant information
from his petition, Statement of Financial Affairs and
schedules filed with the Court. In addition, he [sic] actions
and attitude display a blatant disregard for the law and this
Court. The Debtor recklessly and cavalierly disregarded the
truth.
The Debtor’s purported deed of gift of Moltan to his wife
was ineffective. There was no actual or constructive delivery
nor did the Debtor have donative intent to divest himself of
all the dominion and control of Moltan. Moltan is property of
the estate pursuant to 11 U.S.C. § 541(a)(1).
Additionally, the Trustee may recover property fraud-
ulently transferred by the Debtor with actual intent to hinder,
delay, and defraud the United States as described by the
Court pursuant to Fla. Stat. § 726.105, 28 U.S.C. § 3304, and
11 U.S.C. § 544(b).
Even if the Debtor’s transfer of Moltan was effected by a
valid deed of gift and even if the FUFTA and the FDCPA do
not apply to the trustee’s claim, all property transferred by the
Debtor to Mrs. Gurley is property of the estate. The Debtor
39a
maintains an equitable interest in all property transferred to
Mrs. Gurley, including Moltan, cash and real property,
pursuant to 11 U.S.C. § 541(a)(1). With respect to Moltan,
the Debtor held himself out to the public and employees as
the owner of Moltan. Mrs. Gurley does not exercise control
at Moltan.
Additionally, the Debtor exercises control and dominance
over all other assets transferred to Mrs. Gurley. Through his
trusted employee, Mr. Heath, he has continuous access to the
assets. This enables him to manage all accounts, investments
and interests in Mrs. Gurley’s name. The Debtor’s transfers to
his wife, Mrs. Gurley, were ineffective. The Debtor has an
equitable interest in all property transferred to Mrs. Gurley.
The assets are therefore, property of the estate pursuant to 11
U.S.C. § 541(a)(1).
Dated this 15th day of August, 1997.
/s/ Arthur B. Briskman
ARTHUR B. BRISKMAN
United States Bankruptcy Judge
40a
APPENDIX E
UNITED STATES BANKRUPTCY COURT
MIDDLE DISTRICT OF FLORIDA
ORLANDO DIVISION
[Filed Aug. 15, 1997]
Case No. 95-03833-6B7
IN RE: WILLIAM M. GURLEY,
Debtor.
Adv. Case No. 95-00293
UNITED STATES OF AMERICA,
Plaintiff,
¥.
WILLIAM M. GURLEY,
Defendant.
Adv. Case No. 96-00159
GEORGE E. MILLS JR..,
CHAPTER 7 TRUSTEE,
Plaintiff,
Vv.
BETTY JEAN GURLEY,
Defendant.
JUDGMENT
The United States of America’s Complaint To Object To
Or Revoke A_ Discharge Pursuant to 11 U.S.C.
§ 727(a)(2)(A), (a)(2)(B), (a)(4)(A), (a)(4)(D), (a)(5), (a)(7),
and (c) and George E. Mills Jr.’s, Chapter 7 Trustee, Com-
plaint Seeking To Recover Property of the Estate Pursuant to
11 U.S.C. §§ 544(b), 550, Fla. Stat. sec. 726.105(1)(a) and
(b), and 28 U.S.C. § 3304(a) and (b), having been tried before
4la
the Court, and in conformity with and pursuant to the
Memorandum Opinion entered contemporaneously herewith,
it is
ORDERED, ADJUDGED, and DECREED that judgment
sought in the Plaintiff's, United States of America’s
Complaint To Object To Or Revoke A Discharge is entered in
favor of Plaintiff, the United States of America and against
Defendant/Debtor, William M. Gurley pursuant to 11 U.S.C.
§ 727(a)(4); it is further
ORDERED, ADJUDGED, and DECREED that the
Defendant’s/Debtor’s, William M. Gurley, discharge is
DENIED pursuant to 11 U.S.C. § 727(a)(4); it is further
ORDERED, ADJUDGED, and DECREED that judgment
sought in Plaintiffs, George E. Mills Jr., Chapter 7 Trustee,
Complaint Seeking To Recover Property of the Estate is
entered in part in favor of Plaintiff, George E. Mills Jr.,
Chapter 7 Trustee, and in part against Defendant, Betty Jean
Gurley with respect to property fraudulently transferred as set
out in the Memorandum Opinion pursuant to 11 U.S.C.
§ 544(b) and Fla. Stat. sec. 726.105(1)(a), and 28 U.S.C.
§ 3304(a)(1) and § 3304(b)(1)(A); and it is further
ORDERED, ADJUDGED, and DECREED that the
Plaintiff, George E. Mills Jr., Chapter 7 Trustee, may recover
any and all property transferred by the Defendant/Debtor,
William M. Gurley, to his wife, Betty Jean Gurley pursuant to
11 U.S.C. § 544(b) and 11 U.S.C. § 541(a)(1), including the
following property:
1. Coastal Unilube payments totalling $1,280,000.00;
2. Moltan Co.;
3. $2,099,143.00 in commercial paper held at Union
Planters Bank;
4. $1,550,000.00 held at First Tennessee National
Bank;
PS
11.
12.
42a
$7,500.00 from Memphis stockyard payments;
Tennessee real property located in the 4th and 5th
Civil District of Hardeman County, State of
Tennessee (See Attached P.Ex. #57-83);
Condominium located in Lake County, Florida;
$389,235.00 held at Union Planters National Bank;
$63,626.00 in proceeds from the Mulvaney Note;
Proceeds from sale of real property located at lot 1,
Gurley Subdivision, Desoto County, State of
Mississippi (See Attached P.Ex. #319-320);
$59,714.00 in annuity payments from Great West
Life Annuity and Insurance Company and interest
payments on certificates of deposit; and
Nevada real property located at Mount Diablo
Meridian, Nevada, Township 23 N., Range 27 E.,
section 32, lots 8, 11, and 12 (See Attached P.Ex.
#47-52).
Dated this 15th day of August, 1997.
/s/ Arthur B. Briskman
ARTHUR B. BRISKMAN
United States Bankruptcy Judge
43a
APPENDIX F
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT ;
[Filed Nov. 7, 2000]
No. 99-13416-JJ
IN RE: WILLIAM M. GURLEY,
Debtor.
BETTY JEAN GURLEY,
Plaintiff-Appellant,
versus
GEORGE E. MILLS, JR.,
Trustee, Chapter 7 Trustee,
Defendant-Appellee.
On Appeal from the United States District Court for the
Middle District of Florida
ON PETITION(S) FOR REHEARING AND PETITION(S)
FOR REHEARING EN BANC
(Opinion ie. 19 _. F. 2d ).
Before: TJOFLAT, WILSON and FLETCHER’, Circuit
Judges.
PER CURIAM:
The Petition(s) for Rehearing are DENIED and no member of
this panel nor other Judge in regular active service on the
Court having requested that the Court be polled on rehearing
* Honorab!e Betty B. Fletcher, U.S. Circuit Judge for the Ninth Circuit,
sitting by designation.
44a
en banc (Rule 35, Federal Rules of Appellate Procedure;
Eleventh Circuit Rule 35-5), the Petition¢s) for Rehearing En
Banc are DENIED.
ENTERED FOR THE COURT:
/s/ {Ilegible]
UNITED STATES CIRCUIT JUDGE
45a
APPENDIX G
11 U.S.C. § 541. Property of the estate
(a) The commencement of a case under section 301, 302,
or 303 of this title creates an estate. Such estate is comprised
of all the following property, wherever located and by
whomever held:
(1) Except as provided in subsections (b) and (c)(2) of
this section, all legal or equitable interests of the debtor
in property as of the commencement of the case.
(2) All interests of the debtor and the debtor’s spouse in
community property as of the commencement of the
cose that is—
(A) under the sole, equal, or joint management and
control of the debtor; or
(B) liable for an allowable claim against the debtor,
or for both an allowable claim against the debtor
and an allowable claim against the debtor’s spouse,
to the extent that such interest is so liable.
(3) Any interest in property that the trustee recovers
under section 329(b), 363(n), 543, 550, 553, or 723 of
this title.
(4) Any interest in property preserved for the benefit of
or ordered transferred to the estate under section 510(c)
or 551 of this title.
(5) Any interest in property that would have been
property of the estate if such interest had been an interest
of the debtor on the date of the filing of the petition, and
that the debtor acquires or becomes entitled to acquire
within 180 days after such date—
(A) by bequest, devise, or inheritance;
46a
(B) as a result of a property settlement agreement
with the debtor’s spouse, or of an interlocutory or
final divorce decree; or
(C) as a beneficiary of a life insurance policy or of
a death benefit plan.
(6) Proceeds, product, offspring, rents, or profits of or
from property of the estate, except such as are earnings
from services performed by an individual debtor after
the commencement of the case.
(7) Any interest in property that the estate acquires after
the commencement of the case.
(b) Property of the estate does not include—
(1) any power that the debtor may exercise solely for the
benefit of an entity other than the debtor;
(2) any interest of the debtor as a lessee under a lease of
nonresidential real property that has terminated at the
expiration of the stated term of such lease before the
commencement of the case under this title, and ceases to
include any interest of the debtor as a ‘essee under a
lease of nonresidential real property that has terminated
at the expiration of the stated term of such lease during
the case;
(3) any eligibility of the debtor to participate in
programs authorized under the Higher Education Act of
1965 (20 U.S.C. 1001 et seqg.; 42 U.S.C. 2751 et seq.),
or any accreditation status or State licensure of the
debtor as an educational institution;
(4) any interest of the debtor in liquid or gaseous
hydrocarbons to the extent that—
(A)(i) the debtor has transferred or has agreed to
transfer such interest pursuant to a _farmout
47a
agreement or any written agreement directly related
to a farmout agreement; and
(ii) but for the operation of this paragraph, the
estate could include the interest referred to in clause
(i) only by virtue of section 365 or 544(a)(3) of this
title; or :
(B)(i) the debtor has transferred such interest
pursuant to a written conveyance of a production
payment to an entity that does not participate in the
operation of the property from which such
production payment is transferred; and
(ii) but for the operation of this paragraph, the
estate could include the interest referred to in clause
(i) only by virtue of section 542 of this title; or
(5) any interest in cash or cash equivalents that
constitute proceeds of a sale by the debtor of a money
order that is made—
(A) on or after the date that is 14 days prior to the
date on which the petition is filed; and
(B) under an agreement with a money order issuer
that prohibits the commingling of such proceeds
with property of the debtor (notwithstanding that,
contrary to the agreement, the proceeds may have
been commingled with property of the debtor),
unless the money order issuer had not taken action, prior to
the filing of the petition, to require compliance with the
prohibition.
Paragraph (4) shall not be construed to exclude from the
estate any consideration the debtor retains, receives, or is
entitled to receive for transferring an interest in liquid or
gaseous hydrocarbons pursuant to a farmout agreement.
48a
(cl) Except as provided in paragraph (2) of this
subsection, an interest of the debtor in property becomes
property of the estate under subsection (a)(1), (a)(2), or (a)(5)
of this section notwithstanding any provision in an
agreement, transfer instrument, or applicable nonbankruptcy
law—
(A) that restricts or conditions transfer of such interest
by the debtor; or
(B) that is conditioned on the insolvency or financial
condition of the debtor, on the commencement of a case
under this title, or on the appointment of or taking
possession by a trustee in a case under this title or a
custodian before such commencement, and that effects
or gives an option to effect a forfeiture, modification, or
termination of the debtor's interest in property.
(2) A restriction on the transfer of a beneficial interest of the
debtor in a trust that is enforceable under applicable
nonbankruptcy law is enforceable in a case under this title.
(d) Property in which the debtor holds, as of the
commencement of the case, only legal title and not an
equitable interest, such as a mortgage secured by real
property, or an interest in such a mortgage, sold by the debtor
but as to which the debtor retains legal title to service or
supervise the servicing of such mortgage or interest, becomes
property of the estate under subsection (a)(1) or (2) of this
section only to the extent of the debtor’s legal title to such
property, but not to the extent of any equitable interest in such
property that the debtor does not hold.
(Pub.L. 95-598, Nov. 6, 1978, 92 Stat. 2594; Pub.L. 98-353,
Title Ill, §§ 363(a), 456, July 10, 1984, 98 Stat. 363, 376;
Pub.L. 101-508, Title Il, § 3007(a)(2), Nov. 5, 1990, 104
Stat. 1388-28; Pub.L. 102-486, Title XXX, § 3017(b), Oct.
24, 1992, 106 Stat. 3130; Pub.L. 103-394, Title II, §§ 208(b),
223, Oct. 22, 1994, 108 Stat. 4124, 4129.)
49a
11 U.S.C. § 544. Trustee as lien creditor and as successor
to certain creditors and purchasers
(a) The trustee shall have, as of the commencement of the
case, and without regard to any knowledge of the trustee or of
any creditor, the rights and powers of, or may avoid any
transfer of property of the debtor or any obligation incurred
by the debtor that is voidable by—
(1) a creditor that extends credit to the debtor at the time
of the commencement of the case, and that obtains, at
such time and with respect to such credit, a judicial lien
on ail property on which a creditor on a simple contract
could have obtained such a judicial lien, whether or not
such a creditor exists;
(2) a creditor that extends credit to the debtor at the time
of the commencement of the case, and obtains, at such
time and with respect to such credit, an execution against
the debtor that is returned unsatisfied at such time,
whether or not such a creditor exists; or
(3) a bona fide purchaser of real property, other than
fixtures, from the debtor, against whom applicable law
permits such transfer to be perfected, that obtains the
status of a bona fide purchaser and has perfected such
transfer at the time of the commencement of the case,
whether or not such a purchaser exists.
(b)(1) Except as provided in paragraph (2), the trustee may
avoid any transfer of an interest of the debtor in property or
any obligation incurred by the debtor that is voidable under
applicable law by a creditor holding an unsecured claim that
is allowable under section 502 of this title or that is not
allowable only under section 502(e) of this title.
(2) Paragraph (1) shall not apply to a transfer of a charitable
contribution (as that term is defined in section 548(d)(3)) that
is not covered under section 548(a)(1)(B), by reason of
50a
section 548(a)(2). Any claim by any person to recover a
transferred contribution described in the preceding sentence
under Federal or State law in a Federal or State court shall be
preempted by the commencement of the case.
(Pub.L. 95-598, Nov. 6, 1978, 92 Stat. 2596; Pub.L. 98-353,
Title III, § 459, July 10, 1984, 98 Stat. 377; Pub.L. 105-183,
§§ 3(b), June 19, 1998, 112 Stat. 518.)
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.