On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. No. 96-cv-2439)
Argued: December 12, 1997
Before: Nygaard and Alito, Circuit Judges and Debevoise, Senior District Judge*fn1
The opinion of the court was delivered by: Debevoise, Senior District Judge
The trustee in bankruptcy of the Debtor, Susanne Gutpelet, objected to the Debtor's claimed exemption in money on deposit in two PNC Bank accounts, asserting that the money was the proceeds of real estate, the transfer of which was avoidable pursuant to the provisions of 11 U.S.C. § 548(a). The bankruptcy court sustained the objection. On appeal the district court affirmed. For the reasons set forth below we will affirm the judgment of the district court.
In 1987 the Debtor and her former husband, William Sutphen, were divorced. As part of the marital settlement the Debtor was obligated to pay Sutphen $125,000, which, together with interest, was due in July 1993. The Debtor received real estate which had previously been jointly owned.
In 1990 the Debtor married Herbert Gutpelet ("Gutpelet"). At the time of their marriage Gutpelet owned in his own name real estate located at 1137 Evans Road in Lower Gwynedd Township, Pennsylvania (the "Evans Road Property"). By that time the Debtor had sold the real estate which she had received at the time of her divorce. She received approximately $170,000 net proceeds, which she placed in The Marian State Bank ("the Marian Bank"). It was used to collateralize Gutpelet's indebtedness to the bank and the bank ultimately applied it in payment of Gutpelet's obligations.
Gutpelet was deeply in debt in 1992 and 1993, and various liens had attached to the Evans Road Property, including a mortgage held by the Marian Bank.
On October 18, 1993 Gutpelet transferred title to the Evans Road Property to the Debtor. The Debtor testified that she paid no consideration for the property and that the purpose of the transfer was to enable her to obtain a home equity loan in order to pay Gutpelet's creditors. Gutpelet believed that he was not credit worthy and that he could not obtain a loan in his own name.
On February 24, 1994 the Gutpelets obtained a loan from Equity One Incorporated ("Equity One") in the approximate amount of $500,000. They each executed the note and mortgage. After payments were made to Gutpelet's creditors the net proceeds of approximately $128,000 were deposited in a joint bank account at PNC Bank.
On March 4, 1994 the Debtor executed a deed transferring title to the Evans Road Property from herself to "Susanne B. Gutpelet and Herbert J. Gutpelet, her husband." On September 1, 1994 the Debtor and Gutpelet sold the Evans Road Property for a sales price of $800,000. Most of the sale proceeds were used to pay off debts, including the Equity One refinancing loan. The net proceeds of the sale of the Evans Road Property, approximately $158,500, were deposited in a joint account at PNC Bank.
Not all of the proceeds realized from the equity loan and from the sale of the Evans Road Property were used to pay Gutpelet's debts. Some were used to pay the Debtor's living expenses; a part was used to purchase a sewing business in Costa Rica to provide income for the Debtor; she loaned $6,500 to her sister-in-law; she repaid $34,500 which she had borrowed from friends.
On October 27, 1994 the Debtor filed a petition for relief under Chapter 7 of the Bankruptcy Code, 11 U.S.C. § 101, et seq. Her indebtedness for principal and interest to her former husband amounted at that time to $206,308, about 95% of her total indebtedness. Amended schedulesfiled on June 20, 1995 disclosed the existence of an account in Corestates Bank and two accounts in PNC Bank. None of these accounts had been disclosed in the Debtor's ...