MEMORANDUM AND ORDER ON COMPLAINT TO AVOID A FRAUDULENT TRANSFER
PAUL W. GLENNON, Bankruptcy Judge.
The complaint filed by the Chapter 7 Trustee, John J. Egan (“Trustee”), sought to avoid an alleged fraudulent transfer of real estate by the debtor and his wife. The Court has under advisement the motion of the debtor, David G. Oliver (“debtor”), for summary judgment and the Trustee’s cross-motion for summary judgment. Neither party filed supporting affidavits.
DISCUSSION
The debtor and his wife owned property as tenants by the entirety pursuant to common law principles of Massachusetts. Under the common law, the husband and wife each possessed an indefeasible survivorship right in the tenancy. However, during his lifetime, the husband’s rights were superior to those of his wife.
D’Ercole v. D'Ercole,
407 F.Supp. 1377 (D.Mass.1976). During his lifetime, the husband had the right to the rents and profits from, and the use, possession and control of, the property.
See Friedman v. Harold,
638 F.2d 262 (1st Cir.1981) and
Voigt v. Voigt,
252 Mass. 582, 147 N.E. 887 (1925). The husband could alienate his interest in the property, something that his wife could not do.
Phelps v. Simons,
159 Mass. 415, 34 N.E. 657 (1893). Furthermore, the husband’s creditors could attach the jointly owned property and have it sold on execution (subject to the wife’s survivor-ship interest).
Raptes v. Pappas,
259 Mass. 37, 155 N.E. 787 (1927). On the other hand, the wife’s sole interest was that of survivorship which, because she could not sell, could not be reached by her creditors.
Pineo v. White,
320 Mass. 487, 70 N.E.2d 294 (1946) and
Licker v. Gluskin,
265 Mass. 403, 164 N.E. 613 (1929). The husband’s creditors could reach his interest in property held as a tenant by the entirety. Likewise, he could sell his interest, subject always, however, to the wife’s right of survivorship.
On November 19, 1980, the debtor and his wife conveyed their property owned as tenants by the entirety, under common law principles, to a straw who reconveyed the property back to the debtor and his wife in order that their ownership would be governed by a revised Massachusetts statute, which substantially changed the rights of
tenants by the entirety in the Commonwealth.
Under the revised statute, Mass.Gen. Laws ch. 209 § l,
effective February 11, 1980, where property is held as tenants by the entirety, both the husband and wife are entitled equally to the rents and profits from, and the use, control and possession of, the property in question. Creditors of a debtor spouse may not reach the property interest of the debtor spouse if the property is the principal residence of the nondebt- or spouse. However, the property is available to satisfy debts incurred by either spouse or a member of their family on account of “necessaries”.
On February 13, 1981, the debtor filed his Chapter 7 petition. 11 U.S.C. § 522(b)(2)(B) provides that a debtor may exempt his interest in property owned as a tenant by the entirety to the extent it is exempt from process under applicable non-bankruptcy law.
Here, the debtor claimed his interest in property held as a tenant by the entirety exempt, relying on § 522(b)(2)(B).
The combined result of the November 1980 conveyances and the February 13, 1981 filing of the above-captioned Chapter 7 petition, was to place the property held by the debtor as a tenant by the entirety, taking advantage of his state exemptions, beyond the reach of the Chapter 7 Trustee and thus unavailable to satisfy the claims of his creditors.
While the Court recognizes that under § 522 it is perfectly proper and indeed may be good planning, for a debtor to convert non-exempt assets into those which are exempt, even on the eve of bankruptcy,
the Court also recognizes that under 11 U.S.C. § 548(a) the same transfer
may be avoided if: (1) the transfer occurred on or within one year of the filing of the petition, the debtor received less than a reasonably equivalent value in exchange for the transfer and the debtor was insolvent at the time of the transfer or was rendered insolvent thereby; or (2) the transfer made within the time period set forth above was made with the actual intent to hinder, delay or defraud creditors.
“The rationale for
avoiding prepetition transfers under Code § 548 ... is to preserve assets of the estate”.
In re Jamison,
21 B.R. 380, 381-82 (Bkrtcy.D.Conn.1982).
The Trustee seeks to avoid the transfer relying on both § 548(a)(1) and (2). In paragraph 5 of the complaint, the Trustee alleges that transfer was made within one year of the filing of the Chapter 7 petition, with the intent to hinder, delay and defraud creditors, in exchange for a less than reasonably equivalent value and at which time the debtor was insolvent or became insolvent as a result of the transfer. The debt- or answered paragraph 5 as follows: “The [defendants admit that they conveyed their interest in said real estate to themselves, in order to create a new tenancy by entirety, but deny that the transfer was made with the intent to hinder, delay, and defraud creditors, and that the [d]ebtor received less than a reasonably equivalent value in exchange. The [defendants deny that the transfer was fraudlent, within the meaning of 11 U.S.C. [§] 548.” In substance, the debtor argues that summary judgment in his favor is appropriate because the only effect of the transfers was to enable the debtor to avail himself of a state exemption when he filed his Chapter 7 petition. The trustee’s cross-motion requests the Court to deny the debtor’s motion and states there is no question as to any material facts, therefore he is entitled to judgment as a matter of law.
§ 548(a)(1) requires a finding of actual fraudulent intent, a purely factual question. 4 Collier on Bankruptcy, 11 548.02 (15th ed. 1982). From the uncontroverted facts which were presented, I am unable to determine whether the debtor actually intended to defraud his creditors. I have already stated that an exchange of nonexempt property for exempt property is not fraudulent per se.
See supra,
note 3. Likewise, a transfer of property to a family member, without more, is not necessarily fraudulent.
See, e.g., Chichester v. Golden,
204 F.Supp. 634 (S.D.Cal.1962),
aff'd in part, modified in part,
and
rev’d in part,
321 F.2d 250 (9th Cir.1963) and
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MEMORANDUM AND ORDER ON COMPLAINT TO AVOID A FRAUDULENT TRANSFER
PAUL W. GLENNON, Bankruptcy Judge.
The complaint filed by the Chapter 7 Trustee, John J. Egan (“Trustee”), sought to avoid an alleged fraudulent transfer of real estate by the debtor and his wife. The Court has under advisement the motion of the debtor, David G. Oliver (“debtor”), for summary judgment and the Trustee’s cross-motion for summary judgment. Neither party filed supporting affidavits.
DISCUSSION
The debtor and his wife owned property as tenants by the entirety pursuant to common law principles of Massachusetts. Under the common law, the husband and wife each possessed an indefeasible survivorship right in the tenancy. However, during his lifetime, the husband’s rights were superior to those of his wife.
D’Ercole v. D'Ercole,
407 F.Supp. 1377 (D.Mass.1976). During his lifetime, the husband had the right to the rents and profits from, and the use, possession and control of, the property.
See Friedman v. Harold,
638 F.2d 262 (1st Cir.1981) and
Voigt v. Voigt,
252 Mass. 582, 147 N.E. 887 (1925). The husband could alienate his interest in the property, something that his wife could not do.
Phelps v. Simons,
159 Mass. 415, 34 N.E. 657 (1893). Furthermore, the husband’s creditors could attach the jointly owned property and have it sold on execution (subject to the wife’s survivor-ship interest).
Raptes v. Pappas,
259 Mass. 37, 155 N.E. 787 (1927). On the other hand, the wife’s sole interest was that of survivorship which, because she could not sell, could not be reached by her creditors.
Pineo v. White,
320 Mass. 487, 70 N.E.2d 294 (1946) and
Licker v. Gluskin,
265 Mass. 403, 164 N.E. 613 (1929). The husband’s creditors could reach his interest in property held as a tenant by the entirety. Likewise, he could sell his interest, subject always, however, to the wife’s right of survivorship.
On November 19, 1980, the debtor and his wife conveyed their property owned as tenants by the entirety, under common law principles, to a straw who reconveyed the property back to the debtor and his wife in order that their ownership would be governed by a revised Massachusetts statute, which substantially changed the rights of
tenants by the entirety in the Commonwealth.
Under the revised statute, Mass.Gen. Laws ch. 209 § l,
effective February 11, 1980, where property is held as tenants by the entirety, both the husband and wife are entitled equally to the rents and profits from, and the use, control and possession of, the property in question. Creditors of a debtor spouse may not reach the property interest of the debtor spouse if the property is the principal residence of the nondebt- or spouse. However, the property is available to satisfy debts incurred by either spouse or a member of their family on account of “necessaries”.
On February 13, 1981, the debtor filed his Chapter 7 petition. 11 U.S.C. § 522(b)(2)(B) provides that a debtor may exempt his interest in property owned as a tenant by the entirety to the extent it is exempt from process under applicable non-bankruptcy law.
Here, the debtor claimed his interest in property held as a tenant by the entirety exempt, relying on § 522(b)(2)(B).
The combined result of the November 1980 conveyances and the February 13, 1981 filing of the above-captioned Chapter 7 petition, was to place the property held by the debtor as a tenant by the entirety, taking advantage of his state exemptions, beyond the reach of the Chapter 7 Trustee and thus unavailable to satisfy the claims of his creditors.
While the Court recognizes that under § 522 it is perfectly proper and indeed may be good planning, for a debtor to convert non-exempt assets into those which are exempt, even on the eve of bankruptcy,
the Court also recognizes that under 11 U.S.C. § 548(a) the same transfer
may be avoided if: (1) the transfer occurred on or within one year of the filing of the petition, the debtor received less than a reasonably equivalent value in exchange for the transfer and the debtor was insolvent at the time of the transfer or was rendered insolvent thereby; or (2) the transfer made within the time period set forth above was made with the actual intent to hinder, delay or defraud creditors.
“The rationale for
avoiding prepetition transfers under Code § 548 ... is to preserve assets of the estate”.
In re Jamison,
21 B.R. 380, 381-82 (Bkrtcy.D.Conn.1982).
The Trustee seeks to avoid the transfer relying on both § 548(a)(1) and (2). In paragraph 5 of the complaint, the Trustee alleges that transfer was made within one year of the filing of the Chapter 7 petition, with the intent to hinder, delay and defraud creditors, in exchange for a less than reasonably equivalent value and at which time the debtor was insolvent or became insolvent as a result of the transfer. The debt- or answered paragraph 5 as follows: “The [defendants admit that they conveyed their interest in said real estate to themselves, in order to create a new tenancy by entirety, but deny that the transfer was made with the intent to hinder, delay, and defraud creditors, and that the [d]ebtor received less than a reasonably equivalent value in exchange. The [defendants deny that the transfer was fraudlent, within the meaning of 11 U.S.C. [§] 548.” In substance, the debtor argues that summary judgment in his favor is appropriate because the only effect of the transfers was to enable the debtor to avail himself of a state exemption when he filed his Chapter 7 petition. The trustee’s cross-motion requests the Court to deny the debtor’s motion and states there is no question as to any material facts, therefore he is entitled to judgment as a matter of law.
§ 548(a)(1) requires a finding of actual fraudulent intent, a purely factual question. 4 Collier on Bankruptcy, 11 548.02 (15th ed. 1982). From the uncontroverted facts which were presented, I am unable to determine whether the debtor actually intended to defraud his creditors. I have already stated that an exchange of nonexempt property for exempt property is not fraudulent per se.
See supra,
note 3. Likewise, a transfer of property to a family member, without more, is not necessarily fraudulent.
See, e.g., Chichester v. Golden,
204 F.Supp. 634 (S.D.Cal.1962),
aff'd in part, modified in part,
and
rev’d in part,
321 F.2d 250 (9th Cir.1963) and
In re Kaiser,
32 B.R. 701 (S.D.N.Y.1983).
See also Friedman v. Harold, supra
at 263, note 2 (“no showing of fraud [where] the exemption ... [results] ... from the bankrupt’s choice in holding the property as a tenant by the entirety rather than in some other manner”).
However, since § 548(a) is phrased in the disjunctive, a transfer may be avoided if the factors set forth in § 548(a)(2) are shown to have existed. Under this subsection, the intent of the debtor is immaterial; this section imposes a constructive fraud standard.
In re Roco Corp.,
701 F.2d 978 (1st Cir.1983). Where the above criteria are satisfied, a conclusive presumption of fraud arises.
See In re Nance,
26 B.R. 105 (Bkrtcy.S.D.Ohio 1982) and
In re Missionary Baptist Foundation of America,
24 B.R. 973 (Bkrtcy.N.D.Tex.1982).
In
In re Wheeler,
17 B.R. 85 (Bkrtcy.S.D.Ohio 1981), the husband assigned an undivided one-half interest in his federal and state income tax refunds to his wife in order to provide her with the opportunity to exempt the refunds from her estate. The court found that since the husband was insolvent at the time of the transfer, and he received nothing of value in return, the transfer was voidable under § 548(a)(2). “[T]he rule condoning property conversion from non-exempt to exempt property is inapplicable if the elements of a fraudulent conveyance are determined to exist ...”
Id.
at 89.
See also In re White,
28 B.R. 240, 10 B.C.D. 519 (Bkrtcy.E.D.Va.1983).
Rule 56 of the Federal Rules of Civil Procedure
(made applicable to this adversary proceeding by Bankruptcy Rule 7056) allows a court, in its discretion, to dispose of a case before trial, where there is no genuine issue as to any material fact.
Adickes v. S.H. Kress & Co.,
398 U.S. 144, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970) and
Poller v. Columbia Broadcasting System,
368 U.S. 464, 82 S.Ct. 486, 7 L.Ed.2d 458 (1962). Once the movant establishes the lack of any genuine issue of fact, viewing the facts in the opponent’s favor, the opponent must introduce contradictory facts to defeat the motion. Fed.R.Civ.P. 56(e). “In passing upon ... cross motions for summary judgment, the averments of the complaint must be accepted as facts.”
Iversen v. United States,
63 F.Supp. 1001, 1006 (D.D.C.),
aff'd,
327 U.S. 767, 66 S.Ct. 825, 90 L.Ed. 998,
reh’g denied,
327 U.S. 819, 66 S.Ct. 963, 90 L.Ed. 1041 (1946).
See also Furton v. City of Menasha,
149 F.2d 945 (7th Cir.),
cert. denied,
326 U.S. 771, 66 S.Ct. 176, 90 L.Ed. 466 (1945). The prevailing rule is that even where cross-motions for summary judgment are filed, it is incumbent upon a court to determine that no material facts are in dispute. The mere filing of cross-motions for summary judgment does not entitle one of the moving parties to summary judgment as a matter of law.
See, e.g., Schwabenbauer v. Board of Education,
667 F.2d 305 (2d Cir.1981);
Joplin v. Bias,
631 F.2d 1235 (5th Cir.1980);
Eby v. Reb Realty, Inc.,
495 F.2d 646 (9th Cir.1974); and J. Moore, 6 Moore’s Federal Practice, 11 56.13 (1982).
The defendants do not dispute and the Court finds, that the transfer was made within the applicable time period. Furthermore, since the debtor did not receive anything in return for the transfer the Court finds the transfer was made for a less than reasonably equivalent value.
See In re White supra
and
In re Wheeler, supra.
While it is true that these cases involved a transfer by one party to a second party who had no interest in the property transferred prior to the transfer, the Court finds these cases controlling. Here, the debtor gave up, substantial rights in the property by the transfer and received nothing of value in return.
Compare In re Gray,
704 F.2d 709 (4th Cir.1983);
In re Jamison, supra;
and
In re Hulk,
8 B.R. 444, 7 B.C.D. 339 (Bkrtcy.D.Conn.1981). It must be held the transfer was for a less than reasonably equivalent value.
Therefore, the only question remaining is that of the insolvency of the debtor. The defendants did not allege that the debtor was solvent at the time the transfer was made or was not rendered insolvent there
by; they further failed to deny same. As set forth above, under the standards for granting summary judgment motion, this they were required to do.
See First National Bank v. Cities Service Co.,
391 U.S. 253, 88 S.Ct. 1575, 20 L.Ed.2d 569,
reh’g denied,
393 U.S. 901, 89 S.Ct. 63, 21 L.Ed.2d 188 (1968). Accordingly, the Court finds that since the defendants failed to allege that a dispute as to a material fact exists, summary judgment on the question of insolvency of the debtor is appropriate.
See In re Richardson,
23 B.R. 434, 9 B.C.D. 895 (Bkrtcy.D.Utah 1982).
Cf. United States v. Diebold, Inc.,
369 U.S. 654, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962) and
Klein v. Tabatchnick,
610 F.2d 1043 (2d Cir.1979).
ORDER
Accordingly, the cross-motion of the Trustee for summary judgment.is GRANTED. The defendant’s motion for summary judgment is DENIED.
SO ORDERED.