Branigan v. McGee et al

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF MARYLAND
at Greenbelt
IN RE: 	:
:
STEPHEN HENRY McGEE, JR. 	: 	Case No. 05-33727PM
GLORIA ANN McGEE 	: 	Chapter 13
:
Debtors 	:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - :
TIMOTHY P. BRANIGAN, Trustee 	:
:
Plaintiff 	:
vs. 	: 	Adversary No. 06-1647PM
:
STEPHEN HENRY McGEE, JR. 	:
GLORIA ANN McGEE 	:
:
Defendants 	:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - :
MEMORANDUM OF OPINION
(Not for Publication)
This case came before the court on the Complaint filed by Timothy P. Branigan, Chapter
13 Trustee (“Trustee”and “Plaintiff”), to avoid a fraudulent transfer of Debtor Gloria Ann
McGee’s (“Debtor”) interest in the residence of the Debtors known as 19862 Preference Way,
Valley Lee, Maryland. The property was conveyed from the Debtor to herself and her husband,
Stephen Henry McGee, Jr., as tenants by the entirety by Deed recorded May 20, 2004. There
was no consideration for the transfer. The matter came before the court for trial on June 6, 2007,
and the court received into evidence 12 exhibits of the Plaintiff, as well as testimony of the
Debtors.
Date signed June 12, 2007
Entered: June 13, 2007 Case 06-01647 Doc 25 Filed 06/13/07 Page 1 of 4

The Complaint is in three Counts. Counts 1 and 2, brought under Md. Com. Law Code
Ann. §§ 15-201--214, the Maryland Uniform Fraudulent Conveyance Act, and Count 3, brought
under Md. Fam Law Code Ann. § 4-301(d). The right to rely upon these state law provisions is
granted under § 544(b)(1) of the Bankruptcy Code, that provides:
11 U.S.C. § 544. Trustee as lien creditor and as successor to certain
creditors and purchasers
(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.
This power springs only from the right of an actual creditor in existence at the time of the filing
of the case. See generally, R.I. Aaron, Bankruptcy Law Fundamentals, § 10:10 (2006). This is a
form of quasi-subrogation. To use the vernacular, in order to get his foot in the door, a trustee
must establish that there was a creditor existing at the time of the transfer who was still around at
the time of the filing of the bankruptcy case. In other words, if any existing unsecured creditor
could reach an asset of the debtor outside of bankruptcy, the trustee can use § 544(b) to obtain
that asset for the bankruptcy estate for division among all unsecured creditors, not just the
triggering creditor. 	In re Leonard, 125 F.3d 543, 544-45 (CA7 1997); cf, Levy v. Kindred, 854
F.2d 682, 684-5 (CA4 1988).
To meet this burden the Trustee offered Plaintiff’s Exhibit No. 12 that reflects six
creditors with open balances. Four of these creditors are shown as joint creditors. The transfer
of an asset owned wholly Gloria A. McGee to herself and Stephen H. McGee, Jr., did not
prejudice a joint creditor in any respect. A fifth creditor is the creditor of Stephen McGee alone.
The sixth open creditor is shown as a creditor of Gloria McGee only in the sum $232.00 for an
account opened in April, 2005, after the transaction in question. An earlier obligation to the
same creditor was a joint contractual liability and subject to the same ruling as set forth above.
Similarly, an obligation on page 4 of the Exhibit referred to by the Plaintiff’s attorney appears to
have been for an account opened after the transaction in question.
In short, the court finds no “triggering” creditor upon whom the Trustee can rest his case.
This leaves Count 1 of the Complaint that alleges a fraudulent transfer under § 548(a)(1) of the
Bankruptcy Code, that provides:
Case 06-01647 Doc 25 Filed 06/13/07 Page 2 of 4

11 U.S.C. § 548.
(a)(1) The trustee may avoid any transfer of an interest of the debtor in
property, or any obligation incurred by the debtor, that was made or incurred on
or within one year before the date of the filing of the petition, if the debtor
voluntarily or involuntarily--
(A) made such transfer or incurred such obligation with actual
intent to hinder, delay, or defraud any entity to which the debtor was or
became, on or after the date that such transfer was made or such obligation
was incurred, indebted; or
(B)(i) received less than a reasonable equivalent value in exchange
for such transfer or obligation; and
(ii)(I) was insolvent on the date that such transfer was mde or
such obligation was incurred, or became insolvent as a result of
such transfer or obligation;
(II) was engaged in business or a transaction, or was about to
engage in business or a transaction, for which any property
remaining with the debtor was an unreasonably small capital; or
(III) intended to incur, or believed that the debtor would
incur, debts that would be beyond the debtor’s ability to pay as
such debts matured.
The court finds from its observation of the Debtors that the transfer of the property and the
refinancing loans secured by it were done with the honest intention of paying down some debts
and improving their business, Gloria’s Pawn Shop. The court, again based upon its observation,
does not find that the transaction was made with intent to hinder, delay or defraud any creditor.
With respect to the second aspect of § 548(a)(1) of the Bankruptcy Code, the court does find as a
fact that the transfer by Gloria A. McGee to Stephen H. McGee, Jr., was made for no
consideration nor any reasonably equivalent value. The court does not find from the record that
at the date of the transfer that the Debtor was insolvent or that she became insolvent as a result of
the transfer. The court finds further that there was no evidence that she was continuing to
engage in her pawn shop business with unreasonably small capital. The court finds no evidence
or possible inferences in the record to support the proposition that this Debtor, Gloria A. McGee,
intended to incur debts beyond her ability to repay them. In any event, regardless of this finding,
the transfer occurred more than one year before the date of the filing of the petition. Thus,
recovery under 11 U.S.C. § 548 is barred by the plain meaning of the statute.
Case 06-01647 Doc 25 Filed 06/13/07 Page 3 of 4

The court finds also that the Plaintiff has not sustained his burden under the Family Law
Provision that this transfer between the McGees was made in prejudice of the rights of existing
creditors. An appropriate order will be entered.
cc:
Timothy P. Branigan, Esquire, P.O. Box 1902, Laurel MD 20725-1902
Robert W. Thompson, Esq., 134 Holiday Court, Suite 301, Annapolis, MD 21401
Stephen/Gloria McGee, PO Box 399, Great Mills, MD 20634
Stephen/Gloria McGee, 19862 Preference Way, Valley Lee, MD 20692
End of Memorandum
Case 06-01647 Doc 25 Filed 06/13/07 Page 4 of 4