In re: Thomas C. Wettach v. , 811 F.3d 99 ( 2016 )

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
___________
No. 14-3140
___________
IN RE: THOMAS C. WETTACH,
Debtor
JEFFREY J. SIKIRICA, CHAPTER 7 TRUSTEE
v.
THOMAS C. WETTACH; BETTE C. WETTACH,
Appellants
____________________________________
On Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. Civil No. 2-13-cv-01822)
District Judge: Honorable Nora B. Fischer
____________________________________
Argued November 23, 2015
Before: BENTON, SENTELLE and GILMAN, Circuit
Judges
(Opinion filed: January 20, 2016)
James R. Cooney, Esq. (Argued)
Robert O. Lampl, Esq.
Robert O. Lampl & Associates
960 Penn Avenue
The Convention Tower, Suite 1200
Pittsburgh, PA 15222
Counsel for Appellants
Neal H. Levin, Esq. (Argued)
Freeborn & Peters
311 South Wacker Drive
Suite 3000
Chicago, IL 60606
Jeffrey J. Sikirica, Esq.
121 Northbrook Drive
Gibsonia, PA 15044
Counsel for Appellee

The Honorable Duane Benton, Circuit Judge of the Eighth
Circuit Court of Appeals, the Honorable David Bryan Sentelle,
Senior Circuit Judge of the District of Columbia Court of Appeals,
and the Honorable Ronald Lee Gilman, Senior Circuit Judge of the
Sixth Circuit Court of Appeals, sitting by designation.
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_________
OPINION
_________
SENTELLE, Senior Circuit Judge.
Appellants Thomas C. and Bette C. Wettach appeal
from an order of the district court affirming the bankruptcy
court’s award to the bankruptcy trustee for various fraudulent
transfers between 2001 and 2005. The Wettachs challenge
the bankruptcy court’s (a) allocation of the burdens of
persuasion and production on the fraudulent transfer claims,
(b) evidentiary findings, and (c) legal determination that the
deposit of wages into an account held by the entireties
constitutes the “transfer” of an “asset” under Pennsylvania
state law. Because we conclude that the bankruptcy court’s
legal conclusions were correct and its evidentiary findings
were not clearly erroneous, we affirm the order of the district
court affirming the bankruptcy court’s decision as to all
issues.
I. BACKGROUND
A. FACTS
Because the bankruptcy court has already detailed the
extensive history of this dispute, see Sikirica v. Wettach (In re
Wettach), 489 B.R. 496, 503-06 (Bankr. W.D. Pa. 2013), we
recite only the essential facts.
The debtor in this bankruptcy case is Thomas C.
Wettach, a former partner at the now-defunct law firm of
3
Titus & McConomy, LLP (“Titus”). Prior to its dissolution in
1999, Titus rented office space from Trizechahn Gateway
LLC (“Trizec”) under a long-term lease agreement. After the
firm dissolved, Trizec filed suit in 2000 against Titus’s
former partners for unpaid rent under the lease. The
Pennsylvania Court of Common Pleas for Allegheny County
found that Thomas Wettach and the other Titus partners were
jointly and severally liable for $2,700,000, plus interest and
costs. Although the Pennsylvania Superior Court initially
reversed the judgment as to Wettach, see Trizechahn Gateway
LLC v. Titus, 930 A.2d 524, 539 (Pa. Super. Ct. 2007), the
Pennsylvania Supreme Court reinstated his liability, see
Trizechahn Gateway LLC v. Titus, 976 A.2d 474, 481 (Pa.
2009).
Before the Trizechahn court entered final judgment on
June 7, 2006, Thomas Wettach filed a voluntary Chapter 7
bankruptcy petition on October 14, 2005. Wettach’s
bankruptcy petition listed $3,551,500 in assets, including
$2,951,500 in personal property, retirement accounts,
insurance policies, and the contents of a PNC checking
account held by the entireties (the “entireties account”) with
his wife Bette Wettach. App. 662, 664-67. Wettach claimed
all of this property as exempt under federal bankruptcy law
and applicable Pennsylvania state law, primarily relying on
the exemption for property in which the debtor holds an
interest as a tenant by the entirety. See 11 U.S.C. § 522(b)(1),
(3)(B); 12 Pa. C.S.A. § 5101(b).
B. PROCEDURAL HISTORY
In order to reach at least some of these assets for
distribution to Wettach’s creditors, the trustee of the
4
bankruptcy estate, Jeffrey Sikirica, initiated an adversary
proceeding on October 15, 2007. Following the dissolution
of Titus, Wettach joined the law firm of Cohen & Grigsby,
P.C., and earned wages that the firm directly deposited into
the entireties account. The Trustee claimed in his amended
complaint that these deposits constituted recoverable
fraudulent transfers since they “had the effect of shielding the
Debtor’s individual compensation from the reach of his
individual creditors . . . by converting it into entireties’
property.” In re Wettach, 489 B.R. at 505. In particular, the
Trustee alleged, as relevant here, two counts of constructive
fraudulent transfers under the Pennsylvania Uniform
Fraudulent Transfer Act (the “PUFTA”), 12 Pa. C.S.A.
§§ 5104(a)(2)(ii), 5105.
The bankruptcy court held a trial on these claims on
November 30, 2011. However, before the court could issue
its decision, the presiding judge, U.S. Bankruptcy Judge
Bernard Markovitz, retired. The case was subsequently
reassigned to U.S. Bankruptcy Judge Thomas P. Agresti.
After the parties consented to the bankruptcy court issuing
findings of fact and conclusions of law without the need for a
new trial, the court issued a Memorandum Opinion and Order
on March 26, 2013, finding in favor of the Trustee and
awarding a recovery of $428,868.12. See In re Wettach, 489
B.R. at 531. On November 12, 2013, the bankruptcy court
awarded an additional $37,139.01 in prejudgment interest,
resulting in a total award of $466,007.13. See Sikirica v.
Wettach (In re Wettach), Bankr. No. 05-38188-TPA, Adv.
No. 07-2519, 2013 WL 5999167, at *8 (Bankr. W.D. Pa.
Nov. 12, 2013).
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The Wettachs appealed the bankruptcy court’s
decision to the U.S. District Court for the Western District of
Pennsylvania. The district court rejected each of the
Wettachs’ arguments on appeal and affirmed the bankruptcy
court’s decision. See Sikirica v. Wettach, 511 B.R. 760, 773
(W.D. Pa. 2014). The Wettachs now appeal from the district
court’s order affirming the bankruptcy court’s award.
II. ANALYSIS
We have jurisdiction over this appeal under 28 U.S.C.
§ 158(d)(1). “Because the District Court sat as an appellate
court, reviewing an order of the Bankruptcy Court, our review
of the District Court’s determinations is plenary.” SEC v.
Bocchino (In re Bocchino), 794 F.3d 376, 379 (3d Cir. 2015)
(quoting In re Heritage Highgate, Inc., 679 F.3d 132, 139 (3d
Cir. 2012)). “In reviewing the Bankruptcy Court’s
determinations, we exercise the same standard of review as
did the District Court.” In re Heritage Highgate, Inc., 679
F.3d at 139. We therefore “review the Bankruptcy Court’s
legal determinations de novo and . . . its factual
determinations for clear error.” In re Bocchino, 794 F.3d at
380.
The Bankruptcy Code grants the Trustee the power to
“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 . . . .”
11 U.S.C. § 544(b)(1). Pennsylvania state law permits a
creditor to avoid a fraudulent transfer “to the extent necessary
to satisfy the creditor’s claim.” 12 Pa. C.S.A. § 5107(a)(1).
However, the creditor can recover only for transfers made
during the four-year “lookback” period preceding the date of
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filing the action. Id. § 5109. In this case, the bankruptcy
court determined that the relevant lookback period ran from
October 14, 2001, until October 14, 2005. In re Wettach, 489
B.R. at 509.
Relevant to this appeal are the Trustee’s constructive
fraudulent-transfer claims under 12 Pa. C.S.A.
§§ 5104(a)(2)(ii), 5105. As the district court noted, under
both provisions, “a direct deposit of wages into a jointly held
bank account is generally considered to be a fraudulent
transfer if the debtor was [(a)] insolvent at the time of the
transfer and [(b)] the debtor failed to receive ‘reasonably
equivalent value’ in return.” Sikirica v. Wettach, 511 B.R. at
765. Thomas Wettach’s insolvency is not at issue in this
appeal. However, the Wettachs vigorously dispute whether
there was “reasonably equivalent value” for the transfers.
Because “[u]nder the PUFTA, entireties account funds used
to pay for ‘reasonable and necessary household expenses’ are
not fraudulent[,]” Titus v. Shearer, 498 B.R. 508, 515 (W.D.
Pa. 2013), they argue that the bankruptcy court erred when it
permitted the Trustee to recover based on funds in the
entireties account allegedly used to pay for “necessary”
expenditures.
The Wettachs purport to raise ten separate issues in
their opening brief. Appellants’ Br. 1-2. In addition to
challenging the allocation of the burdens of persuasion and
production for the Trustee’s constructive fraudulent-transfer
claims, they dispute various evidentiary findings by the
bankruptcy court. Id. Furthermore, the Wettachs make a
statutory-interpretation argument that the deposit of wages
into an entireties account is not a “transfer” of an “asset”
under Pennsylvania law. Id. at 2. However, two of the
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Wettachs’ arguments are not developed in their opening brief:
(a) that the Trustee breached his duties to the Court by failing
to offer into the record an exhibit allegedly delineating the
deposits into the entireties account, and (b) that the
bankruptcy court erred by finding that the only deposits into
the entireties account were Thomas Wettach’s wages.
Because these claims were not timely presented, we hold that
the Wettachs have forfeited them.
For those issues not forfeited on appeal, we reject each
of the Wettachs’ arguments and affirm the order of the district
court.
A. THE BANKRUPTCY COURT PROPERLY
ALLOCATED THE BURDENS OF PERSUASION AND
PRODUCTION FOR THE TRUSTEE’S
CONSTRUCTIVE FRAUDULENT TRANSFER
CLAIMS
First, the Wettachs argue that the bankruptcy court
“improperly shifted the burden of proof” to them to
demonstrate that they used funds deposited into the entireties
account to pay for necessities. Appellants’ Br. 13. We
review the allocation of the burdens of persuasion and
production de novo, cf. United States v. Dodd, 225 F.3d 340,
343 (3d Cir. 2000), and affirm the district court’s order
affirming the bankruptcy court.
1. Legal Framework
We recognized in Koppers Co. v. Aetna Cas. & Sur.
Co., 98 F.3d 1440, 1446 (3d Cir. 1996), that, where state law
provides the rule of decision, the allocation of the burden of
proof is a matter of substantive state law. This rule applies
8
even if, as here, the Court’s subject-matter jurisdiction is not
premised on diversity of the parties. See Hatco Corp. v. W.R.
Grace & Co.—Conn., 59 F.3d 400, 406 (3d Cir. 1995).
However, the PUFTA “is silent on the issue of the burden of
proof for constructive fraud claims.” Fidelity Bond & Mortg.
Co. v. Brand, 371 B.R. 708, 717 (E.D. Pa. 2007); cf.
Cardiello v. Arbogast, 533 F. App’x 150, 156 (3d Cir. 2013)
(same). In accordance with the Supreme Court’s decision in
Erie R. Co. v. Tompkins, 304 U.S. 64, 78 (1938), we therefore
proceed by “predict[ing] how the highest court of
[Pennsylvania] would decide the relevant legal issues.” Ohio
Cas. Grp. of Ins. Cos. v. Prof’l Ins. Mgmt. (In re Prof’l Ins.
Mgmt.), 130 F.3d 1122, 1125 (3d Cir. 1997).
On appeal, the Wettachs improperly conflate the
burdens of persuasion and production. Our case law is clear
that these burdens are “two distinct elements of the burden of
proof . . . .” McCann v. Newman Irrevocable Tr., 458 F.3d
281, 287 (3d Cir. 2006). Although the burden of persuasion
“does not change at any time throughout the trial,” the burden
of production “may shift from side to side as the case
progresses.” Pension Transfer Corp. v. Beneficiaries Under
the Third Amendment to Fruehauf Trailer Corp. Ret. Plan
No. 003 (In re Fruehauf Trailer Corp.), 444 F.3d 203, 217
(3d Cir. 2006) (citations and internal quotation marks
omitted).
The record shows that the bankruptcy court required
the Trustee to prove “by a preponderance of the evidence” all
elements of the fraudulent-transfer claims, including a lack of
reasonably equivalent value for the transfers. In re Wettach,
489 B.R. at 507. The district court also recognized that the
9
Trustee retained the burden of persuasion. Sikirica v.
Wettach, 511 B.R. at 765-66.
Ordinarily, this conclusion would end the analysis
since this allocation of the burden of persuasion favors the
Wettachs. However, the bankruptcy court also placed on the
Wettachs “the burden of producing at least some useful
evidence” as to the uses of transferred funds. In re Wettach,
489 B.R. at 507 (emphasis added); see also Sikirica v.
Wettach, 511 B.R. at 766 (affirming the bankruptcy court).
And because the burden of production is itself a function of
the burden of persuasion, the Court must address whether
there was any legal error in the bankruptcy court’s allocations
of both burdens. Cf. United States v. Taylor, 464 F.2d 240,
243 (2d Cir. 1972). For the reasons stated below, we
conclude that there was no error.
2. Burden of Persuasion
The allocation of the burden of persuasion for a
constructive fraudulent-transfer claim under the PUFTA is
unsettled in this circuit. We previously placed the burden of
persuasion on the party defending the transfer to show either
solvency or receipt of reasonably equivalent value by clear
and convincing evidence. See 718 Arch St. Assocs. v.
Blatstein (In re Blatstein), 192 F.3d 88, 98 (3d Cir. 1999); see
also Walsh v. Gutshall (In re Walter), 261 B.R. 139, 143
(Bankr. W.D. Pa. 2001). Normally, this precedent would be
controlling, but other courts have nonetheless rejected the
Blatstein approach as dictum. See, e.g., Fidelity Bond &
Mortg. Co., 371 B.R. at 721; Castle Cheese, Inc. v. MS
Produce, Inc., No. 04-878, 2008 WL 4372856, at *24 (W.D.
Pa. Sept. 19, 2008). Those courts instead have allocated the
10
burden of persuasion to the party opposing the transfer to
prove insolvency and a lack of reasonably equivalent value by
a preponderance of the evidence. See Fidelity Bond & Mortg.
Co., 371 B.R. at 720-22.
At least part of the confusion lies with a change in
Pennsylvania law that occurred in 1993, when the state
replaced the Pennsylvania Uniform Fraudulent Conveyance
Act (“PUFCA”), enacted in 1921, with the PUFTA. Cf. 12
Pa. C.S.A. § 5101 cmt. (1). The Pennsylvania Supreme Court
previously interpreted the PUFCA as shifting the burden of
persuasion to the party defending the transfer in order to
demonstrate either solvency or reasonably equivalent value
by clear and convincing evidence. See, e.g., Butler Cnty. v.
Brocker, 314 A.2d 265, 268 (Pa. 1974); see also Elliott v.
Kiesewetter, 98 F.3d 47, 56-57 (3d Cir. 1996). But when the
Pennsylvania General Assembly enacted the PUFTA in 1993
to replace the PUFCA, it made no mention of the burden of
persuasion in the statutory text. See Fidelity Bond & Mortg.
Co., 371 B.R. at 717. Nor has the Pennsylvania Supreme
Court yet addressed whether the PUFTA altered the burden of
persuasion.
We stated in Blatstein that our discussion of the burden
of persuasion for a constructive fraudulent-transfer claim
under the PUFTA was “not necessary for our result.” 192
F.3d at 98. Our analysis was therefore dictum. We now hold
that, were it to consider the issue, the Pennsylvania Supreme
Court would determine that the burden of persuasion as to all
elements of a constructive fraudulent-transfer claim under the
PUFTA remains with the party opposing the transfer. As
relevant to this case, the Trustee needed to prove a lack of
reasonably equivalent value for the transfers into the
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Wettachs’ entireties account by a preponderance of the
evidence. We thus affirm the district court on this issue.
Pennsylvania has codified its methodology for
statutory construction. See 1 Pa. C.S.A. §§ 1921-39. The
ultimate objective “is to ascertain and effectuate the intention
of the General Assembly.” Id. § 1921(a). Lower courts
addressing this issue have focused primarily on the legislative
history behind the PUFTA. See, e.g., Fidelity Bond & Mortg.
Co., 371 B.R. at 717-18 (noting that Comment (6) to
12 Pa. C.S.A. § 5102 describes the burden-shifting
framework under the PUFCA as “an archaism” that “should
not be followed . . .”). And it is true that under Pennsylvania
law “[t]he comments or report of the commission, committee,
association or other entity which drafted a statute may be
consulted in the construction or application of the original
provisions of the statute . . . .” 1 Pa. C.S.A. § 1939 (emphasis
added). However, we find dispositive Pennsylvania’s
mandate that “[s]tatutes uniform with those of other states
shall be interpreted and construed to effect their general
purpose to make uniform the laws of those states which enact
them.” 1 Pa. C.S.A. § 1927 (emphasis added).
The PUFTA is a statute “uniform with those of other
states,” id., and we therefore interpret it in accordance with
the laws of other jurisdictions, see Klein v. Weidner, 729 F.3d
280, 283 (3d Cir. 2013). The overwhelming weight of
judicial authority on this issue supports placing the burden of
persuasion on the party challenging the transfer to show a
lack of reasonably equivalent value by a preponderance of the
evidence. See, e.g., Dahar v. Jackson (In re Jackson), 459
F.3d 117, 123 (1st Cir. 2006) (New Hampshire UFTA);
Pirrotti v. Respironics, Inc., No. 3:11-CV-00439, 2013 WL
12
951721, at *5 (D. Conn. Mar. 12, 2013) (Connecticut
fraudulent-transfer statute); Floyd v. Option One Mortg.
Corp. (In re Supplement Spot, LLC), 409 B.R. 187, 201
(Bankr. S.D. Tex. 2009) (Texas law); Daneman v. Stanley (In
re Stanley), 384 B.R. 788, 804-05 (Bankr. S.D. Ohio 2008)
(Ohio law); Brandt v. nVidia Corp. (In re 3dfx Interactive,
Inc.), 389 B.R. 842, 863 (Bankr. N.D. Cal. 2008) (California
UFTA); Ellen Equip. Corp. v. C.V. Consultants & Assocs.,
183 P.3d 940, 945 (N.M. Ct. App. 2008) (New Mexico
UFTA); Stone v. Ottawa Plant Food, Inc. (In re Hennings
Feed & Crop Care, Inc.), 365 B.R. 868, 874-75 (Bankr. C.D.
Ill. 2007) (Illinois Fraudulent Transfer Act).
We also observe, as persuasive authority, that, under
the constructive-fraud provision of the Bankruptcy Code, 11
U.S.C. § 548(a)(1)(B), the party opposing the transfer has the
burden of persuasion to show the absence of “reasonably
equivalent value” for the transfer. See BFP v. Resolution Tr.
Corp., 511 U.S. 531, 535 (1994); Mellon Bank, N.A. v.
Official Comm. of Unsecured Creditors of R.M.L., Inc. (In re
R.M.L., Inc.), 92 F.3d 139, 144 (3d Cir. 1996). We see no
reason to treat the PUFTA differently than the Bankruptcy
Code, particularly since claims under the former statute are
likely to arise in proceedings governed by the latter.
The district court’s order affirming the bankruptcy
court’s determination and allocation of the burden of
persuasion is therefore affirmed.
3. Burden of Production
The bankruptcy court stated that the Wettachs
possessed the “burden of producing at least some useful
13
evidence to demonstrate how they spent the transferred
funds . . . .” In re Wettach, 489 B.R. at 507. Absent such
evidence, the Trustee was “deemed to have met his burden of
proof as to reasonably equivalent value.” Id. The bankruptcy
court therefore created a rebuttable presumption that funds
transferred into an entireties account are not in exchange for
reasonably equivalent value. The effect of this rebuttable
presumption was to shift to the Wettachs “the burden of
producing sufficient evidence to rebut the presumed fact.”
See McCann, 458 F.3d at 288.
The bankruptcy court did not specify the type of
presumption it imposed, but we have interpreted
Fed. R. Evid. 301, which applies in bankruptcy proceedings,
as implementing a Thayer, or “bursting bubble,” theory of
presumptions. See McCann, 458 F.3d at 287-88; cf. Official
Comm. of Asbestos Claimants v. G-I Holdings, Inc. (In re G-I
Holdings, Inc.), 385 F.3d 313, 318 (3d Cir. 2004).
Pennsylvania courts have also adopted the Thayer model of
rebuttable presumptions. See In re Fink’s Estate, 21 A.2d
883, 888-89 (Pa. 1941); Lynn v. Cepurneek, 508 A.2d 308,
311-12 (Pa. Super. Ct. 1986). Thus, once the debtor produces
some evidence of reasonably equivalent value for a transfer,
i.e., using entireties funds to pay for necessities, the
presumption “disappears from the case.” McCann, 458 F.3d
at 288 (citation and internal quotation marks omitted).
Whether the imposition of this presumption is correct
presents a more difficult question than whether the
bankruptcy and district courts properly allocated the burden
of persuasion. We have not been able to identify a consensus
among other jurisdictions on the burden of production for a
constructive fraudulent-transfer claim under either the UFTA
14
or the Bankruptcy Code. However, some courts have shifted
the burden of production once the trustee establishes a “prima
facie case.” See, e.g., Braunstein v. Walsh (In re Rowanoak
Corp.), 344 F.3d 126, 131-32 (1st Cir. 2003); Riley v.
Countrywide Home Loans, Inc. (In re Duplication Mgmt.,
Inc.), 501 B.R. 462, 485 (Bankr. D. Mass. 2013).
Nonetheless, because the inquiry turns on how the
Pennsylvania Supreme Court would decide the issue, see
Ohio Cas. Grp. of Ins. Cos., 130 F.3d at 1125, we find
instructive the conditions under which that Court has
recognized other presumptions shifting the burden of
production. Clearly, one purpose of a presumption “is [] to
direct a party to come forward with the evidence . . . .” Rice
v. Shuman, 519 A.2d 391, 395 (Pa. 1986). Such information-
forcing may be necessary if a party has “peculiar means of
access to the evidence, or peculiar knowledge . . . .” Waters
v. New Amsterdam Cas. Co., 144 A.2d 354, 356 (Pa. 1958)
(citation and internal quotation marks omitted). Other
grounds for recognizing a presumption include “the
probability that the presumed fact is . . . likely to be true; the
procedural convenience of presuming, without proof, a fact
frequently not put in issue; the fairness of allocating the
burden of production to the party having superior access to
the means of proof; and considerations of policy which lead
the courts to favor one contention over another by giving it
the benefit of a presumption.” Commonwealth v. Vogel, 268
A.2d 89, 103 (Pa. 1970) (separate opinion of Pomeroy, J.),
overruled on other grounds by Commonwealth v. Reilly, 549
A.2d 503 (Pa. 1988).
In this case, the bankruptcy court’s presumption serves
an information-forcing purpose by requiring the party
15
opposing the fraudulent transfer claim, here the Wettachs, to
come forward with information in their possession—i.e., how
they used funds transferred into an entireties account. In light
of the aforementioned guidelines from the Pennsylvania
Supreme Court, we hold that the bankruptcy and district
courts did not err when they required the Wettachs to produce
“some evidence” as to uses of funds in the entireties account
to rebut the presumption against receipt of reasonably
equivalent value. Nor can the Wettachs claim any prejudice
from this holding, which represents the consensus view of
courts in this circuit. See, e.g., Titus v. Shearer, 498 B.R. at
519-20; Cohen v. Sikirica, 487 B.R. 615, 621 (W.D. Pa.
2013); Cardiello v. Arbogast (In re Arbogast), 466 B.R. 287,
308 (Bankr. W.D. Pa. 2012).
The order of the district court is therefore affirmed on
this issue.
B. THE BANKRUPTCY COURT DID NOT CLEARLY
ERR IN ITS EVIDENTIARY FINDINGS
Having determined that the district and bankruptcy
courts properly allocated the burdens of persuasion and
production on the Trustee’s fraudulent-transfer claims, we
also affirm the district court’s order affirming each of the
disputed evidentiary findings of the bankruptcy court.
1. Existence and Amount of Wages
Deposited Into the Entireties Account
First, the Wettachs argue that the Trustee failed to
show the existence and amount of Thomas Wettach’s wages
deposited into the entireties account. The bankruptcy court
found that the Trustee proved deposits of $933,472 during the
16
lookback period. In re Wettach, 489 B.R. at 512. The district
court then rejected the Wettachs’ argument that this figure
referred only to gross, and not net, wages. Sikirica v.
Wettach, 511 B.R. at 767-68. We agree with the district court
that these findings were not clearly erroneous and affirm.
As to the existence of deposits, the Wettachs admitted
in their answer that Thomas Wettach directed the deposit of
his wages into the account. See App. 145 ¶ 24; 146 ¶ 26; 148
¶ 36; 150 ¶ 51; 151 ¶ 55. These statements “are considered
judicial admissions conclusively binding on the party who
made them.” Amgen Inc. v. Conn. Ret. Plans & Tr. Funds, __
U.S. __, 133 S. Ct. 1184, 1197 n.6 (2013) (quoting Am. Title
Ins. v. Lacelaw Corp., 861 F.2d 224, 226 (9th Cir. 1988)).
Furthermore, Thomas Wettach even testified at trial that his
law firm made these deposits. App. 333:6-:15. This evidence
is sufficient to support the bankruptcy court’s conclusion that
the existence of deposits in the entireties account “is clearly
established by the record.” In re Wettach, 489 B.R. at 511.
With regard to the amount of such deposits, the
bankruptcy court relied on the Wettachs’ tax returns for the
years 2001-2005 to find “potentially actionable deposits of
$933,472” during the lookback period. Id. at 512-13. The
record shows that the Wettachs reported on line 7 of their
income tax returns gross wages of $376,358 in 2001,
$202,122 in 2002, $365,305 in 2003, $242,597 in 2004, and
$216,334 in 2005. See id. at 512. Furthermore, Bette
Wettach testified at trial that she did not earn any income that
she deposited into the entireties account during this period.
See App. 375:10-:12; see also App. 332:9-333:5. In order to
account for the Trustee’s burden of persuasion and the
relevant lookback period, the bankruptcy court took one-half
17
of the strict pro rata amounts reported for 2001 and 2005. See
In re Wettach, 489 B.R. at 512 & n.12 (noting that only 79
days of 2001 and 287 days of 2005 fell within the lookback
period). Based on these figures, the bankruptcy court found
that the Trustee showed deposits of $933,472 into the
entireties account. Id. at 513.1 The bankruptcy court’s
method of calculation does not render this finding clearly
erroneous.
The Wettachs respond, correctly, that line 7 of their
federal income tax returns reflects gross, not net, wages.
However, as the district court noted, this fact also does not
demonstrate clear error by the bankruptcy court. See Sikirica
v. Wettach, 511 B.R. at 767-68. Schedule I to the bankruptcy
petition reports average monthly payroll deductions of $8,500
per month, or an average of $408,000 over the four-year
lookback period. App. 679. The Wettachs provide no basis
for disputing the accuracy of these figures, which are eligible
for treatment as judicial admissions. Cf. In re VanCleef, 479
B.R. 809, 824 n.13 (Bankr. N.D. Ind. 2012); In re Bohrer,
266 B.R. 200, 201 (Bankr. N.D. Cal. 2001). Even accounting
for these payroll deductions, the record supports the district
court’s conclusion that Thomas Wettach deposited $525,472
1
Our calculations, using the bankruptcy court’s own figures,
indicate that there were $935,473.59 in alleged deposits over the
lookback period. We attribute the discrepancy to some
combination of typographical error and rounding. Regardless,
because both figures far exceed the $380,253.87 in recoverable
expenditures for non-necessities found by the bankruptcy court, In
re Wettach, 489 B.R. at 520, any error is harmless. Zolfo, Cooper
& Co. v. Sunbeam-Oster Co., 50 F.3d 253, 261 (3d Cir. 1995).
18
in net wages into the entireties account during the lookback
period.2 See Sikirica v. Wettach, 511 B.R. at 767.
Nevertheless, the Wettachs dispute this otherwise
straightforward arithmetic exercise by reference to an exhibit
(“Exhibit 23”), which they admit was not in the record at trial.
See Appellants’ Br. 14. According to the Wettachs, Exhibit
23 supposedly includes data sheets showing “all deposits and
withdrawals into and out of the PNC entireties bank account.”
Id. at 6 (emphasis in original). These data sheets allegedly
undermine the bankruptcy court’s findings as to the existence
and amount of wages deposited into the entireties account.
See id. at 17-18.
Unfortunately for the Wettachs, Exhibit 23 is not in the
record on appeal. The Wettachs argue that the parties listed
Exhibit 23 in the Joint Pretrial Statement and included it in
the Notebook of Plaintiff’s Exhibits before the bankruptcy
court. Appellants’ Br. 14; Appellants’ Reply Br. 6-7. But
under Fed. R. App. P. 6(b)(2)(B)(iii), for an appeal in a
bankruptcy case, “[t]he record on appeal consists of: the
redesignated record [by the parties] . . . ; the proceedings in
the district court or bankruptcy appellate panel; and a certified
copy of the docket entries prepared by the clerk under Rule
3(d).” Neither party designated Exhibit 23 as part of the
record before this Court or the district court. See Wettach v.
Sikirica, No. 2:13-cv-01822-NBF (W.D. Pa.), ECF Nos. 1-47,
2
Although the district court actually reports that there were
“approximately $535,472 in [net] wages available for deposit into
the joint account,” Sikirica v. Wettach, 511 B.R. at 767, the context
of the decision suggests that the discrepancy is a typographical
error. Cf. Metal Founds. Acquisition, LLC v. Reinert (In re
Reinert), 597 F. App’x 139, 142 (3d Cir. 2015).
19
1-48, 10, 14. The exhibit was also not part of the
“proceedings in the district court.”
Fed. R. App. P. 6(b)(2)(B)(iii). To the contrary, the district
court references Exhibit 23 only in passing and otherwise
appears to have entirely ignored the document. Cf. Sikirica v.
Wettach, 511 B.R. at 766. The bankruptcy court’s brief
mention of Exhibit 23 in its opinion is likewise inapposite.
Cf. In re Wettach, 489 B.R. at 511.
We therefore affirm the district court on this issue.
2. Reasonably Equivalent Value for Funds
in the Entireties Account
Second, the Wettachs argue that the Trustee failed to
show that the deposits into the entireties account funded non-
necessary expenditures. However, because the Wettachs did
not carry their burden of production on this issue, we affirm
the district court.
As discussed above, see supra Part II.A, the
bankruptcy court correctly required the Trustee to prove all
elements of his fraudulent transfer claims by a preponderance
of the evidence. See In re Wettach, 489 B.R. at 507.
However, it also created a rebuttable presumption that funds
deposited into an entireties account were not in exchange for
reasonably equivalent value and thereby shifted the burden of
production to the Wettachs. Id.
The Wettachs produced no evidence to demonstrate
how they spent the wages deposited into the entireties
account. The bankruptcy court even offered them a “dollar-
for-dollar reduction against any liability” for other deposits
20
into the account. In re Wettach, 489 B.R. at 507-08. The
court in fact did exclude from the Trustee’s potential recovery
an inheritance from Thomas Wettach’s father. Id. at 512-13.
The only other potential source of funds that the Wettachs
identify is $107,000 in pre-existing funds in the entireties
account at the start of the lookback period. Yet the sole
evidence of these funds is Exhibit 23, which is not part of the
record in this case. See supra Part II.B.1. Having failed to
carry their burden of production and absent clear error by the
bankruptcy court, the Wettachs have no claim for relief on
appeal.
The order of the district court on this issue is affirmed.
3. Automobile Expenses
Third, the Wettachs argue that the bankruptcy court
erred when it found that the Trustee could recover $76,975
for non-necessary automobile expenses paid by the Wettachs
during the lookback period. The court reached this figure by
strictly apportioning the total automobile expenditures3 of
$134,706.02 among the Wettachs’ seven vehicles after
finding that only three vehicles qualified as necessities. See
In re Wettach, 489 B.R. at 515-16. Because we hold that the
bankruptcy court did not clearly err in its findings, we affirm.
3
The bankruptcy court stated that the Trustee sought “a recovery
of $134,706.02 for automobile expenses . . . during the lookback
period.” In re Wettach, 489 B.R. at 515. But the Trustee’s Exhibit
36 reports that automobile expenditures were actually $134,716.02.
App. 735. Assuming this discrepancy is due to a typographical
error, the error is harmless since it is de minimis and favors the
Wettachs. Cf. SBRMCOA, LLC v. Bayside Resort, Inc., 707 F.3d
267, 272-73 (3d Cir. 2013).
21
Thomas Wettach listed seven vehicles on his
bankruptcy petition as personal property and valued them at
$12,000 each. App. 699. At trial, he also testified that this
$12,000 figure was a “good average” for the vehicles. App.
300:4-:19. Yet for the first time on appeal, and without any
citation to the record, the Wettachs argue that the majority of
their automobile expenditures were on two vehicles that the
bankruptcy court allegedly found were necessities.
Appellants’ Br. 21-23. The fact that the Wettachs provide no
evidence to substantiate this claim should be the end of the
matter. Cf. Mellon Bank, N.A. v. Official Comm. of
Unsecured Creditors of R.M.L., Inc. (In re R.M.L., Inc.), 92
F.3d 139, 156 (3d Cir. 1996). However, they also
mischaracterize the bankruptcy court’s actual finding. In
particular, the court noted that it could find “no basis for
deciding which of the vehicles should be considered
necessities . . .” for the purpose of allocating expenditures. In
re Wettach, 489 B.R. at 516 (emphasis added). This
conclusion was not clearly erroneous in light of the
bankruptcy petition and Thomas Wettach’s own testimony.
Therefore, even assuming reasonable disagreement about the
appropriateness of strict apportionment of the automobile
expenses, the bankruptcy court’s finding that $76,975 were
recoverable was also not clearly erroneous. Cf. Publicker
Indus., Inc. v. Roman Ceramics Corp., 652 F.2d 340, 344 (3d
Cir. 1981) (“mere disagreement with the district court’s
factual determinations” does not warrant reversal).
We thus affirm the order of the district court on this
issue.
4. Home Renovation Expenditures
22
Fourth, the Wettachs challenge the bankruptcy court’s
finding that the Trustee could recover $167,297.65 in home
renovation expenditures during the lookback period. We hold
that the bankruptcy court’s findings were not clearly
erroneous and affirm.
The Wettachs do not dispute the Trustee’s claim that
they spent $178,508.21 during the lookback period on home
renovations. These renovations included the addition of an
art studio, home office, a fourth bathroom, a second garage,
finished basement, and extensive landscaping. However, they
argue that these expenses were necessary in order to
“complete” their home. See Appellants’ Br. 24. But the
bankruptcy court found that the house was already “habitable
prior to the commencement of the improvements . . . .” In re
Wettach, 489 B.R. at 517. The Wettachs do not dispute that
the house already had a living room, dining room, kitchen,
den, four bedrooms, three bathrooms, and a garage. See App.
237:6-:17, 357:6-:7. Furthermore, the bankruptcy court did
reduce the Trustee’s potential recovery by deducting
$11,210.65 in certain home renovation expenditures related to
repairs, furniture, yard work, and tree trimming. See In re
Wettach, 489 B.R. at 518. The Wettachs otherwise rely
entirely on arguments divorced from the factual record on
appeal and fail to demonstrate that the bankruptcy court’s
findings were clearly erroneous. Cf. United States v. Birch,
591 F. App’x 54, 55-56 (3d Cir. 2015).
23
The Court affirms the district court’s order affirming
the bankruptcy court’s award4 of $167,297.65 for these
expenditures.
5. Payments to Bette Wettach for Household
Expenses
Fifth, the Wettachs dispute the bankruptcy court’s
finding, upheld by the district court, that the Trustee could
recover $52,805 conveyed to Bette Wettach. Specifically,
during the lookback period the Wettachs transferred funds
from the entireties account to Bette Wettach, who then
deposited these funds into a separate jointly-held account (the
“Dollar General account”), allegedly to pay for various
household expenses. See In re Wettach, 489 B.R. at 519. The
bankruptcy court found that the total amount of these
transfers during the lookback period was $148,505, of which
$52,805 were potentially recoverable as non-necessary
expenditures. Id. at 519-20. Because these findings are not
clearly erroneous, we affirm.
We agree with the Trustee that the Wettachs’ argument
borders on the incomprehensible. Without any reference to
the record, the Wettachs contend that average household
expenditures paid by Bette Wettach were $2,750 per month.
They then state that “[t]he total amount deposited during the
lookback years totaled $146,405, a difference of $10,405 for
non-necessities.” Appellants’ Br. 26. Presumably, the
4
We note that subtracting the $11,210.65 in deductions from the
Trustee’s total figure of $178,508.21 in renovation expenses results
in $167,297.56 of potentially recoverable expenditures. Any error,
presumably typographical, by the bankruptcy court is de minimis
and harmless.
24
Wettachs intend to argue that over the 48-month lookback
period, Bette Wettach spent an average of $132,000 [= 48
months x $2,750 per month] in necessary household
expenditures, meaning that the Trustee’s potential recovery
should be limited to $14,405 [= $146,405 - $132,000], instead
of the $52,805 awarded by the bankruptcy court. Of course,
they provide no support for any of these figures, and the
Court declines the invitation to comb through the record in an
attempt to disentangle the Wettachs’ reasoning. Cf. United
States v. Starnes, 583 F.3d 196, 216 (3d Cir. 2009).
By contrast, the bankruptcy court’s reasoning is
straightforward and not clearly erroneous, even if it does
suffer from minimal mathematical deficiencies. Schedule J to
the bankruptcy petition lists $10,110 in total average monthly
expenses, App. 713, of which Bette Wettach testified that at
least $1,950 comprised expenses paid by her from the Dollar
General account, see App. 376:17-382:13. The Wettachs also
do not credibly dispute this $1,950 figure. Over the lookback
period, Bette Wettach therefore should have paid $93,600 [=
48 months x $1,950 per month] in household expenses from
the account. Instead, the bankruptcy court found that she
spent $148,505. In re Wettach, 489 B.R. at 519. It would not
be clearly erroneous to conclude that the difference of
$54,905 [= $148,505 - $93,600] therefore corresponds to non-
necessary expenditures during the lookback period. For
reasons that are not clear from the record, the bankruptcy
court instead awarded $52,805 in potentially recoverable
transfers. Id. at 520. As the discrepancy is in the Wettachs’
favor, any error is harmless. Cf. SBRMCOA, 707 F.3d at 272-
73.
25
We therefore affirm the order of the district court
affirming the bankruptcy court on this issue.
6. Balance of Funds in the Entireties
Account at Filing
Sixth, the Wettachs argue that the bankruptcy court
improperly awarded $39,264.25 in potentially recoverable
transfers, corresponding to the balances of the entireties and
Dollar General accounts on the date that Thomas Wettach
filed his bankruptcy petition. Because the bankruptcy court
did not clearly err in its findings, we affirm.
The Wettachs dispute the bankruptcy court’s findings
on two grounds. First, they argue that the Trustee failed to
identify the sources for these funds. For the reasons stated
above, see supra Part II.B.1, the bankruptcy court did not
clearly err when it found by a preponderance of the evidence
that Thomas Wettach’s wages were the source of these funds.
Second, the Wettachs argue that because the funds remained
in the accounts on the date of the bankruptcy filing, they were
not spent on non-necessities. The Wettachs failed to raise this
argument before the district court, see Br. for Appellants,
Sikirica v. Wettach, No. 2:13-cv-01822-NBF, at *17-*18
(W.D. Pa. Jan. 29, 2014), ECF No. 4, and have therefore
forfeited it on appeal here, see Harris v. City of Philadelphia,
35 F.3d 840, 845 (3d Cir. 1994). Regardless, they also failed
to carry the burden of production as to how the funds were
ultimately spent. See supra Part II.A.3. Because they failed
to provide such evidence, the Trustee carried his burden of
persuasion. See In re Wettach, 489 B.R. at 507.
We therefore affirm.
26
C. THE WETTACHS’ DEPOSITS OF WAGES INTO AN
ENTIRETIES ACCOUNT ARE TRANSFERS OF ASSETS
UNDER THE PUFTA
Finally, the Wettachs argue that the deposit of wages
into an entireties account is not a “transfer” of an “asset”
under the PUFTA. The district court considered and rejected
this argument. We review the issue de novo and affirm.
The PUFTA defines a “transfer” as “[e]very
mode . . . of disposing of or parting with an asset or an
interest in an asset.” 12 Pa. C.S.A. § 5101(b). Likewise, an
“asset” under the PUFTA is “[p]roperty of [the]
debtor . . . [but] does not include: . . . (2) property to the
extent it is generally exempt under nonbankruptcy law . . . .”
Id. Because Pennsylvania state law exempts wages held by
the employer, see 42 Pa. C.S.A. § 8127(a), the Wettachs
argue that such wages are not “assets” that a debtor can
fraudulently “transfer” under the PUFTA, Appellants’ Br. 27-
28.
This Court interprets a state statute by “predict[ing]
how the highest court of that state would decide the relevant
legal issues.” Ohio Cas. Grp. of Ins. Cos., 130 F.3d at 1125.
Neither the Pennsylvania Supreme Court nor the Third
Circuit has addressed this issue, but intermediate
Pennsylvania state courts have permitted attachment of wages
directly deposited into an entireties account. See, e.g., Stinner
v. Stinner, 446 A.2d 651, 653 (Pa. Super. Ct. 1982). We have
recognized that decisions of intermediate appellate state
courts are indicative of how the state Supreme Court would
interpret state law. See Sheridan v. NGK Metals Corp., 609
F.3d 239, 254 (3d Cir. 2010). The intermediate courts’ view
27
also coincides with the weight of judicial authority on this
issue. See, e.g., Cohen v. Sikirica, 487 B.R. at 632; In re
Arbogast, 466 B.R. at 310-12; cf. Kaler v. Craig (In re
Craig), 144 F.3d 587, 593 (8th Cir. 1998).
The Wettachs’ reference to Resolute Ins. v.
Pennington, 224 A.2d 757, 760 (Pa. 1966), is inapposite.
That case stated, in dictum, that an individual could not waive
his or her exemption from attachment as to wages. Id. It did
not address the issue presented here, i.e., whether a direct
deposit of wages into an entireties account can constitute a
fraudulent transfer of assets under the PUFTA.
The Wettachs also make much ado about the fact that
Pennsylvania law exempts wages from attachment “while in
the hands of the employer . . . .” 42 Pa. C.S.A. § 8127(a).
Relying, without citation, on “fundamental commercial law,”
they argue that wages directly deposited into an account
“remain in the hands of the employer . . . until the funds are
received by the bank . . . .” Appellants’ Br. 28. Yet the
Wettachs ignore the broad scope of the term “transfer” under
Pennsylvania law. The PUFTA states that a “transfer” can be
“direct or indirect, absolute or conditional, [or] voluntary or
involuntary . . . .” 12 Pa. C.S.A. § 5101(b) (emphasis added).
Thomas Wettach exercised control over where his employer
deposited his wages. Therefore, when his employer initiated
the direct deposit, the funds left the employer’s “hands.” The
subsequent deposit of those funds into the entireties account
is precisely the type of indirect transfer covered by the
PUFTA. See Cohen v. Sikirica, 487 B.R. at 632; In re
Arbogast, 466 B.R. at 312. “A person may not do by
indirection what he is forbidden to do directly.” In re Craig,
28
144 F.3d at 592 (quoting Merriam v. Venida Blouse Corp., 23
F. Supp. 659, 661 (S.D.N.Y. 1938)).
The Wettachs also draw an analogy to an employer
stopping payment on a check as evidence of retained
employer control “until the funds are received by the bank.”
Appellants’ Br. 28. However, they misstate Pennsylvania
law. Pennsylvania requires that a stop-payment notice
provide “reasonable time for the bank to act,” meaning that
the ability to stop payment is not absolute until the payment
of funds. See 13 Pa. C.S.A. § 4303(a); see also id. § 4403(a).
Thus, there exists some period of time before the payment of
funds to the bank where wages are no longer in the
employer’s “hands,” which is consistent with our analysis.
Accordingly, the Court affirms the district court’s
holding that the direct deposit of wages into an entireties
account is a “transfer” of an “asset” under the PUFTA.
D. THE WETTACHS HAVE FORFEITED THEIR
REMAINING ARGUMENTS BY FAILING TO DEVELOP
THEM IN THEIR OPENING BRIEF
The Wettachs raise two additional arguments in their
Statement of the Issues Presented. Appellants’ Br. 1-2.
However, because they fail to develop either argument in
their opening brief, the Court holds that the Wettachs have
forfeited these claims. See Kost v. Kozakiewicz, 1 F.3d 176,
182 (3d Cir. 1993).
First, the Wettachs claim that the Trustee “breach[ed]
his duties to the Court by failing to offer Exhibit 23 into the
record[.]” Appellants’ Br. 1-2. But as the Trustee correctly
29
notes, Appellee’s Br. 2, the Wettachs provide no support for
this position either in their opening brief or on reply. The
Wettachs have therefore forfeited the argument. See Kost, 1
F.3d at 182.
Second, the Wettachs argue that the bankruptcy court
“err[ed] in its ‘finding’ that no deposits were placed in the
entireties account except Thomas Wettach’s” wages.
Appellants’ Br. 2. Yet again the Wettachs provide no
substantive argument on this issue in their opening brief,
instead addressing it for the first time on reply. See
Appellants’ Reply Br. 5; see also Appellee’s Br. 2 (noting the
omission from the Wettachs’ opening brief). These
arguments come too late to avoid forfeiture. See In re
Surrick, 338 F.3d 224, 237 (3d Cir. 2003). Regardless, the
record supports the bankruptcy court’s finding that the only
recoverable deposits into the entireties account during the
lookback period were Thomas Wettach’s wages. See In re
Wettach, 489 B.R. at 512-13; App. 332:12-333:5, 375:10-:12.
We therefore decline to reach these two issues, and
affirm the district court’s order.
III. CONCLUSION
For the reasons stated herein, the Court affirms the
order of the district court affirming the decision of the
bankruptcy court.
30