Templeton v. O'Cheskey (In the Matter of American Housing Foundation)
- Summarized by Craig Geno , Craig M Geno PLLC
- 9 years 8 months ago
- Citation:
- In the Matter of American Housing Foundation; Fifth Circuit; No. 14-10563
- Tag(s):
-
- Ruling:
- In a complex factual setting, where the transactions were poorly documented, the Appellant Templeton "invested" over $2million in limited partnerships that were affiliates of the Debtor. The investments were guaranteed by the debtor.The Debtor's principal diverted many of the investments for purposes other than the initial purpose of the investments. The Appellantl filed claims for the investments.
First, the Fifth Circuit ruled that the Appellant's claims were claims that arose from the purchase/sale of securities and that an equity investment in an affiliate of the Debtor is treated the same as an equity investment in the Debtor. Thus, the claims were subordinated under 510(b).
Second, the Fifth Circuit ruled that funds in bank accounts that were titled to entities other than the Debtor, but that were controlled by the Debtor, were property of the estate for preferential transfer purposes. Next, the Fifth Circuit ruled that the Debtor's businesses were not Ponzi schemes, so that the trial court must consider the ordinary course of business defense raised by the Appellant in the preference litigation on remand.
Third, the Fifth Circuit ruled that the fraudulent conveyance test for the Appellant's defense of good faith was centered around whether the Appellant knew (or was on inquiry notice) of the Debtor's insolvency or fraud. That test must be applied on remand, along with a determination of the Appellant's "value"to the Debtor in the fraudulent conveyance context.
- Procedural context:
- Appeal from the District Court.
- Facts:
- The facts are set forth in the ruling section above. Except that at trial, the Appellee was awarded a judgment for preferential transfers against the Appellant for $157,500 and the Appellant successfully defended the Appellee's fraudulent conveyance claims.
- Judge(s):
- King, Davis and Owen
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