                 United States Bankruptcy Appellate Panel
                                   FOR THE EIGHTH CIRCUIT

                                             ____________

                                              00-6066EA
                                             ____________

In re: John Samuel Marlar                           *
                                                    *
        Debtor                                      *
                                                    *
Renee S. Williams                                   *
                                                    *
        Plaintiff - Appellee                        *
                                                    *    Appeal from the United States
                 v.                                 *    Bankruptcy Court for the
                                                    *    Western District of Arkansas
John Samuel Marlar;                                 *
                                                    *
        Defendant - Appellant                       *
                                                    *
William Bradley Marlar;                             *
Cheyla Evans Marlar                                 *
                                                    *
        Defendants                                  *

                                             ____________

                                      Submitted: August 10, 2000
                                      Filed: September 12, 2000
                                           ____________

Before KOGER, Chief Judge, KRESSEL and SCHERMER, Bankruptcy Judges.
                                    ____________

KOGER, Chief Judge.

        The Chapter 7 trustee, Renee S. Williams, filed an adversary proceeding under 11 U.S.C. § 544
and the Arkansas Fraudulent Transfer Act, Ark. Code Ann. § 4-59-201, et seq., to recover three parcels
of farm property alleging a pre-petition fraudulent transfer by the debtor, John S. Marlar, to his son. The
bankruptcy court1 granted summary judgment in favor of the trustee and set aside the transfer. The debtor
appeals. We affirm.

                                                Background

         On December 19, 1986, two days prior to his marriage to Paula Marlar Davis, the debtor, John
S. Marlar, deeded three parcels of farm property consisting of approximately 712 acres located in Ouachita
County, Arkansas and Dallas County, Arkansas to his son, William Bradley Marlar. Prior to the transfer
the debtor had owned fee title to 600 acres and owned an undivided one-half interest in a 112 acre tract.
The consideration for the transfer was stated as ten dollars with love and admiration. Although it appears
that the debtor gave the deed to his son, the deed was not recorded. After the transfer, the debtor
remained in possession of the property and continued to pay the real estate taxes. In 1993, the debtor
valued this property at $335,000.00 in a loan application. In 1995, Paula Marlar Davis filed for divorce
from the debtor. During the course of a very bitter divorce proceeding, the deed was recorded on June
30, 1995, in the Office of the Dallas County Recorder, and was recorded on July 3, 1995, in the Office
of the Ouachita County Recorder. Subsequently, the divorce court granted the divorce and awarded
Paula Marlar Davis a judgment against the debtor in the amount of about $52,000.00 for her interest in the
couple’s personal property, for improvements made to the debtor’s real estate and for attorney’s fees, and
awarded her an equitable lien on any ownership interest that the debtor had in the three parcels of property
transferred to his son.

         Following the divorce, Paula Marlar Davis filed an action in state court against the debtor and his
son seeking to set aside the transfer of the three parcels of farm property. Paula Marlar Davis alleged that
the debtor conveyed the land to his son in an effort to defeat her marital property rights in a pending divorce
action; that the debtor transferred the land with the actual intent to hinder, delay or defraud creditors in
violation of Ark. Code Ann. § 4-59-204(a)(1); that the debtor conveyed the property to his son without
receiving a reasonably equivalent value in exchange for the transfer; and that after the transfer the debtor
was left with an unreasonably small amount of capital with which to operate his farming business in violation
of Ark. Code Ann. § 4-59-204(a)(2). In an order filed June 5, 1998, the state court ruled against her.
The state court found that the debtor was a single person when he transferred the property to his son in


        1
           The Honorable Mary Davies Scott, United States Bankruptcy Judge for the Eastern and Western
Districts of Arkansas.

                                                      2
1986, that Paula Marlar Davis had no marital interest in the real estate prior to its transfer, that the debtor
had delivered the deed to his son in 1986, that love and affection served as sufficient consideration for the
conveyance, that the conveyance was not ineffective as to Paula Marlar Davis and that there was no
evidence when the deed was transferred in 1986 that the debtor intended to defraud his creditors. The
state court opined:

                  The fact that the deed from John Marlar to Brad Marlar was not recorded does
        not render it ineffective. If it was executed and delivered and for sufficient consideration
        then title to the land was effectively conveyed from the grantor to the grantee. The failure
        to record the deed would only affect competing claims to the title.

        Further, the state court ruled that there was “substantial evidence” presented which indicated that
Paula Marlar Davis knew from the beginning of her marriage to the debtor that the debtor did not own fee
simple title to the real estate in question.

        On June 25, 1998, an involuntary petition for relief under Chapter 7 was filed against the debtor.
It appears that Paula Marlar Davis was one of the petitioning creditors. On December 18, 1998, the
bankruptcy court entered an order for relief in the involuntary case. On June 28, 1999, the Chapter 7
trustee filed a three-count complaint against the debtor, the debtor’s son and the son’s wife seeking to set
aside the transfer of the three parcels of farm land as fraudulent under 11 U.S.C. § 544 and Ark. Code
Ann. § 4-59-201, et seq. In Count I, the trustee sought avoidance of the transfer under Ark. Code Ann.
§ 4-59-204(a)(1); in Count II, the trustee sought avoidance under Ark. Code Ann. § 4-59-204(a)(2); and
in Count III, the trustee sought avoidance under Ark. Code Ann. § 4-59-205. The debtor filed an answer
asserting that the property was transferred in 1986 when he tendered the deed to his son; that due
consideration existed for the transfer; and that the trustee’s action was barred by res judicata arguing that
the Arkansas state court had already ruled in favor of the debtor in a similar action brought by Paula Marlar
Davis. The son and his wife filed an answer to the trustee’s first amended complaint contending they had
lawfully owned the property since 1986.

        Upon the trustee’s motion, on March 2, 2000, the bankruptcy court granted partial summary
judgment in favor of the trustee on Count II and Count III of the complaint. The bankruptcy court
determined that the effective date of the transfer was the date the deed was recorded in 1995; that the
transfer was made without reasonably equivalent value; and that after the deed was recorded the debtor
had virtually no assets of any value from which to satisfy a number of debts then in existence, thus, the

                                                      3
conveyance rendered the debtor insolvent. The bankruptcy court rejected the debtor’s argument that the
trustee’s action was barred by either res judicata or collateral estoppel. The court observed that the
Chapter 7 trustee, who represents all the creditors of the bankruptcy estate, was neither a party nor was
in privity with Paula Marlar Davis in the prior state court action. The bankruptcy court directed the
debtor’s son and his wife to convey all of the real estate in question to the Chapter 7 trustee.

        The bankruptcy court rejected the debtor’s post-summary judgment order attempt to submit
evidence that he was solvent when the deed was recorded in 1995. The court ruled that the materials
which the debtor sought to submit were in existence at the time he was required to respond to the motion
for summary judgment, and he failed to present the evidence in a timely manner.

         Subsequently, the bankruptcy court entered a final judgment in the adversary proceeding on June
5, 2000. Only the debtor appeals from the bankruptcy court’s grant of summary judgment in favor of the
trustee.

        Further facts will be discussed as necessary to resolve the issues raised on appeal.



                                      Standing of Debtor to Appeal

        In her brief, the trustee questions whether the debtor has standing to appeal the bankruptcy court’s
order, contending that he is not an aggrieved party because he no longer has any interest in the real estate
he transferred to his son. Because standing is an element of federal subject matter jurisdiction, it may be
raised as an issue at any time. See Sioux Falls Cable Television v. State of South Dakota, 838 F.2d 249,
251 (8th Cir. 1988).

         “Ordinarily, a party to a lawsuit has no standing to appeal an order unless he can show some basis
for arguing that the challenged action causes him a cognizable injury, i.e., that he is ‘aggrieved’ by the
order.” Yukon Energy Corp. v. Brandon Invs., Inc. (In re Yukon Energy Corp.), 138 F.3d 1254, 1259
(8th Cir. 1998)(quoting Spencer v. Casavilla, 44 F.3d 74, 78 (2d Cir. 1994)). “To appeal from an order
of the bankruptcy court, appellants must have been directly and adversely affected pecuniarily by the
order.” Fidelity Bank, Nat’l Ass’n v. M.M. Group, Inc., 77 F.3d 880, 882 (6th Cir. 1996)(citations
omitted). “This principle, also known as the ‘person aggrieved’ doctrine, limits standing to persons with a

                                                     4
financial stake in the bankruptcy court’s order.” Id. (citation omitted). In Cult Awareness Network, Inc.
v. Martino (In re Cult Awareness Network, Inc.), 151 F.3d 605, 607-608 (7th Cir. 1998), the Seventh
Circuit Court of Appeals instructs that:

                 Bankruptcy standing is narrower than Article III standing. Compare Lujan v.
        Defenders of Wildlife, 504 U.S. 555, 560, 112 S. Ct. 2130, 119 L. Ed. 2d 351
        (1992)(describing Article III standing) with In re Andreuccetti, 975 F.2d 413, 416 (7th
        Cir. 1992)(describing bankruptcy standing). To have standing to object to a bankruptcy
        order, a person must have a pecuniary interest in the outcome of the bankruptcy
        proceedings. Only those persons affected pecuniarily by a bankruptcy order have standing
        to appeal that order. See Andreuccetti, 975 F.2d at 416. Debtors, particularly Chapter
        7 debtors, rarely have such a pecuniary interest because no matter how the estate’s assets
        are disbursed by the trustee, no assets will revert to the debtor. See In re Schultz Mfg.
        Fabricating Co., 956 F.2d 686, 692 (7th Cir. 1992).
                         ....
                 There is an established “exception” to the rule that debtors do not have standing
        to object to bankruptcy orders, which is not so much an exception as a careful application
        of the pecuniary interest rule itself. Occasionally a debtor might be able to satisfy all debts
        with the assets from the estate and be left with some amount remaining. If the debtor can
        show a reasonable possibility of a surplus after satisfying all debts, then the debtor has
        shown a pecuniary interest and has standing to object to a bankruptcy order. See
        Andreuccetti, 975 F.2d at 417.

        In Calpine Corp. v. O’Brien Envtl. Energy, Inc. (In re O’Brien Envtl. Energy, Inc.), 181 F.3d 527,
530-31 (3d Cir. 1999), the Third Circuit Court of Appeals commented that:

                  The “person aggrieved” standard, which is more stringent than the constitutional
        test for standing, serves the acute need to limit collateral appeals in the bankruptcy context.
        Id. As the Court of Appeals for the Ninth Circuit explained:
                  This need [to limit appeals] springs from the nature of bankruptcy litigation
                  which almost always involves the interests of persons who are not formally
                  parties to the litigation. In the course of administration of the bankruptcy
                  estate disputes arise in which numerous persons are to some degree
                  interested. Efficient judicial administration requires that appellate review
                  be limited to those persons whose interests are directly affected.
        Fondiller v. Robertson (In re Fondiller), 707 F.2d 441, 443 (9th Cir. 1983).




                                                      5
        “Whether an appellant is a person aggrieved is a question of fact.” Fidelity Bank, Nat’l Ass’n, 77
F.3d at 882. See also Calpine Corp. v. O’Brien Envtl. Energy, Inc., 181 F.3d at 531(same).

         Here, the attachments to the trustee’s motion for partial summary judgment included the debtor’s
bankruptcy schedules, which show liabilities in the total amount of $98,558.74. In her affidavit, also
attached to the motion for partial summary judgment, Paula Marlar Davis asserted that the real estate in
question was worth “well over $200,000.00" when the debtor conveyed it to his son. The debtor attached
a copy of a 1993 financial statement to his response to the motion for partial summary judgment in which
he valued the subject real property at $335,000.00. It appears that it is highly possible that upon the
trustee’s sale of the property, the debtor’s creditors will be paid in full with a substantial surplus to be
turned over to the debtor. However, if that is the case, the debtor will actually benefit from the bankruptcy
court’s order setting aside the transfer of the real estate. Because it appears that the debtor will not be
adversely affected pecuniarily by the bankruptcy court’s order, it does not appear that the debtor has met
the “person aggrieved” standard. Nevertheless, we feel it is appropriate to address the merits of the
debtor’s appeal.

                                            Merits of the Appeal

        On appeal the debtor presses four reasons why the bankruptcy court improperly granted summary
judgment in favor of the trustee: (1) the Chapter 7 trustee lacks standing to pursue the fraudulent transfer
action because the trustee’s right to bring such an action derives from the rights of individual creditors who
would be barred from bringing such an action by the doctrines of res judicata and collateral estoppel;2 (2)
the fraudulent transfer claim was previously fully litigated in Paula Marlar Davis’s state court action,
therefore, the doctrines of res judicata and collateral estoppel apply to prevent the trustee from relitigating
the fraudulent transfer question; (3) pursuant to Arkansas law, for purposes of setting aside the transaction
as fraudulent, the pertinent conveyance occurred in 1986 when the debtor transferred the deed to the real
estate to his son, and not when the deed was recorded in 1995;3 and (4) genuine issues of material fact


        2
          The debtor did not present this argument to the bankruptcy court. However, questions of
standing may be raised at any time, even on appeal. See Sioux Falls Cable Television v. State of South
Dakota, 838 F.2d 249, 251 (8th Cir. 1988).
        3
           If the transaction alleged to be fraudulent indeed occurred in 1986 as asserted by the debtor, the
trustee’s action would be barred by the applicable statute of limitations. See Mancuso v. Continental Bank

                                                      6
exist regarding the date of the delivery of the property, whether the transfer was made without reasonably
equivalent value, the alleged insolvency of the debtor and the existence of fraudulent intent on the part of
the debtor.

        We begin our discussion with this Court’s standard of review of a bankruptcy court’s grant of a
summary judgment motion. In Ries v. Wintz Properties, Inc. (In re Wintz Cos.), 230 B.R. 848, 857-58
(B.A.P. 8th Cir. 1999), we very comprehensively discussed the applicable standard of review:

                 We review the bankruptcy court's grant of summary judgment de novo. See Peter
        v. Wedl, 155 F.3d 992, 996 (8th Cir.1998); Mayard v. Hopwood, 105 F.3d 1226, 1227
        (8th Cir.1997); Wade v. Midwest Acceptance Corp. (In re Wade), 219 B.R. 815, 818
        (8th Cir. BAP 1998). Summary judgment is only appropriate "if the record 'show[s] that
        there is no genuine issue as to any material fact and that the moving party is entitled to a
        judgment as a matter of law.' " Dulany v. Carnahan, 132 F.3d 1234, 1237 (8th Cir.1997)
        (quoting Fed. R. Civ. P. 56(c)); see Kraft v. Ingersoll-Rand Co., 136 F.3d 584, 585 (8th
        Cir.1998); In re Wade, 219 B.R. at 818; see also Fed. R. Bankr. P. 7056 (making Fed.
        R. Civ. P. 56 applicable in adversary proceedings in bankruptcy). In making this
        determination, the function of the presiding court is not to weigh evidence and to make
        credibility determinations, or to attempt to determine the truth of the matter, but is, rather,
        solely "to determine whether there is a genuine issue for trial." Anderson v. Liberty Lobby,
        Inc., 477 U.S. 242, 250, 106 S. Ct. 2505, 2510, 91 L. Ed. 2d 202 (1986); see Wedl,
        155 F.3d at 996; Quick v. Donaldson Co., 90 F.3d 1372, 1376- 77 (8th Cir.1996); see
        also Mathews v. Trilogy Communications, Inc., 143 F.3d 1160, 1163 (8th Cir.1998)
        ("When evaluating a motion for summary judgment, we must ... refrain from assessing
        credibility."). Indeed, under the proper analysis, "the [c]ourt views the facts in a light most
        favorable to the nonmoving party and allows that party the benefit of all reasonable
        inferences to be drawn from that evidence.' " Prudential Ins. Co. v. Hinkel, 121 F.3d 364,
        366 (8th Cir.1997), cert. denied sub nom. Hinkel v. Hinkel, 522 U.S. 1048, 118 S. Ct.
        693, 139 L. Ed. 2d 638 (1998); see Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
        475 U.S. 574, 587, 106 S. Ct. 1348, 1356, 89 L. Ed. 2d 538 (1986); Dulany, 132 F.3d
        at 1237; Kunkel v. Sprague Nat'l Bank, 128 F.3d 636, 640 (8th Cir.1997).
                 Upon a motion for summary judgment, the initial burden of proof is allocated to the
        movant in the form of demonstrating "that there is an absence of evidence to support the
        nonmoving party's case." Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S. Ct. 2548,
        2553-54, 91 L. Ed. 2d 265 (1986); see Matsushita, at 586, 106 S. Ct. at 1355; Hinkel,



Nat’l Ass’n Chicago (In re Topcor, Inc.), 132 B.R. 119 (Bankr. N.D. Tex. 1991); Ark. Code Ann. § 4-
59-209 (Michie 1996).

                                                      7
        121 F.3d at 366; Nelson v. Kingsley (In re Kingsley), 208 B.R. 918, 920 (8th Cir. BAP
        1997). Once met, the burden then shifts to the nonmoving party "to 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.'
        " Celotex, at 324, 106 S. Ct. at 2553 (quoting Fed. R. Civ. P. 56(c), (e)); see Matsushita,
        at 587, 106 S. Ct. at 1356; Tenbarge v. Ames Taping Tool Sys., Inc., 128 F.3d 656, 658
        (8th Cir.1997); In re Kingsley, 208 B.R. at 920.
                 In this respect, the nonmoving party "must do more than simply show that there is
        some metaphysical doubt as to the material facts; [it] must show there is sufficient evidence
        to support a jury verdict in [its] favor." Chism v. W.R. Grace & Co., 158 F.3d 988, 990
        (8th Cir.1998) (quoting Matsushita, at 586, 106 S. Ct. at 1356) (internal quotation marks
        omitted); see Anderson, at 249, 106 S. Ct. at 2510. "[T]he mere existence of a scintilla
        of evidence in favor of the nonmoving party's position is insufficient to create a genuine
        issue of material fact." Rabushka ex rel. United States v. Crane Co., 122 F.3d 559, 562
        (8th Cir.1997) (internal quotation marks omitted, quoting In re Temporomandibular Joint
        (TMJ) Implants Prods. Liab. Litig., 113 F.3d 1484, 1492 (8th Cir.1997)), cert. denied,
        523 U.S. 1040, 118 S. Ct. 1336, 140 L. Ed. 2d 498 (1998); see Anderson, at 252, 106
        S. Ct. at 2512; Devine v. Stone, Leyton & Gershman, P.C., 100 F.3d 78, 81-82 (8th
        Cir.1996), cert. denied, 520 U.S. 1211, 117 S. Ct. 1694, 137 L. Ed. 2d 821 (1997).
                 "Rule 56(c) mandates the entry of summary judgment, after adequate time for
        discovery and upon motion, against a party who 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." Celotex, at 322, 106 S. Ct. at 2552; see Chism, 158
        F.3d at 990-91; Dulany, 132 F.3d at 1237; Rabushka, 122 F.3d at 562 (internal
        quotationmarks omitted, quoting Temporomandibular Joint, 113 F.3d at 1492). "We look
        to the substantive law to determine whether an element is essential to a case, and '[o]nly
        disputes over facts that might affect the outcome of the suit under the governing law will
        properly preclude the entry of summary judgment.' " Dulany, supra (quoting Anderson, at
        248, 106 S. Ct. at 2510); see South Dakota Mining Assoc., Inc. v. Lawrence County,
        155 F.3d 1005, 1009 (8th Cir.1998) (quoting same); Dodd v. Runyon, 114 F.3d 726,
        729 (8th Cir.1997).

        1. Standing of Chapter 7 Trustee to Pursue the Fraudulent Transfer Action

        The debtor raises the question for the first time on appeal whether the Chapter 7 trustee has
standing to pursue the 11 U.S.C. § 544 fraudulent transfer action. The debtor argues that the rights
inherited by the trustee under section 544 are purely derivative in nature and because the trustee has failed
to show the existence of a creditor who would be able to set aside the transfer of the property under
Arkansas state law, the trustee lacks standing to pursue the fraudulent transfer action. The debtor asserts


                                                       8
that because the Arkansas state court ruled against Paula Marlar Davis in her fraudulent transfer action, any
other creditor would be barred from bringing a fraudulent conveyance action in Arkansas state court
pursuant to the doctrines of res judicata and collateral estoppel. Therefore, the debtor argues, there are
no creditors’ shoes in which the trustee may step in order to prosecute a fraudulent transfer action under
section 544.

        The trustee responds by asserting that she filed her fraudulent conveyance action pursuant to section
544(a), which does not require her to identify a specific unsecured creditor who could set aside the transfer.
Accordingly, the trustee contends, she has standing to pursue the action under section 544(a) because of
her status as a hypothetical lien creditor. Alternatively, the trustee asserts that she did identify several
creditors in her complaint to whom the debtor was indebted at the time of the transfer, which establishes
that she also has standing to proceed under section 544(b).

        Section 544 of the Bankruptcy Code provides in relevant part:

        (a) The trustee shall have, as of the commencement of the case, and without regard to any
        knowledge of the trustee of any creditor, the rights and powers of, or may avoid any
        transfer of property of the debtor or any obligation incurred by the debtor that is voidable
        by –
                         ....
           (3) a bona fide purchaser of real property, other than fixtures, from the debtor, against
        whom applicable law permits such transfer to be perfected, that obtains the status of a
        bona fide purchaser at the time of the commencement of the case, whether or not such a
        purchaser exists [and has perfected such transfer].
        (b)(1) Except as provided in paragraph (2), the trustee may avoid any transfer of an
        interest of the debtor in property or any obligation incurred by the debtor that is voidable
        under applicable law by a creditor holding an unsecured claim that is allowable under
        section 502 of this title or that is not allowable only under section 502(e) of this title.

11 U.S.C. § 544.

         In paragraph 15 of her First Amended Complaint, the trustee generally alleged that she was entitled
to avoid the debtor’s transfer of the real estate to his son pursuant to the strong arm powers granted by
section 544(a). In Counts I, II and III of the First Amended Complaint, the trustee alleged that she was
entitled to avoid the transfer pursuant to section 544 and various provisions of the Arkansas Fraudulent
Transfer Act. The trustee also specifically identified four creditors in her First Amended Complaint to

                                                      9
whom the debtor was indebted at the time he conveyed the property to his son. In her Motion for Partial
Summary Judgment, the trustee relied on the existence of three of these creditors to support her entitlement
to relief under section 544(b): Paula Marlar Davis, Farm Credit Services and Sandra Bradshaw, Esquire.
We first address whether the trustee has standing under section 544(a), then turn our attention to an analysis
of standing under section 544(b).

                A. Trustee’s Standing under Section 544(a)

        When, as in this case, real property is at issue, the applicable avoidance provision is section
544(a)(3). See Midlantic Nat’l Bank v. Bridge (In re Bridge), 18 F.3d 195, 199 (3d Cir. 1994). “Section
544(a)(3) allows the avoidance of a transfer of real property that is not perfected and enforceable against
a bona fide purchaser at the time the bankruptcy petition is filed.” Realty Portfolio, Inc. v. Hamilton (In re
Hamilton), 125 F.3d 292, 298 (5th Cir. 1997). “While the Bankruptcy Code creates the status of a
hypothetical bona fide purchaser, state law defines that status.” Id. See also Bridge, 18 F.3d at 200
(“[T]he trustee’s powers under § 544(a) are subject to the law of the locus of the property.”); Lennington
v. Graham (In re Graham), 110 B.R. 408, 411 (S.D. Ind. 1990)(“Whether a trustee qualifies as a bona
fide purchaser when seeking to avoid a transfer is a question to be determined by looking at state law.”).
The trustee’s rights and powers under section 544(a) are determined as of the date the bankruptcy case
was commenced. See Graham, 110 B.R. at 412.

        The relevant Arkansas statute provides:

          (a) Every deed, bond, or instrument of writing affecting the title, in law or equity, to any
        real or personal property, within this state which is, or may be, required by law to be
        acknowledged or proved and recorded shall be constructive notice to all persons from the
        time the instrument is filed for record in the office of the recorder of the proper county.
          (b) No deed, bond, or instrument of writing for the conveyance of any real estate, or by
        which the title thereto may be affected in law or equity, made or executed after December
        21, 1846, shall be good or valid against a subsequent purchaser of the real estate for a
        valuable consideration without actual notice thereof or against any creditor of the person
        executing such an instrument obtaining a judgment or decree which by law may be a lien
        upon the real estate unless the deed, bond, or instrument, duly executed and
        acknowledged or proved as required by law, is filed for record in the office of the clerk
        and ex officio recorder of the county where the real estate is situated.



                                                     10
Ark. Code Ann. § 14-15-404 (Michie 1998). Pursuant to Arkansas law, a recorded deed provides
constructive notice to a subsequent bona fide purchaser of the real estate. See, e.g., Massey v. Wynne,
791 S.W.2d 368, 369 (Ark. 1990)(“Recordation of an instrument which affects title to real property is
constructive notice of that interest to all persons from the time the instrument is filed.”); Andrews v. All
Heirs and Devisees of H.J. Bellis, 759 S.W.2d 532, 534 (Ark. 1988)(Hays, J., dissenting)(“[R]ecordation
. . . becomes important in order to give notice to subsequent bona fide purchasers.”); Hughes v. McCann,
678 S.W.2d 784, 786 (Ark. App. 1984)(“[P]arties alleging fraud are charged with knowledge of any
pertinent real estate conveyances from the time such conveyances are placed in public records.”); Davis
v. Burford, 125 S.W.2d 789, 791 (Ark. 1939)(recorded deed provides constructive notice to bona fide
purchaser); Long v. Langsdale, 19 S.W. 603 (Ark. 1892)(same).

           Under Arkansas law, a bona fide purchaser only prevails when he or she lacks notice of the
transaction in question. A bona fide purchaser is charged with constructive notice of a transfer when the
deed is recorded. Here, the deed was recorded prior to the filing of the involuntary bankruptcy petition.
Therefore, the trustee, to whom constructive notice of the recorded deed is imputed, cannot utilize section
544(a)(3) to set aside the conveyance. See also Hamilton, 125 F.3d at 299 (Although actual knowledge
of the trustee is irrelevant under section 544(a), constructive notice given by properly recorded instruments
is charged to a person as a matter of law, regardless of the person’s actual knowledge.); In re Mill
Concepts Corp., 123 B.R. 938, 941, 942 (Bankr. D. Mass. 1991)(Section 544(a)(3) grants only the
ability to avoid an unperfected transfer by the debtor, and a trustee armed with the powers of a bona fide
purchaser of real estate prevails over the holder of an unrecorded mortgage.); Graham, 110 B.R. at 413
(“[T]he state law of constructive notice remains applicable in the context of § 544(a)(3).”); Meininger v.
Grigsby (In re Sperry), 101 B.R. 767, 769 (Bankr. M.D. Fla. 1989)(“Under § 544(a)(3), the trustee
assumes the position of a bona fide purchaser and may void a mortgage interest which was unrecorded as
of the petition date.”). “Code § 544(a) provides the trustee with various statuses that, among other things,
invalidate many transfers that are incomplete at the time of bankruptcy because the parties have not
complied with applicable state recording laws.” 3 Norton Bankruptcy Law and Practice 2d § 54:1 (1997).
In short, the recording of the deed pre-petition extinguished the trustee’s avoidance power under section
544(a)(3).




                                                    11
                B. Trustee’s Standing Under Section 544(b)

        “The powers under [Section] 544(b) are in addition to . . . the powers under Section 544(a).”
Brent Explorations, Inc. v. Karst Enters., Inc. (In re Brent Explorations, Inc.), 31 B.R. 745, 748 (Bankr.
D. Colo. 1983). Bankruptcy trustees use section 544(b) as a conduit to assert state-law-based fraudulent
conveyance actions in bankruptcy. See Wintz Cos., 230 B.R. at 859. “Section 544(b) of the Bankruptcy
Code gives the bankruptcy trustee whatever avoiding powers an unsecured creditor with an allowable claim
might have under applicable state or federal law.” Blackwell v. Lurie (In re Popkin & Stern), ___ F.3d
___, 2000 WL 1146044, *4 n.11 (8th Cir. Aug. 15, 2000). Here, the applicable state law is the Arkansas
enactment of the Uniform Fraudulent Transfer Act, Ark. Code Ann. §§ 4-59-201 to 4-59-213 (Michie
1996).

        In her motion for partial summary judgment, the trustee asserted that summary judgment should be
granted on the two constructive fraud counts of her adversary complaint. The provisions of the Arkansas
Fraudulent Transfer Act relied upon by the trustee to support the two constructive fraud counts state in
relevant part:

        (a) 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:
                         ....
           (2) Without receiving a reasonably equivalent value in exchange for the transfer or
        obligation, and the debtor:
             (i) Was engaged or was about to engage in a business or a transaction for which the
        remaining assets of the debtor were unreasonably small in relation to the business or
        transaction; or
            (ii) Intended to incur, or believed or reasonably should have believed that he or she
        would incur, debts beyond his or her ability to pay as they became due.

Ark. Code Ann. § 4-59-204(a)(2)(Michie 1996).

        (a) A transfer made or obligation incurred by a debtor is fraudulent as to a creditor whose
        claim arose before the transfer was made or the obligation was incurred if the debtor made
        the transfer or incurred the obligation without receiving a reasonably equivalent value in
        exchange for the transfer or obligation and the debtor was insolvent at that time or the
        debtor became insolvent as a result of the transfer or obligation.

Ark. Code Ann. § 4-59-205(a)(Michie 1996).

                                                    12
         In order to avail herself of the avoidance powers contained in section 544(b), the trustee must show
the existence of an actual unsecured creditor holding an allowable unsecured claim who could avoid the
transfer in question under the provisions of the Arkansas Fraudulent Transfer Act. See Wintz Cos., 230
B.R. at 859. See also Panama Williams, Inc. v. Parr (In re Panama Williams, Inc.), 211 B.R. 868, 870
(Bankr. S.D. Tex. 1997)(“[T]he trustee must locate an existing unsecured creditor of the debtor who, on
the date of bankruptcy, is able to avoid a transfer of property.”); Young v. Paramount Communications,
Inc. (In re Wingspread Corp.), 178 B.R. 938, 945 (Bankr. S.D.N.Y. 1995)(“In order for a trustee to
maintain an action for avoidance of a fraudulent conveyance, the trustee must show that at least one of the
present unsecured creditors of the estate holds an allowable claim, against whom the transfer or obligation
was invalid under applicable state or federal law.”). “Under § 544(b), the Trustee bears the burden of
proving the existence of a qualified unsecured creditor: a creditor holding an allowable unsecured claim
who could bring the same avoidance action the Trustee is bringing.” Lassman v. Goldstein (In re
Goldstein), 194 B.R. 1, 2-3 (Bankr. D. Mass. 1996). “If the creditor is estopped or barred from recovery
for some . . . reason, so is the trustee.” Brent Explorations, 31 B.R. at 748. The trustee is subject to any
defenses that could be asserted against the unsecured creditor. See Belfance v. Bushey (In re Bushey),
210 B.R. 95, 100 (B.A.P. 6th Cir. 1997).

        In her motion for partial summary judgment, the trustee identified three specific unsecured creditors
existing when the bankruptcy petition was filed who she alleged could avoid the transfer of the real property
under the Arkansas Fraudulent Transfer Act: Paula Marlar Davis, Farm Credit Services4 and Sandra


        4
          At the time the deed was recorded on June 30, 1995, and July 3, 1995, the debtor was indebted
to Farm Credit Services on a loan that was secured by cattle. However, beginning with the payment due
July 1, 1995, the debtor defaulted in his loan payments. Farm Credit Services accelerated the loan on
December 11, 1995, then pursuant to a replevin order entered April 9, 1996, repossessed and sold the
cattle. The net sale proceeds were insufficient to satisfy the debt, and on January 6, 1998, Farm Credit
Services obtained a deficiency judgment against the debtor in the amount of $29,708.49. Although Farm
Credit Services was a secured creditor when the deed was recorded, it became a “future creditor” within
the meaning of Ark. Code Ann. § 4-59-204 (Michie 1996), when it obtained a deficiency judgment for
the unpaid balance of its loan prior to the bankruptcy filing. “[A] bankruptcy trustee can step into the shoes
of any creditor that holds an allowable unsecured claim that arose after the challenged transfer” by means
of the “future creditor” provision of the Uniform Fraudulent Transfer Act. Belfance v. Bushey (In re
Bushey), 210 B.R. 95, 104 (B.A.P. 6th Cir. 1997)(case decided under Ohio’s version of the Uniform
Fraudulent Conveyance Act, which was the precursor to the Uniform Fraudulent Transfer Act). The Eighth

                                                     13
Bradshaw, Esquire.5 In response to the trustee’s identification of the foregoing three creditors, the debtor
summarily stated that:

                The indebtedness alleged to Farm Credit Services, Sandra Bradshaw, Paula
        Davis, and any other creditors alleged did not exist on the effective date of transfer and
        conveyance, December 19, 1986, and accordingly there can be no finding as a matter of
        law that such a transfer was fraudulent in the absence of such debt in 1986.

        The debtor never denied that the foregoing creditors existed when the deed was recorded or when
the involuntary bankruptcy petition was filed; he just defended on the grounds they did not exist in 1986.
The bankruptcy court found that the debtor had a number of debts at the time the deed was recorded in
1995. On appeal, the debtor does not dispute this finding. He merely contends that because the state
court fraudulent transfer action was decided adversely to Paula Marlar Davis, all of his creditors were
barred by either res judicata or collateral estoppel from asserting claims under the Arkansas Fraudulent
Transfer Act, therefore, the trustee lacks a qualifying unsecured creditor to have standing to prosecute the
section 544(b) cause of action.

        “[U]nder the doctrine of res judicata, a valid and final judgment rendered on the merits by a court
of competent jurisdiction bars another action by the plaintiff or his privies against the defendant or his privies
on the same claim or cause of action.” Bruns Foods of Morrilton, Inc. v. Hawkins, 944 S.W.2d 509, 510
(Ark. 1997). See also Armstrong v. Norwest Bank, Minneapolis, N.A., 964 F.2d 797, 802 (8th Cir.
1992). “Privity of parties within the meaning of res judicata means ‘a person so identified in interest with
another that he represents the same legal right.’” Id. (citations omitted); see also Spears v. State Farm Fire
and Casualty Ins., 725 S.W.2d 835, 837 (Ark. 1987). Collateral estoppel requires that “(1) the issue


Circuit Court of Appeals, in a pre-Uniform Fraudulent Transfer Act case, has ruled that “[p]rior to the entry
of [a] deficiency judgment, one whose debt is secured by [a] mortgage cannot maintain a suit to set aside
an alleged fraudulent transfer” of other property owned by the debtor. Carson v. Long-Bell Lumber Corp.,
73 F.2d 397, 403 (8th Cir. 1934).
        5
          The debtor owed a debt to Sandra Bradshaw, Esquire in the amount of $2536.75 for unpaid
attorney’s fees at the time the deed was recorded. This debt was unsecured. On December 14, 1995,
Bradshaw obtained a default judgment against the debtor in the amount of $3036.75. Subsequently,
Bradshaw obtained a Writ of Execution. The only property obtained through the Writ of Execution was
a used car that was sold at public auction. After the vehicle was sold, there remained an outstanding debt
in the amount of $1539.97.

                                                       14
sought to be precluded must be the same as that involved in the prior litigation; (2) the issue must have been
actually litigated; (3) the issue must have been determined by a valid and final judgment; and (4) a
determination must have been essential to the judgment.” National Bank of Commerce v. The Dow
Chemical Co., 1 S.W.3d 443, 449 (Ark. 1999). “The doctrine of collateral estoppel . . . is applicable only
when the party against whom the earlier decision is being asserted had a full and fair opportunity to litigate
the issue in question.” Arkansas Dep’t of Human Servs. v. Dearman, 842 S.W.2d 449, 451 (Ark. App.
1992)(en banc). See also Oldham v. Pritchett, 599 F.2d 274, 279 (8th Cir. 1979). Collateral estoppel
“applies only to persons who were parties or who are in privity with persons who were parties in the first
action and that persons in a privity relationship are deemed to have interests so closely intertwined that a
decision involving one necessarily should control the other.” Id. at 452 (citation omitted). In Arkansas
Department of Human Services v. Dearman, the Court of Appeals of Arkansas discussed privity for
purposes of res judicata and collateral estoppel and opined:

        [I]t appears to be the modern rule that privity should be applied when:
        1. The claim of the nonparty is based on the same transaction or occurrence,
        2. The interests of both claimants are similar and no adverse interests exist,
        3. The nonparty had notice of the earlier action, and
        4. The nonparty did or had an opportunity to participate or intervene in the earlier case.

Dearman, 842 S.W.2d at 452 (citation omitted).

         Here, applying Arkansas law, it is clear that only Paula Marlar Davis would be precluded from
bringing another fraudulent transfer action against the debtor pursuant to the doctrines of res judicata and
collateral estoppel. However, we conclude that under Arkansas law neither Farm Credit Services nor
Sandra Bradshaw would be prevented from bringing a fraudulent transfer action. Neither was a party in
Paula Marlar Davis’s previous state court action. Further, the record on appeal is absent of any evidence
to show that under Arkansas law either was in privity with Paula Marlar Davis in her state court action.
In her complaint, the trustee has specifically identified two unsecured creditors who under Arkansas law
would be able to prosecute a fraudulent transfer action against the debtor in state court in an attempt to set
aside the transfer of the real property, which provides the trustee with standing to proceed under section
544(b).




                                                     15
        2. Whether Trustee is Barred by Res Judicata or Collateral Estoppel

        On appeal, the debtor asserts that even if we determine that individual creditors would not be
barred from bringing a fraudulent transfer action against him in state court, and thus provide the trustee with
standing under section 544(b), the doctrines of res judicata and collateral estoppel do prevent the trustee
fromindependently prosecuting the section 544(b) cause of action because the exact same claim and issues
that will be litigated in the section 544(b) action were previously litigated in Paula Marlar Davis’s state court
lawsuit. The debtor contends that in her state court fraudulent transfer action, Paula Marlar Davis
represented the same statutory legal right as the trustee asserts in the section 544(b) cause of action, and
further argues that “the trustee and the plaintiff in the prior state court action shared such an identity of
interest as to render the trustee in privity with the previous plaintiff.”

        In response, the trustee contends that her adversary proceeding does not involve the same cause
of action as Paula Marlar Davis’s state court lawsuit, and adamantly asserts that she is not in privity with
Ms. Davis. The trustee argues that she represents the interest of all the creditors of the bankruptcy estate
and is attempting to set aside the transfer for all their benefit, and not just the interest of Ms. Davis who
sought to set aside the transfer only on her own behalf.

        The principles of res judicata and collateral estoppel apply in bankruptcy proceedings. See
Johnson v. Miera (In re Miera), 926 F.2d 741, 743 (8th Cir. 1991); Kapp v. Naturelle, Inc. (In re Kapp),
611 F.2d 703, 707 (8th Cir. 1979).

        We agree with the debtor that the fraudulent transfer claim and attendant issues that were raised
by Paula Marlar Davis in her prior state court action are substantially identical to the claim and issues raised
in the trustee’s section 544(b) cause of action. Further, a final judgment on the merits, whether it was right
or wrong, was rendered by a court of competent jurisdiction in Ms. Davis’s state court action. However,
we disagree with the debtor’s contention that the trustee is in privity with Ms. Davis.

        In Corzin v. Fordu (In re Fordu), 201 F.3d 693, 705 (6th Cir. 1999)(citations omitted), the Sixth
Circuit Court of Appeals opined:

        A bankruptcy trustee is the representative of all creditors of the bankruptcy estate. . .
        “[T]he trustee in bankruptcy . . . represents all creditors.” . . . As such, the Trustee is not


                                                      16
        simply the successor-in-interest to the Debtor: he represents the interest of all creditors
        of the Debtor’s bankruptcy estate.
                           ....
        Because the trustee is invested with “extraordinary rights . . . as a general representative
        of . . . creditors,” he is “not bound, either on res judicata or judicial collateral estoppel
        [grounds] by the prior state proceedings.”
                           ....
        “Operation of res judicata requires identity of parties. Yet the creditors presently
        represented by the trustee were not parties to the original action, nor were their interests
        represented therein. Thus they cannot be bound by the dismissal of the action.”

       In Boyajian v. DeFusco (In re Giorgio), 62 B.R. 853, 862-63 (Bankr. D.R.I. 1986)(citations
omitted), the bankruptcy court stated:

        “[A] person cannot be barred from litigating a claim unless he was a formal party or ‘in
        privy’ with a formal party to the first action . . . [T]he [bankruptcy] trustee, who was
        neither a formal party . . . nor represented by a party . . . [is not barred] from litigating this
        claim.” . . . In bringing the instant action, the trustee is carrying out his duties to “collect and
        reduce to money the property of the estate,” and to “object to the allowance of any claim
        that is improper.” . . . A primary obligation of the trustee is to ensure that the assets are
        liquidated and distributed equitably among creditors, and to accomplish this, fraudulent
        and/or usurious claims must be subject to scrutiny. . . . .
                 Operation of res judicata requires identity of parties. Yet the creditors
                 presently represented by the trustee were not parties to the original action,
                 nor were their interests represented therein.

        Finally, in Coleman v. Alcock, 272 F.2d 618, 621-22 (5th Cir. 1959)(footnotes omitted), the Fifth
Circuit Court of Appeals opined:

        [W]e are of the view that the Trustee is not bound, either on res judicata or judicial
        collateral estoppel, by the prior state court proceedings. The Trustee is, of course, a
        successor of the Bankrupt for many purposes. But he is much more both in the
        extraordinary rights with which the Bankruptcy Act invests him, and as a general
        representative of the creditors. Unless he intervenes and takes on the role of an active
        litigant subjecting himself thereby to the usual incidents of such action, he is not bound by
        the judgment merely because the Bankrupt was a party defendant in the prior litigation.




                                                        17
        We are persuaded by the foregoing principles that the trustee in this case is not barred by either
res judicata or collateral estoppel from pursuing the section 544(b) fraudulent transfer action. As the
bankruptcy court so eloquently stated:

        Application of the privity principles indicates that neither the creditors nor the chapter 7
        trustee were in privity with Paula Davis in the prior proceedings between John and Paula.
        The plaintiff in this action is the chapter 7 trustee who is a representative of all of the
        creditors of the bankruptcy estate. The trustee is not merely a successor to the interests
        of the debtor or a representative of a single creditor. Rather she represents the interests
        of all of the creditors of the estate. It cannot be said that the interests of all of the creditors
        are sufficiently identified with the interest of the debtor’s former wife that they can be held
        to be in privity with Ms. Davis. While Ms. Davis may have had representation and be
        collaterally estopped from relitigating the issues, the remainder of the debtor’s creditors
        were not parties to the prior actions and are not bound by the prior determination. Ms.
        [Davis] did not and does not now purport to have represented anyone else’s interest but
        her own. Indeed, she will only be allowed to share in the trustee’s recovery along with all
        of the other unsecured creditors of the debtor.

       In sum, we hold that the trustee in this case is not barred by either res judicata or collateral estoppel
from prosecuting the section 544(b) cause of action.

        3. The Date of the Transfer of the Real Estate Under Arkansas Law

         The debtor argues that pursuant to Arkansas law, the conveyance of the real estate occurred in
1986 when he delivered the deed to his son, and not in 1995 when the son recorded the deed. The debtor
relies on three Arkansas cases to support his argument: Johnson v. Ramsey, 817 S.W.2d 200 (Ark. 1991);
Barker v. Nelson, 812 S.W.2d 477 (Ark. 1991); and Grahamv. Suddeth, 133 S.W. 1033 (Ark. 1911).
In each of these cases, the Supreme Court of Arkansas restated the general rule of law that a delivered
deed will pass title between the grantor and grantee even though it has not been recorded. Further, the
recording of the deed raises a presumption of delivery. However, these cases do not involve a suit brought
by a third-party creditor seeking to set aside a fraudulent conveyance of real estate, which was the scenario
presented to the bankruptcy court.

       In Arkansas, a fraudulent transfer action triggers the application of Arkansas’s version of the
Uniform Fraudulent Transfer Act. Section 4-59-206(1)(i) of the Arkansas Fraudulent Transfer Act
provides that:

                                                       18
        (1) A transfer is made:
           (i) With respect to an asset that is real property other than a fixture, but including the
        interest of a seller or purchaser under a contract for the sale of the asset, when the transfer
        is so far perfected that a good faith purchaser of the asset from the debtor against whom
        applicable law permits the transfer to be perfected cannot acquire an interest in the asset
        that is superior to the interest of the transferee.

Ark. Code Ann. § 4-59-206(1)(i)(Michie 1996). In Arkansas, prior to enactment of the Fraudulent
Transfer Act,6 it was well-established that:

        No conveyance required by the provisions of this act to be recorded shall be valid or
        binding, except between the parties and their legal representatives, until the same shall have
        been deposited in the recorder’s office for record; nor even then if shown to be made with
        intent to defraud prior creditors or purchasers, but shall be void against such prior creditors
        or purchasers.

Murphy v. Marshall, 159 S.W.2d 741, 744 (Ark. 1942)(citation and internal quotation marks omitted).
“[F]or purposes of determining when the statute of limitations begins to run, parties alleging fraud are
charged with knowledge of any pertinent real estate conveyances from the time such conveyances are
placed in public records.” Hughes v. McCann, 678 S.W.2d 784, 786 (Ark. App. 1984). Although
already discussed above, it bears repeating that in Arkansas a subsequent bona fide purchaser will not be
charged with constructive notice of the transfer of property until the deed is recorded. See Halbrook v.
Lewis, 163 S.W.2d 171, 172 (Ark. 1942); Sturgis v. Nunn, 158 S.W.2d 673, 675 (Ark. 1942). Section
4-59-206(1)(i) of the Arkansas Fraudulent Transfer Act specifically addresses when a transfer of real
estate occurs for purposes of determining whether such transfer is fraudulent. Under section 4-59-
206(1)(i), it is clear that a transfer of real property occurs when the deed is recorded. See also Boardwalk
Regency Corp. v. Burd, 620 A.2d 448, 449 (N.J. Super. Ct. App. Div. 1993)(appellate court interpreted
New Jersey Fraudulent Transfer Act and ruled that a transfer of real estate occurs on the date the deed
is recorded).

        We conclude that the bankruptcy court correctly applied Arkansas fraudulent transfer law, and
properly determined that the transfer of the real estate occurred when the deed was recorded in 1995.




        6
            The Arkansas Fraudulent Transfer Act was enacted in 1987.

                                                     19
        4. Whether Genuine Issues of Material Fact Exist That Preclude Summary Judgment

        As his final point on appeal, the debtor asserts that genuine issues of material fact exist regarding
the date of the delivery of the real estate, whether the transfer was made without reasonably equivalent
value, the alleged insolvency of the debtor, and the existence of fraudulent intent on the part of the debtor
that preclude the entry of summary judgment. For the following reasons, the debtor’s arguments on this
point must fail.

                 A. Date of Delivery of the Real Estate

        The debtor repeats the argument he advanced above, and contends the evidence shows that the
transfer of the real estate occurred in 1986 and not in 1995. Although the debtor delivered the deed to his
son in 1986, the evidence is undisputed that the deed was recorded on June 30, 1995, in the Office of the
Dallas County Recorder, and was recorded on July 3, 1995, in the Office of the Ouachita County
Recorder. These undisputed facts merely required the application of Arkansas fraudulent transfer law,
which we have already determined the bankruptcy court correctly applied when ruling the transfer occurred
in 1995 when the deed was recorded.

        B. Reasonably Equivalent Value

        The debtor asserts the state court’s finding in its order dismissing Paula Marlar Davis’s fraudulent
transfer action that “[t]he love and affection which exists between father and son satisfy the requirement that
the conveyance be made for valuable consideration,” shows the transfer was made for reasonably
equivalent value in direct contravention to the bankruptcy court’s determination that same was lacking.

       In First Nat’l Bank of Roland v. Rush, 785 S.W.2d 474, 477-78 (Ark. App. 1990)(citations
omitted), the Court of Appeals of Arkansas opined:

                Our law of fraudulent conveyances is well settled. When a financially embarrassed
        debtor conveys his property to a near relative or member of his household, the conveyance
        must be looked upon with suspicion and scrutinized with care. If the evidence shows the
        conveyance to be voluntary, it is prima facie fraudulent as to existing creditors. If the
        debtor is insolvent and unable to pay his debts, the presumption that the conveyance is
        fraudulent as to antecedent creditors is conclusive.

                                                     20
        The Arkansas Fraudulent Transfer Act defines “value” in relevant part: “Value is given for a transfer
or an obligation if, in exchange for the transfer or obligation, property is transferred or an antecedent debt
is secured or satisfied.” Ark. Code Ann. § 4-59-203(a) (Michie 1996). According to the Comment to
section 3 of the Uniform Fraudulent Transfer Act:

                 Section 3(a) is adapted from § 548(d)(2)(A) of the Bankruptcy Code. See also
        § 3(a) of the Uniform Fraudulent Conveyance Act. The definition in Section 3 is not
        exclusive. “Value” is to be determined in light of the purpose of the Act to protect a
        debtor’s estate from being depleted to the prejudice of the debtor’s unsecured creditors.
        Consideration having no utility from a creditor’s viewpoint does not satisfy the statutory
        definition. The definition does not specify all the kinds of consideration that do not
        constitute value for the purposes of this Act – e.g., love and affection. See, e.g., United
        States v. West, 299 F. Supp. 661, 666 (D. Del. 1969).

7A Uniform Laws Annotated, Uniform Fraudulent Transfer Act § 3, Comment (1999).

         In the context of defining “reasonably equivalent value” as that term is used in section 548 of the
Bankruptcy Code, the Eighth Circuit Court of Appeals in Jacoway v. Anderson (In re Ozark Restaurant
Equip. Co. Inc.), 850 F.2d 342, 344-45 (8t h Cir. 1988), stated that “[t]he concept of reasonably
equivalent value is a means of determining if the debtor received a fair exchange in the market place for the
goods transferred. Considering all the factors bearing on the sale, did the debtor receive fair market value
for the property.”

        In United States v. West, 299 F. Supp. 661, 665-66 (D. Del. 1969), the district court, in the
context of applying the Delaware Fraudulent Conveyance Act to an alleged fraudulent transfer of real
property, ruled that “love and affection” did not constitute fair consideration to support the transfer of the
real estate to the transferors’ son. The district court stated:

        Since the question of fair consideration as it pertains to an alleged fraudulent conveyance
        must be determined from the standpoint of creditors . . . it is clear that no fair equivalent
        is exchanged when the conveyance is simply for natural love and affection. The creditor’s
        interest will not be protected since the debtor’s property has departed without any fair
        equivalent taking its place.

Id. at 666 (citations and internal quotation marks omitted).


                                                     21
        InJahner v. Jacob, 252 N.W.2d 1, 5-6 (N.D. 1977), the Supreme Court of North Dakota opined:

                It is contended that “love and affection” is a valid consideration for the
        conveyances made by Valentine Jacob. This is a correct statement, so far as the parties
        to the conveyances are concerned, if there is not fraud. Love and affection is a sufficient
        consideration for a deed. Trengen v. Mongeon, 206 N.W.2d 284 (N.D. 1973). But
        “love and affection” is not that “fair consideration” required by Section 13-02-04. As
        defined by the Uniform Fraudulent Conveyance Act, a “fair consideration” involves an
        exchange of property or obligation which is a fair equivalent of that conveyed. Sec. 13-
        02-03, N.D.C.C. Under this rule, conveyances to family members for love and affection
        have frequently been held fraudulent as to creditors. . . .

        In Doerschuk v. Wiseman, 181 S.W.2d 789, 792 (Mo. App. 1944), the Kansas City Court of
Appeals of Missouri stated that “a conveyance based on love and affection, when made by an insolvent,
or by one made insolvent by the very act of conveying the property, cannot be regarded other than
voluntary, and consequently fraudulent and void as to existing creditors.” See also Walker v. Treadwell
(In re Treadwell), 699 F.2d 1050, 1051 n.1 (11th Cir. 1983)(“love and affection” are clearly insufficient
consideration to protect transfers under 11 U.S.C. § 548; noting that “love and affection” have been held
to be inadequate consideration under state fraudulent conveyance laws); McPherson Oil Co., Inc. v.
Massey, 643 So. 2d 595, 596 (Ala. 1994)(“[A] conveyance given in return for ‘love and affection’ is
supported by ‘good,’ rather than ‘valuable’ consideration, and is thus a voluntary conveyance and void
against existing creditors.”).

        Here, the unrebutted evidence in the record on appeal shows that the debtor transferred the real
property to his son for ten dollars and love and admiration. We determine that the bankruptcy court did
not err by finding that the foregoing consideration did not constitute reasonably equivalent value under the
Arkansas Fraudulent Transfer Act.

                 C. Debtor’s Insolvency

        The debtor maintains that a genuine issue a material fact exists regarding whether he was insolvent
at the time the deed was recorded in 1995. The Arkansas Fraudulent Transfer Act, in relevant part,
provides that a debtor is insolvent “if the sum of the debtor’s debts is greater than all of the debtor’s assets
at a fair valuation.” Ark. Code Ann. § 4-59-202(a) (Michie 1996). Further, “[a] debtor who is generally



                                                      22
not paying his or her debts as they become due is presumed to be insolvent.” Ark. Code Ann. § 4-59-
202(b) (Michie 1996).

         In her motion for summary judgment, the trustee presented evidence that the debtor was rendered
insolvent upon transferring the real estate. Specifically, the trustee attached to the motion for summary
judgment a transcript of a pretrial conference held in the bankruptcy court in which the debtor stated in
response to the bankruptcy court’s statement that if an order for relief was entered in the involuntary
Chapter 7 case, a trustee would be appointed to take over the debtor’s assets and sell them to pay
creditors that “I have no assets. They have taken all my assets. So the only thing I [am] going to try to do
here is conserve your time as well as mine.” Further, the trustee attached an affidavit to her motion for
summary judgment that had been prepared by Sandra Bradshaw, Esquire, in which she stated in pertinent
part:

        3. Our law firm obtained a Default Judgment against Mr. Marlar in the Crossett Municipal
        Court on December 14, 1995, in the total amount of $3,036.75. . . .
        4. I filed the Default Judgment in the Office of Norma Castleberry, Circuit Clerk and
        Recorder for Dallas County, on December 28, 1995.
        5. After I filed the Default Judgment in Dallas County, I obtained a Writ of Execution from
        the Clerk of Court and it was served by the Sheriff of Dallas County on John S. Marlar.
        The only property that was obtained through the Writ of Execution was a used car which
        was sold at public auction. After the vehicle was sold, there remained an outstanding debt
        to our law firm in the amount of $1,539.97 which is still outstanding and unpaid.

         The debtor’s only response to the trustee’s evidence was to “specifically den[y] that Debtor and
Defendant herein was in any way insolvent on the date of actual transfer and conveyance.” The debtor
totally failed to present any evidence of his solvency in his response to the trustee’s motion for summary
judgment. The debtor’s son likewise failed to address the question of the debtor’s solvency in his response
to the trustee’s motion.

         Following the entry of the order granting the trustee’s motion for partial summary judgment on
Counts II and III of the adversary complaint, the bankruptcy court entered an order to show cause why
final judgment should not be entered in favor of the trustee on the complaint. In the order to show cause,
the bankruptcy court pointed out that it appeared unnecessary to render a decision on Count I of the
complaint (actual fraud) because relief had been granted on the alternative Counts II and III of the
complaint (constructive fraud). In his response to the order to show cause, the debtor’s son, for the first

                                                    23
time, argued that a question of fact existed concerning whether the debtor was insolvent at the time the deed
was recorded. The debtor’s son relied upon statements made by Paula Marlar Davis in her petition for
divorce filed on February 13, 1995, in which she alleged that “she and John Marlar ‘own registered cattle
which are located on several farms that they own in Dallas County, Arkansas. The registered cattle have
a current market value of approximately $250,000.00.’” and further alleged that “‘(t)he parties have
acquired substantial marital property during their marriage.’” A copy of Ms. Davis’s petition for divorce
was attached to the debtor’s son’s response. Although a copy of Ms. Davis’s petition for divorce was also
attached to the debtor’s son’s original response to the trustee’s motion for partial summary judgment, the
son, at that time, advanced absolutely no arguments in regards to the solvency of the debtor.

        Subsequent to the entry of the order granting the trustee’s motion for partial summary judgment and
the entry of the order to show cause, the debtor filed a pleading entitled Amended Response to Motion for
Summary Judgment to which he attached an affidavit that purported to establish his solvency effective June
30, 1995. The affidavit lists only assets allegedly owned by the debtor on June 30, 1995, and does not
list any indebtedness. Contemporaneously, the debtor also filed a pleading entitled Motion to Amend
Response to Motion for Summary Judgment in which he requested leave of the bankruptcy court “to amend
his prior response to supply additional financial information pertaining to his solvency effective throughout
the year 1995.” The debtor pleaded that “[s]uch amendment goes to the heart of the Court’s pending
decision in this regard and addresses this Court’s order to show cause filed in this same matter.” The
bankruptcy court treated the debtor’s and debtor’s son’s motions as requesting reconsideration of the
order granting partial summary judgment, and denied the request to supplement the original responses to
the motion for summary judgment to add financial information pertaining to the debtor’s solvency at the time
the deed was recorded.

        On appeal, the debtor asserts that the copy of Ms. Davis’s petition for divorce that was attached
to his son’s response to the order to show cause along with the affidavit in which he listed his assets as of
June 30, 1995, raise a genuine issue of material fact regarding his solvency which precludes the entry of
summaryjudgment. The debtor argues that the bankruptcy court opened the proceeding for the submission
of new evidence by entering the order to show cause and requesting the parties show cause why a final
judgment should not be entered in favor of the trustee. The debtor also points out that a copy of Ms.
Davis’s petition for divorce was attached to his son’s original response to the trustee’s motion for partial
summary judgment and, accordingly, the statements made in the petition concerning the value of the
debtor’s assets should have been considered by the bankruptcy court when making its initial ruling.

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         First, we do not believe that the bankruptcy court intended to open the matter for additional
evidence by entering the order to show cause. The bankruptcy court entered the order to show cause
because summary judgment had been granted on two counts of the three-count complaint. Although the
need to address the remaining count appeared to be moot, the bankruptcy court merely attempted to give
the parties an opportunity to advise the court if any reason existed that required the court to rule on the
remaining count. Accordingly, the bankruptcy court correctly refused to consider the debtor’s post-
judgment affidavit in which he purported to list assets owned as of June 30, 1995. See Chism v. W.R.
Grace & Co., 158 F.3d 988, 992 n.4 (8th Cir. 1998). In any event, the affidavit fails to list liabilities and,
therefore, is insufficient to establish solvency under section 4-59-202(a) of the Arkansas Fraudulent
Transfer Act. Further, even if Ms. Davis’s petition for divorce might be construed to contain information
that raises a question of solvency under section 4-59-202(a), the debtor failed to rebut the presumption
of insolvency created by section 4-59-202(b). The affidavit of Larry F. Hall, who is employed by Farm
Credit Services, which was attached to the trustee’s motion for summary judgment, advises that the debtor
defaulted on his loan obligation beginning with his July 1, 1995 payment. Thereafter, the loan remained
delinquent. Likewise, the affidavits of Paula Marlar Davis and Sandra Bradshaw, along with the
attachments thereto, establish that the debtor failed to pay his debts to them around the time period in which
the deed was recorded. At the time the transfer of the real estate occurred, the debtor was not paying his
debts to either Farm Credit Services, Ms. Davis or Sandra Bradshaw as they became due, which raises
a presumption of insolvency under section 4-59-202(b).

        In sum, we determine that no genuine issue of material fact exists regarding the solvency of the
debtor which would preclude the entry of summary judgment in favor of the trustee.



                D. Existence of Fraudulent Intent on the Part of the Debtor

       Lastly, the debtor contends that summary judgment was improperly granted in favor of the trustee
because the trustee failed to prove that he intended to defraud his creditors.

        The bankruptcy court did not grant summary judgment on Count I of the trustee’s complaint, which
alleged the transfer was actually fraudulent under Ark. Code Ann. § 4-59-204(a)(1). That section requires
proof that the debtor made the transfer with “actual intent to hinder, delay, or defraud any creditor of the
debtor.” The court granted summary judgment on Counts II and III of the trustee’s complaint, which

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alleged constructive fraud under Ark. Code Ann. § 4-59-204(a)(2) and § 4-59-205, respectively. “The
law does not require parties challenging a transaction as constructively fraudulent to establish actual
dishonesty or intent.” Benson v. Richardson, 537 N.W.2d 748, 757 (Iowa 1995). A court can properly
set aside a conveyance of property as in fraud of creditors notwithstanding that the conveyance may not
have been made with the actual intent to defraud creditors. See White v. Milburn, 122 S.W.2d 589, 592
(Ark. 1938).

         Because evidence, or the lack thereof, of fraudulent intent on the part of the debtor is irrelevant
under the constructive fraud provisions of the Arkansas Fraudulent Transfer Act, the bankruptcy court did
not err by granting summary judgment in favor of the trustee on the two counts alleging constructive fraud.

                                                Conclusion

        We affirm the bankruptcy court’s order granting summary judgment in favor of the trustee.




        A true copy.

                Attest:

                          CLERK, U.S. BANKRUPTCY APPELLATE PANEL,
                          EIGHTH CIRCUIT




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