Wagner v. Fenton (In re Vaughan Co.), Case No. 10-10759

In re: VAUGHAN COMPANY, REALTORS, Debtor.JUDITH A. WAGNER, Chapter 11 TrusteeOf the bankruptcy estate of the Vaughan Company, Realtors, Plaintiff, v. CRAIG FENTON, CHERIE FENTON, and NORMAN FENTON, Defendants.

Case No. 10-10759

Adv. No. 12-1116

UNITED STATES BANKRUPTCY COURT DISTRICT OF NEW MEXICO

Date entered on docket: January 22, 2014

MEMORANDUM OPINION

THIS MATTER is before the Court on various motions for summary judgment filed by Plaintiff Judith Wagner, Chapter 11 Trustee of the bankruptcy estate of the Vaughan Company Realtors (the "Trustee").¹ See Docket Nos. 80-83, 85-86. The Trustee seeks judgment in her favor on her claims under 11 U.S.C. §§ 547 and 548 and New Mexico's version of the Uniform Fraudulent Transfer Act ("UFTA"), N.M.S.A. 1978 §§ 56-10-18(A)(1) and (2). The Defendantsdid not respond to the Motions for Summary Judgment. After consideration of the Motions for Summary Judgment, the supporting papers, and being otherwise sufficiently informed, the Court finds that they should be granted, in part, and denied, in part, as described below.

SUMMARY JUDGMENT STANDARDS

Summary judgment, governed by Rule 56, Fed.R.Civ.P., will be granted when the movant demonstrates that there is no genuine dispute as to a material fact and that the movant is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(a), made applicable to adversary proceedings by Rule 7056, Fed.R.Bankr.P. "[A] party seeking summary judgment always bears the initial responsibility of informing the ... court of the basis for its motion, and ... [must] demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). In considering a motion for summary judgment, the Court must "examine the factual record and reasonable inferences therefrom in the light most favorable to the party opposing summary judgment." Wolf v. Prudential Ins. Co. of America, 50 F.3d 793, 796 (10th Cir. 1995) (quoting Applied Genetics Int'l, Inc. v. First Affiliated Sec., Inc., 912 F2d 1238, 1241 (10th Cir. 1990)). "[A] party opposing a properly supported motion for summary judgment may not rest on mere allegation or denials of his pleading, but must set forth specific facts showing that there is a genuine issue for trial" through affidavits or other supporting evidence. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S.Ct. 2505, 91 L.Ed .2d 202 (1986).

UNDISPUTED FACTS RELATING TO ALL DEFENDANTS

A. Vaughan Company Realtors ("VCR") filed a voluntary petition under Chapter 11 of the Bankruptcy Code on February 22, 2010 (the "Petition Date"). See Docket No. 1 in Case No. 10-10759.

B. The Trustee commenced the above-captioned adversary proceeding on February 19, 2012. See Trustee's Complaint, Docket No. 1 in Adv. No. 12-1116.

UNDISPUTED FACTS RELATING TO CRAIG FENTON

1. Craig Fenton invested a total of $500,000 into VCR's promissory note program. See Trustee's Motion for Summary Judgment as to the Timing and Amount of the Transfers to Craig Fenton (Docket No. 83) (the "First Motion Relating to Craig Fenton"), ¶ 2; Stipulated Order Granting Plaintiff's Motion to Extend the Deadline for the Plaintiff to File Dispositive Motions on Unconsolidated Issues (Docket No. 75) (the "Order Relating to Craig Fenton"), ¶ 2(a); Affidavit of Edward Mazel (Docket No. 79) (the "Affidavit"), ¶ 10.

2. Over the life of the investments, Craig Fenton received a total of $123,145.07 in payments from VCR. See First Motion Relating to Craig Fenton, ¶ 3; Order Relating to Craig Fenton, ¶ 2(b); Affidavit, ¶ 10.

3. From February 22, 2006 through the Petition Date, Craig Fenton received $123,145.07 from VCR. See First Motion Relating to Craig Fenton, ¶ 4; Order Relating to Craig Fenton, ¶ 2(c); Affidavit, ¶ 10.

4. From February 22, 2008 through the Petition Date, Craig Fenton received $121,862.88 from VCR. See First Motion Relating to Craig Fenton ¶ 5; Order Relating to Craig Fenton, ¶ 2(d); Affidavit, ¶ 10.

5. Craig Fenton received $11,531.49 from VCR within the ninety days prior to the Petition Date. See Trustee's Motion for Summary Judgment on Her Claims Under 11 U.S.C. § 547 Against Defendant Craig Fenton (Docket No. 81) (the "Second Motion Relating to Craig Fenton"), ¶ 3; Order Relating to Craig Fenton, ¶ 2(e); Affidavit, ¶ 10.

6. All payments described in paragraphs 2 through 5 were made on account of Craig Fenton's investments in VCR's promissory note program. See First Motion Relating to Craig Fenton, ¶ 6; Order Relating to Craig Fenton, ¶ 2(b)-(e); Affidavit, ¶ 10.

7. From February 22, 2006 through February 22, 2010, Craig Fenton received $9,838.49 in fees from VCR in exchange for referring new investors to VCR's promissory note program. See First Motion Relating to Craig Fenton, ¶ 7; Order Relating to Craig Fenton, ¶ 2(f); Affidavit, ¶ 10.

UNDISPUTED FACTS RELATING TO CHERIE FENTON

8. Cherie Fenton invested a total of $248,000 in VCR's promissory note program. See Trustee's Motion for Summary Judgment as to the Timing and Amount of the Transfers to Cherie Fenton (Docket No. 86) (the "First Motion Relating to Cherie Fenton"), ¶ 2; Stipulated Order Granting Plaintiff's Motion to Extend the Deadline for the Plaintiff to File Dispositive Motions on Unconsolidated Issues (Docket No. 76) (the "Order Relating to Cherie and Norman Fenton"), ¶ 2(g); Affidavit, ¶ 10.

9. Over the life of the investments, Cherie Fenton received a total of $77,229.12 in payments from VCR. See First Motion Relating to Cherie Fenton, ¶ 3; Order Relating to Cherie and Norman Fenton, ¶ 2(h); Affidavit, ¶ 10.

10. From February 22, 2006 through the Petition Date, Cherie Fenton received $77,229.12 from VCR. See First Motion Relating to Cherie Fenton, ¶ 4; Order Relating to Cherie and Norman Fenton, ¶ 2(i); Affidavit, ¶ 10.

11. From February 22, 2008 through the Petition Date, Cherie Fenton received $63,994.72 from VCR. See First Motion Relating to Cherie Fenton, ¶ 5; Order Relating to Cherie and Norman Fenton, ¶ 2(j); Affidavit, ¶ 10. 12. Cherie Fenton received $5,802.53 from VCR within the ninety days prior to the Petition Date. See Trustee's Motion for Summary Judgment on Her Claims Under 11 U.S.C. § 547 Against Defendant Cherie Fenton (Docket No. 80) (the "Second Motion Relating to Cherie Fenton"), ¶ 3; Order Relating to Cherie and Norman Fenton, ¶ 2(k); Affidavit, ¶ 10.

13. All payments described in paragraphs 9 through 12 were made on account of Cherie Fenton's investments in VCR's promissory note program. See First Motion Relating to Cherie Fenton, ¶ 6; Order Relating to Cherie and Norman Fenton, ¶ 2(h)-(k); Affidavit, ¶ 10.

UNDISPUTED FACTS RELATING TO NORMAN FENTON

14. Norman Fenton invested a total of $340,000 in VCR's promissory note program. See Trustee's Motion for Summary Judgment as to the Timing and Amount of the Transfers as to Norman Fenton (Docket No. 85) (the "First Motion Relating to Norman Fenton"), ¶ 2; Order Relating to Cherie and Norman Fenton, ¶ 2(a); Affidavit, ¶ 10.

15. Over the life of the investments, Norman Fenton received a total of $128,035.01 in payments from VCR. See First Motion Relating to Norman Fenton, ¶ 3; Order Relating to Cherie and Norman Fenton, ¶ 2(b); Affidavit, ¶ 10.

16. From February 22, 2006 through the Petition Date, Norman Fenton received $128,035.01 from VCR. See First Motion Relating to Norman Fenton, ¶ 4; Order Relating to Cherie and Norman Fenton, ¶ 2(c); Affidavit, ¶ 10.

17. From February 22, 2008 through the Petition Date, Norman Fenton received $87,574.73 from VCR. See First Motion Relating to Norman Fenton, ¶ 5; Order Relating to Cherie and Norman Fenton, ¶ 2(d); Affidavit, ¶ 10.

18. Norman Fenton received $7,955.06 from VCR within the ninety days prior to the Petition Date. See Trustee's Motion for Summary Judgment on Her Claims Under 11 U.S.C. §547 Against Defendant Norman Fenton (Docket No. 82) (the "Second Motion Relating to Norman Fenton"), ¶ 3; Order Relating to Cherie and Norman Fenton, ¶ 2(e); Affidavit, ¶ 10.

19. All payments described in paragraphs 15 through 18 were made on account of Norman Fenton's investments in VCR's promissory note program. See First Motion Relating to Norman Fenton, ¶ 6; Order Relating to Cherie and Norman Fenton, ¶ 2(b)-(e); Affidavit, ¶ 10.

20. From February 22, 2006 through the Petition Date, Norman Fenton received $19,318.49 in fees from VCR in exchange for referring investors to VCR's promissory note program. See First Motion Relating to Norman Fenton, ¶ 7; Order Relating to Cherie and Norman Fenton, ¶ 2(f); Affidavit, ¶ 10.

DISCUSSION

I. Whether the Trustee Established the Prima Facie Elements of Her Actual Fraud Claims

The Trustee seeks to establish the requisite elements of her actual fraud claims against each Defendant under 11 U.S.C. § 548(a)(1)(A) and N.M.S.A. 1978 § 56-10-18(A)(1). The elements of a fraudulent transfer action under 11 U.S.C. § 548(a)(1)(A) are: "(1) a transfer of an interest of the debtor in property; (2) made within two years before the debtor filed for bankruptcy; and (3) done with actual intent to hinder, delay, or defraud the debtor or any entity the debtor would become after the transfer." See In re The 1031 Tax Group, LLC, 439 B.R. 47, 68 (S.D.N.Y.Bankr.2010) (quoting the statute). The UFTA, N.M.S.A. § 56-10-19(A)(1), which contains similar elements, uses a four-year look-back period. See N.M.S.A.1978 § 56-10-23 (establishing a four year statute of limitations on pursuing fraudulent transfer actions under New Mexico law); In re Strom, 2013 WL 265071, *3 n. 5 (Bankr.D.N.M. 2013) ("The New Mexico UFTA has a four-year 'look-back' period.").

In its memorandum opinion entered October 23, 2013, the Court found that each transfer to the Defendants made within four years before the Petition Date: (1) constituted an interest of VCR in property; and (2) was made with the actual intent to defraud creditors. See Wagner v. Oliva, et al, 500 B.R. 778 (Bankr.D.N.M. 2013). The only remaining issue with respect to the Trustee...