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Full Opinion
ORDER GRANTING TRUSTEE PARTIAL SUMMARY JUDGMENT
This matter came before the Court on April 15, 2013, on the Motions for Summary Judgment as to Claims Relating to Transfers by Debtor & Invalidity of Trust and as to Claim of Denial of Discharge, filed by Mark D. Waldron, Trustee for the estate of Donald G. Huber (Trustee) against Donald G. Huber (Debtor). At the conclusion of the hearing, the Court took the matter under advisement. Based on the arguments and pleadings presented, the order of the Court is as follows:
The Debtor has been involved in real estate development and management in the Puget Sound area for over 40 years. He graduated from Pacific Lutheran University in Tacoma with a degree in Business Administration and Sociology. In 1968, he founded United Western Development, Inc. (UWD) with its principal place of business located in Tacoma, Washington. The purpose was to use it as a vehicle to engage in real estate development. The Debtor still serves as its President, although he is partially retired. The operation of UWD and the Debtorâs other businesses is now primarily performed by his
In the past, the Debtorâs residential development customers were not only the typical home buying public, but large home builders such as Quadrant Homes and Polygon Northwest, which have substantial financial backing. Many, if not all, of the projects of the Debtor were undertaken by him through the use of an entity separate and apart from UWD, such as through a corporation or limited liability company, with the Debtor owning all, or a portion, of the project. The .Debtor, however, was required on many projects to sign as guarantor in favor of third party lenders, many of them local banks. These appear to be the largest creditors of his bankruptcy. In 2002, UWD added additional staff in order to expand its market share and geographic market within the Pacific Northwest.
In 2007, UWD hired an individual who was experienced in investment banking and real estate securitization with a plan to secure additional financing. Subsequently, UWD entered into an engagement letter with Houlihan Lokey, a private finance group, to assist it in raising approximately $55 million in capital. The Private Placement Memorandum was completed in August 2008. The funds were to be used to pay off existing debt, provide additional working capital for present and future needs, and to fund the transaction fees. The cost of the âdue diligenceâ requirements was substantial, but in late September or early October 2008, the Debtor embarked on a fund raising trip to New York City. The Debtor/UWD, however, proved to be unsuccessful in its attempt to secure additional financing, receiving only one verbal offer and no written offers. On October 10, 2008, UWD terminated the agreement with Houlihan Lokey, partly due to the market turmoil that was by then affecting the real estate market nationwide, further dimming their chances of securing additional funding.
In 2007, the Debtor had and was in partnership on many of his projects with Robert Terhune, who was also a guarantor of many of the same projects. In a series of emails entered into the record as exhibits between the Debtor and Mr. Terhune, it became apparent that several of their joint projects were beginning to unwind due to a lack of capital, particularly with the withdrawal and cancellation of the Quadrant Homes projects. The Debtor placed ever increasing pressure on Mr. Terhune from the spring of 2008, through the end of the year to become current on monies he believed he was owed. When Mr. Terhune also threatened to set up his own spendthrift trust, the Debtor through his counsel made it clear to Mr. Terhune that the setting up of such a trust would be fraudulent as to him, as he considered himself a creditor.
The Examiner indicated in his report filed with the Court that the Debtor was or had to be aware of the âgathering storm clouds.â In addition to the threat of a collapsing housing market, a review of court files after the establishment of the Trust reflects that several loans in existence in August 2008 were fragile at best. The following are examples set forth in the Examinerâs Report:
a. In Columbia State Bank v. Donald G. Huber, 10-2-08686-8, Pierce County, Columbia Bank sued the Debtor and his business partner, Robert Terhune, for failure to pay a promissory note of $3,370,000 executed on November 30, 2007, and secured by certain real property known as
b. In Frontier Bank v. Black Lake Estates, et al., 09-2-09503-3, Snohomish County, Frontier Bank sued Black Lake Estates, LLC (one of the Debtorâs real estate holdings), the Debtor and Robert Terhune for failure to pay a promissory note of $1,706,000 executed on April 30, 2007. The Debtor had personally guaranteed the note. The maturity date of the note was extended multiple times, the last time from July 15, 2008, to October 15, 2008. An interest payment was made for approximately $9,000 on September 15, 2008, and although due and owing, no subsequent interest payments were made on this loan. Although Frontier Bank did not serve process on the Debtor until at least May 29, 2009, presumably he would have anticipated litigation if the loan was not repaid. The state court granted summary judgment for Frontier Bank against the Debtor on April 22, 2010, and that obligation remains unpaid.
c. In Anchor Bank v. Oakland Bay Estates, LLC, 09-2016750-3, Pierce County, Anchor Bank sued Oakland Bay Estates, LLC (one of the Debtorâs real estate holding LLCs), the Debtor and once again his business partner, Robert Terhune, for failure to pay a promissory note of $588,250 executed on March 13, 2006. The Debtor had personally guaranteed the note. The maturity date of the note was extended multiple times, the last time from July 1, 2008, to January 1, 2009, although the extension was not signed until the day after the Trust was signed. On September 30, 2008, an interest reserve account was established on the companyâs books and interest payments were applied against this account until funds were reduced to zero in February 2009; no subsequent interest payments were made on this loan. The state court granted summary judgment in favor of Anchor Bank against the Debtor on April 23, 2010. The obligation- remains unpaid.
d.In a separate action Anchor Mutual Savings Bank v. Terhune et. al., 10-2-16750-3, Anchor Bank sued the Debtor and Mr. Terhune for Oakland Bay Estatesâ failure to pay a different promissory note of $1,101,750 executed on January 23, 2006. The Debtor had personally guaranteed the note. The maturity date of the note was extended multiple times, the last time from July 1, 2008, to January 1, 2009, although the extension was not signed until September 24, 2008. On September 30, 2008, an interest reserve account was established on the companyâs books and interest payments were applied against this account until funds were reduced to zero in February 2009. No subsequent interest payments were made on this loan. The state court granted summary judgment against the Debtor on April 23, 2010.
It is well documented that in 2007 and 2008 nationally, as well as locally, the real estate market began to deteriorate due to the collapse of the subprime mortgage market and the implementation of more restrictive lending standards. On August 19, 2008, Kevin Huber, on behalf of his father, emailed attorney Harold Snow, an estate planning attorney, because â[m]y
With the assistance of Mr. Snow, the Debtor transferred $10,000 in cash and his ownership or membership interest in over 25 entities into DGH, LLC, an Alaska limited liability company, set up on September 4, 2008, to receive those interests. DGH, LLC, after it was established, was owned 99% by the Trust and 1% by Kevin Huber, its manager. UWDâs shares were transferred directly into the Trust and not through DGH, LLC. Assets such as the Debtorâs residence at 8310 Warren Street in Tacoma were conveyed to an Alaska corporation (8310, LLC) and then into DGH, LLC. The 8310, LLC then leased the residence to the Debtor, and the Trust made the mortgage payments. The corporate assets were transferred in a similar fashion via quit claim deed to an Alaska corporation, then the new entityâs interest into DGH, LLC. The Debtor acknowledges that he received no consideration for the transfers.
In summary, the assets owned or partially owned by the Debtor, either directly or indirectly, prior to the Trust implementation consisted of approximately 13 development projects, his residence and the residence of his disabled daughter, interests in several shopping centers, a few corporations, and $3 million dollars in uncollecta-ble receivables. As of July 2010, and after the Trust was created and further after several entities/projects were either foreclosed or sold, the Debtor personally owned only a 5% interest in the James Center Professional Plaza, worthless notes and accounts receivable, and a 50% interest in Burnett Highlands, LLC. Meanwhile the Trust appeared to own the Debtorâs holding and real estate operating companies, such as UWD Group, LLC, UWD Management, LLC, and DGH, LLC, as well as the residence occupied by his disabled daughter, an 85% interest in both the Kimball Center, LLC and Pioneer Plaza, LLC, PSEA, LLC, and Sure Seal, LLC. The Debtor was the trustor of the Trust, while Kevin Huber, Amber Haines, and Alaska USA Trust Company (AUSA) were trustees. There was only one asset of the Trust held in Alaska, which is a certificate of deposit for $10,000 transferred there by the Debtor. All other assets are located in Washington State.
The ultimate beneficiaries of the Trust, beside the Debtor, consist of his sons Kevin and Dillon, daughters Darby and Neysa, and stepchildren Amber, Seth, Cedar and Star. The Debtor also has grandchildren that the Trust assists in paying for their educational expenses. The Trust established by the Debtor generated $345,248 in discretionary beneficiary income in 2010, and $360,000 in 2009.
In August 2011, the Debtor filed an amended Schedule I reflecting then current income of $17,444 per month. Of this amount, $1,300 was in the form of the Debtorâs social security benefit. He also received social security income for each of his two minor children. The Debtor received trust income of $14,500 per month. The Debtor has provided documents showing the disbursements from the Trust assets following the resignation of Kevin Huber as a trustee. From October 1, 2010, through July 30, 2012, some of the ex
Don Huber personal expenses: $9,977.09
Dylan Huber personal expenses: $6,055.32
Darby Huber personal expenses: $4,775.32
Groceries: $7,081.17
Loan payments: $2,325.05
Home personal expenses: $1,363.51
Cash: $17,000.00
Educational expenses for children and grandchildren: $66,502.14
Payments to Debtorâs former spouse: $14,125.80
The payments to the Debtorâs former spouse extended from October 2010, through July 2012.
The total amount paid out from the Trust assets between October 1, 2010, and July 30, 2012, was $571,332.81. From the date of the filing of the chapter 11 petition on February 10, 2011, through July 30, 2012, the amount of the distributions was $406,837.27.
The Trustee contends that the Debtor made requests for disbursement from Kevin Huber, Kevin then prepared a request for a payment, and AUSA approved the disbursement, without any inquiry. The Debtor asserts, however, that Kevin Huber at times did refuse his requests for disbursements. It does not appear as if Kevin actually met with the representatives of AUSA. Further, the record before this Court indicates that AUSA did nothing to become involved with the preservation and/or protection of the assets of the Trust and was acting merely in the nature of a straw man.
The Debtor filed for chapter 11 bankruptcy protection on February 10, 2011. On May 31, 2011, creditor Anchor Mutual Savings Bank filed a Motion for Appointment of Chapter 11 Trustee or Conversion to Chapter 7, with a hearing set for June 23, 2011. On June 23, 2011, the Court entered an agreed Order re: Motion for Appointment of Chapter 11 Trustee or Conversion to Chapter 7, which provided that the U.S. Trustee would appoint an examiner âto investigate and report the financial status of Debtor, including, but not necessarily limited to pre-petition transfers and the propriety of said transactions and shall have full subpoena powers concerning any and all parties necessary to thoroughly investigate said issues.â (Bankruptcy Case No. 11^41013, Docket # 61). The appointment of Eric D. Orse and Orse & Company, Inc. to serve as examiner was approved on June 27, 2011, and the Examinerâs Report was filed on September 30, 2011. The case was converted to chapter 7, title 11 on October 21, 2011. The Plaintiff in this action is the duly appointed chapter 7 trustee. On November 19, 2012, an Order Granting Preliminary Injunction was entered preventing selected disbursements from the Trust.
Law
A party seeking summary judgment bears the burden of demonstrating that there is no genuine dispute as to any material fact and that the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56; Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). All inferences drawn from the evidence presented must be drawn in favor of the party opposing summary judgment, and all evidence must be viewed in the light most favorable to that party. Summary judgment should be granted if, after taking all reasonable inferences in the nonmoving partyâs favor, the court finds that no reasonable jury could find for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The responding party must pres
The moving party need only identify that evidence âwhich it believes demonstrates the absence of a genuine issue of material fact.â Caneva v. Sun Communities Operating Ltd. Pâship (In re Caneva), 550 F.3d 755, 761 (9th Cir.2008) (internal quotation marks omitted) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265). Once the party meets this initial burden, the burden shifts to the nonmovant âto set forth, by affidavit or as otherwise provided in Rule 56, specific facts showing that there is a genuine issue for trial.â F.T.C. v. Stefanchik, 559 F.3d 924, 927-28 (9th Cir.2009) (citation and internal quotation marks omitted).
The Ninth Circuit Court of Appeals (Ninth Circuit) has determined that â[i]n opposing summary judgment, a nonmoving party must go beyond the pleadings and, by her own affidavits, or by the depositions, answers to interrogatories, and admissions on file, designate specific facts showing that there is a genuine issue for trial.â Bias v. Moynihan, 508 F.3d 1212, 1218 (9th Cir.2007) (internal quotation marks omitted) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)); see also Estate of Tucker ex rel. Tucker v. Interscope Records, Inc., 515 F.3d 1019, 1033 n. 14 (9th Cir.2008). The nonmoving party must present significant probative evidence to support his or her allegations.
A. Validity of the Trust
The Trustee initially contends that the Trust should be invalidated under Washington State law. The Trust was created in the State of Alaska and designates the law of Alaska to govern the Trust. Alaska recognizes self-settled asset protection trusts, see AS 34.40.110, but Washington does not, see RCW 19.36.020. As such, the parties agree there is a conflict in the laws of the two states, and the Court must look to choice of law rules for guidance.
1. Choice of Law
âIn federal question cases with exclusive jurisdiction in federal court, such as bankruptcy, the court should apply federal, not forum state, choice of law rules.â Lindsay v. Beneficial Reinsurance Co. (In re Lindsay), 59 F.3d 942, 948 (9th Cir.1995). In applying federal choice of law rules, courts in the Ninth Circuit follow the approach of the Restatement (Second) of Conflict of Laws (1971) (Restatement). Liberty Tool & Mfg. v. Vortex Fishing Sys., Inc. (In re Vortex Fishing Sys., Inc.), 277 F.3d 1057, 1069 (9th Cir.2002). Section 270 of the Restatement addresses the validity of an inter vivos trust in movables in relevant part as follows:
An inter vivos trust of interests in movables is valid if valid
(a) under the local law of the state designated by the settlor to govern the validity of the trust, provided that this state has a substantial relation to the trust and that the application of its law does not violate a strong public policy of the state with which, as to the matter at issue, the trust has its most significant relationship under the principles stated in § 6.1
b. Law designated by the settlor to govern validity of the trust. Effect will be given to a provision in the trust instrument that the validity of the trust shall be governed by the local law of a particular state, provided that this state has a substantial relation to the trust and that the application of its local law does not violate a strong public policy of the state with which as to the matter at issue the trust has its most significant relationship.
A state has a substantial relation to a trust when it is the state, if any, which the settlor designated as that in which the trust is to be administered, or that of the place of business or domicil of the trustee at the time of the creation of the trust, or that of the location of the trust assets at that time, or that of the domicil of the settlor, at that time, or that of the domicil of the beneficiaries. There may be other contacts or groupings of contacts which will likewise suffice.
Although as to most grounds for invalidity the local law of the designated state will be applied, provided that this state has a substantial relation to the trust, it will not be applied if this would violate a strong public policy of the state with which as to the matter in issue the trust has its most significant relationship. Thus, where the settlor creates a revocable trust in a state other than that of his domicil, in order to avoid the application of the local law of his domicil giving his surviving spouse a forced share of his estate, it may be held that the local law of his domicil is applicable, even though he has designated as controlling the local law of the state in which the trust is created and administered.
Under the Restatement, the Debtorâs choice of Alaska law designated in the Trust should be upheld if Alaska has a substantial relation to the Trust. Restatement § 270(a). Comment b provides that âa state has a substantial relation to a trust if at the time the trust is created: (1) the trustee or settlor is domiciled in the state; (2) the assets are located in the state; and (3) the beneficiaries are domiciled in the state. These contacts with the state are not exclusive.â In re Zukerkorn, 484 B.R. 182, 192 (9th Cir. BAP 2012). In the instant case, it is undisputed that at the time the Trust was created, the settlor was not domiciled in Alaska, the assets were not located in Alaska, and the beneficiaries were not domiciled in Alaska. The only relation to Alaska was that it was the location in which the Trust was to be administered and the location of one of the trustees, AUSA.
Conversely, it is undisputed that at the time the Trust was created, the Debtor resided in Washington; all of the property placed into the Trust, except a $10,000 certificate of deposit, was transferred to the Trust from Washington; the creditors of the Debtor were located in Washington; the Trust beneficiaries were Washington residents; and the attorney who prepared the Trust documents and transferred the
Additionally, Washington State has a strong public policy against self-settled asset protection trusts. Specifically, pursuant to RCW 19.36.020, transfers made to self-settled trusts are void as against existing or future creditors. Carroll v. Carroll, 18 Wash.2d 171, 175, 138 P.2d 653 (1943). This statute has been in existence for well over a century, as it was first enacted in 1854. This policy is consistent with those in other states. For instance, in Marine Midland Bank v. Portnoy (In re Portnoy), 201 B.R. 685, 701 (Bankr.S.D.N.Y.1996), the bankruptcy court considered the public policy of New York against self-settled trusts when determining a choice of law issue: âPortnoy may not unilaterally remove the characterization of property as his simply by incorporating a favorable choice of law provision into a self-settled trust of which he is the primary beneficiary. Equity would not countenance such a practice.â As with New York, Washington has a policy that a debtor should not be able to escape the claims of his creditors by utilizing a spendthrift trust. Thus, in accordance with § 270 of the Restatement, this Court will disregard the settlorâs choice of Alaska law, which is obviously more favorable toâ him, and will apply Washington law in determining the Trusteeâs claim regarding validity of the Trust.
2. RCW 19.36.020
Interests in property are determined by state law. Butner v. United States, 440 U.S. 48, 54-55, 99 S.Ct. 914, 59 L.Ed.2d 136 (1979). RCW 19.36.020 provides in relevant part as follows:
That all deeds of gift, all conveyances, and all transfers or assignments, verbal or written, of goods, chattels or things in action, made in trust for the use of the person making the same, shall be void as against the existing or subsequent creditors of such person.
The Trust is admittedly a self-settled trust. In accordance with RCW 19.36.020, the Debtorâs transfers of assets into the Trust were void as transfers made into a self-settled trust. See Rigby v. Mastro (In re Mastro), 465 B.R. 576, 611 (Bankr.W.D.Wash.2011) (where a bankruptcy judge applying Washington State law held that the debtorsâ transfers of assets into a self-settled trust were void). The Debtor has provided no legal authority to the contrary. Accordingly, the Debtorâs transfers of assets into the Trust are void, and the Trustee is entitled to summary judgment as a matter of law to the extent the Trustee seeks to have the transfers invalidated.
The Debtorâs untimely Supplemental Memorandum does not warrant a different result. As set forth in the Trusteeâs Memorandum of Authorities filed in response to the Supplemental Memorandum, the issue presented does not satisfy RCW 2.60.020. RCW 19.36.020 clearly determines that the transfer of assets into a self-settled trust is void. Thus, there is no need and grounds do not exist to have the issue certified to the Washington State Supreme Court.
B. Alter Ego Doctrine
Alternatively, the Trustee seeks to have the Trust declared the alter ego of the Debtor and apply âreverse piercingâ to the Trust in order to bring its assets into the bankruptcy estate. The Debtor contends that issues of material fact exist regarding the Debtorâs intent in creating the Trust, thereby precluding summary judgment on this claim.
The Court has reviewed the federal cases cited by the Trustee that have applied the alter ego doctrine to trusts based on the forum state law. These cases, however, are not controlling and shed no light on whether Washington courts would extend the alter ego theory to trusts. It is clear that federal courts that have chosen to extend this doctrine to trusts have done so after careful review and analysis of the forum stateâs statutes and case law. The Trustee has failed to present any Washington authority, or any argument predicated on Washington law, to assist this Court in making a determination as to whether Washington courts would extend the alter ego doctrine to trusts. The Trustee further has failed to address whether a trust, as opposed to a trustee, can legally be the alter ego of an individual, an issue that has been thoughtfully considered by leading trust experts and several state courts, including recently by the California Court of Appeals in Greenspan v. LADT, LLC, 191 Cal.App.4th 486, 521-22, 121 Cal.Rptr.3d 118 (2011). See Elizabeth M. Schurig & Amy P. Jetel, 1 Asset Protection: Dom. & Intâl L. & Tactics § 2:10 (2013); Richard W. Nenno, 2 Asset Protection: Dom. & Intâl L. & Tactics § 14A:120 (2013) (a trustâs status as a non-entity logically precludes a trust from being an alter ego, but it is reasonable to ask whether a trustee is the alter ego of a defendant who made a transfer into a trust).
The Trustee has the burden of demonstrating that it is entitled to summary judgment as a matter of law. Absent any Washington authority or argument to support Trusteeâs position, this Court will not speculate as to whether Washington courts would apply the alter ego doctrine in the trust context, and if so, whether they would limit application to trustees as in the Greenspan case. Accordingly, the Court concludes that the Trustee has not met its burden on the alter ego theory. Notwithstanding this, in light of the Courtâs decision as to the invalidity of the transfers pursuant to RCW 19.36.020, the Court need not decide the alter ego issue under Washington law.
C. 11 U.S.C. § 548(e)(1)
The Trustee also seeks summary judgment under 11 U.S.C. § 548(e)(1), ar
11 U.S.C. § 548(e)(1) provides as follows:
In addition to any transfer that the trustee may otherwise avoid, the trustee may avoid any transfer of an interest of the debtor in property that was made on or within 10 years before the date of the filing of the petition, ifâ
(A) such transfer was made to a self-settled trust or similar device;
(B) such transfer was by the debtor;
(C) the debtor is a beneficiary of such trust or similar device; and
(D) the debtor made such transfer 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, indebted.
The parties agree that each of the elements of § 548(e)(1) has been established except for the last element: whether the Debtor made the transfers to the Trust âwith 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, indebted.â The Trustee contends that the overwhelming evidence establishes the Debtorâs intent to hinder, delay and defraud his creditors, while the Debtor argues there is an issue of material fact as to his intent.
The Trustee has the burden of proving the elements of a fraudulent conveyance by a preponderance of the evidence. Thompson v. Jonovich (In re Food & Fibre Prot., Ltd.), 168 B.R. 408, 418 (Bankr.D.Ariz.1994) (citing Grogan v. Garner, 498 U.S. 279, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991)); see W. Wire Works, Inc. v. Lawler (In re Lawler), 141 B.R. 425, 428 (9th Cir.BAP1992) (âA fair reading of the Supreme Courtâs opinion leads to the inference that the preponderance standard applies in all bankruptcy proceedings grounded in allegations of fraud.â).
âThe language used for the level of intent tracks identical language in section 548(a)(1)(A), presumably to allow courts to use cases and interpretive guides for such language (which has been part of Anglo-American jurisprudence since at least 1571) when called upon to construe section 548(e).â 5 Collier on Bankruptcy ¶ 548.07[3][d] (Alan N. Resnick & Henry J. Sommer eds., 16th ed.). Fraudulent intent may be established on the basis of circumstantial evidence. Barclay v. Mackenzie (In re AFI Holding, Inc.), 525 F.3d 700, 704 (9th Cir.2008). In assessing the evidence, courts consider âbadges of fraud,â which are âcircumstances so commonly associated with fraudulent transfers that their presence gives rise to an inference of intent.â In re Roca, 404 B.R. 531, 543 (Bankr.D.Ariz.2009) (internal quotes omitted).
The Ninth Circuit has articulated that
[a]mong the more common circumstantial indicia of fraudulent intent at the time of the transfer are: (1) actual or threatened litigation against the debtor;
(2) a purported transfer of all or substantially all of the debtorâs property;
(3) insolvency or other unmanageable indebtedness on the part of the debtor;
(4) a special relationship between the debtor and the transferee; and, after the transfer, (5) retention by the debtor of the property involved in the putative transfer.
In support of his motion for summary judgment, the Trustee submitted over one hundred exhibits containing declarations, emails, documents, and pleadings to establish the Debtorâs intent to hinder, delay, or defraud his creditors. Conversely, the only evidence submitted by the Debtor on summary judgment is the Debt- orâs deposition testimony taken on September 20, 2011, by counsel for the Examiner. Even though not accompanied by a declaration, the deposition is authenticated for summary judgment as it identifies the names of the deponent and the action, and it includes the reporterâs certification that the deposition is a true record of the testimony of the deponent. See Orr v. Bank of America, 285 F.3d 764, 774 (9th Cir.2002) (citing Fed.R.Evid. 901(b); Fed.R.Civ.P. 56(e) & 30(f)(1)). Notably, while the deposition references numerous exhibits, the Debtor did not file these exhibits with the Court. Accordingly, the deposition it is of minimal value to the Court, particularly as it fails to designate specific portions rebutting the very specific allegations of the Trustee. See Bias, 508 F.3d at 1218. Additionally, the Court arguably has grounds to disregard this deposition since it was taken prior to the Trusteeâs appointment on October 21, 2011, and does not respond to many of the arguments made by the Trustee in his motion for summary judgment. See Fed.R.Civ.P. 32(a)(1), made applicable by Fed. R. Bankr.P. 7032. Because the Court reaches the same outcome on the Trusteeâs § 548(e)(1) claim even if the deposition is considered, however, the Court declines to exclude the Debtorâs previously taken deposition submitted in opposition to summary judgment.
Considering each of the badges of fraud, the evidence submitted by the Trustee first establishes that at the time the Debt- or transferred his assets into the Trust, there was threatened litigation against the Debtor. Specifically, it appears that foreclosure of several properties for which the Debtor had guaranteed the bank loans was becoming increasingly certain, including Ridge at Molasses Creek, LLC, Black Lake Estates, and Oakland Bay Estates. The maturity dates on these loans had been extended at least one time; the local and national real estate markets were collapsing; Robert Terhune had not, and apparently could not, repay the Debtor an approximately one million dollar debt, on which the Debtor depended to service the loans; and by March 2008, the Debtor was not making timely payments on his project debts, which he had guaranteed. Ultimately, litigation ensued, beginning in spring 2009. While the Debtorâs responsive pleading states that nothing indicates the Debtor anticipated that the loans would not be further extended, the Debtor submitted no declaration or evidence in support of this proposition.
The Trustee also has established that the Debtor transferred all or substantially all of his property into the Trust. It is undisputed that the Debtor transferred $10,000 in cash and his ownership or membership interest in over 20 entities into DGH, LLC, which was owned 99% by the
The Trustee further has established significant indebtedness on the part of the Debtor when he transferred his assets into the Trust. The Trusteeâs evidence indicates that in 2007, the Debtor began to experience substantial financia