In re Calumet Farm, Inc.

398 F.3d 555 (2005)

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In re Calumet Farm, Inc.

United States Court of Appeals for the Sixth Circuit
398 F.3d 555 (2005)

Facts

Calumet Farm, Inc. (Calumet) (debtor) signed a promissory note for $6,500,000 to purchase an interest in a thoroughbred horse named Mogambo from White Birch Farm, Inc. (White Birch) (creditor). As of March 7, 1991, Calumet had defaulted on its payment obligations under the note and owed White Birch over $1,000,000 plus approximately $103,057.50 in interest. On March 8, 1991, Calumet’s president instructed its bookkeeper, Angela Holleran, to make a $77,301.58 payment to White Birch for interest due through January 31,1991. Accordingly, Holleran contacted Calumet’s bank, First National Bank & Trust Company (First National), to arrange the payment via wire transfer to White Birch’s account at Citibank. Holleran also called White Birch regarding the wire transfer, though the parties disputed the amount that Holleran indicated White Birch should expect to receive. On March 11, 1991, Holleran learned that First National mistakenly transferred $770,301.58 to Citibank in a wire transfer referencing “Mogambo Int.” Citibank refused to reverse the transfer because it had already credited the funds to White Birch’s account. On the same date, and before White Birch credited the amount to Calumet’s debt that afternoon, First National informed White Birch of the mistake, and White Birch refused to return the excess funds. Moreover, White Birch’s owner had separated the excess funds by moving them to his personal account. Calumet sued First National for the mistake. The parties settled Calumet’s claim for approximately $550,000, and Calumet assigned to First National any claims it had against White Birch. Subsequently, Calumet filed for bankruptcy. First National initiated an adversary proceeding against White Birch. Both parties moved for summary judgment. The bankruptcy court ruled in White Birch’s favor pursuant to the discharge-for-value defense. The district court affirmed.

Rule of Law

Issue

Holding and Reasoning (Gilman, J.)

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