- Gladstone, et al. v. Schaefer, et al. (In re UC Lofts on 4th, LLC, et al.), BAP No. SC-14-1287-JuKlPa & SC-14-1320-JuKlPa (BAP 9th Cir. Sept. 4, 2015)
- In a 49 page opinion addressing ten issues related to fraudulent transfer, preference, and equitable subordination claims in a consolidated appeal, the BAP for the 9th Circuit affirmed the ruling of the bankruptcy court (S.D. Cal.) on all issues, including (1) use of parol evidence to interpret a contract provision; (2) exclusion of certain debts that were stipulated facts in its insolvency analysis; (3) finding of "reasonably equivalent value"; (4) application of burden of proof to plaintiff to negate good faith defense as subsequent transferee; (5) determination that payment from debtor was avoidable as fraudulent transfer because transferee was not a secured creditor based on filing of lis pendens; (6) determination that transferee did not give reasonably equivalent value for payment by releasing its note, dismissing lawsuit, and withdrawing lis pendens; (7) determination that one defendant was not liable for receipt of fraudulent trransfer where entire transfer went to third party creditors of debtor; (8) finding that certain defendants did not have actual knowledge of defalcations as they occurrred for purposes of aiding and abetting breach of fiduciary duty under California law; (9) determination that certain defendants were not "insiders" within the meaning of 101(1) or 547, so that transfer was not avoidable as preference; and (10) determination that certain defendants had not engaged in inequitable conduct and that consequently defendants' claim would not be equitably subordinated.
- Procedural context:
- Chapter 7 trustee commenced fraudulent transfer avoidance adversary against more than ten parties, at least four of whom were subsequently dismissed. Trustee also asserted equitable subordination claims and preferential transfer claims against one defendant. Bankruptcy court bifurcated issues for trial into (1) insolvency; and (2) all others. Court held trial on insolvency and issued ruling fiinding that trustee failed to prove debtors were insolvent on particular date. Bankruptcy court later conducted eight day bench trial addressed issue of insolvency at separate date, and all remaining issues. Following trial, court issued single judgment, granting judgment in favor of all multiple defendants, granting judgment for the trustee against one defendant. Trustee appealed to BAP for the 9th Cir., appealing the bankruptcy court's ruling in favor of the defendants. Losing defendant also appealed.
- Trustee brought fraudulent transfer, preference, equitable subordination, and other claims against multiple parties based on several transfers arising out of a series of loan transactions to finance the acquisition and initial development of real property held by two debtors. The BAPs factual summary encompasses eleven pages of its 49 page opinion. Creditors of two separate entity debtors commenced involuntary petitions against the debtors, and orders for relief entered approving the chapter 11 petitions. Subsequent orders entered appointing a chapter 11 trustee, and jointly administering the cases. One creditor obtained relief from stay and foreclosed on certain real property. The cases were subsequently converted to chapter 7 and Gladstone was appointed as chapter 7 trustee.
- Jury, Klein, Pappas
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