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In re Forral

April 14, 2010

IN RE JOEL ESGUERRA FORRAL, DEBTOR.
DAVID WALDEN, APPELLANT,
v.
GREGORY A. AKERS, CHAPTER 7 TRUSTEE, APPELLEE.



The opinion of the court was delivered by: Honorable Janis L. Sammartino United States District Judge

ORDER: AFFIRMING DECISION OF BANKRUPTCY COURT

David Walden ("Appellant") appeals from the Bankruptcy Court's Order Granting Summary Judgment in favor of Gregory A. Akers ("Appellee"), Chapter 7 trustee. (Bankr. Ct. Order) Appellant asserts that the United States Bankruptcy Court for the Southern District of California improperly granted summary judgment in favor of Appellee's claim to avoid transfers made to Appellant as preferences. (Appellant Br. at 1.) For the reasons stated below, the Court AFFIRMS the decision of the Bankruptcy Court.

BACKGROUND

This appeal arises from the September 6, 2007 Chapter 7 bankruptcy filing of Joel Esguerra Forral ("Debtor"). (Appellee Br. at 2.) Appellee was appointed as bankruptcy trustee in Debtor's case. (Id.) Appellee filed suit on behalf of Debtor's bankruptcy estate, seeking to avoid certain transfers made by Debtor to his brother-in-law, Appellant, as preferential pursuant to 11 U.S.C. § 547. (Id.)

It is uncontested that the transfers at issue were related to property located at 2381 Boswell Road, Chula Vista, California ("Boswell"). (Id.) Debtor owned a 50% undivided interest in Boswell. Debtor's sister, Anabel Walden, along with her husband, Appellant, (collectively the "Waldens") owned the remaining 50% interest. (Id. at 3.) In order to finance the purchase of Boswell, Debtor and the Waldens obtained a loan of $1,350,000 from a predecessor of Union Bank. (Id.) Debtor and the Waldens were equally liable for the loan, and were each required to pay half of the monthly mortgage payment. (Id.) Boswell was leased to For All, Inc., a real estate and mortgage business owned 51% by Debtor and 49% by the Waldens. (Id.) The rent paid by For All was used by Debtor and the Waldens to make the monthly mortgage payments on Boswell. (Id.) In August 2005, Debtor purchased the Waldens' share of For All. (Id. at 3--4.)

For All defaulted on the Boswell lease and ceased paying rent to Debtor and the Waldens in July 2006. (Id. at 4.) As a result, Debtor and the Waldens were no longer able to make the monthly mortgage payments to Union Bank, and the loan went into arrears. (Id.) Union Bank brought a state court foreclosure action, at which point Appellant agreed to pay the $44,337.99 in loan arrears to avoid foreclosure. (Id.) Appellant and Debtor claim that the $44,337.99 payment represented an "advance" or "loan" from Appellant to Debtor. (Id.) On February 14, 2007, Debtor and the Waldens borrowed an additional $100,000 from Union Bank, secured by a deed of trust on Boswell. (Id.)

Subsequently, between October 1, 2006 and February 14, 2007, Debtor made four transfers totaling $94,181.48 to Appellant. Appellant characterizes these transfers as repayment of the $44,337.99 "advance" and reimbursement for money Appellant paid towards Boswell, but for which Debtor was responsible. (Id. at 5.) In addition to the transfers made directly to Appellant, Debtor made two full loan payments totaling $25,127.10 to Union Bank in June and July of 2007. (Id. at 6.) Because Debtor and Appellant were equally liable for the loan obligation, half of the payments ($12,563.55) made by Debtor were on Appellant's behalf. (Id.) All of Debtor's transfers presently at issue, which total $106,745.03, fell within the one-year preference period immediately preceding Debtor's September 6, 2007 bankruptcy filing. (Id.)

On April 10, 2008, Appellee brought an action in the Bankruptcy Court to avoid and recover as preferences the $94,181.48 of transfers from Debtor to Appellant and $12,563.55 of the transfer from Debtor to Union Bank. (Id. at 2.) Appellee filed a motion for summary judgment on July 22, 2009. In response, Appellant denied that the transfers were preferential, claiming that Debtor was not insolvent at the time they were made. (Opp. to MSJ at 4--5.) Alternatively, Appellant argued that the transfers occurred within the ordinary course of Debtor's business, a defense to preference actions codified in § 547(c)(2). (Id.) The Bankruptcy Court granted Appellee's motion for summary judgment on September 22, 2009. (Appellee Br. at 2.) The Bankruptcy Court found that $49,095.23 of the transfers from Debtor to Appellant were avoidable, and that the entire $12,563.55 transfer to Union Bank was avoidable. (Id.) The Bankruptcy Court entered judgment against Appellant for $61,658.78 on November 2, 2009. (Id.) On October 2, 2009, Appellant filed a motion for reconsideration, which was denied by the Bankruptcy Court. Appellant timely filed Notice of Appeal to the United States District Court on November 12, 2009, along with a written statement of election to have the appeal heard by the district court, pursuant to Bankruptcy Rule 8001(e).

LEGAL STANDARD

The district court has jurisdiction to hear an appeal from the bankruptcy court in this district under 28 U.S.C. § 158(a). A bankruptcy court's findings of fact are reviewed for clear error and its conclusions of law are reviewed de novo. See In re Karelin, 109 B.R. 943, 946--47 (B.A.P. 9th Cir. 1990). A bankruptcy court's decision to grant a motion for summary judgment is subject to de novo review. Beeler v. Jewell (In re Stanton), 303 F.3d 939, 941 (9th Cir. 2002).

DISCUSSION

The Bankruptcy Court granted summary judgment on Appellee's claim for avoidance of preferential transfers between Debtor and Appellant. When reviewing a grant of summary judgment, this Court's task "is identical to that of the [bankruptcy court]." In re Black & White Cattle Co., 783 F.2d 1454, 1457 (9th Cir. 1986). "We must view the evidence and inferences therefrom in the light most favorable to the party opposing the motion for summary judgment." Jewel Cos. v. Pay Less Drug Stores Northwest, Inc., 741 F.2d 1555, 1559 (9th Cir. 1984). A court must then determine whether the moving party has shown through admissible pleadings, depositions, answers to interrogatories, and other affidavits that there is no genuine issue of material fact and that it would be entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). If this burden has been met, the court assesses whether the non-moving party has come forward with its own significant and probative evidence showing a genuine issue of material fact as to the relevant claims or defenses. Id. at 322--23. Without specific evidence to support the conclusion, a bald assertion of the "ultimate fact" by the nonmoving party is insufficient to fulfill its burden. See Schneider v. TRW, Inc., 938 F.2d 986, 990--91 (9th Cir. 1991).

Applying this framework, the Court finds that the Bankruptcy Court properly granted Appellee's motion for summary judgment. Because Appellant failed to establish a genuine issue of material fact in response to Appellee's motion, the Court AFFIRMS the Bankruptcy ...


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