- Case No. 10-20670 (5th Cir. January 27, 2012)
- The Court of Appeals affirmed that the debtor was the "de facto" owner of three bank accounts that funded the alleged fraudulent transfers and that the chapter 7 trustee met his burden in establishing fraudulent transfer liability of appellants under the Texas Uniform Fraudulent Transfer Act.
- Procedural context:
- The Bankruptcy Court entered judgment of over $3 million in favor of chapter 7 trustee. The District Court affirmed the judgment. The Court of Appeals for the Fifth Circuit affirmed the judgment.
- IFS Financial Corporation ("IFS") and its 17 affiliated organizations filed a series of chapter 7 bankruptcy cases. IFS and its affiliates had international operations in insurance, mortgage, and banking service industries. Hugo Pimienta, an individual, was the primary decision maker for IFS and many of its affiliates. Although all the entities had separate corporate structures, there was a single advisory board that was dominated by the Pimienta family. The advisory board oversaw operations and controlled management of all the entities. The Appellants received over $3 million in transfers from IFS in the years leading up to the bankruptcy cases. The chapter 7 trustee sought to avoid these transfers under the Texas Uniform Fraudulent Transfer Act. The transfers were made from a bank account that IFS did not hold legal title in. Accordingly, the Appellants argued that the transfers did not involve property of IFS' estate. The Bankruptcy Court found that IFS had "de facto" ownership of the accounts; thus, the accounts were found to be property of IFS' estate. The Court of Appeals affirmed this finding and held that control can be sufficient to show ownership. In addition, the Bankruptcy Court found that the chapter 7 trustee met his burden in establishing a fraudulent transfer under the Texas Uniform Fraudulent Transfer Act. In affirming, the Court of Appeals reiterated that the Texas statute focuses on the transferor's intent, rather than the transferree's.
- Garza, Clement, and Southwick
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