Warren, Trustee v. Abreu et al

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
RALEIGH DIVISION
IN RE:
LISA GAIL SKUMPIJA
DEBTOR
CASE NO.
11-00338-SWH
DAVID M. WARREN, Trustee,
Plaintiff
v.
JANET ABREU and
KATHIE L. RUSSELL, Trustee,
Defendants.
ADVERSARY PROCEEDING NO.
11-00072-8-SWH
ORDER DENYING MOTION TO DISMISS
The matter before the court is the motion of the defendant Janet Abreu (“Abreu”) to dismiss
the amended complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, made
applicable in this adversary proceeding by Rule 7012(b) of the Federal Rules of Bankruptcy
Procedure. A hearing took place in Raleigh, North Carolina, on August 25, 2011. The motion to
dismiss will be denied.
SO ORDERED.
SIGNED this 07 day of October, 2011.
________________________________________
Stephani W. Humrickhouse
United States Bankruptcy Judge
____________________________________________________________
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Statement of the Case
Lisa Gail Skumpija filed a petition under chapter 7 of the Bankruptcy Code on January 14,
2011. David M. Warren, was appointed as trustee for the debtor, and filed a complaint initiating this
adversary proceeding against Janet Abreu on February 25, 2011. 1 The complaint alleged that the
debtor fraudulently conveyed to Abreu a security interest in certain property, and sought to avoid
the conveyance pursuant to § 548(a)(1)(B). On April 29, 2011, Ms. Abreu filed a motion to dismiss
the case for failure to state with particularity the circumstances constituting the fraudulent
conveyance as required under Bankruptcy Rule 7009(b). An order granting the motion to dismiss
was entered on July 14, 2011, but it afforded the plaintiff the opportunity to amend the complaint.
In fact, the plaintiff had, on July 13, 2011, already filed an amended complaint. Ms. Abreu therefore
filed a second motion seeking to dismiss the amended complaint on August 25, 2011, contending
that the amended complaint failed to state a claim upon which relief could be granted.
Statement of the Facts
On June 10, 2008, the debtor acquired, from her brother, an interest in real property and
improvements located at 575 Chapel Ridge Drive, Pittsboro, North Carolina (the “Chapel Ridge
Property”). Two days later, on June 12, 2008, the debtor executed a promissory note in the amount
of $500,000 for “value received” to the defendant, Janet Abreu. 	Amended Complaint, Ex. F p. 1.
Ms. Abreu is the debtor’s mother. Ms. Abreu contends that she advanced funds to the debtor to
purchase the Chapel Ridge Property and, in addition, another property located at 151 Hawfields
Drive, also in Pittsboro (the “Hawfields Property”). Pursuant to the note, repayment of the principal
1 The amended complaint also names Kathie L. Russell as a defendant in her official
capacity as the Trustee under the Deed of Trust that is the subject of the amended complaint.
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was due as follows: $200,000 upon the sale of the Chapel Ridge Property, and $300,000 upon the
sale of the Hawfields Property. On or about September 16, 2009, the debtor executed a deed of trust
to Ms. Abreau on the Chapel Ridge Property to secure the promissory note. 	That transfer,
represented by the granting of the deed of trust to Ms. Abreau, is the subject of this avoidance
action.
Discussion
Under the pleading requirements set out in Bell Atlantic Corp. v Twombly, 550 U.S. 544,
570, 127 S. Ct. 1955, 1974 (2007), and Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009), the
plaintiff’s complaint must plead sufficient factual allegations to establish, on its face, that the claim
for relief is plausible. Accordingly, the court must determine whether the plaintiff has satisfied this
burden under §548(a)(1)(B). Section § 548(a)(1)(B) provides:
(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 2 years
before the date of the filing of the petition if the debtor voluntarily or involuntarily
—
. . .
(B)(i) received less than a reasonably equivalent value in exchange
for such transfer or obligation; and
(ii)(I) was insolvent on the date that such transfer was made 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;
(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; or
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(IV) made such transfer to or for the benefit of an insider, or incurred
such obligation to or for the benefit of an insider, under an
employment contract and not in the ordinary course of business.
11 U.S.C. § 548(a)(1)(B).
The court finds that the plaintiff has satisfied the requirements for properly pleading a cause
of action under § 548(a)(1)(B). Plaintiff’s complaint lists the alleged fraudulent transfer, identifies
the consideration alleged to have been received by the transfer, and identifies information
concerning why plaintiff maintains the consideration was not reasonably equivalent in value, as well
as sufficient facts regarding insolvency. 	In re Careamerica, Inc., 409 B.R. 737, 756 (Bankr.
E.D.N.C. 2009). 	“If the court finds well-pleaded factual allegations in the complaint, the court
‘should assume their veracity’ and proceed to determine ‘whether they plausibly give rise to an
entitlement of relief.’” Id. at 747 (quoting Iqbal, 129 S. Ct. at 1950). “Determining whether a claim
for relief is plausible is a ‘context-specific task’ requiring the court ‘to draw on its judicial
experience and common sense.’” Id. (quoting Iqbal, 129 S. Ct. at 1950). In sum, landscape in which
a court navigates a motion to dismiss was significantly rearranged by Twombly and Iqbal, such that
now, “a claim’s survival on a 12(b)(6) motion [is] contingent on the inclusion of ‘sufficient factual
matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Id. (quoting Iqbal,
129 S. Ct. at 1949).
The plaintiff bears the burden of proof on all essential elements of § 548(a)(1)(B), including
the burden of showing the lack of reasonably equivalent value referenced in § 548(a)(1)(B)(i).
Plaintiff maintains that the transfer of the deed of trust from the debtor to Ms. Abreu occurred within
two years before the date of the filing of the petition, and was not in exchange for reasonably
equivalent value. 	More specifically, plaintiff contends that Ms. Abreu did not provide any
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consideration to the debtor: instead, Ms. Abreu paid on invoices submitted for payment by Absolute
Construction & Development, LLC, a construction company owned solely by the debtor’s non-filing
spouse, for improvements made to the Chapel Ridge Property, which was at that time titled in the
debtor’s brother’s name.
Because Ms. Abreu’s payments were made for improvements to the Chapel Ridge Property
prior to the debtor taking title, the plaintiff alleged, no consideration was given to the debtor, and
the grant of a deed of trust by the debtor was not for reasonably equivalent value. The plaintiff
further alleges that the promissory note and deed of trust were an “after the fact cover” and do not
evidence an agreement in place at the time of the alleged consideration.
Ms. Abreu argues that the debtor owed her money for advances Ms. Abreu made to improve
the Chapel Ridge Property, and that the security of such antecedent debt constitutes value pursuant
to § 548(d)(2)(A). Ms. Abreu further maintains that she allowed the debtor’s brother to transfer the
Chapel Ridge Property to the debtor without consideration in the expectation that her advances,
which benefitted the Chapel Ridge Property, ultimately would be repaid by the debtor. Ms. Abreu
argues that this intent and expectation is evidenced on the face of the promissory note: “This Note
is given to secure the purchase of real property located at 575 Chapel Ridge Drive, Pittsboro, NC
27312 and is secured by a Deed of Trust.” Amended Complaint Ex. F, p. 1. Ms. Abreu further
alleges on this point that the property transfer to the debtor and the execution of the note by the
debtor in favor of Ms. Abreu so close in time establishes a connection between the two actions and
supports her position with respect to the intent of the parties.
While Ms. Abreu may be able to establish those points through the presentation of evidence,
it also is plausible that, through discovery, the plaintiff may establish the opposite – that reasonably
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equivalent value was not given in exchange for the deed of trust. 	For instance, discovery may
establish that the value of the improvements ostensibly evidenced by the promissory note was not
reasonably equivalent to the amount of the deed of trust granted on the Chapel Ridge Property,
especially in light of the insider relationship between the debtor, the defendant, the property owner,
and the contractor. Plaintiff plausibly could also discover that there was never an intent for the
debtor to be burdened by this debt, because the debtor’s brother was then and continues to be the
responsible party. In sum, because the plaintiff has stated facts sufficient to “state a claim to relief
that is plausible on its face,” namely facts tending to show that the alleged antecedent debt is not
truly a debt owed by the debtor to the defendant, or that the true amount of the antecedent debt was
not reasonably equivalent to the deed of trust, dismissal is not appropriate. Twombly, 550 U.S.
at 570, 127 S. Ct. at 1974.
The court readily acknowledges that a review of this case on a properly supported summary
judgment motion may well yield a different result, but this proceeding is not, at this time, in that
posture. Based on the foregoing, the motion to dismiss is DENIED.
SO ORDERED.
END OF DOCUMENT
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