Goldsmith v. O'Beirne (In re MPAC Home Improvement & Constr.)

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In re MPAC HOME IMPROVEMENT AND CONSTRUCTION, LLC, Debtor

JONATHAN R. GOLDSMITH, CHAPTER 7 TRUSTEE, Plaintiff v. PADRAIG O'BEIRNE, MARY E. O'BEIRNE, SUDBURY PROPERTY MANAGEMENT, LLC, AND COLONIAL PARK KITCHENS, LLC, Defendants

No. 19-41940-CJP

Adv. Pro. No. 21-4033-CJP

United States Bankruptcy Court, D. Massachusetts

April 1, 2024

MEMORANDUM OF DECISION AND ORDER ON MOTION FOR SUMMARY JUDGMENT OF MARY E. O'BEIRNE AND RELATED MOTIONS

Christopher J. Panos United States Bankruptcy Judge

In an amended complaint [Dkt. No. 33] (the "Amended Complaint"), Johnathan R. Goldsmith, as chapter 7 trustee (the "Trustee") of the bankruptcy estate of MPAC Home Improvement and Construction, LLC (the "Debtor"), has asserted claims against several defendants, including Mary E. O'Beirne ("O'Beirne"). There are ten (10) counts in the Amended Complaint, nine (9) of which are asserted against O'Beirne^[1]: (a) the avoidance of allegedly fraudulent transfers, based on both actual and constructive fraud (Counts I-V), (b) the recovery of those transfers under 11 U.S.C. § 550^[2] (Count VI), (c) unjust enrichment (Count VII), (d) alter ego (Count IX), and (e) breach of fiduciary duty/corporate waste (Count X).

Before the Court are (i) the motions filed by O'Beirne (a) for summary judgment [Dkt. No. 69] (the "SJ Motion") and (b) to strike [Dkt. No. 84] (the "Motion to Strike") the Trustee's Response to Defendant's Statement of Undisputed Facts and Plaintiff's Statement of Facts That Preclude Summary Judgment [Dkt. No. 79] (the "Trustee SOF") and (ii) the opposition to the Motion to Strike and cross-motion to strike filed by the Trustee [Dkt. No. 89] (the "Cross-Motion to Strike") portions of O'Beirne's reply to the Trustee's opposition to the SJ Motion [Dkt. No. 82] (the "O'Beirne Reply").^[3] O'Beirne seeks summary judgment in her favor on each count in which she is named as a defendant in the Amended Complaint. After considering the foregoing, all responses, the affidavits filed by the parties, the arguments of counsel at a hearing, and the record in this case, the Court grants in part and denies in part the SJ Motion, grants in part the Motion to Strike, and denies the Cross-Motion to Strike.^[4]

I. LEGAL STANDARD

When the moving party demonstrates that there is no genuine dispute of material fact as to a claim, that party "is entitled to judgment as a matter of law" and summary judgment shall enter. See Fed. R. Civ. P. 56(a). "As to issues on which the nonmovant has the burden of proof, the movant need do no more than aver an absence of evidence to support the nonmoving party's case. . . . The burden of production then shifts to the nonmovant, who, to avoid summary judgment, must establish the existence of at least one question of fact that is both 'genuine' and 'material.'" Desmond v. Varasso (In re Varasso), 37 F.3d 760, 763 n.1 (1st Cir. 1994) (internal quotations and citations omitted). A fact is material if it "might affect the outcome of the suit under the governing law. . . ." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). "For the purpose of summary judgment, an issue of fact is genuine if it may reasonably be resolved in favor of either party." Cadle Co. v. Hayes, 116 F.3d 957, 960 (1st Cir. 1997) (internal quotations and citation omitted).

"The court must examine the record in the light most favorable to the nonmoving party and must make all reasonable inferences in that party's favor." Vazquez-Velazquez v Puerto Rico Highways & Transp. Auth., 73 F.4th 44, 50 (1st Cir. 2023). Summary judgment should not be granted "where evidence of record in [a] case is 'sufficiently open-ended to permit a rational factfinder to resolve the [liability] issue in favor of either side.'" Coyne v. Taber Partners I, 53 F.3d 454, 457 (1st Cir. 1995) (quoting Nat'l Amusements, Inc. v. Town of Dedham, 43 F.3d 731, 735 (1st Cir. 1995)). Ultimately, the Court's role is limited to assessing whether there exists evidence such that a fact finder could find for the nonmoving party. Perry v. Roy, 782 F.3d 73, 78 (1st Cir. 2015).

II. DISCUSSION

A. Fraudulent Conveyance Related Claims (Counts I-VI)

Counts I and II of the Amended Complaint seek to avoid transfers under § 548 of the Bankruptcy Code, and Counts III, IV, and V seek to avoid transfers under Massachusetts General Laws chapter 109A ("Chapter 109A"). Count VI seeks to recover the avoided transfers. The Trustee asserts that O'Beirne received transfers that were both actually and constructively fraudulent and that evidence in the record, and reasonable inferences therefrom, demonstrate a genuine issue of material fact as to whether O'Beirne received: 1) as a fifty-percent member of co-defendant Sudbury Property Management, LLC ("SPM"), the benefit of all direct transfers made from Debtor to SPM as well as Debtor's payments of SPM's mortgage, taxes, utilities, insurance, and attorneys' fees (collectively, the "SPM Transfers")^[5]; 2) $50,000 from the Debtor's Bank of America account ending in -0706 (the "-0706 Account") deposited to the O'Beirnes' joint savings account on March 29, 2018, Declaration of Richard B. Reiling [Dkt. No. 80] ("Reiling Decl."), Ex. Z; 3) $8,000 (the "$8,000 Transfer") from the -0706 Account deposited to the O'Beirnes' joint checking account on May 16, 2018, Reiling Decl., Ex. AA; 4) $5,000 (the "$5,000 Transfer") from the Debtor deposited in the O'Beirnes' joint bank account at Bank of America on May 13, 2019, Affidavit of Padraig O'Beirne [Dkt. No. 72] ("P. O'Beirne Aff.") ¶ 32; 5) two $10,000 transfers (the "$10,000 Transfers" and, collectively with the $5,000 Transfer, the "$25,000 Transfers") on May 17, 2019, deposited in the O'Beirnes' joint bank accounts at Bank of America, P. O'Beirne Aff. ¶ 33; 6) $75,000.00 at an unspecified time as repayment for funds that she claims to have advanced to the Debtor for the Debtor's project for Deborah Race and James LaPlante, Reiling Decl., Ex. C, Mary O'Beirne Dep. Tr., October 21, 2022 ("O'Beirne Dep."), at 107:18-24, 108:1-7; and (7) certain transfers alleged to have paid the personal expenses of the O'Beirnes set forth in paragraphs 39 and 43 of the Amended Complaint for calendar years 2018 and 2019, respectively (the "Personal Expense Transfers").^[6] Section 548(a)(1)(A) permits a trustee to avoid a transfer made or an obligation incurred by a debtor within two years of the petition date if made "with actual intent to hinder, delay, or defraud" creditors. 11 U.S.C. § 548(a)(1)(A). Under Chapter 109A, the look-back period is four years. See Mass. Gen. Laws ch. 109A, § 10. A trustee must prove actual intent at the time of the transfer or incurrence of the obligation. See Max Sugarman Funeral Home, Inc. v. A.D.B. Investors, 926 F.2d 1248, 1254 (1st Cir. 1991); see also Fed. Deposit Ins. Corp. v. Anchor Props., 13 F.3d 27, 31-32 (1st Cir. 1994) (interpreting Chapter 109A, § 7).

Because a bankruptcy trustee may not have access to direct evidence of the actual intent to hinder, delay or defraud creditors, I may look to "badges of fraud" to establish such intent based on circumstantial evidence. Max Sugarman Funeral Home, 926 F.2d at 1254. The United States Court of Appeals for the First Circuit (the "First Circuit") has identified certain factors to assess fraudulent intent:

(1) actual or threatened litigation against the debtor; (2) a purported transfer of all or substantially all of the debtor's property; . . . (3) insolvency or other unmanageable indebtedness on the part of the debtor; . . . (4) a special relationship between the debtor and the transferee; and, after the transfer, . . . (5) retention by the debtor of the property involved in the putative transfer.

Id. at 1254 (internal citations omitted). While the presence or absence of any single badge of fraud is not conclusive, "the confluence of several [of these factors] can constitute conclusive evidence of an actual intent to defraud, absent 'significantly clear' evidence of a legitimate supervening purpose." Id. at 1254-55.

The analysis under Chapter 109A § 5(a)(1) is analogous to the analysis under § 548(a)(1)(A) of the Bankruptcy Code. See Mass. Gen. Laws ch. 109A, § 5(b) (setting out non-exhaustive list of factors to consider when determining actual intent to defraud); see also Cruickshank v. Blast Fitness Group, LLC (In re Blast Fitness Grp., LLC), 602 B.R. 208, 224 (Bankr. D. Mass. 2019) (applying Chapter 109A § 5(a)(1) and analogous provisions of Bankruptcy Code § 548(a)(1)(A) to permit a finding of intent to defraud where, for example, "a transferee is in a position of dominance or control over a debtor's disposition of property, such that the transferee's intent to hinder, delay, or defraud creditors may be imputed to the debtor so as to render the transfer fraudulent.").

Section 548(a)(1)(B) of the Bankruptcy Code provides that a trustee may also avoid any transfer of a debtor's interest in property made within two years before the filing of a bankruptcy petition if the transfer was constructively fraudulent. See 11 U.S.C. § 548(a)(1)(B). The elements necessary to establish a constructive fraudulent transfer pursuant § 548(a)(1)(B) are, in pertinent part (1) a transfer; (2) of an interest of the debtor in property; (3) that occurred within two years prior to the filing of the petition; (4) for which the debtor received less than a reasonably equivalent value in exchange for the transfer; and (5) the debtor was insolvent at the time of the transfer. Tomsic v. Pitocchelli (In re Tri-Star Techs. Co.), 260 B.R. 319, 323 (Bankr. D. Mass. 2001) (citing § 548(a)(1)(B)). Section 544(b) also permits a trustee to assert state law fraudulent conveyance claims and "wear the mantel of any actual unsecured creditor who could have avoided a prepetition...