I.     Introduction

This is an action to recover fraudulent transfers and preferences and for other relief. The court has jurisdiction pursuant to 28 U.S.C. § 1334(b) and the district court's order of reference. It is a core proceeding under 28 U.S.C. § 157(b)(2)(F) and (H). The trustee will recover the sum of $11,615.48 from Norman Kelly and $60,873.37 from Midtown Executives, Inc. The complaint will be dismissed as to Kevin Hines, Sharon R. Kelly Professionals, Inc., and Rosa Claypool, with prejudice. The trustee's objection to discharge count will be dismissed without prejudice.

     II.      Statement of Uncontested Facts

The following is a statement of uncontested facts, as agreed by counsel for the trustee and counsel for the defendants. I have amended them slightly to avoid confusion. Instead of referring to defendant S.R. Kelly Professionals, Inc., as "S.R. Kelly," I have amended the statement to refer to the corporation as "SRKP, Inc." I have also changed some of the headings.

           6 ABR 522   A.      Parties

1.	Plaintiff Larry D. Compton is the duly appointed and serving chapter 13 trustee in the main bankruptcy case, In re Kelly, Case No. A-98-00917-DMD, which case was filed as a case under chapter 7 of the Bankruptcy Code on August 20, 1998 and converted at the request of the debtor to a case under chapter 13 of the Code on March 17, 2000.
2.	Sharon R. Kelly ("Sharon") is the debtor in the main case.
3.	Defendant Rosa S. Claypool ("Rosa") is an individual residing in Sacramento, California, and is the mother of Sharon.
4.	Defendant Norman Kelly ("Norman") is an individual residing in Escondido, California, and is the father of Sharon.
5.	At all time material to this action, S.R. Kelly Professionals, Inc. ("SRKP, Inc.") was a corporation duly organized and existing under the laws of the State of Alaska.
6.	Sharon was the sole shareholder of SRKP, Inc.
7.	Sharon, Norman, and Betty S. Kelly (his current wife) comprised the board of directors of SRKP, Inc. Norman was the duly elected and serving President and Sharon the duly elected and serving Secretary/Treasurer of the corporation.
8.	Midtown Executives, Inc. ("MEI") is a corporation duly organized and existing under the laws of the State of Alaska.
9.	All the issued and outstanding shares of stock in Midtown Executives, Inc. are held by Rosa S. Claypool.
10.	The directors [of] Midtown Executives, Inc. are: Kevin Hines (the son of Sharon); Rosa; and Sharon.
11.	The officers of Midtown Executives, Inc. are: Kevin Hines, President & Treasurer; Rosa, Vice-President; and Sharon, Secretary.

           6 ABR 523   B.      Alma Corporation Claim

12.	In a February 24, 1994 special meeting, the directors of SRKP, Inc., authorized Sharon R. Kelly to entered into a lease with Alma corporation. [Exhibit 14, p. 212]
13.	On March 3, 1994, SRKP, Inc., entered into a month to month lease with Alma Corporation.
14.	In the summer of 1997 Alma Corporation served Sharon with an FED complaint it had filed in district court seeking the removal of SRKP, Inc., from its property. [Exhibit 8]
15.	On September 9, 1997, an order was entered directing SRKP, Inc., to vacate Alma Corporation's premises on or before November 17, 1997. [Exhibit 9]
16.	In vacating the property, Sharon directed the removal of certain assets in the leased offices which Alma Corporation maintained were fixtures.
17.	At a hearing on October 13, 1997, Alma Corporation sought preliminary relief in State Court to stop the actions of SRKP, Inc.; it subsequently amended its complaint to name Sharon individually and to allege further damages.
18.	A trial on Alma Corporation's complaint was held in April, 1998.
19.	A jury verdict in favor of Alma Corporation was entered April 24, 1998 against SRKP, Inc., and Sharon for $24,141.93 for actual damages and against Sharon for $10,000 in punitive damages. [Exhibit 10]
20.	On June 26, 1998 final judgment was entered on the verdict.
21.	On July 28, 1998 Sharon R. Kelly was served with a summons to appear at a judgment debtor exam and a restraining order prohibiting her from transferring or in any manner disposing of any of her property not exempt from execution pending that hearing scheduled for August 21, 1998. [Exhibit 11]

           6 ABR 524  
C.     Norman Kelly/Sharon Kelly Account

22.	In December 1984, Norman opened a JTWROS investment account with E.F. Hutton in his name and that of Sharon.
23.	Sometime prior to October 1990, the E.F. Hutton account was transferred to Shearson Lehman Account, which account held shares in Shearson Lehman Brothers Municipals Fund. The account was an automatic reinvestment account and all dividends received or distributions made on account of the shares held in that account were reinvested.
24.	On November 30, 1995, the shares held in Smith Barney account 515-09953-13(1) were transferred to Smith Barney account 581-11418-10 and the account moved from Escondido, California to Anchorage, Alaska.
25.	During the four years preceding the filing of the petition in the main bankruptcy case, other than reinvested income/dividends, the following deposits were made to Smith Barney account 581-11418-10.

Date	Amount	Cash/Property
2/7/95	1,000.00	Cash
12/8/95	1,142.00	Cash
1/9/96	1,250.00	Cash
1/17/97	1,000.00	Cash
10/14/97	11,825.00	706 shares of Nuveen stock (2)
7/27/98	11,618.48	Journal Transfer
Total	27,835.48

26.	In May 1996, the Norman/Sharon Smith Barney account 581-11418-10 was converted to a margin account.
27.	Subsequently, monies were borrowed in the Norman/Sharon Smith Barney account 581-11418-10 and distributed as follows:

      6 ABR 525  

Date	Amount	Paid To
5/21/96	2,998.00	S.R. Kelly Professionals, Inc.
6/30/96	3,290.90	S.R. Kelly Professionals, Inc
7/30/96	315.00	S.R. Kelly Professionals, Inc
8/20/96	1,700.00	S.R. Kelly Professionals, Inc
8/27/96	431.00	S.R. Kelly Professionals, Inc
9/25/966	350.00	S.R. Kelly Professionals, Inc
9/26/96	2,500.00	S.R. Kelly Professionals, Inc
11/18/96	2,500.00	S.R. Kelly Professionals, Inc
11/4/97	2,000.00	S.R. Kelly Professionals, Inc
12/4/97	1,500.00	S.R. Kelly Professionals, Inc
4/6/98	1,500.00	B. Tiernan for attorney's fees in Alma Action
5/22/98	5,745.00	B. Tiernan for attorney's fees in Alma Action
Total	24,829.90

28.	On October 13, 1997, 674.224 shares of Smith Barney California Municipals Fund were sold @ $16.76/share for a total of $11,299.99. $11,294.94 of these proceeds were utilized to repay the then current balance, including accrued interest, owed on the Smith Barney margin account loan. [Exhibit 4, p. 96]
29.	On July 30, 1998, the following shares held in the Norman/Sharon Smith Barney account 581-11418-10 were transferred to Salomon Smith Barney account 515-12007-13, which account is in the sole name of Norman M. Kelly. [Exhibit 4, p. 114]

Description	Value
706 shares Nuveen California Quality Income	11,958.22
850.871 shares Smith Barney California Municipals	14,354.19
895.086 shares Smith Barney California Municipals	15,100.10
Total	41,412.51

30.	On July 31, 1998 the Norman/Sharon Smith Barney account 581-11418-10 contained no securities or anything else of value.
6 ABR 526
31.	Sharon reported all income from account 581-11418-10 on her Federal income tax return; Norman did not report that income on his Federal income tax return.
32.	Transactions in this account required the signatures of both Sharon and Norman.

  D.     Rosa Claypool/Sharon Kelly Account

33.	On March 18, 1992, Rosa loaned $44,081.96 to Sharon, which loan was secured by a deed of trust on real property owned by Sharon [Lot 1, Block 2, Southfork Subdivision, Plat No. 82-121, Anchorage Recording District, Third Judicial District, Alaska], which deed of trust was recorded March 25, 1992, in Book 2252, at page 856, Anchorage Recording District.
34.	Sometime prior to September 1998, Vicki L. Simonis of Escrow Services, Inc., at the request of Sharon, computed the interest accrual shown on Exhibit 30, p. 462, assuming that no payments were made on the note. The assumption that no payments were made was a specific instruction given to her by Sharon.
35.	In April 1992, Rosa and Sharon established an JTWROS account with Shearson Lehman Brothers Account No. 58-09281-18.(3)
36.	During 1992, 1993, 1994, 1995, 1996 and 1997, funds were withdrawn from account 581-0281-18 and used to pay property taxes on Lot 1, Blk 2, Southfork Subdivision.
37.	For the period from its inception through August 31, 1998, the following deposits, other than reinvestments and loan payments received from Alva L. Rowland, were made to account 581-09281-18.

      6 ABR 527  

Date	Amount	Date	Amount	Date	Amt.	Date	Amount
3/29/92	750.00	4/1/92	500.00	4/13/92	750.00	4/28/92	1,219.39
5/18/92	750.00	6/8/92	750.00	7/12/92	750.00	8/26/92	750.00
10/1/92	750.00	10/15/92	750.00	10/26/92	40,000.00	12/3/92	40,000.00
12/16/92	750.00	1/13/93	750.00	2/9/93	750.00	4/1/93	750.00
4/15/93	750.00	5/13/93	750.00	6/16/93	750.00	7/21/93	750.00
8/13/93	750.00	8/25/93	801.00	9/29/93	757.00	10/12/93	750.00
11/15/93	750.00	12/10/93	750.00	2/9/94	750.00	2/15/94	750.00
3/29/94	750.00	4/15/94	750.00	5/11/94	750.00	7/26/94	750.00
8/11/94	708.07	9/7/94	750.00	10/1/94	750.00	10/13/94	750.00
2/7/95	750.00	3/21/95	750.00	5/7/96	750.00	5/7/96	750.00
10/14/97	10,468.75

38.	Between April 1, 1992 and August 31, 1998, the following withdrawals were made from account 581-09281-18.

Date	Amount	Date	Amount	Date	Amount	Date	Amount
6/8/92	994.50	10/30/92	40,000.00	12/15/92	40,000.00	9/7/93	650.20
7/28/93	650.21	6/8/94	708.06	8/11/94	708.07	8/15/94	708.07
1/6/95	4,000.00	6/20/95	1,506.47	9/13/95	1,000.00	11/7/95	3,000.00
11/8/95	2,000.00	11/13/95	90.00	11/20/95	3,000.00	6/17/96	797.93
8/16/96	797.93	6/17/97	809.02

39.	On August 1, 1997, Sharon R. Kelly and Rosa Claypool's Smith Barney Account contained 441.1925 shares of Nuveen California Performance Plus Municipal Fund (NCPPMF) valued at $7,610.57 and 463.035 shares of Smith Barney Tax Exempt income Fund (SBTEIF) valued at $8,269.81. [Exhibit 5, p. 117]
40.	On October 14, 1997 a journal entry appearing reflecting the addition to the Sharon and Rosa account of 625 shares of NCQIMF valued at $10,468.75 transferred from the SRKP, Inc. Smith Barney account 581-09281-01. [Exhibit 5, p. 122]
41.	On July 1, 1998, this account held securities valued at $30,666.86. [Exhibit 5, p. 139]
6 ABR 528
42.	On July 22, 1998 three journal entries appear reflecting the transfer of 466.0445 shares of NCPPMF valued at $8,272.28, 625 shares of NCQIMF valued at $10,664.37, and 190 shares of Rambus valued at $10,853.75 to the Sharon d/b/a Midtown Executive Office Suites Smith Barney account 581-12413-01. [Exhibit 5, p 139]
43.	On July 31, 1998 the net value of this account was $0. [Exhibit 5, p. 139]
44.	Sharon reported all income from account 581-09281-18 on her Federal income tax return; Rosa did not report that income on her Federal income tax return.
45.	Transactions in this account required the signatures of both Sharon and Rosa.
46.	At no time did Sharon deduct any interest paid on the March 18, 1992 Deed of Trust Note for Federal income tax purposes, nor did Rosa include any interest income from that Deed of Trust Note on her Federal income tax return.

     E.     PG&E Stock

47.	Prior to May 1998, Sharon and Rosa had acquired as joint owners (each owning an undivided one-half (½) interest) 1,105 shares of common stock, 50 shares of 6% Preferred Stock, and 500 shares of 5% Redeemable Preferred Stock in Pacific Gas & Electric Company ("PG&E"). [Exhibit 18, p. 284]
48.	In April, 1998. Sharon R. Kelly and Rosa Claypool owned, as joint tenants, 1089.721 common shares of PG & E Corporation in a dividend reinvestment plan. [Exhibit 18, p. 284] By August, 1998 through dividend reinvestments, they owned 1,105 shares of PG & E common stock.
49.	On the April 15, 1998 statement, Sharon R. Kelly or Rosa Claypool wrote, "Please transfer shares to account 581-09281-1-8-013" (Sharon R. Kelly and Rosa Claypool joint Smith Barney account). [Exhibit 18, p. 284]
50.	The statement reflects that the only taxpayer ID on this plan was Sharon R. Kelly's.
6 ABR 529
51.	On July 28, 1998, Sharon R. Kelly and Rosa Fink signed a letter addressed to PG&E Corporation requesting that it transfer the shares of stock in their dividend reinvestment program to the Sharon R. Kelly and Rosa Claypool Smith Barney account. [Exhibit 18, p. 1]
52.	Each of the shares of PG& E stock was imprinted with the restriction that they could only be transferred in New York or San Francisco. [Exhibit 18, pp. 275, 276, & 282]
53.	On August 5, 1998 Smith Barney transferred by mail 50 shares of preferred stock (ZQP 195) and 500 shares of preferred stock (ZQP 112) to its New York office. The transmittal form incorrectly identified the 50 shares as "5% redeemable preferred" [Exhibit 18, pp. 274-276]
54.	On August 7, 1998 Smith Barney transferred by mail endorsement and stock powers for 550 shares of 5% redeemable preferred. [Exhibit 18, pp. 276.1-276]
55.	On August 12, 1998 Smith Barney received 500 shares of PG & E preferred shares valued at $11,962.50; the stock power and endorsement for this stock was received before August 20, 1998 and this stock transferred from Rosa and Sharon to Midtown Executives, Inc. before August 20, 1998.
56.	On August 12, 1998 Smith Barney received 50 shares of PG&E preferred shares valued at $1,275; the stock power and endorsement for this stock was not received until after August 28, 1998, and consequently, this stock did not transfer from Sharon and Rosa to Midtown Executives, Inc. until after August 28, 1998. This transfer was not authorized by either the Bankruptcy Code or the Court.
57.	On August 20, 1998, Smith Barney received 1,105 shares of PG&E common shares valued at $34,362.74; the stock power and endorsement for these shares was not received until after August 28, 1998 and consequently this stock did not transfer from Sharon and Rosa to Midtown Executives, Inc. until after August 28, 1998 [Exhibit 6, p. 147] This transfer was not authorized by the Bankruptcy Code or the Court.
58.	On August 20, 1998, Smith Barney transferred by mail 1105 shares of common stock (ZQH 33468) to New York. [Exhibit 18, pp. 281-282]
59.	On August 28, 1998, Smith Barney transferred by mail the endorsement and stock powers for the 50 shares of 6% non-redeemable preferred to       6 ABR 530   New York. [Exhibit 18, p. 277] The earlier transferred stock power for 550 shares was deemed to not be effective for both shares of preferred stock, so it was utilized for the 500 shares of 5% redeemable preferred, requiring this stock power and endorsement for the 50 shares of 6% nonredeemable preferred stock.
60.	On August 28, 1998 Smith Barney transferred the endorsement and stock power for 1105 shares to New York. [Exhibit 18, p. 278]
61.	Since the transfer of these 550 shares of preferred stock and 1105 of common stock to Midtown Executives, Inc. Smith Barney account, no dividends have been reinvested, and all dividends have been paid to the Midtown Executives, Inc. Smith Barney account.

  F.      S.R. Kelly Professionals, Inc. Account

62.	In or about January, 1992, SRKP, Inc., established an investment account with Smith Barney, account 518-09169-15. [Exhibit 14, p. 228] The funds deposited in that account were derived from the income realized by the corporation from its business activities.
63.	On January 2, 1992, Sharon signed, on behalf of SRKP, Inc., a Shearson Lehman Hutton Financial Management Account ("FMA") Application. [Exhibit 14, p. 228]
64.	A Shearson Lehman Hutton New Account Application and Option Suitability was signed by the SRKP, Inc., account representative on January 20, 1992. [Exhibit 14, p. 225]
65.	In the minutes from the 1993 annual meeting of SRKP, Inc., Sharon represented that the corporation held Nuvine [sic] stock at Shearson Lehman Hutton worth $54,391.24 and money market funds of $1,435.97. [Exhibit 14, p. 211]
66.	In a November 27, 1994 special meeting Sharon represented that SRKP, Inc., held stock valued at $48,969.02 with a margin account loan against that stock of $17,478.95. [Exhibit 12, p. 213]
67.	In the minutes of the annual meeting held February 10, 1995, Sharon R. Kelly represented that the corporation owned stock valued at $51,026.67 encumbered by margin borrowing of $14,849.73. [Exhibit 12, p. 214]
6 ABR 531
68.	In September 1997, the board of directors of SRKP, Inc., determined to cease operations and wind up the business affairs of the corporation. Salomon Smith Barney account 581-09169-01 was closed and the assets transferred to the Sharon/HW Publishing/Home Stays account 581-10509-12 or Sharon/Midtown Executive Office Suites account 581-12413-13, to be disbursed by Sharon first in satisfaction of the corporate obligations, other than salary obligations to Sharon, with any remaining balance after payment of all other obligations, to be paid to Sharon.
69.	The following transfers were made from the SRKP, Inc., account 581-09169-01 to account Sharon d/b/a HW Publishing/Home Stays account 581-10509-12.

Date	Amount	Property
10/14/97	12,378.14	738.9936 Nuveen shares
10/17/97	3,795.90	Cash
Total	16,174.04

70.	The following transfers were made from SRKP, Inc., account 581-09169-01 to the Sharon d/b/a Midtown Executive Office Suites account 581-12413-13.

Date	Amount	Property
11/5/97	193.40	11.7213 Nuveen shares
11/5/97	2,262.84	Cash
Total	2,456.24

      6 ABR 532  

71.	While held in account 581-10509-12, the 738.9936 shares of Nuveen stock earned dividends, totaling $489.76.
72.	The 738.9936 shares of Nuveen stock were sold July 23, 1998 for a net of $12,768.94.
73.	On August 1, 1997, SRKP, Inc., Smith Barney account contained 4,545.8046 shares of Nuveen California Qualified Income Municipal Fund (NCQMIF) valued at $73,869.32 against which $28,505.69 had been borrowed leaving a net value of $45,285.64. [Exhibit 1, p. 000]
74.	On September 9, 1997, a special meeting of the board of directors of SRKP, Inc., was held at which meeting it was resolved to pay all outstanding bills and obligations of the corporation, and to close out the corporate account by October 15, 1997. [Exhibit 9]
75.	On October 7, 1997, a journal entry appears describing the sale of 120 shares of NCQIMP valued at $1,952.39. [Exhibit 1, p. 7]
76.	On October 16, 1997, a journal entry appears describing the sale of 2,400 shares of NCQIMF valued at $39,480.35. [Exhibit 1, p. 7]
77.	On October 14, 1997, three journal entries appear describing: (1) the transfer of 625 shares of NCQIMF valued at $10,468.75 to the Sharon/Rosa Smith Barney account 581-09281-01; (2) the transfer of 738.9936 shares of CQIMF valued at $12,378.14 to the Sharon d/b/a HW/Homestays Smith Barney account 581-10509-01; and (3) the transfer of 706 shares of NCQIMF valued at $11,825.50 to the Norman/Sharon Smith Barney Account 581-11418-02. [Exhibit 1, p. 7]
78.	On October 31, 1997, this SRKP, Inc., account had a cash balance of $262.84.

  G.     Sharon Kelly d/b/a HW Publishing/Homestays

79.	While in account 581-12413-13, the 11.7213 shares of Nuveen stock earned dividends totaling $7.68.
80.	On July 22, 1998, the 11.7213 shares of Nuveen stock held in account 581-12413-13 were transferred to Midtown Executives, Inc., Salomon Smith Barney account 581-12960-01.
81.	On August 1, 1997 the Sharon d/b/a HW/Homestays account contained 3,470.18 shares of Smith Barney Funds Cash Portfolio (SBFCP) valued at $3,470.18. [Exhibit 2, p. 15]
82.	On October 14, 1997 a journal entry appears reflecting the transfer into this account of 738.9936 shares of NCQIMF valued at $12,332.33 from the S.R. Kelly Smith Barney account 581-09169-02. [Exhibit 2, p. 19]
83.	On February 10, 1998 two journal entries appear reflecting the transfer of $3,000 from this account to Sharon d/b/a Midtown Executive Office Suites Smith Barney account 581-12413-01. [Exhibit 2, p. 29]
6 ABR 533
84.	On March 3, 1998 one journal entry appears reflecting the transfer of $3,000 from this account to the Sharon Kelly d/b/a Midtown Executive Office Suites Smith Barney account 581-12413-01. [Exhibit 2, p. 32]
85.	On July 29, 1998 one journal entry appears reflecting the sale of 770 shares of NCQIMF valued at $12,768.94 and the transfer of $6,500 from this account to the Sharon Kelly d/b/a Midtown Executive Office Suites Smith Barney account 581-12413-01. [Exhibit 2, p. 41]

  H.     Sharon R. Kelly d/b/a Midtown Executive Office Suite

86.	On July 15, 1998, Sharon R. Kelly wrote Smith Barney and requested that this account be transferred to a new account to be established in the name of Midtown Executives, Inc. [Exhibit 13, p. 218]
87.	On July 22, 1998 three journal entries reflect the transfer to this account from the SRKP, Inc., account 581-09169 of 466.0445 shares of NCPPMF valued at $8,272.28, 625 shares of NCQIMF valued at $10,664.37 and 190 shares of Rambus valued at $10,853.75. [Exhibit 3, p. 87] [Note by court. This portion of the agreed statement appears in error. P.87 of Exhibit 3 indicates transfers from account 581-0928-01 (Sharon and Rosa's joint account) to account number 518-12413-01, (Sharon d/b/a Midtown Executive Office Suite). The values of the shares are accurate].
88.	On August 5, 1998 three journal entries appear which reflect the transfer from this account to the Smith Barney Midtown Executives, Inc account 581-12960 of 466.0445 shares of NCPPMF valued at $8,272.28, 625 shares of NCQIMF valued at $10,664.37 and 190 shares of Rambus valued at $10,853.75. [Exhibit 3, p. 90]
89.	On August 30, 1998 there was $4.88 in this account. [Exhibit 3, p. 90]

  I.     Midtown Executives, Inc. Account

90.	The organizational meeting of Midtown Executives Office, Inc. was held July 17, 1998. Rosa was the only shareholder. Sharon was authorized to open a Smith Barney account. [Exhibit 13, p 215] That account (581-12960-10) was opened on about July 22, 1998. [Exhibit 13, p. 217].
91.	In her July 15, 1998, letter to Smith Barney requesting the transfer of her entire FMA account 581-12413 (Sharon d/b/a Midtown Executives Office Suites) Sharon also requested that Smith Barney accept checks written to Midtown Executive Office Suite, Homestays at Homesteads,       6 ABR 534   AAA Plus Tours and Sharon R. Hines. She supplied her social security number as the tax ID number for Midtown Executives, Inc. [Exhibit 13, p. 218]
92.	Three journal entries on August 5 and 7, 1998 reflect the transfer from Sharon R. Kelly d/b/a Midtown Executives Office Suites account 581-12413 to this account of 466.0445 shares of NCPPMF valued at $8,185.13, 625 shares of NCQIMF valued at $10,664.37 and 190 shares of Rambus valued at $10,770.00. [Exhibit 6, p. 147]
93.	Midtown Executives Offices Inc. entered into a lease with Bob Larson for office space in an office building on Tudor Rd.
94.	The rent deposit and first month's rent of $5,549 was paid out of the Sharon Kelly d/b/a H&W Publishing Smith Barney account (581-10509) on October 15, 1997. [Exhibit 13, p. 222]
95.	Midtown Executives, Inc. represents itself as an Alaskan Corporation providing business and travel services. [Exhibit 13, p. 223]
96.	August 1998, the following transfers were made into the Midtown Executive Account from the Kelly/Claypool Account 581-09281-18.(4)

      6 ABR 535  

Date	Property	Amount/Value
8/5	466.0445 Shares Nuveen Performance Plus Municipals	8,185.13
	636.7213 Shares Nuveen Income Municipals	10,864.37
	190 Shares Rambus	10,070.00
8/7	2.2659 Shares Nuveen Performance Plus Municipals	39.93
8/6	Cash	50.94
Total		29,210.37

  III.     Analysis

The facts reveal that, between the time Alma Corporation obtained its judgment against Sharon, in June of 1998, and the time that Sharon filed her bankruptcy petition, on August 20, 1998, Sharon made numerous, sizeable transfers of assets in which she had an interest to either her parents or to entities which she controlled. As will be discussed in detail below, I find that several of these transfers were fraudulent conveyances pursuant to 11 U.S.C. § 548(a)(1), which provides:

(a)(1) The trustee may avoid any transfer of an interest of the debtor in property, or any obligation incurred by the debtor, that was made or incurred on or within one year before the date of the filing of the petition, if the debtor voluntarily or involuntarily -

(A) made such transfer or incurred such obligation with actual intent to hinder, delay, or defraud any entity to which the debtor was or became, on or after the date that such transfer was made or such obligation was incurred, indebted; . . . .

A debtor's fraudulent intent can be determined from circumstantial evidence, particularly where certain recognized "badges of fraud" indicative of such intent are present.⁽⁵⁾

      6 ABR 536  

Among the more common circumstantial indicia of fraudulent intent at the time of the transfer are: (1) actual or threatened litigation against the debtor; (2) a purported transfer of all or substantially all of the debtor's property; (3) insolvency or other unmanageable indebtedness on the part of the debtor; (4) a special relationship between the debtor and the transferee; and, after the transfer, (5) retention by the debtor of the property involved in the putative transfer.

The presence of a single badge of fraud may spur mere suspicion; the confluence of several can constitute conclusive evidence of actual intent to defraud, absent "significantly clear" evidence of a legitimate supervening purpose.⁽⁶⁾

Several badges of fraud are present here. The majority of transfers at issue here occurred just after a substantial state court judgment was entered against the debtor. In fact, most of them occurred at about the same time Sharon was served with a summons to attend a judgment debtor examination. The transfers were made to individuals or entities that Sharon had a special relationship with. She transferred significant assets from an account held jointly by herself and one parent into an account belonging solely to that parent. She also transferred assets from joint accounts or her d/b/a's or sole proprietorships to a corporation controlled by herself and other relatives. Finally, Sharon filed bankruptcy after the majority of the transfers had been accomplished, and did not disclose these transfers on her bankruptcy schedules and statements.

      6 ABR 537  

Sharon's explanations justifying the transfers were not credible. Based on the evidence, I find that Sharon made the transfers with the actual intent to hinder, delay or defraud her creditors. Each transaction is examined further, below.

  A.     Norman Kelly/Sharon Kelly Account; Norman Kelly as Fiduciary

Sharon and Norman had a joint account. One month after the Alma Corporation judgment was entered, on July 27, 1998, Sharon transferred $11,615.48 cash from her d/b/a Midtown Executive Office Suite (MEOS) account via journal transfer to their joint account. The entire contents of the joint account were then transferred to an account solely in Norman's name. Both transfers were made with the intent of placing the funds in the MEOS account, which was owned solely by Sharon, beyond the reach of Alma Corporation. Both transfers are avoidable pursuant to 11 U.S.C. § 548(a)(1). The trustee can recover the sum initially transferred, $11,615.48, from either the initial transferee or an immediate or mediate transferee of the initial transferee.⁽⁷⁾ The trustee shall recover the sum of $11,615.48 from Norman, the ultimate transferee.

The trustee would also like to recover 50% of the value of the remaining shares held in the Sharon and Norman joint account as of July 30, 1998. Norman has effectively rebutted any claim of the trustee to such funds. Sharon had no ownership interest in the other securities in that account. They were purchased entirely by Norman and represent his appropriate share of the joint account. They are not recoverable by the trustee. The trustee's fraudulent transfer claim fails as to the 1695       6 ABR 538   shares of California Municipals held in the Norman and Sharon joint account on July 30, 1998.

The trustee further contends that Norman is responsible to creditors on the "trust fund" theory for breach of his fiduciary duty as a director of SRKP, Inc. According to the trustee, Norman is responsible as a fiduciary for improper distributions of SRKP, Inc., corporate assets. Although SRKP, Inc., improperly transferred $34,723.90 worth of stock to Sharon, Rosa and Norman on October 13, 1997, the trustee has no standing to assert the trust fund claim.⁽⁸⁾

     B.     Rosa Claypool/Sharon Kelly Account; Quit-Claim Deed

On October 1, 1997, Sharon and Rosa's joint Smith Barney account held securities worth $16,500.00. SRKP, Inc., transferred securities worth an additional $10,468.00 to the joint account on October 14, 1997. On July 27 1998, $29,790.00 was erroneously sent from the Sharon/Rosa joint account to the Sharon d/b/a Midtown Executive Office Suite account. The funds were then transferred from this account to the intended account, Midtown Executive, Inc. (MEI) on August 5, 1998. Sharon's transfers to MEOS/MEI were made with the intent to hinder, delay and defraud Alma Corporation. Under 11 U.S.C. § 548(a)(1), the trustee can avoid such a transfer, but only to the extent of the debtor's interest in the property. Here, the debtor was a joint tenant with her mother in the account prior to the MEOS/MEI transfers. What was the extent of the debtor's interest in the joint tenancy property?

      6 ABR 539 

In Alaska, tenants-in-common are presumed to take equal undivided interests in real property, although the presumption may be rebutted.⁽⁹⁾ I will adopt a similar approach in evaluating the respective interests of Sharon and Rosa in their joint tenancy account. Sharon is presumed to own half of the account; the burden of rebutting this presumption rests with the party attacking equal ownership.⁽¹⁰⁾

Sharon alleges that she had no interest in the joint account. She says the account was established solely as a convenience for her mother to receive payments on Sharon's mortgage. At first blush, her statement appears reasonable. Sharon's mother apparently loaned Sharon $44,081.96 under a deed of trust dated March 18, 1992. Sharon was required to make monthly payments of $286.87 on this obligation beginning April 1, 1992, and the joint account was established about the same time. Some loan payments were received from Alva L. Rowland on a separate mortgage and also placed in the account.⁽¹¹⁾

Other facts in the record contradict Sharon's testimony, however. For example, Sharon never made the required mortgage payments of $286.87 per month. Instead, she made deposits of $750.00 a month to the account in 1992 and 1993, 8 payments of $750.00 in 1994; and 2 payments of $750.00 each in 1995 and 1996. None of the payments were treated as mortgage payments on either Sharon or Rosa's tax returns. Moreover, Sharon told an escrow officer computing the loan balance in       6 ABR 540   1998 to assume that no payments had been made on the mortgage. Sharon declared all the income from the joint account on her individual tax returns. Additionally, Rosa made deposits to the account of $1,719.39 in 1992 and $1,558.00 in 1993. Sharon then used the account to pay real property taxes on her home from 1993 through 1997, and to make loans to the corporation SRKP, Inc., for over $16,000.00. Rosa did not take any draws or report any income from the account. The account balance was ultimately transferred to MEI, on August 5, 1998.

The parties' conduct indicates that Sharon controlled the account and used it as she pleased. The $750.00 a month payments did not go to her mother but were used by Sharon to pay property taxes and make loans. Sharon was the true owner of most of the funds in the account. The presumption of equal ownership in the account has been effectively rebutted by the trustee. Sharon had a present, vested beneficial interest in the account. Based upon their contributions to the account, I conclude that Sharon owned 82.5% of the account and Rosa Claypool owned 17.5%.⁽¹²⁾ The trustee is entitled to avoid the transfer from Sharon and Rosa's joint account to Midtown Executives, Inc., in the sum of $24,576.50.⁽¹³⁾

Rosa quit-claimed her interest in Sharon's home to Sharon on January 1, 1998. The trustee alleges that the quit-claim deed eliminated Rosa's 1992 deed of trust. I find that it was not the intention of the parties to eliminate the deed of trust       6 ABR 541   but, rather, an ill-advised attempt to qualify for Alaska's homestead tax exemption for senior citizens. Rosa's deed of trust was not voided by the quit-claim deed.

     C.     PG&E Stock

The parties agree that two stock transfers by Sharon and Rosa are avoidable, in part. Sharon and Rosa jointly owned 1,105 shares of PG & E common stock and 50 shares of preferred stock at the time of Sharon's bankruptcy filing on August 20, 1998. The common stock was valued at $34,362.74 as of the date of the petition. The preferred stock was valued at $1,275.00 on August 12, 1998. Sharon and Rosa transferred the common stock and preferred stock to Midtown Executives, Inc., after August 28, 1998. Both transfers occurred after Sharon's bankruptcy filing. Neither transfer was authorized by the Bankruptcy Code. They are avoidable as to Sharon's one-half interest in the stock under 11 U.S.C. § 549(a). Pursuant to 11 U.S.C. § 550(a)(1), the trustee can recover the sums of $17,181.37 and $634.50 from Midtown Executives, Inc.

A prior transfer of PG& E stock to MEI, is disputed by Rosa. Sharon and Rosa jointly owned an additional 500 shares of PG&E stock. It was transferred from their joint account to MEI, between August 12 and 19 of 1998. Sharon owned a one-half interest in the stock. She claims the transfer was to be utilized to pay down her mortgage debt to Rosa. I do not find her testimony credible. The transfer was an obvious attempt to avoid both execution by Alma Corporation and disclosure to a bankruptcy trustee. The trustee can recover the additional sum of $5,981.00 from MEI, representing half the value of this stock, in accordance with 11 U.S.C. §§ 548(a)(1) and 550(a).

           6 ABR 542   D.     S.R. Kelly Professionals, Inc. Account

On October 1, 1997, SRKP, Inc., transferred securities worth $10,468.00 to Sharon and Rosa's joint account, $12,378.00 to Sharon Kelly, d/b/a H.W. Publishing and $11,825.01 to Sharon and Norman's joint account. These transfers were made to hinder, delay or defraud Alma Corporation and left SRKP, Inc., insolvent. The transfers are not recoverable by the estate because no property of the debtor was transferred. 11 U.S.C. §§ 547(b) and 548(a)(1) require the transfer of an interest of the debtor in property. The trustee seeks to disregard the corporate form of SRKP, Inc., and recover the transfers under an alter ego or veil piercing theory. He has no standing to assert such theories.⁽¹⁴⁾ Moreover, even if the trustee did have such power, these equitable devices are not causes of action. They simply provide a means for obtaining liability against third parties.⁽¹⁵⁾ If applied by a creditor, these theories could make SRKP, Inc., liable for the debts of Sharon Kelly. By no means, however, do they allow the trustee of Sharon Kelly's individual estate to recover fraudulent transfers made by SRKP, Inc..

     E.     Sharon Kelly

Sharon Kelly made three fraudulent transfers totaling $12,500.00 from her Sharon Kelly d/b/a HW account to her Sharon Kelly d/b/a MEOS account, between February 10, 1998, and July 29, 1998. These transfers were made with the actual intent of hindering, delaying and defrauding Alma Corporation. Sharon then       6 ABR 543   transferred those funds to MEI, on August 5, 1998. The transfer from Sharon d/b/a/ MEOS to MEI, was also fraudulent under 11 U.S.C. § 548(a)(1). MEI is liable to the trustee as a transferee of Sharon d/b/a MEOS under 11 U.S.C. § 550(a)(2). The estate can recover the funds.

     IV.     Conclusion

After state court litigation was initiated against her, Sharon Kelly systematically and deviously transferred assets to avoid liability to the judgment creditor, Alma Corporation. The trustee can avoid certain of these transfers as either fraudulent conveyances under 11 U.S.C. § 548(a) or as improper post-petition transactions under 11 U.S.C. § 549(a). The estate is entitled to recover the value of these fraudulent transfers and improper post-petition transactions from Norman Kelly and Midtown Executives, Inc., together with his costs of suit. The estate's claims against Kevin Hines, Rosa Claypool, and S. R. Kelly Professionals, Inc. will be dismissed with prejudice. The trustee's objection to discharge claim will be dismissed without prejudice.

An order and judgment will be entered consistent with this memorandum decision.

Dated:      September 14, 2000.

BY THE COURT





DONALD MacDONALD IV
United States Bankruptcy Judge

N O T E S:

1.      Through acquisitions and mergers, Shearson Lehman Brothers became Smith Barney, then Salomon Smith Barney. The account, although it changed numbers on occasion, remained the same account until its transfer from Escondido to Anchorage. As used herein, Account No. 515-09953-13 020 refers to that account.

2.      "Nuveen California Quality Income Municipal Fund, Inc., referred to herein as "Nuveen".

3.      Through acquisitions and mergers, Shearson Lehman Brothers became Smith Barney, then Salomon Smith Barney. The account number remained the same until September 1994, when it changed to Account No. 581-09281-18. As used herein, Account No. 581-09281-18 refers to both accounts.

4.      It was intended to transfer the assets in account 581-09281-18 to the Salomon Barney Account of Midtown Executives, Inc. Due to a mis-communication, the assets in account 581-09281-18 were transferred to an account in the name of Sharon R. Kelly d/b/a Midtown Executives (account 581-12413-01). Immediately when that error was discovered, the assets that had been transferred from account 581-09281-18 were transferred from account 581-12413-01 to Account 581-12960-10.

5.       Acequia, Inc. v. Clinton (in re Acequia, Inc), 34 F.3d 800, 805-806 (9th Cir. 1994).

6.      Id. at 806 [emphasis in original]; citing Max Sugarman Funeral Home.,Inc. v. A.D.B. Investors, 926 F.2d 1248, 1254-55 (1st Cir. 1991).

7.      11 U.S.C. § 550(a)(1) and (2).

8.      Williams v. California 1st Bank, 859 F.2d 664, 667 (9th Cir. 1988).

9.      D.M. v. D.A., 885 P.2d 94, 96 (Alaska 1994).

10.       Kan-Miller v. Clayco State Bank, 10 Kan.App.2d 659, 662, 708 P.2d 997, 1000 (Kansas 1985).

11.      Paragraph 37 of the statement of uncontested facts indicates that payments were received from Ms. Rowland in this account. The amount of such payments is unknown.

12.      Rosa contributed $1,719.39 in 1992 and $1,558.00 in 1993. Sharon contributed a total of $24,750.00; she withdrew $1,000 and paid her real property taxes of $8,330.46 from the account. Sharon's net contribution to the account was $15,419.54 (82.5%); Rosa's was $3,277.39 (17.5%).

13.      Under 11 U.S.C. § 550(a)(2), Midtown Executives, Inc., is liable as a transferee from Sharon d/b/a Midtown Executive Office Suites.

14.       Williams, 859 F.2d at 667 (9th Cir. 1988).

15.       Securities Inv. Protection Corp. v. Stratton Oakmont, Inc. , 234 B.R. 293, 321 (Bankr. S.D.N.Y. 1999).