Gold v. First Tennessee Bank National Association (In re Taneja)
- Summarized by Brooke Schumm , Daneker, McIntire, Schumm, et al.
- 10 years 10 months ago
- Citation:
- In re Taneja (Gold, Trustee, v. First Tennessee Bank, N.A., Slip Opin., February Case No 13-1058, (4th Cir. 2014) (scheduled for publication)
- Tag(s):
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- Ruling:
- Over a dissenting opinion, the Circuit Court affirmed 2-1 the ruling of the District Court on appeal, and the bankruptcy court's finding at trial that the Bank was a good faith transferee of assets from a fraudulently operated company, and therefore, in conjunction with the "for value" element (which was conceded by the trustee) in section 548(c), the transfers to the Bank could not be avoided.
- Procedural context:
- The case was an appeal from the district court which had affirmed the Bankruptcy Court's ruling and findings at trial.
- Facts:
- Taneja's company, Financial Mortgage Inc., ("FMI") was in the business of making mortgage loans, documenting them, and selling the loans to secondary purchasers, and often doing so more than once. The Bank was a warehouse lender, which extended credit to FMI and was repaid using the proceeds of loans sold to secondary purchasers. As the 2007-2008 mortgage crisis came to a climax, FMI was in financial difficulty and the Bank was able to collect some of its debt. The Bank suffered significant losses. The trustee for Taneja and FMI sued to recover the amounts paid to the Bank arguing that the Bank knew or should have known based on several indicia that the proceeds were proceeds of a fraudulent scheme and therefore avoidable. The case turned on whether or not the Bank took the payments in good faith on an objective and subjective basis despite what the trustee characterized as red flags which should have led the Bank to know the money was tainted. The case is a good primer on how a lender might defend a section 548 claim of this sort made by a trustee or creditor.
- Judge(s):
- Keenan, Wynn, Thacker (dissenting)
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