United States Bankruptcy Appellate Panel

For the Eighth Circuit

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Nos. 16-6034 and 16-6035

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In re: Top Hat 430, Inc., Formerly doing business as Top Hat, Inc., doing business 

as Be Iced Jewelers, doing business as Be Iced Diamond Exchange, doing business 

as Gold Stop, doing business as Bidx

lllllllllllllllllllllDebtor

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Randall L. Seaver, Trustee

lllllllllllllllllllll Appellant/Cross-Appellee

v.

Pennie Glasser

lllllllllllllllllllll Appellee/Cross-Appellant

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Appeals from United States Bankruptcy Court 

for the District of Minnesota - Minneapolis

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Submitted: April 26, 2017

Filed: June 12, 2017

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2

Before SALADINO, Chief Judge, FEDERMAN and SHODEEN, Bankruptcy 

Judges. 

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FEDERMAN, Bankruptcy Judge

Randall L. Seaver, Chapter 7 Trustee in the bankruptcy case of Top Hat 430, 

Inc., filed suit against Pennie Glasser, seeking to recover from her, as a preference, 

a payment made by the Debtor to her. Since the payment was made more than ninety 

days, but less than one year, prior to its filing bankruptcy, the Trustee can only 

prevail if Ms. Glasser is found to have been an insider of the Debtor at the time of 

payment. Ms. Glasser is the former wife of an insider of the Debtor, as well as a

minor investor and employee of the Debtor at the time of payment. The Bankruptcy 

Court1 held that Ms. Glasser was not an insider of the Debtor. Therefore, the

payment was not an avoidable preference pursuant to 11 U.S.C. § 547(b) and 

Minnesota Statute § 513.45(b). The Trustee appeals, and Ms. Glasser cross-appeals 

the finding that, even though she was not an insider, the transaction between her and 

the Debtor was not at arm’s length. For the reasons that follow, we AFFIRM.

FACTUAL BACKGROUND

Top Hat, Inc., was founded in 2004 by David Pomije, Sr. and Duane 

Wermerskirchen, and operated under the name of “Be Iced Jewelers.” Pennie 

Glasser and her current husband, David Glasser, were stockholders of Top Hat, Inc., 

owning approximately 2.1% of the company’s stock. 

 1 The Honorable Michael E. Ridgway, United States Bankruptcy Judge for 

the District of Minnesota.
3

Top Hat 430, Inc. the Debtor in this case, operated retail jewelry stores, buying 

and selling new and used jewelry, precious metals, and gemstones. In 2012, Top 

Hat 430 merged with Top Hat, Inc., with Top Hat 430 (the “Debtor”) emerging as 

the surviving entity. Mr. Pomije was the president of the Debtor and had control 

over its operations.

Pennie Glasser and Mr. Pomije had been married from December 1985 

through February 1997, prior to the formation of the Debtor. They share three 

children, all of whom are grown. During the marriage, Ms. Glasser worked at two 

companies founded by Mr. Pomije, namely, Protectronics, Inc. and Funco, Inc. 

After the marriage ended, Ms. Glasser continued to work for other companies 

founded by Mr. Pomije, including 2nd Swing, Inc. and the Debtor. The couple’s son 

also worked for the Debtor. Ms. Glasser testified that, due to Mr. Pomije’s past 

successes, she had confidence in him as a business person.

In March of 2011, which was before Ms. Glasser went to work for the Debtor, 

Mr. Pomije approached the Glassers (among other potential lenders) regarding a

bridge loan for the Debtor. The bridge loans were intended to be short term loans 

which would be repaid from a new capital infusion, for which Mr. Pomije would 

seek investors. David Glasser negotiated the terms of the Glassers’ loan with Mr. 

Pomije. As a result of those negotiations, on March 31, 2011, Mr. Pomije signed, 

on behalf of the Debtor, a promissory note in favor of the Glassers in the amount of 

$200,000. The terms of the note provided for repayment of the $200,000 principal 

within 90 days without interest, a $10,000 origination fee, and a 20% interest rate if 

default occurred. Mr. Pomije personally guaranteed the note. Shortly after this loan 

was made, Ms. Glasser went to work sorting jewelry at the corporate office for the 

Debtor. Ms. Glasser testified she went to work at the Debtor because she wanted to 

“get out of the house.” 
4

Several other people also made bridge loans to the Debtor. There is no 

evidence that the Debtor repaid the principal on any of those loans within 90 days. 

However, it did make interest payments, including $36,555.55 to the Glassers, from 

the middle of 2011 through early 2012. Meanwhile, Mr. Pomije was working on 

raising capital to repay the bridge loans and operate the company. As part of those 

efforts, in November 2011, the Debtor issued a Private Placement Memorandum 

(“PPM”) intending to raise $8 million in capital. The PPM described the lenders and 

terms of the bridge loans, and provided that $1.3 million of the capital raised would 

be used to pay bridge loans. As a result of the PPM, the Debtor raised $4 million in 

capital on or about April 13, 2012.2

 Using those funds, the Debtor made a payment 

in the amount of $205,444.45 to the Glassers on April 19, 2012, paying the note in 

full. Some of the other bridge loans were also paid, but not all of them. In addition, 

a few, but not all, creditors with accounts over ninety days were paid. The evidence 

at trial was that it was Mr. Pomije who decided which creditors to repay with the $4 

million capital infusion. 

Less than a year later, on February 12, 2013, the Debtor filed a Chapter 11 

bankruptcy case. The case was converted to Chapter 7 on March 25, 2013, and the 

Chapter 7 Trustee filed an adversary proceeding against Ms. Glasser for recovery of 

the payment as a preference, asserting that she was a non-statutory insider, and so 

the one-year lookback period in § 547(b)(4) applied. Mr. Glasser was not named as 

a defendant in the preference action. 

Following a trial, the Bankruptcy Court entered judgment in favor of Ms. 

Glasser, finding that, although the transaction was not at arm’s length, she was not 

an insider. The Trustee appeals. And, although Ms. Glasser prevailed as to the 

 2 A publicly held company purchased a 20% share of the Debtor’s preferred 

stock for $4 million in cash. 
5

outcome, she cross-appeals the conclusion that the transaction was not at arm’s 

length. 

STANDARD OF REVIEW

Generally speaking, we review findings of fact for clear error and conclusions 

of law de novo.

3

 However, as we commented in In re Rosen Auto Leasing, Inc., the 

appropriate standard of review for a determination of non-statutory insider status is 

in dispute.4

 Indeed, the United States Supreme Court recently granted certiorari on 

the question of whether review is de novo, clearly erroneous, or a combination of 

both.

5

 In In re Rosen Auto, we said we believed the determination is a mixed 

question of law and fact and, until the Supreme Court says otherwise, we adhere to 

that opinion. Nevertheless, as was the case in Rosen Auto, we would reach the same 

result under either standard of review. 

DISCUSSION

Section 547(b) of the Bankruptcy Code provides that a trustee may avoid the 

transfer of an interest of the debtor in property –

(1) to or for the benefit of a creditor;

 3 Addison v. Seaver (In re Addison), 540 F.3d 805, 809 (8th Cir. 2008).

 

4 Stalnaker v. Gratton (In re Rosen Auto Leasing, Inc.), 346 B.R. 798, 803 

(B.A.P. 8th Cir. 2006). 

5 U.S. Bank N.A. v. The Village at Lakeridge, LLC (In re The Village at 

Lakeridge, LLC), 814 F.3d 993 (9th Cir. 2016), cert. granted, 137 S.Ct. 1372 

(2017) (the Ninth Circuit holding that establishing the definition of non-statutory 

insider status is reviewed de novo, but whether a specific person qualifies as such 

an insider is a question of fact reviewed for clear error; the Third, Seventh, and 

Tenth Circuits holding that review is de novo).
6

(2) for or on account of an antecedent debt owed by the debtor before 

such transfer was made;

(3) made while the debtor was insolvent;

(4) made--

(A) on or within 90 days before the date of the filing of the 

petition; or

(B) between ninety days and one year before the date of the filing 

of the petition, if such creditor at the time of such transfer was 

an insider; and

(5) that enables such creditor to receive more than such creditor would 

receive if--

(A) the case were a case under chapter 7 of this title;

(B) the transfer had not been made; and

(C) such creditor received payment of such debt to the extent 

provided by the provisions of this title.6

“The Trustee bears the burden of proving each of these elements by a preponderance 

of the evidence.”7

 

Section 513.45(b) of the Minnesota Statutes, on which the Trustee also relied, 

provides:

A transfer made by a debtor is voidable as to a creditor whose claim 

arose before the transfer was made if the transfer was made to an insider

 6 11 U.S.C. § 547(b) (emphasis added).

7 Doeling v. O’Neill (In re O’Neill), 550 B.R. 482, 514 (Bankr. D. N.D. 

2016) (citing Stingley v. AlliedSignal, Inc. (In re Libby Int’l, Inc.), 247 B.R. 463, 

466 (B.A.P. 8th Cir. 2000)).
7

for an antecedent debt, the debtor was insolvent at that time, and the 

insider had reasonable cause to believe that the debtor was insolvent.8

In order for the Trustee to prevail under either statute, the Trustee was required 

to prove that Ms. Glasser was an insider of the Debtor, which is the sole issue 

presented in this appeal.

As relevant here, the term “insider” is defined in § 101(31)(B) of the 

Bankruptcy Code:

(31) The term “insider” includes—

* * *

(B) if the debtor is a corporation--

(i) director of the debtor;

(ii) officer of the debtor;

(iii) person in control of the debtor;

(iv) partnership in which the debtor is a general partner;

(v) general partner of the debtor; or

(vi) relative of a general partner, director, officer, or 

person in control of the debtor. . . .9

Minnesota’s definition of “insider” is nearly identical,10 and at least one court in 

Minnesota has used the same analysis under both statutes.11 

 8 Minn. Stat. § 513.45(b).

9 11 U.S.C. § 101(31)(b) (emphasis added).

10 See Minn. Stat. § 513.41(8)(ii).

11 See, e.g., In re Petters Co., Inc., 499 B.R. 342, 365-66 (Bankr. D. Minn. 

2013). 
8

The parties agree that Ms. Glasser does not fall within any of the statutorily 

defined categories of insiders with respect to the Debtor, but the list of insiders in §

101(31) “is illustrative, not exclusive,” and so we must look beyond the statutory 

categories to determine if Ms. Glasser is an insider of the Debtor.

12

The legislative history emphasizes the closeness of the relationship in making 

this determination: “[A]n insider is one who has a sufficiently close relationship 

with the debtor that [her] conduct is made subject to closer scrutiny than those 

dealing at arm’s length with the debtor.”13 The determination of whether a person 

is a non-statutory insider is fact-intensive, and must be made on a case-by-case 

basis.14 Since each case that decides non-statutory insider issues is based on its 

unique facts, courts have developed any number of tests for that determination.15 In 

In re Rosen Auto, we described “insider” as follows:

 12 In re Rosen Auto, 346 B.R. at 804; 11 U.S.C. § 102(3) (the terms 

“includes” and “including” are not limiting).

13 H.R. REP. No. 95–595, at 25 (1978), reprinted in 1978 U.S.C.C.A.N. 

5963, 6269; S.R. REP. No. 95–989, at 24 (1978), reprinted in 1978 U.S.C.C.A.N. 

5787, 5810 (quoted in Matter of Newcomb, 744 F.2d 621, 625 n.4 (8th Cir. 1984)).

14 In re Petters Co., 499 B.R. at 365.

15 See, e.g., In re Winstar Commc’ns, Inc., 554 F.3d 382 (3d Cir. 2009)

(holding that a person need not be in “actual control” of the debtor to be an 

insider); In re U.S. Medical, Inc., 531 F.3d 1272, 1280 (10th Cir. 2008) (“We hold 

here that a creditor may only be a non-statutory insider of a debtor when the 

creditor’s transaction of business with the debtor is not at arm’s length; a 

bankruptcy court, however, may find a statutory insider without this 

requirement.”); In re O’Neill, 550 B.R. at 516-17 (using a multi-element test in the 

context of a former spouse); In re Petters Co., 499 B.R. at 366 (“a closeness of 

relationship alone is not sufficient to establish insider status for the avoidance of a 

particular transfer. There must also be something anomalous, beyond arms-length, 

about the transaction that featured the transfer.”); Bruno Mach. Corp. v. Troy Die 
9

An insider is one who does not deal at arm’s length with the debtor. 

Involvement in the day-to-day business of a debtor may elevate a 

creditor to insider status. However, the creditor would have to exert 

control over the debtor before gaining insider status. The ability of a 

creditor to compel payment of a debt is insufficient control to render 

the creditor an insider. In ascertaining insider status, the closeness of 

the relationship between the parties is also relevant.16

As some other courts have done,17 and as this passage would seem to suggest, 

the Bankruptcy Court here applied essentially a three-part test considering: (1) the 

closeness between the Ms. Glasser and the Debtor; (2) the degree of control or 

influence Ms. Glasser had over the Debtor; and (3) whether the transactions between 

them were conducted at arm’s length. Despite the various tests coming from courts 

attempting to deal with endless variations of possible insiders, “[i]t is important not 

to allow judicial glosses . . . to supersede the statute itself.”18 Based on the statutory 

language and legislative history, the ultimate issue is whether the creditor has a 

 

Cutting Co., LLC (In re Bruno Mach. Corp.), 435 B.R. 819 (Bankr. N.D. N.Y. 

2010); In re Oakwood Homes Corp., 340 B.R. 510, 523 (Bankr. D. Del. 2006) 

(“courts have applied insider status ‘flexibly to include a broad range of parties 

who have a close relationship with the debtor’”) (citation omitted); Hirsch v. 

Tarricone (In re Tarricone), 286 B.R. 256 (Bankr. S.D. N.Y. 2002) (holding that 

influence by an insider can be assumed, so it is unnecessary to prove actual control 

if a close relationship has been established).

16 In re Rosen Auto, 346 B.R. at 804 (citing In re Newcomb, 744 F.2d 621, 

625 n. 4 (8th Cir. 1984)).

17 See, e.g., OHC Liquidation Trust v. Credit Suisse First Boston (In re 

Oakwood Homes Corp.), 340 B.R. 510, 523-24 (Bankr. D. Del. 2006).

18 Krieger v. Educ. Credit Mgmt. Corp., 713 F.3d 882, 884 (7th Cir. 2013) 

(in the context of the dischargeability of student loans). 
10

sufficiently close relationship to management to presume that that creditor unfairly 

received special treatment. 

In determining closeness, the degree of control a defendant had over the 

debtor is certainly relevant. As stated, however, the parties agree that Ms. Glasser 

was not “in control of the Debtor,” and is thereby not a statutory insider. But at some 

point, if any measure of control were proven, that would be a factor in evaluating 

the closeness of the relationship with the Debtor.

Here, the Trustee argues that since Ms. Glasser worked in the Debtor’s 

warehouse, she had some control over its operations. But being an employee proves 

nothing, since there was no evidence that she had anything at all to do with any 

operational decisions. We agree that the Bankruptcy Court correctly found that the 

Trustee failed to prove that Ms. Glasser had any measure of control over the Debtor’s 

operations. 

As to closeness – the ultimate determination here – the Trustee points to 

several other aspects of Ms. Glasser’s relationship with the Debtor (via Mr. Pomije). 

First, the Trustee points out that she was his ex-spouse, and that they had three 

children. But they had been divorced for more than fifteen years at the time of 

payment, and the three children were grown. Next, the Trustee points out that Ms. 

Glasser (and her husband) made the loan to the Debtor without receiving its financial 

records. But, as Ms. Glasser testified, she and her husband made the loan due to her 

past relationship with Mr. Pomije, because she had confidence based on his past 

successes. And, the Glassers both testified that they consulted with their accountant 

and financial manager about the loan. 

Next, the Trustee points out that the Glassers got a personal guaranty from 

Mr. Pomije while other bridge lenders did not. But the loans to the various bridge 
11

lenders all had different terms. For example, several of the lenders were given 

warrants (options to purchase stock in the future for a set price), and the right to 

payment of interest, at various rates, during the first 90 days of the loan. The 

Glassers instead opted for a personal guaranty and charged an origination fee rather 

than interest for the 90-day repayment period. While the Glassers were given a 

default interest rate of 20%, slightly higher than some of the others, that is hardly 

sufficient to prove a less than arm’s length negotiation. The Trustee failed to prove 

that there was anything untoward about Mr. Glasser’s efforts to negotiate the best 

deal for him and his wife. The fact that they negotiated slightly different terms 

proves nothing. 

And, finally, the Trustee argues that the fact that Ms. Glasser was repaid 

means that she was sufficiently close to Mr. Pomije to be treated as an insider. But 

that would make an insider of anyone who gets paid within a year prior to 

bankruptcy. Ultimately, the Trustee argues that while no one part of their 

relationship proves sufficient closeness, the various ways in which their lives 

intersect create a close enough relationship to make Ms. Glasser an insider. The 

Court correctly disagreed, holding that the Trustee failed to prove that Ms. Glasser 

had any measure of control other than as a creditor to whom payment was due, or 

that she had a sufficiently close relationship with Mr. Pomije to merit insider status.

Up to this point, this appeal seems relatively straightforward. However, the 

Bankruptcy Court also found that the original loan from the Glassers to the Debtor 

was not made at arm’s length. As seen, the evidence was that Mr. Glasser negotiated 

the terms of the loan, as did five other lenders in the same set of bridge loans.19 The 

bridge lenders all had Mr. Pomije over a barrel – he needed their loans to keep his 

 19 Mr. Pomije himself made three bridge loans at this same time as well.
12

business in operation until additional capital could be raised. So, not surprisingly 

given the risk, each of them negotiated terms that were harsher than the Debtor 

would have gotten if it had been able to obtain conventional bank financing. Like 

the other bridge lenders, the Glassers knew they would only be repaid if the Debtor 

succeeded in raising new capital. The fact that Mr. Glasser only made the loan on 

terms that were acceptable to him and his wife, given the risk, does not mean that 

the negotiations were at less than arm’s length. And, other than the fact that Mr. 

Glasser drove a hard bargain, there is no evidence about those negotiations which 

shows anything other than that he and Mr. Pomije were each acting in their own best 

interests.

More importantly, the Court did not find that the repayment of the loan was 

at less than arm’s length. We think it significant that the PPM expressly stated that 

$1.3 million of the funds raised would be used to repay bridge loans. Of course, 

some of the bridge loans were not repaid from the initial capital infusion, but it is 

also significant that all of the bridge loans which had been made at the same time as 

the Glassers’ and which were not paid, had both warrants and lower interest rates. 

As a result, it made good business sense for the Debtor to repay the Glassers. In 

sum, the Trustee failed to prove that Ms. Glasser was an insider simply because her 

husband negotiated the best deal he could get, or because the obligation to her was 

repaid. 

After considering the statute, the legislative history, and after weighing the 

factors we considered in Rosen Auto, the Bankruptcy Court found that Ms. Glasser 

did not have sufficient closeness to be treated as an insider. Since we agree with 

this ultimate conclusion, we AFFIRM. 

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