Nickless,Trustee v. Saykosy et al

OCR transcription for search; preserved printed pages are authoritative

Case 07-04103 Doc20 Filed 02/11/08 Entered 02/11/08 16:05:30 Desc Main
Document Page1of9

UNITED STATES BANKRUPTCY COURT
DISTRICT OF MASSACHUSETTS

IN RE : CHAPTER 7
AROUNDETH SAYKOSY

DEBTOR : CASE NO. 07-41908-JBR
DAVID M. NICKLESS,

PLAINTIFF,

Vv. : AP. NO. 07-04103

AROUNDETH SAYKOSY, LA SAYKOSY,
AND SISAVETH SAYKOSY

DEFENDANTS.

7 ae &3e

MEMORANDUM OF DECISION ON PLAINTIFF’S MOTION FOR SUMMARY

JUDGMENT

This matter came before the Court on Plaintiff's Motion for Summary Judgment
(Docket #9), the accompanying affidavit of Brian R. Goodwin (Docket #12), and the
Defendant’s Amended Opposition to Plaintiff's Motion for Summary Judgment (Docket
#18). The Plaintiff's Complaint alleges three counts: the transfer of the debtor’s interest
in 27 Canada Street, Lowell, Massachusetts constitutes grounds for denial of discharge
under 11 U.S.C. § 727(a)(2)(B), the transfer of the debtor’s interest in 27 Canada Street,
Lowell, Massachusetts constitutes a voidable post-petition transfer under 11 U.S.C. §

549, and Defendants Aroundeth Saykosy, La Saykosy, and Sisaveth Saykosy conspired to

defraud the Debtor’s creditors and the bankruptcy estate. (Complaint).

AUTHENTICATED
U.S. GOVERNMENT
INFORMATION

GPO

Case 07-04103 Doc20 Filed 02/11/08 Entered 02/11/08 16:05:30 Desc Main
Document Page 2of9

FACTS

3? == ant . 77
i

Aroundeth Saykosy (“Debtor”) filed a petition for relief under Chapter 7 of tl

of the
Bankruptcy Code on May, 18, 2007. (Trustee’s Concise Statement of Undisputed or
Uncontroverted Material Facts, 1).' David M. Nickless is the duly appointed trustee of
the Bankruptcy Estate. (Undisputed Facts, 1). At the time of the filing, Debtor owned, as
a joint tenant with Sisaveth Saykosy, the subject premises located at 27 Canada Street,

Lowell, Massachusetts (‘Premises’). (Undisputed Facts, 2). Seven days after the filing of

the Bankruptcy petition, the Debtor transferred his interest in the Subject Premises to

obtain any authority from the court in this post-petition transfer. (Undisputed Facts, 2) At
the time of the transfer of the premises, payments totaling $269,999.29 were made to the
mortgagee, Litton Loan Service. Payments totaling $8,127.53 were made to Rab
Performance services and Citibank. (Undisputed Facts, 2).

The Debtor contends that he received no money as a result of the transfer. The
deed indicates that consideration for the transfer was $1.00. The “Schedule A. Real
Property Report” indicates that the fair market value of the Premises was $300,000.
(Goodwin Affidavit, Exhibit B). On May 10th, 2007, the Premises were appraised at
$315,000. (Defendant’s Amended Opposition to Plaintiff's Motion for Summary
Judgment, Exhibit A). Although the Defendant Debtor challenges this Appraisal, it was
made by the Debtor’s own appraiser and is attached as Exhibit A to Defendant’s
Memorandum in Support of the Defendant’s Amended Opposition to the Plaintiff's

Motion for Summary Judgment.

' Hereinafter referred to as “Undisputed Facts.”

Case 07-04103 Doc20 Filed 02/11/08 Entered 02/11/08 16:05:30 Desc Main
Document Page 3of9

POSITIONS OF THE PARTIES

The Defendant Debtor argues that the Appraisal is only an “estimate,” not an
“exact science,” and therefore cannot be accepted as completely accurate. (Memorandum
in Support of the Defendant’s Amended Opposition to the Plaintiff's Motion for
Summary Judgment, 3). Further, the Defendant Debtor argues that the $315,000
Appraisal value is “roughly equivalent” to the $269,999.29 sum of the two Litton Loan
Service’s mortgages on the home. (Memorandum in Support of the Defendant’s
Amended Opposition to the Plaintiff's Motion for Summary Judgment, 3). Therefore, the

a that an waty in tha Dram:
v l £

A+
€s that no equi Yea

Saas gac wad fPANnYVveva. al nd
AQ1iLIDeOS Wao VWLliVEy”' w MU

Sisaveth Saykosy and Defendant Debtor could not have intended to defraud creditors of
the estate. (Memorandum in Support of the Defendant’s Amended Opposition to the
Plaintiff's Motion for Summary Judgment, 3).

The Plaintiff Trustee argues that the Defendant Debtor did have equity in the
Premises. (Memorandum of Law in Support of Trustee’s Motion for Summary Judgment,
3). The Trustee alleges that the fact that the Debtor conveyed equity in the Subject
Premises for one dollar to Defendants La and Sisaveth Sakosy indicates that the Debtor
intended to “hinder, delay, or defraud” creditors along with all other officers of the
estate. (Memorandum of Law in Support of Trustee’s Motion for Summary Judgment, 4).
Therefore, the Plaintiff Trustee argues that this fraudulent, post-petition transfer warrants
a denial of discharge under 11 U.S.C. § 727(a)(2)(B). (Memorandum of Law in Support
of Trustee’s Motion for Summary Judgment, 4). Plaintiff also argues that Defendants La

and Sisaveth Saykosy intended to conspire with the Debtor in this fraudulent transfer.

(Memorandum of Law in Support of Trustee’s Motion for Summary Judgment, 6).

Case 07-04103 Doc20 Filed 02/11/08 Entered 02/11/08 16:05:30 Desc Main
Document Page 4 of 9

STANDARD FOR SUMMARY JUDGMENT

snes

summary judgment shall be entered “if the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any, show that
there is no genuine issue as to any material fact and that the moving party is entitled to a
judgment as a matter of law.” A nonmoving party is not allowed to rely upon the mere
allegations in a complaint or denials in an answer, but the nonmoving party’s “response .

. . must set forth specific facts showing that there is a genuine issue for trial.” FED. R.
Civ. P. 56(f). The nonmoving party is not re
admissible at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986).
ANALYSIS

A. Intent to Hinder, Delay, or Defraud

Section 727 of the Bankruptcy Code states that “(t]he court shall grant the debtor
a discharge unless . . . the debtor, with intent to hinder, delay, or defraud a creditor or an
officer of the estate charged with custody of property under this title, has transferred,
removed, destroyed, mutilated, or concealed, or has permitted to be transferred, removed,
destroyed, mutilated, or concealed property of the estate, after the date of the filing of the
petition.” 11 U.S.C. § 727 (a)(2)(B). In order for the Trustee’s motion to prevail, he must
convince the Bankruptcy Court that there is no “genuine issue of material fact” as to
whether the Defendant Debtor acted with the intent to “hinder, delay, or defraud his

creditors” from collecting on their debts. In Re Watman, 301 F.3d 3, 8 (2002). The

Defendant Debtor’s intent must be actual, not constructive.

Case 07-04103 Doc20 Filed 02/11/08 Entered 02/11/08 16:05:30 Desc Main
Document Page5of9

Given the practical difficulty of mounting direct evidence of a debtor’s actual
intent, courts have identified seven indicia that indicate fraudulent intent. These seven
indicia, referred to as “badges of fraud,” are “1) insider relationships between the parties
2) the retention of, possession, benefit, or use of the property in question; 3) the lack or
inadequacy of the consideration for the transfer; 4) the financial condition of the party
sought to be charged both before and after the transaction at issue; 5) the existence or
cumulative effect of the pattern or series of transactions or course of conduct after

incurring the debt, onset of financial difficulties, or pendency or threat of suits by

an attempt by the debtor to keep the transfer a secret.”” Watman, 301 F.3d. at 8.

Here, the Debtor denies any fraudulent intent to delay, defraud, or hinder any
creditor or officer of the estate in this action. Therefore, the Court must review all
circumstantial evidence under the seven “badges of fraud” in determining whether a
genuine issue of material fact exists as to Count 1 of the Plaintiff Trustee’s Complaint.
Regarding the first badge of fraud, there is no genuine issue of material fact as to whether
an “insider relationship” exists between the Defendant Debtor, La Saykosy, and Sisaveth
Saykosy. Defendant Debtor has admitted that La Saykosy is the Debtor Defendant’s
father and Sisaveth Saykosy is the Debtor Defendant’s mother. (Answer of Defendants
Aroundeth Saykosy, La Saykosy, and Sisaveth Saykosy, 1) The Debtor does not dispute
that, after his Bankruptcy petition was filed, he transferred the Premises without the
Court’s knowledge or permission. (Undisputed Facts, 2).

There is no disputed issue of fact regarding the “retention of, possession, benefit,

or use of the property in question.” In his “Memorandum of Law in Support of Motion of

Case 07-04103 Doc20 Filed 02/11/08 Entered 02/11/08 16:05:30 Desc Main
Document Page 6 of 9

David M. Nickless For Summary Judgment,” Plaintiff Trustee alleges that Defendant
or continues to reside at the Subject Premises. This conduct indicates that Debtor
continues to benefit from and use the property. The Defendant’s Opposition fails to
provide any evidence that the Defendant Debtor no longer resides at the Subject
Premises. Therefore, the Defendant Debtor “fails to set forth specific facts showing that
there is a genuine issue for trial.”

Although the Debtor would have the Court find otherwise, there is no genuine
disputed issue of material fact regarding the third badge of fraud, namely, whether there
was a lack or inadequacy of consideration for the transfer. In Trustee Plaintiffs Motion
for Summary Judgment, the Trustee Plaintiff asserts that the transfer of the Premises was
made for the insufficient consideration of one dollar. The Defendant Debtor argues that
no money was received at the time of the transfer. Regardless of whether the Defendant
Debtor received any money at the time of the transfer, Debtor’s own Schedule A and
subsequent appraisal clearly indicates that a considerable amount of equity in the home
was transferred to his parents for inadequate consideration. The undisputed facts show
that at a minimum, the equity in the Premises was $15,000 and could be as high as
$30,000, a portion of which belonged to the Debtor’s estate as Debtor was an owner bya
joint tenancy.

In his Amended Opposition to Plaintiffs Motion for Summary Judgment, the
Defendant Debtor argues that the $315,000 appraisal value is only an estimate and should
not be used to determine the value of the premises. Because appraising is not an “exact

science” the value of the Premises could be “equivalent” or roughly equivalent to the two

mortgages. Although the Defendant Debtor argues that the appraisal is not accurate and

Case 07-04103 Doc20 Filed 02/11/08 Entered 02/11/08 16:05:30 Desc Main
Document Page 7 of 9

only an estimate, he does not provide the Court with any proof that the Premises can be
valued diiferentiy. Therefore, the Debtor Defendant fails to set forth specific facts
showing there is a genuine issue for trial regarding the adequacy of consideration
received for the Subject Premises.

There is no issue of fact regarding the seventh badge of fraud. Defendant Debtor
did not attempt to keep the transfer a secret. Both parties agree that, on the date of
conveyance, payments were made to the Litton Loan Service totaling $269,999.29 and
payments were made to Rab Performance Services and Citibank totaling $8,127.53. The
Debtor did not attempt to keep the conveyance a secret. Further, the Plaintiff Trustee
doesn’t provide any evidence indicating that the Defendant Debtor attempted to keep the
transaction a secret.

Based on this analysis, there is no genuine issue of material fact as to whether the
Defendant Debtor intended to defraud “creditors.” The Trustee has provided the Court
with evidence that the Defendant Debtor conveyed a significant amount of equity to his
parents for little or no consideration. This strongly indicates that the Defendant Debtor
intended to defraud his creditors by this post-petition transfer. City Nat’] Bank v.
Bateman, 646 F.2d 1220 (8th Cir. 1981). Defendant Debtor has failed to come forth with
any material evidence, other than the Defendant Debtor’s own opinion, that the
Appraisal, which he commissioned, is inaccurate and cannot be relied upon to determine
how much equity in the home was conveyed. As grounds therefore, Plaintiff Trustee’s

Motion for Summary Judgment on Count 1 of the Complaint will be granted.

Case 07-04103 Doc20 Filed 02/11/08 Entered 02/11/08 16:05:30 Desc Main
Document Page 8 of 9

B. Post Petition Transfer
the Premises was transferred post-petition and without
Court approval. This is clearly an avoidable transfer under the express language of 11

U.S.C. § 549(a)(2)(B). Therefore, Plaintiff Trustee’s Motion for Summary Judgment on

Count 2 of the Complaint is granted.

C. Conspiracy to Defraud

The Plaintiff Trustee argues that Debtor, La Saykosy, and Sisaveth Saykosy all
participated in a conspiracy to fraudulently convey the Premises. Plaintiff Trustee argues
that the fact that the Premises were conveyed to La and Sisaveth Saykosy for inadequate
consideration and while the Debtor still resided at the Premises indicates that all three
defendants were involved in a conspiracy to defraud creditors. The Defendants argue that
there cannot have been any conspiracy to defraud creditors because no equity was
transferred at the closing and two creditors were paid at the closing. Plaintiff Trustee does
not provide any facts showing that La and Sisaveth Sakosy were involved in a conspiracy
with the Debtor to defraud creditors. That the Debtor intended to defraud creditors of the
estate does not mean that Defendants La and Sisaveth Sakosy conspired to defraud such
creditors. This indicates that there is a genuine issue of material fact as to whether
Defendants La and Sisaveth Saykosy conspired with Defendant Debtor to defraud
creditors of the estate. Therefore, Plaintiff Trustee’s Motion for Summary Judgment on

Count 3 is denied.

Case 07-04103 Doc20 Filed 02/11/08 Entered 02/11/08 16:05:30 Desc Main
Document Page 9 of 9

Conclusion

For the reasons set forth herein, the Court hereby GRANTS Plaintiff's Motion for
Summary Judgment on Counts 1 and 2 and DENIES Plaintiff's Motion for Summary
Judgment on Count 3.

A separate order shall issue.

Dated February 11, 2008 By the Court,

gel B. Rosenthal
United States Bankruptcy Judge