First Bank of Dalton v. Manton Family P'ship, LLLP (In re Manton)

585 B.R. 630
CourtUnited States Bankruptcy Court, N.D. Georgia
DecidedFebruary 28, 2018
DocketCASE NUMBER: 17–40595–MGD; ADVERSARY PROCEEDING NO.: 17–4027–MGD
StatusPublished
Cited by10 cases

This text of 585 B.R. 630 (First Bank of Dalton v. Manton Family P'ship, LLLP (In re Manton)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, N.D. Georgia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
First Bank of Dalton v. Manton Family P'ship, LLLP (In re Manton), 585 B.R. 630 (Ga. 2018).

Opinion

Mary Grace Diehl, U.S. Bankruptcy Court Judge

Before the Court are (1) the Chapter 7 Trustee ("Trustee") in Bankruptcy for Linda P. Manton's Motion to Intervene Together with Supporting Memorandum of Law , filed on August 7, 2017 (the "Motion to Intervene"), (2) the Motion of First Bank of Dalton ("Plaintiff") to Remand to the Superior Court of Catoosa County Georgia and/or for Abstention , filed on August 19, 2017 (and accompanying brief) (the "Motion to Remand") and (3) the Defendants' Joinder of Chapter 7 Trustee's Motion to Intervene and Defendants' Motion: (A) to Substitute Chapter 7 Trustee as Plaintiff as Real Party in Interest, (B) to Dismiss Claims by First Bank of Dalton, and (C) to Set Aside First Bank of Dalton's Default Judgment as Void Ab Initio , filed on September 5, 2017 (and accompanying brief) (the "Joinder Motion"). (Docket Nos. 3, 9, 10, 12, & 13). The Defendants also filed a response objecting to the Motion to Remand on September 5, 2017 and Plaintiff filed a response objecting to the Joinder Motion on September 19, 2017 (Docket Nos. 11 & 14).

BACKGROUND

Plaintiff alleges that on or about November 30, 2011, Linda Proctor Manton ("Debtor") transferred three parcels of real property to the Manton Family Partnership, LLP ("MFP") for no consideration. (Docket No. 1, Ex. A at *3, ¶ 12). On or about January 30 or 31, 2012, the couple transferred $15,478.04 from a joint bank account to MFP for no consideration. (Docket No. 1, Ex. A at *4, ¶ 13, 16). MFP is owned by the couple as limited partners, with TLM Diversified, LLC ("TLM") as the general partner. (Docket No. 1, Ex. A at *2, ¶ 6). TLM is solely owned by the couple, with each owning a 50% membership interest. (Docket No. 1, Ex. A at *2, ¶ 6). At the time of the transfers, the couple was indebted to several creditors including Plaintiff. (Docket No. 1, Ex. A at *2, ¶ 8).

In January 2013, the couple defaulted on Plaintiff's loan. Plaintiff foreclosed on the related secured property and obtained a deficiency judgment against the couple for approximately $750,000. (Docket No. 1, Ex. A at *2, ¶ 8-9). Unable to satisfy the deficiency judgment, on November 30, 2015, Plaintiff filed a complaint (the "Complaint") including a count for fraudulent conveyance,1 (the "Fraudulent Conveyance *634Action") against Debtor, Mr. Manton, MFP, and TLM (collectively, the "Defendants") in the Superior Court of Catoosa County, Georgia (the "Superior Court"). (Docket No. 1, Ex. A at *1). In the Complaint, Plaintiff alleged that Debtor and Thomas L. Manton fraudulently transferred three parcels of real property and funds in the amount of $15,478.04 from their joint account to MFP and TLM. (Docket No. 1, Ex. A at *4-5, ¶ 14-22). On July 14, 2017, the Superior Court entered a default judgment on all "well pleaded allegations of the complaint" against Thomas L. Manton, MFP, and TLM, with damages to be determined subsequent to a hearing on August 9, 2017. (Docket No. 1, Ex. W) (the "Superior Court Judgment").

On March 13, 2017, before the Superior Court Judgment was entered, Debtor filed for relief under Chapter 7. (Case No. 17-40595, Doc.1). Debtor then received her discharge on July 19, 2017. (Case No. 17-40595, Doc. 35). On August 3, 2017, Debtor filed a Notice of Removal ("Notice") pursuant to 28 U.S.C. §§ 1334, 1452, and Rule 9027 of Federal Rules of Bankruptcy Procedure ("FRBP"). (Doc. 1). Trustee then filed the Motion to Intervene. In response to the removal, Plaintiff filed the Motion to Remand. On September 5, 2017, Defendants filed the Joinder Motion, seeking to substitute Trustee as the real plaintiff in interest, to dismiss First Bank of Dalton's claim, and to set aside the Superior Court Judgment as void ab initio.2 (Doc. 12). Plaintiff opposes the relief sought in Joinder Motion. (Doc. 14).

On October 30, 2017, the Court held a telephonic status conference regarding the various motions. The parties have failed to reach a unanimous consensus regarding the disposition of the pending motions. Trustee and Defendants filed joint status report and requested the Court to grant Trustee's Motion to Intervene, Defendants' Motion for Trustee Intervention as Plaintiff, and to deny Plaintiff's Motion to Remand. (Doc. 16).

Pursuant to that status conference, and the reports submitted by the parties following that status conference, and as will be set forth below, the Court concludes that (1) Trustee is entitled to intervene, (2) Trustee shall be substituted as plaintiff as the real party in interest, because he has the exclusive standing to bring a fraudulent transfer claim, and (3) the present proceeding shall not be remanded to the state court, because it was properly removed to the Court, Plaintiff failed to establish the grounds for mandatory abstention, and the Court declines to remand under permissive abstention, and denies Plaintiff's request for equitable remand. All other relief being sought in the Joinder Motion is not addressed at this time.

ANALYSIS

I. Trustee's Motion to Intervene

The Plaintiff's claims at issue in this proceeding are to avoid what it alleges *635are fraudulent transfers of the three parcels of real property and funds from the joint bank account of the Debtor and her non-debtor husband to MFP for no consideration. Plaintiff brought these claims in the Superior Court pursuant to nonbankruptcy law, under Georgia's Uniform Voidable Transactions Act, O.C.G.A. 18-2-70, et seq. , which allows a creditor such as Plaintiff to bring such an action. Two well-established principles of bankruptcy law, however, are that fraudulent transfer actions become property of the estate, and that only the trustee has the power to prosecute a fraudulent transfer action.

Property of the estate includes any interest that a trustee recovers under 11 U.S.C. § 550. 11 U.S.C. § 541(a)(3). Section 550 provides, as applicable here, that "to the extent that a transfer is avoided under section 544, 545, 547, 548, 549, 553(b), or 724(a) of this title, the trustee may recover, for the benefit of the estate, the property transferred[.]" 11 U.S.C. § 550(a). In turn, § 544(b)(1) provides that a trustee may avoid any transfer by the debtor that is voidable by a creditor holding an unsecured claim. 11 U.S.C.

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Cite This Page — Counsel Stack

Bluebook (online)
585 B.R. 630, Counsel Stack Legal Research, https://law.counselstack.com/opinion/first-bank-of-dalton-v-manton-family-pship-lllp-in-re-manton-ganb-2018.