In re Mortgage Store, Inc.
United States Court of Appeals for the Ninth Circuit
773 F.3d 990 (2014)
- Written by Abby Roughton, JD
Facts
In 2008, Mano-Y&M Limited (Mano) agreed to sell a shopping plaza to George Lindell for $2.2 million. The sale contract provided that attorney Mark Freeland would receive the purchase money and distribute the money as required by the contract. On January 20, 2009, The Mortgage Store (Mortgage Store) (debtor) wired $311,065.25 to Freeland to satisfy Lindell’s obligations under the sale contract. Freeland subsequently distributed the money as required by the contract. In November 2010, Mortgage Store filed for Chapter 7 bankruptcy, and an audit revealed that Mortgage Store had been operating a Ponzi scheme. Bankruptcy trustee Dane Field brought an adversary proceeding against Mano, alleging that Mortgage Store’s January 2009 transfer in connection with the shopping-plaza sale was fraudulent. Field sought to avoid the transfer and recover the funds from Mano. The bankruptcy court held that the transfer was fraudulent and that Mano was the initial transferee of the $311,065.25, such that Field had an absolute right to recover the money from Mano. The district court affirmed. Mano appealed, asserting that Lindell should be considered the initial transferee because Freeland had received the money from Mortgage Store and distributed it on Lindell’s behalf.
Rule of Law
Issue
Holding and Reasoning (Tashima, J.)
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