United States Court of Appeals
For the First Circuit
No. 05-1858
In re: ROBERT LOUIS MARRAMA,
Debtor.
ROBERT LOUIS MARRAMA,
Plaintiff, Appellant,
v.
CITIZENS BANK OF MASSACHUSETTS,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Patti B. Saris, U.S. District Judge]
Before
Selya, Circuit Judge,
Stahl, Senior Circuit Judge,
and Lipez, Circuit Judge.
David G. Baker for the appellant.
Michael A. Wirtz, with whom Jack Mikels & Associates was on
brief, for the appellee.
April 20, 2006
LIPEZ, Circuit Judge. After Robert Marrama filed for
Chapter 7 bankruptcy protection, Citizens Bank contended that
Marrama should be denied a discharge because he recently had
transferred assets to defraud his creditors. See 11 U.S.C.
§ 727(a)(2)(A). The bankruptcy court entered summary judgement for
the bank. Marrama appealed to the district court, which sustained
the bankruptcy court's judgment. On Marrama's further appeal, we
too conclude that summary judgment was appropriate and affirm.
I.
We review the facts in the light most favorable to
Marrama, the non-movant in the summary judgment proceedings.
Medeiros v. Vincent, 431 F.3d 25, 29 (1st Cir. 2005).1 Before his
bankruptcy filing, Marrama owned RLM Flooring, a small
Massachusetts company that sold and installed flooring products.
RLM Flooring maintained a line of credit with Citizens Bank, which
Marrama had guaranteed personally. When Marrama's flooring
business ran into problems, Citizens demanded repayment of the line
of credit -- roughly $255,000 -- in June 2002. Two weeks later,
Citizens commenced a Massachusetts state court collection action.
In August, the state court granted Citizens the authority to seize
RLM Flooring and sell its assets. At the same time, that court
1
We also narrated facts relating to this case in our previous
opinion affirming the bankruptcy court's finding that Marrama's
"bad faith" warranted the court's refusal to allow him to convert
his petition for Chapter 7 bankruptcy protection into a Chapter 13
case. See In re Marrama, 430 F.3d 474 (1st Cir. 2005).
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also ordered Marrama not to dispose of any personal assets except
to pay for his normal living expenses. Citizens liquidated
Marrama's flooring business, but sale of the company's assets
failed to satisfy the bank's claim.
Meanwhile, Marrama made some unusual personal financial
transactions. In July 2002, Marrama refinanced a vacation home he
owned in York, Maine. In connection with the refinancing, Marrama
received $118,000 in cash. He deposited these proceeds into a
Maine bank account he held jointly with his girlfriend, Josephine
Bolleterio. From the joint account, he withdrew approximately
$8,000, which he told the trustee that he used, at least in part,
to pay certain personal and business creditors. Then he
transferred roughly $109,000 into an account standing in
Bolleterio's name alone, leaving only a small sum in the joint
account. In late August 2002 -- after the Massachusetts court
ordered him not to transfer any assets -- Marrama used the York
property to fund "the Bo-Mar Realty Trust," a spendthrift trust of
which Bolleterio is the trustee. The York home is the trust's only
asset, and Marrama is its only beneficiary. Marrama later
testified that he placed the home into the trust to "try to protect
it."
In March 2003, Marrama petitioned for Chapter 7
bankruptcy protection. On forms and schedules he filed with his
bankruptcy petition, Marrama disclosed his beneficial interest in
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the Bo-Mar trust but stated, under penalty of perjury, that he had
not transferred any assets during the previous year. Marrama later
termed his failure to disclose the transfer of the York home a
scrivener's error. Marrama does not point to anything in the
record suggesting an excuse for his failure to disclose his deposit
of the refinancing proceeds into Bolleterio's solo account.
Citizens soon filed a bankruptcy court adversary action
to deny Marrama a discharge. The bank contended that Marrama had
forfeited his right to a discharge by transferring the York home to
the trust; by transferring the refinancing proceeds to Bolleterio;
and by transferring $40,000 to the lawyer who represented him in
state court,2 also less than a year before his petition for
bankruptcy protection. Any of these allegedly fraudulent transfers
could constitute an independent ground for denying Marrama a
discharge, pursuant to § 727(a)(2)(A).3
Contentious proceedings followed. Citizens demanded
discovery testimony from Marrama. Marrama answered certain
inquiries from the bankruptcy trustee. But, in reaction to
2
Marrama is represented by a different lawyer in this action.
3
The bank leveled other accusations as well. Altogether, its
complaint against Marrama included nine counts, including one that
alleged Marrama's "commission of Bankruptcy Crimes for making false
oaths and withholding records." The bankruptcy court relied on the
fraudulent transfer issue in granting summary judgment to the bank.
Because a fraudulent transfer is a sufficient ground for denying
Marrama a discharge, we need not reach Marrama's objections about
the other counts of Citizens's complaint.
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Citizens's insistent complaints about his "bankruptcy crimes,"
Marrama cited the Fifth Amendment and refused to respond to
Citizens's questions about the transfers to the trust, Bolleterio,
and his lawyer.
The bankruptcy court granted the bank's motion for
summary judgment. Ruling from the bench, the court concluded:
[T]he bank has certainly made a prima facie
case that . . . disclosures were not made that
should have been made, that transfers were
made that should have been reported. All
these things are set out in the motion for
summary judgment, and if standing alone with
no opposition would certainly justify the
granting of summary judgment and the denial of
Marrama's discharge.
One of the problems here is that the
defendant debtor is in the unenviable position
of wishing to claim the Fifth Amendment and
defending against a motion for summary
judgment. Now he claims that the bank is
unable to give proof of evidence that he
intended to defraud, but at the same time he
claims that the bank is not prejudiced. But
there's no way to find out his intent if he's
claiming the Fifth because he won't tell us
what his intent was. Indeed, I can and will
draw a negative inference from the fact that
he is standing mute when it comes to these
matters which are civil and not criminal.
When I come to the response to the
motion for summary [judgment], which I
permitted to be filed in open court today, and
I look over it, I don't find anything that
contradicts the assertions made in the bank's
moving papers to the extent that they are
necessary for me to grant summary judgment.
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Marrama's appeal to the district court focused on the
bankruptcy court's determination that it could draw a negative
inference, in summary judgment proceedings, from Marrama's
invocation of the Fifth Amendment in adversarial discovery
proceedings. Marrama argued that such an inference was
inconsistent with the maxim that, on summary judgment, inferences
are drawn in favor of the non-movant. The district court was
unconvinced by Marrama's argument but concluded that, even without
any negative inference, the record warranted summary judgment for
the bank.
II.
On further appeal, Marrama again claims that the
bankruptcy court drew an impermissible inference from his
invocation of his Fifth Amendment rights. Marrama admits that he
transferred property less than one year before his bankruptcy
petition. He contends only that, without an inference drawn
against him, the summary judgment record does not permit a
conclusion that Marrama intended to defraud his creditors when he
made the transfers.
We have recognized that four elements are required to
deny a discharge pursuant to § 727(a)(2)(A): (1) transfer or
concealment of property (2) that belonged to the debtor (3) less
than a year before the bankruptcy petition (4) with actual intent
to hinder, delay, or defraud a creditor. See In re Schifano, 378
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F.3d 60, 66-67 (1st Cir. 2004). Because a debtor rarely gives
direct evidence of fraudulent intent, we have recognized that, even
on summary judgment, intent to defraud a creditor can be proved by
circumstantial evidence. See In re Varrasso, 37 F.3d 760, 764 (1st
Cir. 1994). In weighing evidence of fraudulent intent courts
should look to the following "objective indicia":
(1) insider relationships between the parties;
(2) the retention of possession, benefit or
use of the property in question; (3) the lack
or inadequacy of consideration for the
transfer; (4) the financial condition of the
[debtor] both before and after the transaction
at issue; (5) the existence or cumulative
effect of the pattern or series of
transactions or course of conduct after the
incurring of the debt, onset of financial
difficulties, or pendency or threat of suits
by creditors; (6) the general chronology of
the events and transactions under inquiry; and
(7) an attempt by the debtor to keep the
transfer a secret.
In re Watman, 301 F.3d 3, 8 (1st Cir. 2002) (internal citations
omitted).
Evidence of fraud is conclusive enough to support summary
judgment in a § 727(a)(2)(A) action when it yields no plausible
conclusion but that the debtor's intent was fraudulent. See In re
Varrasso, 37 F.3d at 764 ("[I]n certain cases, circumstantial
evidence may be sufficiently potent to establish fraudulent intent
beyond hope of contradiction."). In the face of such evidence, the
debtor hoping to resist summary judgment cannot rest on
"'conclusory allegations, improbable inferences, and unsupported
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speculation.'" Id. (quoting Medina-Munoz v. R.J. Reynolds Tobacco
Co., 896 F.2d 5, 8 (1st Cir. 1990)).
We acknowledge our reservations about the bankruptcy
court's decision to draw a negative inference against Marrama, at
the summary judgment stage, on the basis of his invocation of a
Fifth Amendment privilege. It is clear that the bankruptcy court
can draw an inference at trial from a party's invocation of a Fifth
Amendment privilege, see In re Carp, 340 F.3d 15, 23 (1st Cir.
2003). But we have expressed doubt as to whether a court can draw
the same inference at the summary judgment stage, where all
reasonable inferences must be drawn for the non-movant. See
Mulero-Rodríguez v. Ponte, Inc., 98 F.3d 670, 678 (1st Cir. 1996)
(explaining that a party's invocation of the Fifth Amendment in
discovery does not alter requirement that inferences be drawn in
favor of summary judgment non-movant); see also United States v.
4003-4005 5th Ave., 55 F.3d 78, 83 (2d Cir. 1995) (noting that
invocation of the Fifth Amendment privilege does not alter
evidentiary burdens (citing United States v. Rylander, 460 U.S. 752
(1983)); LaSalle Bank Lake View v. Seguban, 54 F.3d 387, 389-94
(7th Cir. 1995) (holding that non-movant's invocation of the Fifth
Amendment privilege does not free the summary judgment movant from
showing that the evidence in the record requires judgment as a
matter of law).
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We need not determine here whether the bankruptcy court's
inference constituted error. Our standard of review in this case
is de novo. In re Spookyworld, Inc., 346 F.3d 1, 6 (1st Cir.
2003). We are in the same position as the bankruptcy court and can
affirm a grant of summary judgment "on any independently sufficient
ground" in the record. Mesnick v. General Elec. Co, 950 F.2d 816,
822 (1st Cir. 1991). We draw no inference from Marrama's silence
but still see no issue of material fact that precludes summary
judgment. We also note one other difference between the bankruptcy
court's analysis and our own. While the bankruptcy court appears
to have looked generally at Marrama's course of conduct in granting
summary judgment, we focus specifically on Marrama's transfer of
his York vacation home to the Bo-Mar trust and his deposit of over
$100,000 into an account under the sole control of his girlfriend.
The summary judgment record includes Marrama's direct
admission that he had transferred his vacation home "to protect
it," and several circumstantial badges of fraud. As for the
transfer to the trust: Marrama acted in direct violation of a
state court order that he not dispose of any assets except to pay
for normal living expenses; Marrama transferred the property to a
spendthrift trust, a device designed to shield assets from
creditors;4 Marrama attempted to retain his right to use his
4
"A spendthrift trust is defined as one created to provide a
fund for a beneficiary and at the same time secure it against his
improvidence or incapacity. It is an active trust with provision
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vacation home by making himself the sole beneficiary of his new
spendthrift trust; and Marrama failed to include the transfer in
the papers accompanying his bankruptcy petition. As for the
deposit of the refinancing proceeds into Bolleterio's account:
Marrama admits that he continued to have access to the money after
the transfer; he did not disclose the transfer or any financial
interest in Bolleterio's account (or the joint account in which the
funds previously were held) in his bankruptcy papers; the transfer
occurred during a period of financial distress and actual or
impending litigation; and he had a close relationship with the
person to whom he made the transfer.
Marrama notes that he recorded the transfer of the home
to the trust with the local deeds office, that his lawyer
testified that the omission of the transfer of the home to the
trust from the bankruptcy schedules had been his scrivner's error,
and that he disclosed his beneficial interest in the spendthrift
trust, and its holdings, in the bankruptcy petition. As for the
transfer of funds to Bolleterio, Marrama points to his equivocal
statement that he put the refinancing proceeds in Bolleterio's
account because having two accounts was unnecessary, and that the
money rightfully belonged to Bolleterio as trustee of the Bo-Mar
against alienation of the fund or property by voluntary act of the
beneficiary or through legal process by creditors." Sec. Pac. Bank
v. Chang, 80 F.3d 1412, 1415 (9th Cir. 1996).
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trust.5 Also, he argues that Citizens has not proved that the
transferred property constituted "all or substantially all" of his
assets, even though the bankruptcy court has recognized such
evidence as probative of fraudulent intent. See In re Lang, 246
B.R. 463, 469 n.9 (Bankr. D. Mass.), aff'd 256 B.R. 539 (B.A.P. 1st
Cir. 2000). Marrama argues that this evidence is sufficient to
create a triable issue of fact on the question of his intent in
making the transfer.
We disagree. Marrama's argument that the transfer of the
refinancing proceeds to Bolleterio was warranted because she was
the trustee of the Bo-Mar trust overlooks the fact that Marrama
5
This evidence comes from comments Marrama made to the
bankruptcy trustee about the transfer. The exchange between
Marrama and the trustee was as follows:
The trustee: Why did you give [the money] to
Josephine?
Marrama: Just um, no reason. No reason to have
two accounts, so Josephine you know, was -- I had
no reason for it.
The trustee: Well, did you give it to her --
Marrama: Well, Josephine asked, you know -- even
though she's not on paper with the home and
everything she is part, was part of the trust.
The trustee: Uh-huh.
Marrama: Um, I had owed her some money that we had
borrowed to -- you know, at different times she had
given me money. But ah, she had asked me about
just have her hold the money. [sic] And I said
sure.
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deposited the refinancing proceeds on July 29, before the transfer
of the home to the trust. The funds belonged to Marrama alone, and
he has not presented any legitimate financial explanation for the
action other than a desire to let Bolleterio control the money.
Although Marrama argues that his payments to creditors with the
funds from the refinancing demonstrate that he had no fraudulent
intent, Marrama only claims to have used a small portion of the
money to pay creditors, and he concealed the funds transferred to
Bolleterio when listing his assets. In other words, he continued
to have access to and control over the money, and any reasonable
finder of fact would be compelled to conclude on the evidence
presented that the transfer was motivated at least in part by a
desire to keep the funds out of the hands of his creditors.
Moreover, an array of undisputed facts support nearly
every indication of fraudulent intent that we have recognized.
Marrama transferred assets to the control of a person with whom he
had a confidential relationship; Marrama admits that he retained
beneficial interest in the assets; Marrama points to no evidence
that he received valuable consideration for his transfer of the
refinancing proceeds to Bolleterio; Marrama made the transfers
while in financial distress and facing seizure of his assets; the
transfers constitute a pattern of hiding assets that should have
been subject to the bankruptcy proceeding; at least one of the
transfers took place in violation of a state court order; and
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Marrama attempted to conceal at least his transfer of the
refinancing proceeds to Bolleterio. See In re Watman, 301 F.3d at
8; see also In re Marrama, 430 F.3d at 482 ("The instant case
comports in all material respects with the classic profile of
playing fast and loose with the bankruptcy process."); In re Lang,
246 B.R. at 470 (noting "common fact pattern seen in § 727(a)(2)(A)
cases" of a debtor who "transfers property to a family member or
close friend but retains the control or enjoyment of the
transferred assets"). To boot, Marrama admitted that he had
transferred his vacation home to the trust in order to "protect
it," an inescapable reference to protection from his creditors.
There is only one reasonable inference that can be drawn
from this record: that Marrama transferred valuable assets
belonging to him, less than a year before he petitioned for
bankruptcy protection, with the actual intent to defraud his
creditors. See In re Schifano, 378 F.3d at 66-67. The bankruptcy
court correctly granted summary judgment, and the district court
correctly upheld that disposition.
Affirmed.
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