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Margaret Kinney v. HSBC Bank USA

Summarizing by Lars Fuller

In re Carlo Bondanelli

Case Type:
Case Status:
BAP No. CC-19-1175-TaFS (9th Circuit, Mar 18,2020) Not Published
BAP for 9th Cir. affirmed ruling of bankruptcy court (CD Cal.) approving chapter 7 trustee's settlement of fraudulent transfer action against debtor's investment company over strenuous creditors' objection. Settlement was fair and equitable. Creditors' opposition was a factor that court properly considered, but creditors do not have veto power of settlements.
Procedural context:
Over creditors' objection, bankruptcy court (CD Cal.) approved chapter 7 trustee's settlement of fraudulent transfer action against debtor's investment company over creditors' objection. Creditors appealed to BAP for 9th Cir.
In 2004, Mr. Bondanelli, Appellants, and others formed a joint venture to develop real property in Santa Monica, California (the “Property”). A newly-formed entity, New West TC, LLC (“New West”), would acquire title and Mr. Bondanelli would complete development using joint venturer contributions and loan proceeds. But after acquisition of the land, disputes arose regarding the amount of additional development funding from Appellants. Mr. Bondanelli, who was responsible for the development and had guaranteed repayment of the acquisition loan, eventually sued Appellants to compel additional capital contributions. Mr. Bondanelli then entered into a settlement with Appellants where he agreed to pay them $800,000 in exchange for a transfer of all rights to New West and its assets, including the Property. Unbeknownst to Appellants, Mr. Bondanelli caused New West to sell the Property and to distribute the proceeds among all Defendants before entering into the settlement. Thereafter, he never paid the $800,000, and the value of New West, now a mere former owner of the Property, was negligible. After Appellants learned of Mr. Bondanelli’s deception, they sued him for fraudulent transfer, fraud, and breach of fiduciary duty. He responded by filing a chapter 7 case. Eventually, the chapter 7 trustee, filed § 548(a)(1)(A) complaints against Defendants, alleging that New West’s transfers of the sale proceeds were made to defraud Mr. Bondanelli’s creditors (i.e., the Appellants). The trustee sought the return of nearly $400,000 from the non-debtor defendants. On the verge of trial, the parties reached a mediated settlement that required payment to the estate of $60,000 (the “Settlement”).
Taylor, Faris, Spraker

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