Cheri Whitlock v. John Lowe
- Case Type:
- Consumer
- Case Status:
- Reversed and Remanded
- Citation:
- 18-50335 (5th Circuit, Dec 23,2019) Published
- Tag(s):
-
- Ruling:
- A trustee cannot use 11 USC 550(a) to "recover" fraudulently conveyed property or its value from a transferee if the transferee returned the property to the debtor pre-petition. Once fraudulently conveyed property has been returned, pre- or post-petition, there is nothing for a trustee to recover. The single-satisfaction rule of 11 USC 550(d) applies to property that is returned to the debtor pre-petition, regardless of what the debtor does with property once it has been returned.
- Procedural context:
- Defendant in fraudulent-conveyance adversary proceeding appealed from the District Court's order affirming the Bankruptcy Court's judgment granting the Chapter 7 Trustee (for her brother-in-law's estate) an award of $241,500. Defendant argued on appeal that allowing the Chapter 7 Trustee to recover against her for funds she transferred back to Debtor pre-petition violated the single-satisfaction rule of 11 USC 550(d).
- Facts:
- Debtor's spouse and her sister-in-law (Defendant) set up a joint account at Bank with $275,000 drawn from Debtor and spouse's joint account. Debtor's spouse removed herself from the account soon thereafter. Defendant transferred most of the funds to Debtor's spouse and to Debtor's wholly-owned LLC prior to Debtor's bankruptcy. Chapter 7 Trustee sought to recover the value of the funds transferred to Debtor's spouse and Debtor's LLC. Bankruptcy Court and District Court ruled for the Chapter 7 Trustee.
The Fifth Circuit vacated the District Court's judgment and remanded the case for further proceedings, including a determination of whether transfers to Debtor's spouse and/or to Debtor's wholly-owned LLC counts as actually returning funds to the Debtor in this instance.
- Judge(s):
- Oldham, Clement, Duncan
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