Montoya v. Wilson et al

1The underlying chapter 7 petition was filed on December 17,
2003. 	The amendments made by the Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005, Pub. L. No. 109-8 (2005) do not
apply to this case.
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW MEXICO
In re:
ROSANNE WILSON and
LEROY WILSON,
Debtors. 	No. 7-03-19437 SA
PHILIP J. MONTOYA,
Plaintiff,
v. 	Adv. No. 05-1283 S
ROSANNE WILSON, et al.,
Defendants.
MEMORANDUM OPINION ON DEFENDANTS’
MOTION FOR RULE 52(c) DISMISSAL
This matter came before the Court for trial on the merits of
Plaintiff’s Complaint. 	Plaintiff appeared through his attorney
Moore, Berkson & Gandarilla, P.C. (Bonnie B. Gandarilla).
Defendants appeared through their attorney Puccini & Meagle, P.C.
(Shay E. Meagle). 	This is a core proceeding. 	28 U.S.C. §
157(b)(2)(H) 1. 	This Memorandum Opinion constitutes the Court’s
Findings of Fact and Conclusions of Law as may be required by
Bankruptcy Rule 7052(a).
Plaintiff’s complaint is based on 11 U.S.C. § 548(a)(1),
which 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 one year before the date of the filing of the
petition, if the debtor voluntarily or involuntarily--
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(A) made such transfer or incurred such obligation
with actual intent to hinder, delay, or defraud
any entity to which the debtor was or became, on
or after the date that such transfer was made or
such obligation was incurred, indebted; or
(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; or
(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.
At trial, Plaintiff withdrew all claims against the
Defendants except for his claim that $13,000.00 of contributions
to the Defendants’ individual retirement accounts (“IRAs”) were
fraudulent. 	At the conclusion of Plaintiff’s case, Defendants
made an oral motion to dismiss. 	This motion implicates
Bankruptcy Rule 7052, which incorporates Fed.R.Civ.P. 52(c).
Rule 52(c) provides:
Judgment on Partial Findings. 	If during a trial
without a jury a party has been fully heard on an issue
and the court finds against the party on that issue,
the court may enter judgment as a matter of law against
that party with respect to a claim or defense that
cannot under the controlling law be maintained or
defeated without a favorable finding on that issue, or
the court may decline to render any judgment until the
close of all the evidence. 	Such a judgment shall be
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2 “[T]he conversion of non-exempt to exempt property for the
purpose of placing the property out of the reach of creditors,
without more, will not deprive the debtor of the exemption to
which he otherwise would be entitled.” 	Marine Midland Business
Loans, Inc. v. Carey (In re Carey), 938 F.2d 1073, 1076 (10 th
Cir. 1991). 	(Citations and additional punctuation omitted.)
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supported by findings of fact and conclusions of law as
required by subdivision (a) of this rule.
A Rule 52(c) motion should be granted either 1) if plaintiff
fails to make out a prima facie case, or 2) despite a prima facie
case, the Court determines that the preponderance of evidence
goes against the plaintiff’s claim. 	Regency Holdings (Cayman),
Inc. v. The Microcap Fund, Inc. (In re Regency Holdings (Cayman),
Inc.), 216 B.R. 371, 374 (Bankr. S.D. 	N.Y. 1998)(Citation
omitted.) 	The Court does not draw any special inferences in
nonmovant’s favor, nor does the court consider the evidence in
the light most favorable to the nonmoving party. 	Id. (Citations
omitted.) 	Rather, the court acts as both judge and jury, weighs
evidence, resolves conflicts, and decides where the preponderance
of the evidence lies. 	Id. (Citations omitted.)
As grounds for their motion, Defendants claim that Plaintiff
has not established fraud, nor has Plaintiff established that the
transfer in question was for less than a reasonably equivalent
value. 	The Court agrees and finds that the Motion to Dismiss
should be granted.
First, the Court finds no fraud on Defendants’ part. 2 	As
part of Plaintiff’s case, both Defendants testified at length
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regarding the financial transactions questioned by the Trustee,
including the IRA contributions. 	They accounted for and
justified substantially all of the funds transferred. 	Regarding
the IRAs, both Debtors testified that they had been informed by a
financial planner that their retirements were severely
underfunded and that they should make the contributions. 	Based
on this testimony, the Court finds that the contributions to the
IRAs were not made with an intent to hinder, delay or defraud.
Therefore, Plaintiff has not met the requirements of 11 U.S.C. §
548(a)(1)(A).
Exhibit 3 shows that Defendants had adjusted gross income in
2003 of $191,248. 	The modified adjusted gross income for Roth
IRA purposes is also $191,248. 	See Dept. of Treasury, Internal
Revenue Service, Publication 590, Individual Retirement
Arrangements (IRAs) (for use in preparing 2003 returns), p. 56.
(“Pub 590") (Worksheet 2-1). 	See also 26 U.S.C. § 219(g)(3)(A).
In 2003, married filing jointly taxpayers with modified adjusted
gross income of over $150,000.00 were not permitted to contribute
to a Roth IRA. 	See Pub 590, p. 55 (Table 2-1). 	See also 26
U.S.C. § 408A(c)(3)(A). 	“A 6% excise tax applies to any excess
contribution to a Roth IRA.” 	Pub 590, p. 58 (Emphasis in
original). 	See also 26 U.S.C. § 4973(a)(1) (6 percent of the
amount of the excess contributions per year.) 	Plaintiff argues
that Defendants, by contributing to a Roth IRA in 2003 when they
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were ineligible, automatically did not receive reasonably
equivalent value for their transfer because the contributions are
subject to an excise tax. 	Plaintiff asks the Court to establish
a bright line rule that any unauthorized contribution to a
retirement account is a fraudulent transfer subject to recovery
by a trustee. 	The Court declines to do so.
First, in this case the Defendants made their Roth IRA
contribution early in the year, well before they knew or could
know what their adjusted gross income was going to be. 	There are
provisions in the Tax Code that allow excess contributions to be
withdrawn before certain dates to avoid the tax. 	See 26 U.S.C. §
4973(b). 	Therefore, the tax is not actually incurred at the time
of contribution. 	It is incurred when it becomes an excess
contribution, usually the next year after the return is filed.
Second, §548(a)(1)(B) does not require an exact exchange of
value. 	“Although the minimum quantum necessary to constitute
reasonably equivalent value is undecided, it is clear that the
debtor need not collect a dollar-for-dollar equivalent to receive
reasonably equivalent value.” 	Butler Aviation Int’l, Inc. v.
Whyte (In re Fairchild Aircraft Corp.), 6 F.3d 1119, 1125-26 (5 th
Cir. 1993). 	It is also clear to this Court that $1 now is
reasonably equivalent value to $1 a year in the future that has
grown tax free but may be subject to a 6% tax.
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Therefore, because the Court finds that there was a
reasonably equivalent value received for the IRA contribution,
Plaintiff cannot prevail under 11 U.S.C. § 548(a)(1)(B).
CONCLUSION
The Court finds that Defendants’ Rule 52(c) motion is well
taken and should be granted. 	The Court will enter a Judgment for
Defendants dismissing the adversary proceeding with prejudice.
Honorable James S. Starzynski
United States Bankruptcy Judge
copies to:
Bonnie Bassan Gandarilla
Moore, Berkson & Gandarilla, P.C.
PO Box 216
Albuquerque, NM 87103-0216
Shay E Meagle
PO Box 30707
Albuquerque, NM 87190-0707
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