Wagner v. McAnena et al

UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW MEXICO
In re: 	THE VAUGHAN COMPANY, REALTORS, 	No. 11-10-10759 JA
Debtor.
JUDITH A. WAGNER, Chapter
11 Trustee of the bankruptcy estate
Of the Vaughan Company, Realtors,
Plaintiff,
v. 	Adversary No. 12-1109 J
PETER McANENA and
SARAH BLACKWOOD,
Defendants.
MEMORANDUM OPINION
THIS MATTER is before the Court on two motions for summary judgment filed by
Plaintiff Judith A. Wagner, Chapter 11 Trustee of the bankruptcy estate of the Vaughan
Company Realtors (the “Trustee”) against Defendant Peter McAnena.1 The Trustee seeks
judgment in her favor on her claims under 11 U.S.C. § 547 and 548 of the Bankruptcy Code and
under New Mexico’s version of the Uniform Fraudulent Transfer Act (“UFTA”), N.M.S.A. 1978
§§ 56-10-18(A)(1) and (2). Specifically, the Trustee requests the Court to i) establish the timing
and amount of the transfers made by The Vaughan Company Realtors (“VCR”) to Mr.
McAnena; ii) enter a money judgment in favor of the Trustee with respect to the “net winnings”
Mr. McAnena received in excess of his total investment during the two-year and four-year look
back periods under 11 U.S.C. § 548 and the UFTA; iii) declare that the Trustee has proven her
1See Plaintiff’s Motion for Partial Summary Judgment on her Claims Under 11 U.S.C. § 547
Against Defendant Peter McAnena (Docket No. 34) (the “§ 547 Motion”) and Chapter 11
Trustee’s Motion for Partial Judgment Against Peter McAnena as to the Timing and Amount of
the Transfers (Docket No. 32) (the “Fraudulent Transfer Motion”).
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prima facie case against Mr. McAnena on her actual fraud claims brought under 11 U.S.C. § 548
and the UFTA, and, if appropriate, enter a money judgment on those claims; and iv) enter a
money judgment in favor of the Trustee for the amount of the transfers from VCR to Mr.
McAnena made during the 90-day period before VCR’s filing of its bankruptcy petition. Mr.
McAnena did not file a response to the Motions for Summary Judgment. After considering the
Motions for Summary Judgment and the supporting documentation, and being otherwise
sufficiently informed, the Court finds that the § 547 Motion should be denied and the Fraudulent
Transfer Motion should be granted, in part, and denied in part, as explained below.
SUMMARY JUDGMENT STANDARDS
Summary judgment, governed by Rule 56, Fed.R.Civ.P., will be granted when the
movant demonstrates that there is no genuine dispute as to a material fact and that the movant is
entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(a), made applicable to adversary
proceedings by Rule 7056, Fed.R.Bankr.P. “[A] party seeking summary judgment always bears
the initial responsibility of informing the ... court of the basis for its motion, and ... [must]
demonstrate the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S.
317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). In considering a motion for summary
judgment, the Court must “examine the factual record and reasonable inferences therefrom in the
light most favorable to the party opposing summary judgment.” Wolf v. Prudential Ins. Co. of
America, 50 F.3d 793, 796 (10th Cir. 1995) (quoting Applied Genetics Int’l, Inc. v. First
Affiliated Sec., Inc., 912 F2d 1238, 1241 (10th Cir. 1990)). “[A] party opposing a properly
supported motion for summary judgment may not rest on mere allegation or denials of his
pleading, but must set forth specific facts showing that there is a genuine issue for trial” through
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affidavits or other supporting evidence. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106
S.Ct. 2505, 91 L.Ed .2d 202 (1986).
FACTS NOT SUBJECT TO GENUINE DISPUTE
1. 	VCR filed a voluntary petition under Chapter 11 of the Bankruptcy Code on
February 22, 2010 (the “Petition Date”). See Docket No. 1 in Case No. 10-10759.
2. 	The Trustee commenced this adversary proceeding on February 19, 2012. 	See
Trustee’s Complaint, Docket No. 1.
3. 	Peter McAnena transferred a total of $290,000.00 to VCR between 1999 and the
Petition Date. 	See Complaint, ¶ 30 (chart showing that Mr. McAnena invested a total of
$290,000 from 1999 through the Petition Date); [Answers to] Plaintiff’s First Request for
Admissions, 	Interrogatories 	and 	Requests 	for 	Production 	to 	Defendant 	Peter 	McAnena
(“Discovery Responses”) – Request for Admission No. 1. 2
4. 	From 1999 through the Petition Date, Peter McAnena received $387,818.04 from
VCR. See Complaint, ¶ 32; Discovery Responses – Request for Admission No. 2.
5. 	From February 22, 2006 through the Petition Date, Peter McAnena received
$212,326.07 from VCR. See Complaint, ¶ 34; Discovery Responses – Request for Admission
No. 3.
6. 	From February 22, 2008 through the Petition Date, Peter McAnena received
$103,945.49 from VCR. See Complaint, ¶ 35; Discovery Responses – Request for Admission
No. 4.
2Mr. McAnena admits the Trustee’s request to admit that the total amount he transferred to VCR from 1999 through
the Petition date is $290,000.00, but indicated in his Discovery Responses that he was “relying on information from
‘your office’ as I no longer have those documents.” See Discovery Responses, Request for Admission No. 1. Mr.
McAnena reiterated this qualification in admitting Requests for Admission Nos. 2, 3, 4, 5, 6, and 7 upon which the
Trustee relies in support of the § 547 Motion and the Fraudulent Transfer Motion.
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7. 	Peter McAnena received from VCR $97,818.04 more than he invested. See
Complaint, ¶ 33; Discovery Responses – Request for Admission No. 7.
8. 	Within the 90-day period before the Petition Date, Peter McAnena received
$13,661.41in transfers from VCR. See Complaint, ¶ 36; Discovery Responses – Request for
Admission No. 5.
9. 	The transfers Peter McAnena received from VCR were on account of his
participation in VCR’s promissory note program. See Complaint, ¶¶ 30 and 41; Discovery
Responses – Request for Admission No. 6.
DISCUSSION
I. 	Whether the Trustee Established the Prima Facie Elements of her Actual Fraud
Claims
Claims for actual fraud under 11 U.S.C. § 548(a)(1)(A) require a proof of “(i) a transfer
of an interest of the debtor in property; (ii) made within two years before the debtor filed for
bankruptcy; and (iii) done with ‘actual intent to hinder, delay, or defraud’ the debtor or any entity
the debtor would become after the transfer.” See McHale v. Boulder Capital LLC (In re The
1031 Tax Group, LLC), 439 B.R. 47, 68 (Bankr.S.D.N.Y. 2010) (quoting 11 U.S.C. §
548(a)(1)(A)). The UFTA contains similar elements but uses a four-year look-back period. See
N.M.S.A. 1978 § 56-10-18(A)(1)(actual fraud)3 ; N.M.S.A. 1978 § 56-10-23 (establishing a four
year statute of limitations on pursuing fraudulent transfer actions under New Mexico law). 4 In
Wagner v. Oliva (In re Vaughan Co. Realtors), 500 B.R. 778 (Bankr.D.N.M. 2013) this Court
3The New Mexico statute provides:
A transfer made or obligation incurred by a debtor is fraudulent as to a creditor, whether the creditor's claim
arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or
incurred the obligation:
(1) with actual intent to hinder, delay or defraud any creditor of the debtor[.]
N.M.S.A. 1978 § 56-10-18(A)(1).
4Montoya v. Velasquez (In re Strom), 2013 WL 265071, *3 n. 5 (Bankr.D.N.M. Jan. 10, 2013) (“The New Mexico
UFTA has a four-year ‘look-back’ period[.]”).
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determined that, to the extent a transfer was made to an investor in VCR’s promissory note
program within the four-year period before the Petition Date: (1) each transfer constituted an
interest of VCR in property; (2) each transfer was made with the actual intent to defraud
creditors; (3) VCR received less than reasonably equivalent value in exchange for the transfer of
any returns in excess of the original investment; and (4) on the date of each transfer, VCR was
insolvent and/or believed (or reasonably should have believed) it would incur debts beyond its
ability to repay. 5 The only remaining issues are whether, and to what extent, the transfers
actually occurred, and Mr. McAnena’s good faith defense.
The facts not subject to material dispute establish the timing and amount of the transfers
with respect to the Trustee’s actual fraud claims. From February 22, 2006 through the Petition
Date, Mr. McAnena admits that he received $212,326.07 from VCR. From February 22, 2008
through the Petition Date, Mr. McAnena admits that he received $103,945.49 from VCR.
Under the actual fraud provision of 11 U.S.C. § 548(a)(1)(A), the Trustee may recover
the total amount of the transfers, not just the amount in excess of an investor’s initial investment,
unless the investor can show that he received the transfer in good faith in exchange for value.
See 11 U.S.C. § 548(c)(“a transferee . . . of such transfer . . . that takes for value and in good
faith . . . may retain any interest transferred . . . to the extent that such transferee . . . gave value
to the debtor in exchange for such transfer.”); Soifer v. Bozarth (In re Lydia Cladek, Inc.), 494
B.R. 555, 557 (Bankr.M.D.Fla. 2013)(stating that § 548(c) “provide[s] transferees with a
defense to fraudulent transfer actions based on actual fraud, if the transferees gave value in
exchange for the transfers and acted in good faith.”); Fisher v. Sellis (In re Lake States
Commodities, Inc.), 253 B.R. 866, 879 n.9 (Bankr.N.D.Ill. 2000)(stating that “a trustee may
5Wagner v. Oliva established certain elements of the Trustee’s prima facie fraudulent transfer claims with respect to
each defendant in similarly-situated adversary proceedings involving investors in VCR’s promissory note program,
including the defendants in this Adversary Proceeding No. 12-1109.
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recover the full amount of a transfer if the debtor made the transfer with actual intent to defraud.
In that scenario, the transferee will only avoid liability if it can establish good faith . . .”)(citation
omitted). The UFTA also contains a good faith defense to fraudulent transfer claims. See
N.M.S.A. 1978 § 56-10-22(A)(“A transfer . . . is not voidable . . . against a person who took in
good faith and for a reasonably equivalent value . . .”).
The Trustee points out that Mr. McAnena did not expressly raise any affirmative
defenses. He did not respond to the Motions for Summary Judgment. Defendant Sarah
Blackwood is the only Defendant who signed the Answer to the Complaint, though the Answer
contains separate responses for each Defendant. See Docket No. 26. In the Pre-Trial Order,
Defendants state that whether they knew or should have known that Douglas Vaughan was
causing VCR to engage in fraud should be measured by the standard of “a reasonably prudent
person of same or similar class of persons” as the Defendants; that the Defendants did not
recognize that VCR’s promissory note program was a Ponzi scheme when they made their
investments, and that they are “victims, not perpetrators [of the fraud].” See Pre-Trial Order,
pp.6 and 16 –Docket No. 37. Even though Mr. McAnena did not expressly assert the good faith
defense to the Trustee’s claims, the Court finds that it is not appropriate to grant the Trustee a
money judgment for the total amount of the transfers.6 The Pre-Trial Order and the Answer
6Mr. McAnena bears the burden of proof with respect to the good faith defense. See Satriale v. Key Bank USA, N.A.
(In re Burry), 309 B.R. 130, 135 (Bankr.E.D.Pa. 2004)(observing that, because the good faith defense is an
affirmative defense, the defendant bears the burden of proof). When the party requesting summary judgment does
not bear the burden of proof with respect to an issue for trial, the moving party can satisfy its burden of
demonstrating an absence of genuine issue of material fact by (1) presenting evidence to negate an essential element
of the nonmovant’s claim or defense; or (2) “indicating to the court a lack of evidence for the nonmovant on an
essential element of the nonmovant’s claim.” 1-800 Contacts, Inc. v. Lens.com, Inc., 722 F.3d 1229, 1242 (10 th Cir.
2013)(quoting Sally Beauty Co., Inc., 304 F.3d 964, 971 (10th Cir. 2002)(internal quotation marks omitted)). The
Trustee’s argument that Mr. McAnena did not make a sufficient showing with respect to an affirmative defense
ordinarily would trigger Mr. McAnena’s duty to come forward with evidence regarding his defenses sufficient to
defeat the Trustee’s request for summary judgment. But the Court nevertheless may exercise its discretion
consistent with Rule 56 and decline to grant summary judgment. See In re Curtis, 38 B.R. 364, 368 (Bankr.Okla.
1983)(“even where movant’s showing appears sufficient, a judge has some discretion to deny the motion
notwithstanding the technically adequate showing in support thereof.”)(emphasis in original)(citation omitted);
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include statements that Mr. McAnena did not know that VCR was operating a Ponzi scheme at
the time of his investment or when he received the transfers, and that he “believed in and trusted
[Douglas] Vaughan for a long time.” See Answer, p. 10 – Docket No. 26. These statements are
sufficient for the Court to exercise its discretion under Rule 56 and decline to enter a money
judgment for the total amount of the transfers during the two- and four-year look-back periods
notwithstanding the Trustee’s establishment of the timing and amount of the transfers comprising
her actual fraud claims. See 10A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane,
Federal Practice and Procedure: Civil § 2728 (3d ed. 1998)(“the court has discretion to deny a
Rule 56 motion . . . . when it has any doubts as to the wisdom of terminating the action prior to a
full trial.”). A trial on the merits of this Adversary Proceeding is scheduled for November 17,
2014. Mr. McAnena will have an opportunity at that time to present evidence of good faith.
II. 	Whether the Trustee is Entitled to a Money Judgment for “Net Winnings”
The Trustee also seeks summary judgment on her constructive fraud claims.
Constructive fraud under 11 U.S.C. § 548(a)(1)(B) requires the plaintiff to establish that the
debtor “received less than a reasonably equivalent value in exchange for the transfer.” 11 U.S.C.
§ 548(a)(1)(B)(i). The constructive fraud provisions of the UFTA contain a similar
requirement.7 Whether the debtor received reasonably equivalent value in exchange for a
transfer in Ponzi scheme cases depends on whether the investor had already recouped their initial
investment at the time of the transfer. As the Court explained more fully in Wagner v. Oliva, to
Lyons v. Hospitality of Vermont, Inc., (In re Hospitality of Vermont, Inc.), 27 B.R. 737, 739 (Bankr.Vt. 1983)(“Even
if it were assumed that the instant parties had satisfied the criteria for summary judgment, ‘the Court may deny
summary judgment as a matter of discretion.’”)(quoting Fine v. City of New York, 71 F.R.D. 374, 375 (S.D.N.Y.
1976)). In this case, the Court exercises its discretion to not grant summary judgment on the good faith defense
notwithstanding Mr. McAnena’s failure to come forward with evidence to support the defense in response to the
Trustee’s request for summary judgment.
7N.M.S.A. 1978 §§ 56-10-18(A)(2) and 56-10-19(A) require that the debtor make a transfer “without receiving a
reasonably equivalent value in exchange for the transfer.”
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the extent the transfer at issue represents a return of principal, the Ponzi perpetrator receives
reasonably equivalent value as a matter of law. Wagner v. Oliva, 500 B.R. at 793-794.8
For both constructive fraud claims and actual fraud claims in Ponzi scheme cases, courts
generally apply the “netting rule” to determine the amount of the potential liability of the
transferee. Under the netting rule, the “[a]mounts transferred by the Ponzi scheme perpetrator to
the investor are netted against the [total] amounts invested by that individual.” Donell v. Kowell,
533 F.3d 762, 771 (9th Cir. 2008). “The actual amount of liability depends ‘on factors such as
whether transfers were made within the limitations period[.]’” Wagner v. Eberhard (In re
Vaughan Company, Realtors), 2014 WL 271632, *4 (Bankr.D.N.M. Jan. 23, 2014) (quoting
Donell, 533 F.3d at 771).
Mr. McAnena admits that he received $97,818.04 in excess of the total amount he
invested in VCR’s promissory note program. He also admits that he received $212,326.07 from
VCR during the four-year look-back period, and $103,945.49 during the two-year look-back
period. Because the amount of the net winnings is less than the amounts Mr. McAnena received
during the look-back periods, Mr. McAnena necessarily received the net winnings during the
applicable look-back period.
In sum, the Trustee has established all required elements of her claims to recover
payments in excess of Mr. McAnena’s initial investment under both the actual and constructive
fraud provisions of 11 U.S.C. §§ 548(a)(1)(A) and (B) and N.M.S.A. 1978 § 56-10-18(A)(1) and
(2). The good faith defense can only protect Mr. McAnena to the extent of his original
8See also Jobin v. McKay (In re M & L Business Machine Co.), 84 F.3d 1330, 1341 (10th Cir.1996)
(explaining that “investors in fraudulent schemes ha[ve] claims for restitution and rescission against the
debtor [Ponzi perpetrator] and that, by reducing the amount of these claims, the debtors’ payments
provided reasonably equivalent value.”)(citations omitted); Merrill v. Abbott (In re Independent Clearing
House Co.), 77 B.R. 843, 857 (D.Utah 1987) (holding that the a Ponzi perpetrator received reasonably
equivalent value as a matter of law for any transfers up to the amount of the investor’s initial investment).
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investment. And the Trustee’s recovery on her constructive fraud claims is limited to the amount
transferred in excess of the amount VCR received. The Trustee is therefore entitled to judgment
in her favor in the amount of $97,818.04 (i.e. the total amount of net winnings transferred to Mr.
McAnena by VCR during the four-year look-back period), plus post-judgment interest at the
federal judgment rate.
III. 	Whether the Trustee is Entitled to a Money Judgment on her Preferential Transfer
Claim under 11 U.S.C. § 547
Preferential transfers are governed by 11 U.S.C. § 547(b), which provides, in relevant
part:
[T]he trustee may avoid any transfer of an interest of the debtor in property-
(1) to or for the benefit of a creditor;
(2) for or on account of an antecedent debt owed by the debtor before such
transfer was made;
(3) made while the debtor was insolvent;
(4) made-(A) on or within 90 days before the date of the filing of the petition;
(5) that enables such creditor to receive more than such creditor would receive if-
(A) the case were a case under chapter 7 of this title;
(B) the transfer had not been made; and
(C) such creditor received payment of such debt to the extent provided by
the provisions of this title.
11 U.S.C. § 547(b).
In Wagner v. Valencia (In re Vaughan Company, Realtors), 2013 WL 5818766
(Bankr.D.N.M. Oct. 25, 2013), this Court found that the Trustee has established that VCR had an
interest in the funds transferred to Mr. McAnena as part of VCR’s promissory note program, and
that VCR was insolvent between at least January 1, 2005 and the Petition Date. See Wagner v.
Valencia, 2013 WL 5818766 at *6 (incorporating the Court’s companion decision in Wagner v.
Oliva for purposes of establishing some of the elements required for the Trustee’s preferential
transfer claims). With respect to 11 U.S.C. § 547’s requirement that the transfers be made on
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account of an antecedent debt (i.e., to a “creditor”), the Court determined that further analysis
was required as to Mr. McAnena. See Wagner v. Valencia, 2013 WL 5818766 at *8. If Mr.
McAnena received only net winnings during the 90-day period prior to the Petition Date, such
transfers “would not be avoidable as preferential transfers because at that point, VCR had no
obligation to pay those funds.” Id. Consequently, Mr. McAnena would not be a “creditor” with
a claim against the estate at the time of the alleged preferential transfers. Id. (explaining that for
preferential transfer claims, “an investor ceases to be a ‘creditor’ of the Ponzi perpetrator at the
moment the investor recovers the amount of the initial investment.”).
The facts not subject to genuine, material dispute establish that VCR transferred
$13,661.41 to Mr. McAnena during the 90-day period before the Petition Date. But because the
90-day period is a subset of the four-year and two-year look-back period applicable to the
Trustee’s fraudulent transfer claims, the amount of the preferential transfer is necessarily a part
of the net winnings. Consequently, the Trustee cannot prevail on her preferential transfer claim
against Mr. McAnena because the transfers by VCR to Mr. McAnena during the 90-day period
before the Petition Date were not made on account of an antecedent debt. Mr. McAnena had
already recovered the total amount of his investment in VCR’s promissory note program at the
time of the alleged preferential transfers.
CONCLUSION
Based on the foregoing, the Court concludes that the Trustee is entitled to a money
judgment for the “net winnings” transferred §by VCR to Mr. McAnena on account of his
investment in VCR’s promissory note program during the applicable look-back periods. The
Court will not grant the Trustee summary judgment for the full amount of the transfers made
during the applicable look-back periods, notwithstanding the fact that the Trustee has established
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all prima facie elements of her actual fraud claims. At trial, Mr. McAnena will have an
opportunity to present evidence to support his good faith defense. The Trustee is not entitled to
summary judgment on her preferential transfer claim under 11 U.S.C. § 547. The Court will
enter a separate orders and judgments consistent with this memorandum opinion.
______________________________
ROBERT H. JACOBVITZ
United States Bankruptcy Judge
Date entered on docket: August 7, 2014
COPY TO:
Edward Alexander Mazel 	Peter McAnena
Daniel Andrew White 	Defendant
Askew & Mazel, LLC 	45120 Hwy 79 #706
Attorneys for Plaintiff 	Aguanga, CA 92536
320 Gold Ave S.W., Suite 300A
Albuquerque, NM 87102
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