FI LED U. S . COURT OF AP PE ALS E L E V E N T H C IR C U IT D e c e m be r 12, 2005 T HOM AS K. KAHN CL E RK [ P UB L I S H] I N THE UN I TE D STATE S C OU RT OF APPE ALS F O R T H E E L E V E N T H C IR C U IT

________________________ N o. 04- 16463

________________________ D . C . D o c k e t N o s . 0 4 - 2 1 5 5 5 - CV - CM A & 0 1 - 1 3 1 8 9 - BK C- RA I n R e : I N T E R N A T I O N A L P H A R M A C Y & D I S C O U N T I I , I N C .,

D e b to r .

-- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- W E S T G A T E V A C A T I O N V I L L A S , L T D ., W E S T G A T E L A K E S , L T D ., D e fe n d a n ts - A p p e lle e s , v ersu s J O E L L . T A B A S , P la in tif f- A p p e lla n t.

________________________ A pp ea l fr om the U ni t ed S t at es D i stri ctC ou rt forthe S outhe r n D i s tr i c tof F l or i da

_________________________ ( D e c e m be r12, 2005)Honora ble Will is B. Hunt, Jr., United States Senior District J udg e for the Northern * District of Ge org ia, sitting by desig nation. 2 B e fo r e E DMON DS ON , C h i e f J u d g e , B AR KE T T , C i r c u i tJ u d g e , a n d HU NT , * D i stri ctJudg e. P E R C U R I A M: J oe l L . T aba s ( the “ T r us t e e ” ) , a c ti ng a s ba nkr upt c y tr us t e e forthe e s t a t e of Int er nat i on al P harm ac y & D i sc ou ntII , Inc. (the “ D ebt or”) , appeal s the di stri ct c o u r t’s r e v e r s a l o f

ab a n k r u p tc y c o u r t o r d e rth a t s e t a s id e $ 1 4 ,1 0 3 .8 3 in p a y m e n ts m a de t o a ppe l l e e s W e s t ga t e V a c a t i on V i l l a s , L t d. a nd W e s t ga t e L a ke s , L t d. (c ol l ec t i vel y, “ W es t gat e” ). T he bank rupt cy courtse tas i de the paym ent s a s f r a udul e nttr a ns fe r s of

the D e bt or ’ s pr ope r t y , pur s ua ntt o 11 U . S . C . § 544( b) a nd F lo r id aS ta tu te s § 7 2 6 .1 0 5 ( 1 ) ( b ) . T h e c e n tr a l is s u e in th e a p p e a l is w h e th e rth e r e is s u f f ic ie n t e v id e n c e to c onc l ude tha tthe tr a ns fe r s i nvol ve d the pr ope r t y of the D e bt or , gi ve n tha tthe tr a ns fe r s w e r e m a de f

r om a n a c c ounthe l d by a n e nt i t y na m e d I nt e r nac i on al P ha r m a c y I nc . I I , ( “ I nt e r na c i ona l ” ) w hi l e the D e bt or ’ s na m e i s I nt e r nat i on al P h arm acy & D is c o untI I . W hi l e the ba nkr upt c y c our te nt e r e d j udgm e ntforthe T rust ee , fi nd i ng thatthe fund s i n q uesti on bel on ged t o the D ebt or, the di stri ctcourt r e v e r s e d , h o ld in g th a t th e r e c o r d c o n ta in e d in s u f f ic ie n tly c le a re v id e n c e to c o n c lu d e th a t I n te r n a tio n a l w a s am e r e m is n o m e rfo rI n te r n a c io n a l.It is undisput ed that Westg ate received the transfer s at issue in g ood faith, without 1 kn o w l e d g eo f

th e i r v o i d ab i l i ty. 3 O n app ea l , the T rust ee ar gu es thatthe di stri ctcourti m prop er l y overturned the bank rupt cy court ’ s r ea sonabl e f i nd i ng of fa ctthatthe ac coun tati ss ue w as ow ne d by the D e bt or , thus i gnor i ng the l a t i tude a f for de d the l ow e rc our t ’ s f i ndi ngs unde rc l e a re rr orr e vi e w . W e a gr e e , a nd r e ve r s e the di s tr i c tc our t , r e i ns t a t i ng the bank rupt cy court ’ s order . B AC KG R OU ND T ony N ovoaa nd D r um ni aM i que z - N ovoa( the “ N ovoa s ” ) w e r e the pri nci pal s of the nam ed D ebt or. A si de fr om the nam ed D ebt or (I nt er nat i on al P ha r m a c y & D i s c ountI I , I nc . ) , the N ovoa s c ontr ol l e d fourothe rF l or i da c orpor a t i ons w i th s i m i l a rna m e s : ( 1) I nt e r na c i ona l P ha r m a c y I nc . I I ; ( 2) I n te r n a tio n a l P h a r m a c y & D is c o u n t, I n c .; ( 3 ) I n te r n a tio n a l P h a r m a c y a n d D is c o u n t, I nc . I I I ; a nd ( 4) I nt e r na t i ona l R X P l us , I nc . N one of the s e fourc orpor a t i ons ha ve f ile d fo rb a n k r u p tc y p r o te c tio n . B e fo r e th e De b t o r ’ s b a n k r u p t c y p e t i t i o n wa s f i l e d , th e No v o a s m a d e th e t wo tr a ns fe r s a ti s s ue f

r om aB a nkA t l a nt i c a c c ounthe l d by I nt e r na c i ona l . A s ar e s ul tof these tra nsfe rs , W es t gat e r ec ei ved a t ot al of $1 4, 10 3. 83 . T he tra nsfe rs pai d o ff 1 m or t ga ge s on t i m e s ha r e pr ope r t i e s ow ne d by the N ovoa s . N e i the rthe D e bt ornor Int er naci on al had any i nt er es ti n o r obl i gat i on s r el ati ng t o the t i m es hare s, w hi ch4

ha ve be e n c ont i nuous l y ow ne d by the N ovoa s pe r s ona l l y s i nc e the da t e of the tran sfers. T he D ebt or fi l ed a bankrup t cy pet i t i on , l i sti ng i t s nam e a s I nt er nat i on al P ha r m a c y & D i s c ountI I , I nc . , e ve n though no s uc h c orpor a t i on ha s e ve re xi s t e d or be e n i nc or por a t e d i n F l or i da . N one the l e s s , the fe de r a l t a x num be rw hi c h the nam ed D ebt or prov i ded i n i t s bankrup t cy pet i t i on i dent i ca l l y m at ches the t ax num be rforI nt e r na c i ona l . F ur the r m or e , the D e bt orl i s t e d the B a nkA t l a nt i c a c c ount hel d b y I nt er naci on al as on e of i t s a ss et s i n the st at em entof fi nanci al af fa i rs fi l ed i n i t s b an k ru p t cy p ro ceed i n g s. A c c or di ngl y , the ba nkr upt c y T r us t e e i ni t i a t e d a n a dve r s a r y pr oc e e di ng a g a in s t W e s tg a te to r e c o v e rth e tr a n s fe r s m a d e f r o m th e I n te r n a c io n a l a c c o u n t, pu rs uantt o 1 1 U . S . C . § 5 44 (b) a nd F l ori da S t atut es § 7 26 . 10 5(1)(b). T he T rust ee pr oc e e de d on the the or y tha tthe D e bt or ’ s na m e w a s l i s t e d i nc orr e c t l y i n i t s f i l i ng a s I nt e r nat i ona l r a the rtha n I nt e r nac i ona l . T he ba nkr upt c y c our ta gr e e d, f i ndi ng th a t d e s p ite th e d if

fe r e n c e in s p e llin g , th e T r u s te e h a d p r o v e n th a t th e a c c o u n t in q u e s tio n b e lo n g e d to th e D e b to r , b e c a u s e : ( i) th e d if fe r e n c e in n a m e w a s o n ly s l i ght ; ( i i ) the D e bt or ’ s t a x i de nt i f i c a t i on num be rw a s i de nt i c a l t o the one l i s t e d on the Int er naci on al ac coun t ; and (i i i ) the paym ent s f rom the ac coun tati ss ue w er e a uthor i z e d by one of

the s a m e pr i nc i pa l s w ho c ontr ol l e d the D e bt or . T he5

bank rupt cy courtbase d i t s det er m i nat i on l ar gel y on t es t i m on y f rom the T rust ee tha tbe c a us e the D e bt or ’ s pr i nc i pa l s w e r e una va i l a bl e a tthe t i m e of f i l i ng, the na m e of the D e bt orm a y ha ve be e n m i s s pe l l e d i n the ba nkr upt c y pe t i t i on. T h e d is tr ic t c o u r t r e v e r s e d th e b a n k r u p tc y c o u r t, f in d in g th a t th e r e c o r d d id n o tco n t ai n su ffi ci en tev i d en ce t o su p p o rta fi n d i n g th atIn t ern aci o n al w as si m p l y a m is n o m e rfo rI n te r n a tio n a l. C o m p a r in g th e r e c o r d in th is c a s e to o th e rd e c is io n s in w hi ch the pet i t i on erroneou sl y m i snam ed the debt or, the di stri ctcourtfoun d that th ere w as i n su ffi ci en tev i d en ce t o co n cl u d e th at“ In t ern at i o n al ” w as c le a r ly a m i s nom e rfor“ I nt e r na c i ona l . ” M or e ove r , the di s tr i c tc our the l d i n the a l t e r na t i ve thateven i f I nt er nat i on al w as erroneou sl y s ub sti tut ed for I nt er naci on al , the T rust ee d id n o t e s ta b lis h th a t I n te r n a c io n a l c o n tr o lle d th e f u n d s in th e a c c o u n t a t is s u e . S pe c i f i c a l l y , w hi l e I nt e r na c i ona l di d ha ve l e ga l t i t l e , the di s tr i c tc our the l d tha tthe T rust ee al so w ou l d b e r equi re d sho w thatInt er naci on al ac tual l y had control ov er th o s e f u n d s , a s th e r e c o r d h e r e o n ly in d ic a te d th a t o n e o f th e D e b to r ’s p r in c ip a ls had m ade tra nsfe rs fr om the Int er naci on al ac coun tfor purpo se s unrel at ed t o ei ther th e D e b to ro rI n te r n a c io n a l. T h e T ru st ee t i m el y ap p eal s.

ST AN DA RD OF RE VI EW A s the s e c ond c our tt o r e vi e w the ba nkr upt c y c our t ’ s j udgm e nt , w e e xa m i ne6

the ba nkr upt c y c our t ’ s or de ri nde pe nde nt l y of the di s tr i c tc our t . I n r e B i l z e r i a n, 153 F . 3d 1278, 1281 ( 11th C i r . 1998) . S pe c i f i c a l l y , w e r e vi e w de t e r m i na t i ons of l a w m a de by e i the rthe di s tr i c torba nkr upt c y c our tde novo, w hi l e r e vi e w i ng the ba nkr upt c y c our t ’ s f

i ndi ngs of

fa c tforc l e a re rr or . I n r e I nt ' l . A dm i n. S e r vs . , 408 F . 3d 689, 699 ( 11th C i r . 2005) ; I n r e F i n. F e de r a t e d T i t l e & T r us t , I nc . , 309 F . 3d 1325, 1328- 29 ( 11th C i r . 2002) . T he ba nkr upt c y c our t ’ s f i ndi ngs of

fa c ta r e not c le a r ly e rr o n e o u s u n le s s , in lig h t o f a ll th e e v id e n c e , w e a r e le f t w ith th e d e f

in ite a nd f i r m c onvi c t i on tha tam i s t a ke ha s be e n m a de . I n r e C ox, 338 F . 3d 1238, 1241 (11t h C i r. 20 03 ). DI S C US S I ON U n d er 1 1 U . S . C . § 5 4 4 (b ), a tru st ee i n b an k ru p t cy m ay “ st ep i n t o th e sh o es” o f a n u n s e c u r e d c r e d ito ra n d v o id atr a n s fe ro f a n in te r e s t in th e d e b to r ’s p r o p e r ty th a t th e u n s e c u r e d c r e d ito rw o u ld h a v e th e p o w e rto v o id u n d e rfe d e r a l o rs ta te l a w . S e e I n r e G r a ha m , 747 F . 2d 1383, 1386- 87 ( 11th C i r . 1984) . I n a ddi t i on, F l or i dal a w pr ovi de s tha tatr a ns fe rm a de by ade bt ori s voi da bl e a s f r a udul e nt w he r e the de bt orm a de the tr a ns fe r : ( i ) w i thoutr e c e i vi ng r e a s ona bl y e qui va l e nt v a lu e in e x c h a n g e ; ( ii) a n d r e a s o n a b ly s h o u ld h a v e b e lie v e d it w o u ld in c u rd e b ts b e y o n d its a b ility to p a y a s th e y c a m e d u e . S e e F la . S ta t. § 7 2 6 .1 0 5 ( 1 ) ( b ) . I n o r d e rto e x e r c is e th e s e p o w e r s , th e T r u s te e m u s t p r o v e , in r e le v a n t p a r t,7

th a t th e tr a n s fe ra t is s u e in v o lv e d ap r o p e r ty in te r e s t o f th e d e b to r . 1 1 U .S .C . § 544( b) ( “ the tr us t e e m a y a voi d a ny tr a ns fe rof a n i nt er es tof

the debt or i n p ropert

y .

. . ” ) ; s e e a l s o I n r e L e vi ne , 134 F . 3d 1046, 1053 ( 11th C i r . 1998) ( “ 11 U . S . C . § 544

. . . perm i t s the trust ee t o avo i d any tra nsfe r of the prop er t y of the debt or”) ( i nt e r na l c i t a t i ons a nd quot a t i ons om i tt e d) . W he the rthe tr a ns fe ri nvol ve s the prop er t y of the D ebt or i s afi nd i ng of fa ctthati s s ubj ec tt o revi ew on l y for cl ear e rr or . S e e I n r e C ha s e & S a nbor n C orp. , 813 F . 2d 1177, 1180 ( 11th C i r . 1987) (i m pl yi ng thatthe det er m i nat i on thatfund s are a debt or’ s property i s afa ctual fi nd i ng ); In re G utpel et , 13 7 F . 3d 74 8, 75 2 (3d C i r. 19 98 ) ( subj ec t i ng “ bank rupt cy c our t ’ s f i ndi ng tha tthe [ d] e bt orha d a n i nt e r e s ti n the [ ] [ p] r ope r t y ” t o r e vi e w for c le a re rr o r ) . I n thi s c a s e , the di s tr i c tc our tr e ve r s e d the ba nkr upt c y c our t ’ s fa c tua l f i ndi ng tha tthe tr a ns fe ri nvol ve d the de bt or ’ s pr ope r t y ba s e d w ha ti tt e r m e d al a c k of “c e r ta in ty ” a s to th e r e la tio n s h ip b e tw e e n I n te r n a tio n a l a n d I n te r n a c io n a l. H ow e ve r , thi s l a c k of

“ c e r t a i nt y ” doe s notr e nde rthe ba nkr upt c y c our t ’ s f i ndi ngs cl earl y e rr on eous. S ee In re C ox , 33 8 F . 3d at12 41 (11t h C i r. 20 03 ) ( bank rupt cy c our t ’ s fa c tua l f

i ndi ngs a r e notc l e a r l y e rr one ous unl e s s the y l e a ve the f i r m a nd defi ni t e i m pres si on thata m i st ake has been m ade) . F urtherm ore, the T rust ee w as o n l y req u i red t o p ro v e th atth e tran sfer i n v o l v ed th e D eb t o r’ s p ro p ert y b y a8

pr e ponde r a nc e of

the e vi de nc e . I n r e A m . W a y S e r v. C orp. , 229 B . R . 496, 525 (B ankr. S . D . F l a. 19 99 ). T he bank rupt cy courtfoun d thatst andard sati sf i ed base d on e vi de nc e tha tthe D e bt or ’ s t a x i de nt i f i c a t i on num be rm a t c he d the num be rfor Int er naci on al , and t haton e of the N ov oas ( w ho control l ed the D ebt or) a utho ri ze d the tr a ns fe r s a ti s s ue . I n l i ghtof thi s e vi de nc e , a nd gi ve n the l i m i t e d na tur e of our c l e a re rr orr e vi e w , w e c a nnota gr e e tha tthe ba nkr upt c y c our t ’ s fa c tua l f i ndi ng c o n c e r n in g th e m is n o m e ro f th e D e b to rw a s c le a r ly e rr o n e o u s . I n the a l t e r na t i ve , the di s tr i c tc our the l d tha te ve n i f I nt e r na c i ona l c oul d be subst i tut ed for I nt er nat i on al , there w as i nsuffi ci entre cord evi dence t o sho w that Int er naci on al control l ed the fund s a ti ss ue. H ow ever , as the di stri ctcourt re co g n ized , fu n d s in a d eb to r’s a cc o u n t are g en er ally p re su m ed to b e th e d eb to r’s pr ope r t y . S e e N a t ’ l B a nk of G a . v. K e nne s a w L i fe & A c c i de ntI ns . C o. , 800 F . 2d 1542, 1545 ( 11th C i r . 1986) ( r e c ogni z i ng tha ti n m os ts t a t e s the na m e ort i t l e t o a ba nk a c c ountc r e a t e s apr e s um pt i on of ow ne r s hi p i n the t i t l e hol de r ) ; c f . B e a l B a nk, S S B v. A l m and & A ss ocs. , 78 0 S o. 2d 45 , 58 -59 (F l a. 20 01 ) ( ho l di ng thatw here bank ac coun tt i t l ed i n the nam es of t w o m arri ed pers on s, a pre sum pt i on ar i se s that bo th h ol d the fund s i n the ac coun tas a t enancy by the ent i re t y) . W hi l e the di stri ct courtw as troub l ed by the l ac k o f e vi dence thatInt er naci on al ac tual l y e xerc i se d c o n tr o l o v e rth e a c c o u n t, c o u p le d w ith e v id e n c e th a t o n e o f th e N o v o a s d id a c tu a lly9

e x e r c is e c o n tr o l o v e rth e a c c o u n t, w e fo u n d n o c a s e s w h ic h s u g g e s t th a t a pr i nc i pa l ’ s e xe r c i s e of

c ontr ol ove raD e bt or ’ s a c c ountne ga t e s the pr e s um pt i on thatthe ac coun tfund s r em ai n p roperty of the D ebt or. G i ven t hatInt er naci on al he l d l e ga l t i t l e t o the a c c ount , a nd gi ve n the l a c k of e vi de nc e s uf

f i c i e ntt o r e butthe p re su m p ti o n th at In tern ac io n al co n tro ll ed th e a cc o u n t fu n d s, th e d istrict co u rt’s a lte r n a tiv e h o ld in g r e g a r d in g c o n tr o l o f th e f u n d s p r o v e s in s u f

f ic ie n t to s u s ta in its ju d g m e n t. A s w e c onc l ude tha ts uf f i c i e ntr e c or d e vi de nc e s uppor t s the D e bt or ’ s c ontr ol ove rthe f

unds , a nd a l s o c onc l ude tha tthe ba nkr upt c y c our t ’ s fa c tua l f i ndi ngs c onc e r ni ng m i s nom e rof the D e bt ora r e notc l e a r l y e rr one ous , w e r e ve r s e the d is tr ic t c o u r t a n d r e in s ta te th e b a n k r u p tc y c o u r t ju d g m e n t. R E V E R S E D .