- Case Type:
- Case Status:
- 19-20358 (5th Circuit, Jul 30,2020) Published
- AFFIRM the judgment as to the merits of Elbar’s claims denying all relief requested and REMAND for the district court to explain the exceptional circumstances or to order prejudgment interest. This ruling relied heavily on the fact that Elbar repeatedly violated the stay.
- Procedural context:
- This appeal arises from Elbar’s litigation against United, TransWorld, and Industry in the debtor’s bankruptcy proceeding. The bankruptcy court conducted a multi-day trial, took the matter under advisement, and issued a 176-page memorandum opinion detailing its judgment denying all relief requested by Elbar against United, TransWorld, and Industry. Elbar appealed to the district court, which affirmed. Elbar then timely appealed to the Fifth Circuit.
- The short version of the facts are United hired Prins to conduct a foreclosure sale; Elbar wired funds to Prins; Prins stole those funds and used them to reimburse other clients. United Sentry Mortgage Investment Fund is a private lender. Unfortunately you have to look further into the facts to understand the courts ruling. United provided financing to Triple Gate Investments, an entity owned by Oluyemisi Omokafe Okedokun, the debtor, to purchase the real property located in Houston, Texas. Upon default by the debtor, United retained attorney Todd Prins to post the property for notice of sale, scheduled to occur on October 4, 2016. Elbar Investments, Inc., a privately held foreclosure investment firm, attended the October 4, 2016 sale. On the morning of the foreclosure sale, the debtor filed a Chapter 7 bankruptcy petition and faxed a notice-of-bankruptcy filing to Prins. Notwithstanding the bankruptcy notice, the foreclosure sale proceeded. With a bid of $2.4 million, Elbar won the auction. To satisfy the purchase price, Elbar tendered eleven cashier’s checks, totaling the $2.4 million purchase price, to Victoria Shum, Prins’s associate. Prins claimed, however, that his bank would not accept the cashier’s checks and therefore the purchase price would need to be paid with either a single check or a wire transfer. The next morning, October 5, 2016, Prins received both the recorded deed, evidencing a transfer of the property from Triple Gate to the debtor, and records from the Harris County Appraisal District, evidencing a homestead claim on the property. Victoria Shum relayed this information to Elbar which it acknowledged. Elbar, knowing that the automatic stay would preclude transfer of title, still wired $2.4 million to Prins’s IOLTA account, in its second attempt to satisfy the purchase price. Because of the automatic stay triggered by the bankruptcy proceeding, Prins lacked the legal ability to transfer title to Elbar. Prins subsequently transferred $2 million from his IOLTA account into his Prins Law Firm Wells Fargo account. Between October 19, 2016 and December 12, 2016, Prins spent these funds liberally. With the funds now in his Wells Fargo Operating account, Prins closed his law firm, paid his personal lawyers and taxes, and traveled across Europe. Prins also used a portion of the funds to pay clients from whom he had previously stolen. Two of these clients were TransWorld Leasing Corp. and Industry Drive Partners. TransWorld and Industry had an unfortunate relationship with Prins. Transworld’s started working with Prins on February 4, 2008, when it transferred $230,853.66 to Prins to resolve a tax dispute with Bexar County. Prins did not use these funds to resolve the tax dispute. Unbeknownst to TransWorld, as of December 27, 2017, the tax debt of $230,000 had risen to over $445,000. Prins’s streak of fraudulent conduct continued in 2016 after TransWorld became concerned that its tax dispute from 2008 had not been resolved. Prins forged a letter from the county tax assessor’s counsel stating that TransWorld owed $169,807.29 in unpaid taxes. Prins then convinced TransWorld to deposit $169,807.29 into his IOLTA account. On October 21, 2016, after “resolving the tax issue” for $5,000, Prins wrote a check from the Wells Fargo Operating account to TransWorld in the amount of $164,807.29. This amount represents the $169,807.29 deposited by TransWorld, less the $5,000 “tax settlement.” Elbar claims that it is entitled to the $164,807.29 Prins transferred to TransWorld because Prins took those funds out of its $2.4 million wire transfer. We turn next to Industry’s relationship with Prins. A year before the Foreclosure sale at issue, Jim Pfirrmann, a co-manager of Industry’s general partner, G5 Property Holdings, LLC, transferred $300,000 out of Industry’s account and into Prins’s for safekeeping. On November 4, 2016, upon learning that Prins had filed for bankruptcy and was being sued by two of his former clients, Cindy Gabriel, a general partner of Industry, asked Pfirrmann to request the $300,000 he had placed in safekeeping to be returned. Prins returned $300,000 later that day. Elbar claims that it is entitled to the $300,000 Prins transferred to Industry because the source of this transfer was also its own $2.4 million wire transfer. On November 8, 2016, Elbar’s counsel requested that Prins return the $2.4 million Elbar had wired to Prins. However, as we now know, Prins had already transferred a significant portion of these funds to his Wells Fargo Operating account. As of October 17, 2016 only $13,414.57 remained. Prins has since entered into a plea agreement with the United States Attorney for the Western District of Texas. He pled guilty to wire fraud and on May 15, 2018 was sentenced to seventy-two months imprisonment, three years of supervised release, and was ordered to pay $2,975,264 in restitution. That district court granted the government’s motion to set aside the preliminary order of forfeiture in lieu of restitution, effectively allowing funds to be returned to Elbar. In fact, of the $2.4 million that Elbar initially sought to recover, Elbar has received a total of $1,683,915.42: $82,373.28 from the IRS as a result of Prins’s bankruptcy plus $1,601,542.14 from Prins’s criminal case.
- Elrod, Sothwick and Haynes
In re Barbara Wigley
Summarizing by Bradley Pearce
Publicly Traded Firms Paid Dividends, Bought Their Own Stock after Receiving PPP loans to Pay Employees
3145 in the system
1 Being Processed