United States District Court, E.D. Kentucky, Central Division, Lexington
FRED C. CARUSO, Plaintiff,
NELSON E. CLEMMENS, Defendant.
MEMORANDUM OPINION AND ORDER
K. CALDWELL, CHIEF JUDGE
matter is before the Court on Clemmens' objections to the
Bankruptcy Judge's proposed findings of fact and
conclusions of law in this case. (DE 3; DE 14). For the
reasons stated below, Clemmens' objections are overruled.
Likewise, Caruso's motion for summary judgment is
granted, (DE 2), and Clemmens' motion for summary
judgment, (DE 1), is denied.
parties stipulate the following facts. (DE 3 at 2-5).
Industries, LLC, an automobile business and Delaware LLC, was
founded in 2008 by and among three Children's Trusts,
which were established for the benefit of the children of
Revstone's chairman and sole board member: George S.
Hofmeister. In 2011, the Children's Trusts assigned their
membership interests in Revstone to Ascalon Enterprises, LLC,
for which Hofmeister was also the chairman and sole member
the board. Id. at 3. Revstone-founded by
Hofmeister's Childrens' Trusts, and owned by
Hofmeister's Ascalon Enterprises-operated its business
through the direct or indirect ownership and management of
approximately thirty-two (32) subsidiary entities.
Id. at 2.
met Hofmeister in 1986. In 2007, Hofmeister later selected
Clemmens to serve as the trustee of Hofmeister's family
trusts. Id. at 3.
2009, Clemmens had a personal account with Keeneland, which
allowed him to bid on and purchase horses at Keeneland's
auctions. Clemmens authorized Hofmeister to use the account.
In 2009, Hofmeister used the account to purchase $268, 765.00
in thoroughbreds. The thoroughbreds were shipped to
Hofmeister's farm, but Clemmens was liable for the debt,
for which Clemmens received the bills in November and
December 2009. Clemmens sent the bills to Hofmeister
requesting payment for the debt. Id. at 3-4.
January 2010, Revstone issued a check to Keeneland in the
amount of $269, 026.21. Id. For purposes of this
proceeding, this transaction is known as the “Keeneland
Transfer.” In December 2012, Revstone filed for Chapter
11 relief in the United States Bankruptcy Court for the
District of Delaware. In 2014, Revstone filed a complaint in
that Delaware court seeking to avoid and recover its payment
to Keeneland for the personal benefit of Clemmens as a
fraudulent transfer. In 2015, after resolving some procedural
issues, the matter was transferred to the Eastern District of
Kentucky. In 2017, Keeneland agreed to pay Caruso $160,
000.00, in exchange for being dismissed as a defendant,
reducing Clemmens' potential aggregate liability to $109,
026.21. Id. at 4-5.
and Caruso then filed cross motions for summary judgment. (DE
1; DE 2). Caruso, the Bankruptcy Trustee for the
Revstone/Spara Litigation Trust, seeks summary judgment
against Clemmens to recover $109, 026.21 in funds plus
interest based on a theory of constructively fraudulent
transfer pursuant to 11 U.S.C. § 544 and 550, and Del.
Cod. Ann. 6 §§ 1301-12. (DE 2). Clemmens seeks
summary judgment asserting Caruso cannot show Clemmens is the
initial transferee or received a benefit from the transfer
pursuant to 11 U.S.C. § 550(a)(1). The Bankruptcy Court
held that Caruso's motion should be granted and
Clemmens' motion should be denied. (DE 3). Clemmens
presents nine (9) objections to the Bankruptcy Court's
determinations. (DE 14).
STANDARDS OF REVIEW
Court reviews de novo the portions of the Bankruptcy
Court's decision to which Clemmens objects.
Fed.R.Bankr.P. 9033(d). The Court may accept, reject, or
modify the Bankruptcy Court's proposed findings of fact
and conclusions of law as required. In re Sahuaro
Petroleum & Asphalt Co., 170 B.R. 689 (C.D. Cal.
1994), aff'd 89 F.3d 846 (9th Cir. 1996),
cert. denied 519 U.S. 992 (1996). The Bankruptcy
Court opinion is to be reviewed with no deference,
presumption of validity or correctness. Waldman v.
Stone, 599 Fed.Appx. 569, 572 (6th Cir. 2015) (citing
Perry v. Simplicity Eng'g, 900 F.2d 963, 966
(6th Cir.1990)). Nonetheless, the Court is under no
obligation to expand the Record beyond that presented.
Fed.R.Bankr.P. 9033(d); Waldman, 599 Fed.Appx. at
572 (citing Deutsche Bank Nat'l Trust Co. v.
Tucker, 621 F.3d 460, 464 (6th Cir.2010)).
motion for summary judgment, the movant has the burden of
showing that there are no genuine issues of material fact in
dispute. The evidence, together with all permissible
inferences, is construed in the light most favorable to the
opposing party. Fed. R. Bank. P. 7056 (incorporating
Fed.R.Civ.P. 56); see Matsushita Elec. Indus. Co., Ltd.
v. Zenith Radio Corp., 475 U.S. 574, 585-87 (1986). Once
the moving party has made this initial showing, the opposing
party must come forward with affirmative evidence sufficient
“to permit a reasonable jury to find in that
party's favor.” Van Gorder v. Grand Trunk W.
R.R., Inc., 509 F.3d 265, 268 (6th Cir. 2007) (citing
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252
(1986)). Summary judgment must be entered if, “after
adequate opportunity for discovery, ” a party
“fails to make a showing sufficient to establish the
existence of an element essential to that party's case,
and on which that party will bear the burden of proof at
trial.” Tolton v. American Biodyne, Inc., 48
F.3d 937, 940 (6th Cir. 1995) (quoting Celotex Corp. v.
Catrett, 477 U.S. 317, 322 (1986) (internal quotation
seeks to recover pursuant to 11 U.S.C. § 544 and Del.
Code. Ann. 6 § 1305, which is substantially the same as
11 U.S.C. § 548. To prevail, Caruso must show by a
preponderance of the evidence that (1) Revstone made a
transfer for less than reasonably equivalent value; and (2)
Revstone was insolvent or became insolvent due to the
transfer, engaged or about to engage in a business or
transaction for which the remaining assets were unreasonably
small in relation to the business or transaction, or intended
to incur, or believed or reasonably should have believed that
it would incur, debts beyond its ability to pay. See
Miller v. Greenwich Capital Fin. Prods., Inc. (In re
Am. Bus. Fin. Servs., Inc.), 471 B.R. 354, 378 n.17
(Bankr. D. Del. 2012); In re ...