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God's Universal Kingdom Christian Church, Inc. v. Rose

United States District Court, D. Maryland

August 15, 2014

IN RE LYNETTE TAWANA NICHOLS GOD'S UNIVERSAL KINGDOM CHRISTIAN CHURCH, INC., Appellant,
v.
CHERYL E. ROSE, Trustee, Appellee.

MEMORANDUM OPINION

THEODORE D. CHUANG, District Judge.

This matter is before the Court on a Motion for Leave to Appeal from an Order of the United States Bankruptcy Court for the District of Maryland in Rose v. God's Universal Kingdom Christian Church, Inc., Adversary Proceeding Number 13-00499 PM, denying the Motion to Dismiss the Complaint filed by God's Universal Kingdom Christian Church, Inc. ("the Church"). The issue before the Court is whether the Church should be granted leave to appeal from an interlocutory order. Having reviewed the pleadings and supporting documents, the Court finds no hearing necessary. See Local Rule 105.6 (D. Md. 2014). For the following reasons, the Church's Motion for Leave to Appeal is DENIED.

BACKGROUND[1]

On January 2, 2013. Debtor Lynette Tawana Nichols ("Nichols"). the Resident Agent and President of the Church, tiled a voluntary petition of relief under Chapter 7 of the United States Bankruptcy Code. In Schedule F of the Debtor's Bankruptcy Schedules in the Nichols Bankruptcy. Nichols listed the Church as having an "unsecured non-priority contingent, unliquidated, and disputed claim for an unspecified amount." Am. Compl. ¶¶ 19-20. The Church itself had filed a voluntary petition of relief under Chapter 11 of the United States Bankruptcy Code on October 16, 2012, which was dismissed on May 31, 2013.

On August 28, 2013, Cheryl E. Rose, the Chapter 7 Trustee for the Bankruptcy Estate of Lynette Tawana Nichols (the "Trustee"), filed a Complaint. DE No. I, to recover transfers of payment by Nichols to the Church. In the Complaint, the Trustee pled that some of Nichols's charitable contributions to the Church were fraudulent conveyances and therefore avoidable. Specifically, the Trustee alleged that Nichols made charitable contributions of $62.653 in 2011 and $31, 138 in 2010 to the Church. By contrast, Nichols's contributions to the Church prior to 2010 were for much smaller amounts: $3.140 in 2009 and $16, 896 in 2008. The Trustee also pled that Nichols contributed an unspecified amount in 2012, which was not yet determinable because the Trustee had not seen Nichols's 2012 tax returns.

The Trustee alleged that Nichols's 2011 and 2012 payments to the Church were fraudulent conveyances under 11 U.S.C. § 548(a)(1)(A) (Count I) and 11 U.S.C. 548(a)(1)(B) (Count II). The Trustee also alleged a claim that the 2010, 2011, and 2012 payments were all fraudulent conveyances under Md. Code Ann. Commercial Law § 15-204. 205, & 207, which the Trustee had standing to bring under 11 U.S.C. § 544 (Count III), and that the amount of the payments should be avoided and turned over to the Trustee under 11 § 550 (Count IV). The Trustee further alleged that any payments made in 2012 were avoidable under 1 I U.S.C. § 547 (Count V).

On October 7. 2013, the Church tiled a Motion to Dismiss Complaint, DE No. 11. arguing that the Trustee's claims were barred by the Religious Freedom Restoration Act ("RFRA"), 42 U.S.C. §§ 2000bb-2000bb-4 (1993) and the First Amendment to the United States Constitution, because allowing the Trustee to recover Nichols's 2010. 2011, and 2012 charitable contributions to the Church did not advance a compelling government interest and would substantially burden Nichols's free exercise of religion.

On October 23, 2013, the Trustee filed an Opposition to Defendant's Motion to Dismiss. DE No. 14, along with the Amended Complaint, which contained no additional or amended factual allegations, but pled an additional claim that the 2011 and 2012 payments were also fraudulent under 11 U.S.C. § 548(a)(2) (Count VI). because they exceeded 15 percent of Nichols's gross annual income and therefore were not protected as religious tithes.

On January 27, 2014, the United States Bankruptcy Court for the District of Maryland denied the Church's Motion to Dismiss, reasoning that the "dichotomy established by Congress" in the Bankruptcy Code through the enactment of the Religious Liberty and Charitable Donation Act of 1998 ("RLCDA"), Pub. L. No. 105-183, 112 Stat. 517, had already created built-in protections for the religious practice of tithing, and that the fraudulent conveyance provisions of the Code, along with the other provisions, are "generally applicable and do not target religious practices." Mem. Order 3-4. DE No. 26.

On March 3. 2013, the Church tiled a Motion for Leave to Appeal from the bankruptcy court's order denying its Motion to Dismiss. ECF No.

DISCUSSION

Under 28 U.S.C. § 158(a), district courts have jurisdiction to hear bankruptcy appeals:

(1) from final judgments, orders, and decrees:
(2) from interlocutory orders and decrees issued under section 1121(d) of title 11 increasing or reducing the time periods referred to ...

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