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In re The Personal and Business Insurance Agency

United States Court of Appeals for the Third Circuit
334 F.3d 239 (2003)


The Personal and Business Insurance Agency (PBI) (debtor) was an insurance-brokerage firm. Emil Kesselring was the owner and chief executive officer of PBI. Using his position as PBI’s principal agent, Kesselring submitted fraudulent loan applications to Premium Finance Services (Premium) under the names of PBI clients. Kesselring then kept the loan proceeds for himself and caused PBI to make payments on the loans with PBI funds. Kesselring was eventually caught, and PBI filed for bankruptcy under chapter 7 of the bankruptcy code. The bankruptcy trustee initiated a proceeding to recover the payments PBI made for the fraudulent loans to Premium, arguing that the loan payments were fraudulent transfers. Premium claimed that PBI’s loan payments were not fraudulent because Kesselring’s debt became PBI’s debt, and PBI’s payments compensated Premium for the loaned funds. The bankruptcy court agreed with Premium and rejected the trustee’s attempt to recover the loan payments. The trustee appealed, and the district court affirmed. The trustee then appealed to the court of appeals, arguing that even if Kesselring’s fraudulent debt could be imputed to PBI, the debt could not be imputed to the trustee.

Rule of Law


Holding and Reasoning (Becker, J.)

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