Appeal from the United States District Court for the Southern District of Illinois. No. 01-CV-302-DRH--David R. Herndon, Judge.
Before Easterbrook, Rovner, and Evans, Circuit Judges.
The opinion of the court was delivered by: Evans, Circuit Judge.
Michael Frierdich is a Chapter 7 debtor, which means, in simplest terms, that he does not have enough assets to pay off a staggering amount of debt. This case, between the bankruptcy trustee (Mottaz) and Frierdich's wife (Oswald), turns on when Frierdich transferred shares of stock (or their proceeds, worth $400,000) to Oswald. The answer to that question affects whether Mottaz can upset the transfer and obtain its proceeds for distribution to Frierdich's creditors. Oswald, who would just as soon keep the $400,000, has already had two swings at this issue. She lost before the bankruptcy judge and the district judge. We will ring her up on strikes.
Because this case arose on summary judgment, we state the facts in the light most favorable to Oswald. We turn first to the events of early 1998. At that time, Frierdich was a director and the treasurer of Columbia Centre, Inc., a closely held company, and owned 360 of its outstanding 1,000 shares. Paul Frierdich (his brother) and Joe Koppeis held the remaining shares. (Paul and Michael Frierdich both submitted affidavits saying that Columbia Centre never issued stock certificates to its shareholders. A certificate--"Certificate #6"--evidencing Frierdich's shares turned up but had never been signed.) The stock record book was also lost.
Meanwhile Frierdich and Oswald were pondering the business of marriage. In anticipation of their engagement, they decided to take stock of their respective financial situations. Based on information that Frierdich provided to Oswald, they determined that the value of Frierdich's estate exceeded that of Oswald's. So they assented to an arrangement under which Frierdich would transfer his Columbia Centre stock to Oswald and she would waive any interest in Frierdich's estate. On January 7, 1998, Frierdich and Oswald were engaged.
The next day Frierdich executed a "Stock Transfer/Stock Power." It assigned to Oswald his interest in the stock and gave the officers of Columbia Centre power of attorney to transfer the stock on the company books. On January 16 Frierdich sent the transfer document, along with transfer instructions, to Paul Frierdich. The transmittal letter read: "Please transfer stock as of Jan. 8, 1998 to Bev. This is part of the prenuptial agreement we have. Call if any questions." On February 10 Paul Frierdich sent a "speed message" reading:
Mike and Bev I received your stock transfer of all Mike's stock in Columbia Centre Inc. Shopping Center Corporation, and accordingly the transfer to Bev Oswald of his 36%. We do not need anything else for the transfer. Oswald never received a stock certificate and no notation on the (missing) stock record book was ever made.
Frierdich and Oswald each signed a prenuptial "waiver" to any interest in the other's estate on March 4. Paragraph six of Oswald's waiver read:
It is the intent of the undersigned that her present and future interest in any assets of Michael V. Frierdich is specifically limited to those assets which Michael V. Frierdich shall have voluntarily transferred an interest to the undersigned and only then in circumstances wherein he has affirmatively taken action transferring an ownership interest to the undersigned. Reference herein includes interest Michael V. Frierdich has previously and voluntarily, by execution of a stock transfer, assigned all his rights, title, and interest in and to his stock ownership in a Columbia, Illinois shopping center to Beverly K. Oswald.
Frierdich and Oswald were married 3 days later.
In August or September of 1998, Koppeis and Paul Frierdich approached Frierdich about having the corporation repurchase his shares in Columbia Centre. They offered him $250,000, a price that increased, based on financial appraisals, to $400,000. Koppeis, who was Columbia Centre's president and managing officer, was not aware of any transfer to Oswald.
In September a sale agreement was forwarded to Frierdich. It listed him as the seller. On a draft of the agreement Frierdich crossed out his name, substituted "Bev Oswald" as the seller, and sent the documents back to Paul Frierdich with a transmittal letter reading: "I believe Bev needs to sign this because of the transfer document I gave her several months ago. The money should go to her." The final agreement of sale, however, again listed Frierdich as the seller. Frierdich signed that agreement, warranting that he held title to the stock and that it was not subject to any agreement that would restrict its sale. Koppeis and Paul Frierdich also signed the agreement. At closing, which apparently took place on September 10, Columbia Centre issued Frierdich a $400,000 check. He signed the receipt and deposited the check in Oswald's account after endorsing it "for deposit." At that same time, Frierdich resigned his positions with the company.
In a letter dated September 23, 1998, to Union Planters Bank, with which Oswald and Frierdich's son were trying to arrange a loan for a ...