IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF ALABAMA

NORTHERN DIVISION

N.D. HORTON, JR., JAMES M. )

REYNOLDS, III, )

 )

Appellants, )

 ) CIVIL ACTION NO. 2:06cv746-WHA

v. )

 ) (WO)

J. LESTER ALEXANDER, III, )

 )

Appellee. )

ORDER

This cause is before the court on an appeal under 28 U.S.C. §158(a) from the Order

Denying the Motion to Alter or Amend entered by the United States Bankruptcy Court for the

Middle District of Alabama on July 17, 2006 and from the Judgment entered by that same court

on May 30, 2006. This matter has been fully briefed, and the court heard oral argument on

November 15, 2006. Subsequent to oral argument, this court certified a question to the Supreme

Court of Alabama for interpretation. On July 13, 2007, the Supreme Court issued an opinion

interpreting ALA. CODE §8-9A-8(d), thereby answering this court’s certified question. See

Horton v. Alexander, __ So. 2d __ , No. 1060445, 2007 WL 2019588 (Ala. July 13, 2007). For

the reasons to be discussed, the bankruptcy court’s Judgment is due to be REVERSED and the

case is due to be REMANDED to the bankruptcy court for further proceedings consistent with

that decision.

Although the appellants raised three issues on appeal, the court, after reviewing the

parties’ briefs, determined that only one of the issues might be meritorious. Therefore, the court

focused primarily on the issue of whether the trial court erred in failing to determine that ALA.

CODE §8-9A-8(d) applies in the present case and provides a complete defense or an offset to the

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1

 It should be noted that the appellee does not concede that the appellants qualify as

“good faith transferees.” The bankruptcy court did not address this issue below. This issue,

however, is pertinent as to whether the offset applies. The court believes that the bankruptcy

court, as the finder of fact in this case, is the appropriate venue for such a determination. 

Accordingly, the bankruptcy court should address this issue on remand.

bankruptcy trustee’s claims. 

Without rehashing this entire opinion, the court will now apply the Alabama Supreme

Court’s interpretation of §8-9A-8(d) to the present case. The Alabama Supreme Court’s full

opinion is attached hereto as Appendix A. In essence, the Alabama Supreme Court rejected the

trustee’s argument that §8-9A-8(d) codified the “indirect benefit rule” commonly applied in

other jurisdictions, because the court could not harmonize the plain meaning of the statute with

such an interpretation. Accordingly, the Alabama Supreme Court held that “the phrase in § 8-

9A-8(d), ‘or to another person as a consequence of the debtor’s making such transfers,’ refers to

value given by a good-faith transferee to any other person, without qualification or exception, as

a consequence of the debtor’s transfer.” Horton, 2007 WL 2019588 at *7. The Alabama

Supreme Court further concluded that “[a]ny dissatisfaction with the consequences of the plain

meaning of § 8-9A-8(d) is a matter for the legislature.” Id. 

In its opinion below, the bankruptcy court failed to address the appellants’ argument

regarding §8-9A-8(d). Following the Alabama Supreme Court’s interpretation, however, the

appellants are subject to an offset of liability so long as the appellants qualify as good faith

transferees.1

 The appellee recognizes as much in his Post-Hearing Memorandum (Doc. 12-3). 

The bankruptcy court thus erred in failing to address the issue of whether the Alabama

Fraudulent Transfer Act mandates an offset against the appellants’ liability. 

Based on the foregoing discussion, it is hereby ORDERED that

The bankruptcy court’s May 30, 2006 Judgment is REVERSED, and the case is

Case 2:06-cv-00746-WHA Document 18 Filed 08/08/2007 Page 2 of 3
REMANDED to the bankruptcy court for further proceedings consistent with this Order.

Done this 8th day of August, 2007.

 /s/ W. Harold Albritton 

W. HAROLD ALBRITTON

SENIOR UNITED STATED DISTRICT JUDGE

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