Partial Summary Judgment Was Appropriate Where Chapter 7 Trustee Filed Preference And Fraudulent Transfer Claims After Statute Of Limitations Ran, And Where Trustee Merely Recited Fraudulent Transfer Statute, But Alleged No Facts In Support Of Claims
Burtch v. Dent, (In re Circle Y of Yoakum, Tx.), 354 B.R. 349 (Bankr. D. Del. 2006) (Judge Mary F. Walrath)
The Chapter 7 Trustee of debtor Circle Y’s estate asserted claims under sections 547 and 548 of the Bankruptcy Code relating to payments made to an insider more than one year before the petition date. The Bankruptcy Court held that those claims were time-barred. Also, because the Trustee’s fraudulent transfer claims pled no facts in support of the Trustee’s allegations, but merely recited relevant statutory language, the Bankruptcy Court dismissed those claims for failure to plead fraud with sufficient particularity. However, the Court granted the Chapter 7 Trustee leave to amend to add additional payments where those payments were part of a discernible pattern with payments alleged in the Trustee’s original complaint.
The Trustee of debtor Circle Y’s estate filed complaints against each of two defendants – Stephen G. Dent, an insider of the Debtor, and Dent and Company, Inc. The Complaints asserted claims under section 544, 547, 548 and 550 of the Bankruptcy Code. The Trustee thereafter amended the complaints to include additional payments. The defendants moved to dismiss. The Trustee thereafter filed motions to amend the complaints to include a breach of fiduciary duty claim against Dent and an aiding and abetting the breach of fiduciary duty claim against Dent & Company.The Court granted the motion to dismiss with respect to each payment sought to be recovered under sections 547 and 548 that occurred more than one year before the petition date. Accordingly, all the transfers sought be recovered from Dent, and thirty of the thirty-three transfers sought be recovered from Dent & Company could not be recovered under sections 547 and 548.
The Court also granted the defendants’ motions to dismiss the claims under sections 544 and 548 for failure to plead fraud with particularity. The complaints merely recited the statutory language without supporting facts. However, the Court granted leave to the Trustee to amend to add supporting facts.
The defendants also argued that the claims added in the first amended complaint should be dismissed because they were barred by the statute of limitations. The Trustee claimed that the defendants were on notice in the original complaint that additional claims may be added because he reserved the right to amend. The Court rejected this assertion as insufficient, standing alone, to allow amendments to relate back under Fed. R. Civ. P. 15(c). The Court also found that because there was no showing that the additional payments to Dent were part of a pattern relating to the payment alleged in the original complaint, the new claims in the first amended complaint were time-barred. However, the Court found that there was a connection between the twenty additional payments to Dent & Company alleged in the amended complaint and those in the original complaint, where each was made monthly in exactly the same or similar amounts. The Court held that such payments related back to the original complaint for statute of limitations purposes.
The Court therefore granted the motion to file the second amended complaint in so far as it was consistent with the Court’s statute of limitations holding under sections 547 and 548.
