In re: Robert F. Hadley, Jr., Debtor.
Barry E. Savage, Defendant-Appellant. Douglas A. Dymarkowski, Trustee, Plaintiff-Appellee,
from the United States Bankruptcy Court for the Northern
District of Ohio at Toledo. No. 12-33850-John P. Gustafson,
E. Savage, Toledo, Ohio, for Appellant.
L. Reeves, Lima, Ohio, for Appellee.
Before: DELK, PRESTON, and WISE, Bankruptcy Appellate Panel
PAULETTE J. DELK, Bankruptcy Appellate Panel Judge.
case, the Chapter 7 trustee filed an adversary proceeding to
avoid and recover preferential or fraudulent transfers from
Debtor's business attorney, Appellant herein. The
bankruptcy judge granted the trustee's motion for partial
summary judgment, finding that two preferential transfers
occurred just six days prior to bankruptcy, and awarded the
trustee the value of the transferred property pursuant to 11
U.S.C. § 550(a). A separate hearing was subsequently
held to determine the value of the property transferred. The
transferee attorney appeals the bankruptcy court's order
granting partial summary judgment, the order determining the
value of the property transferred, and the order denying his
motion to amend and modify the judgment.
ISSUES ON APPEAL
raises three issues on appeal:
A. Did the bankruptcy court err in concluding that the
transfers at issue were preferential and subject to avoidance
under 11 U.S.C. § 547(b)?
B. Did the bankruptcy court clearly err in its determination
of the value of the property transferred?
C. Did the bankruptcy court abuse its discretion in denying
the transferee's motion for a new trial and for amendment
and modification of the judgment?
JURISDICTION AND STANDARD OF REVIEW
Panel has jurisdiction to decide this appeal. The United
States District Court for the Northern District of Ohio has
authorized appeals to this Panel, and neither of the parties
has timely elected to have these appeals heard by the
district court. 28 U.S.C. § 158(b)(6), (c)(1). A
bankruptcy court's final order may be appealed as of
right pursuant to 28 U.S.C. § 158(a)(1). For purposes of
appeal, an order is final if it "ends the litigation on
the merits and leaves nothing for the court to do but execute
the judgment." Midland Asphalt Corp. v. United
States, 489 U.S. 794, 798, 109 S.Ct. 1494, 1497 (1989)
(citation omitted). The bankruptcy court's grant of
summary judgment and subsequent orders resolved the
underlying adversary proceeding on its merits and the orders
appealed are therefore final, appealable orders. Lyon v.
Eiseman (In re Forbes), 372 B.R. 321, 325
(B.A.P. 6th Cir. 2007).
bankruptcy court's legal conclusions are reviewed de
novo, Caradon Doors & Windows, Inc. v.
Eagle-Picher Indus., Inc. (In re Eagle-Picher
Indus., Inc.), 447 F.3d 461, 463 (6th Cir.
2006), including a decision that applies or interprets state
law. See Official Comm. of Unsecured Creditors v. Dow
Corning Corp. (In re Dow Corning Corp.), 456
F.3d 668, 675 (6thCir. 2006). "De novo means
that the appellate court determines the law independently of
the trial court's determination." Treinish v.
Norwest Bank Minn., N.A. (In re Periandri), 266
B.R. 651, 653 (B.A.P. 6th Cir. 2001) (citations
omitted). "No deference is given to the trial
court's conclusions of law." Mktg. &
Creative Solutions, Inc. v. Scripps Howard Broad. Co.
(In re Mktg. & Creative Solutions, Inc.), 338
B.R. 300, 302 (B.A.P. 6th Cir. 2006) (citations
omitted). Decisions to grant summary judgment are reviewed
determination of value is a finding of fact, reviewed under
the clearly erroneous standard. Tedeschi v. Falvo
(In re Falvo), 227 B.R. 662, 663 (B.A.P. 6th Cir.
1998). " A factual finding is clearly erroneous when
'a court, on reviewing the evidence, is left with the
definite and firm conviction that a mistake has been
committed.'" United States v. Ray, 803 F.3d
244, 275 (6th Cir. 2015) (quoting United
States v. Gunter, 551 F.3d 472, 479 (6th Cir. 2009)).
bankruptcy court's denial of a motion to amend and modify
a judgment pursuant to Federal Rule of Civil Procedure Rule
59(e) (made applicable by Federal Rule of Bankruptcy
Procedure 9023) is reviewed for abuse of discretion.
Kreipke v. Wayne State Univ., 807 F.3d 768, 781-82
(6th Cir. 2015). An abuse of discretion
occurs where the reviewing court has "'a definite
and firm conviction that the trial court committed a clear
error of judgment.'" CFE Racing Prods. v. BMF
Wheels, Inc., 793 F.3d 571, 584 (6th Cir.
2015) (quotation omitted).
facts of this case are undisputed. Prior to bankruptcy,
Debtor had a long-standing professional and personal
relationship with Appellant, Debtor's attorney. Appellant
provided legal services for Debtor and Debtor's business
interests. Debtor's businesses were flailing, and Debtor
was unable to pay the $70, 000 attorney fees that accrued
over a period of several years. Appellant was aware that
Debtor would be unable to pay his fees, but continued to
provide legal services. Debtor's unpaid legal expenses
continued to escalate, and on May 19, 2008, Debtor gave
Appellant possession of the titles to two of Debtor's
vehicles - a 1954 MG and a 1977 Ferrari - as a form of
security for payment of the legal fees. There was, however,
no written security agreement.
continued to provide legal services over the next several
years, and the legal fees remained unpaid. When a bank began
putting pressure on Debtor for payment, Appellant requested
possession of the vehicles to further solidify his security
interest. Debtor accordingly turned over possession of the
two vehicles to Appellant in the spring (last week of April
or first week of May) of 2012. Debtor did not transfer
ownership of the vehicles by signing over the two titles and
completing assignment of ownership forms, however, until
August 15, 2012 - just six days prior to Debtor's Chapter
7 bankruptcy filing on August 21, 2012. Debtor and Appellant
agreed that the Ferrari was worth approximately $25, 000 and
that the MG was worth approximately $15, 000. Although these
amounts were insufficient to cover the amount of the unpaid
legal fees, Debtor and Appellant agreed that the transfer
would satisfy Debtor's fee debt.
time Appellant obtained ownership of the vehicles, the
vehicles were not in working order - both required mechanical
work to get them running - with substantial work required on
the Ferrari. Appellant presented no evidence, however, of the
value of the mechanical work that was performed.
Appellant obtained title to the vehicles, he put the vehicles
up as collateral on two bank loans totaling $37, 500, and
then, in November 2013, sold the vehicles to a third party
for $40, 000. More than eight months after the sale, on
August 1, 2014, the Chapter 7 trustee filed an adversary
complaint against Appellant pursuant to § 547(b), among
other provisions, seeking to avoid Debtor's transfer of
ownership to Appellant, and to recover the value of the
vehicles. The trustee alleged that the transfer occurred when
Debtor signed the titles over to Appellant, just six days
prior to bankruptcy. Appellant contended that he had a
possessory attorney's lien on the vehicles to secure
payment of his fees, which was perfected by possession of the
titles in 2007, or, at the latest, on or about May 1, 2012,
when he took possession of the vehicles - either date falling
outside the 90-day look-back period for avoidance of a
transfer under § 547(b). Both parties filed motions for
through the elements of § 547(b), the bankruptcy court
concluded that Appellant did not have a valid or perfected
attorney lien on the vehicles under Ohio law, and that the
transfer occurred when Debtor transferred ownership by
signing over the vehicle titles on August 15, 2012, within
the look-back period for avoidance. As Appellant failed to
show an exception to avoidance pursuant to § 547(c), the
bankruptcy court granted the trustee's motion for partial
summary judgment, avoiding the transfer, and denied
Appellant's summary judgment motion. Because an issue of
material fact existed as to the value of the transfer, the
bankruptcy judge reserved that issue for a later hearing.
bankruptcy court subsequently held a hearing to determine the
amount of the judgment in favor of the trustee. While it was
agreed that the MG was worth $15, 000, there was a dispute as
to the value of the inoperable Ferrari at the time of
transfer. Although the cars were ultimately sold for $40,
000, Appellant had been forced to make substantial
improvements to the vehicles, especially the Ferrari, during
his ownership. The trustee requested the entire $40, 000 sale
price plus prejudgment interest from the date the trustee
filed the adversary complaint. As the repairs to the vehicles
were essentially a barter transaction between Appellant ...