FI L ED U.S. COURT OF APPEAL S EL EVENTHCI RCUI T J ULY 13, 2012 J OHN L EY CL ERK [DO NOT PUBLISH] IN THE U

NITED STATE S COURT OF APPEALS FOR THE ELE VENTH CIRCUIT

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__ __ __ __ __ __ __ __ __ __ __ __ D.C. Dock etNos . 8: 10 -cv -0 10 36 -J SM ; 8: 05 -b k- 27 38 1- KRM InRe: JAM ES LOGAN MCM ILLIN, Deb to r,

__ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ ANGELA STATHOPOULOS, ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll Pl ai nt iff -Ap pe ll an t,
ve rs us DAN ALFORD, ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll Defen da nt -Ap pe ll ee.

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__ __ __ __ __ __ __ __ __ __ __ __ D.C. Dock etNos . 8: 10 -cv -0 10 36 -J SM ; 8: 05 -b k- 27 38 1- KRM Case: 11-12114 Date Filed: 07/13/2012 Page: 1 of 9InRe: JAM ES LOGAN MCM ILLIN, Deb to r,

__ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ ANGELA STATHOPOULOS, ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll Pl ai nt iff -Ap pe ll ee, ve rs us DAN ALFORD, ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll Defen da nt -Ap pe ll an t.

__ __ __ __ __ __ __ __ __ __ __ __ App eal s fr om

th e Uni te d S ta te s Di st ric t Co urt forth e Mi dd le Dis tri ctof F lo rid a

__ __ __ __ __ __ __ __ __ __ __ __ (J ul y 13 , 20 12 ) Befo re DUBINA, Ch ie f Ju dg e, EDMONDSON, Circ ui t J ud ge , andGOLDBERG, * Ju dg e. PER CURI AM: I. BACK GROUND

Honora ble Richard W. Goldber g , United States Court of International Trade J udg e, * sitti ngby designation. 2 Case: 11-12114 Date Filed: 07/13/2012 Page: 2 of 9App el la nt -Tru st ee An ge laSta th op ou lo s (“ App el la nt -Tru st ee”) is th e

Trus te e fo r th e b an krup tc y est at e o f Ja m es Log anMcM il la n (“ Deb to r”). App el la nt -Tru st ee ap pe al s t he di st ric t co urt’s jud gm en t af firm in g the ba nkrupt cy co urt’s o rd er i n a n a dv ers ary pr oc eed in g s he fil ed . In the ad ve rs ary pr oc eed in g, th e Tru st ee al le ge d s ev eral cau se s o f act io n a ga in stm ul ti pl e in di vi du al s, i nc lu di ng se ve ral frau du le ntco nv ey an ce cl ai m s ag ai ns t Ap pe ll ee Dan Alfo rd(“ Alfo rd ”). The re ar e m an y

in di vi du al s an d e nt it ie s i nv ol ve d i n t hi s ca se . Debt oris a se ria l b an krup tc y

fil er. Virt ua l Trad in g Gro up , Inc . (“ Deb to r/VT”) is a co m pa ny th atDebt ordo es no t o wn, b utin whi ch Debt orha d s uf fic ie ntco nt ro l s uc h t ha t t he ba nk rupt cy

co urt fo un d i t t o b e Deb to r’s al te r eg o. Al fo rdown s B lu ewat er Trad in g C om

pa ny (“ BWT ”), a Geo rg iaco rp or at io n t ha t i s n otaffi li at edwit h Deb to r/VT b utth atha d “ pa rtn ered ” wit h Deb to r/VT i n m an y tra ns act io ns in th e pr oduc ts -tr ad in g b us in es s. Alf or d i s al so affi li at edwit h t he co ns tru ct io n c om pa ny So ut he as te rnGene ral (“ SEG”). Alfo rddo es no t o wn SEG; ho wev er, h e m ak es lo an s t o S EG andsh ares in th e co m pa ny’ s p ro fit s an d l os se s. Two p art ic ul ar tran sa ct io ns form th e b as is of Ap pe ll an t-Tr us te e’s cl ai m s th atAlfo rdis li ab le to th e es ta te forrece iv in g afrau du le nttra ns fer fr om Deb to r/VT. The fir sttra ns act io n i nv ol ve s t he tra ns fer o f a s um of m on ey

fro m BWT to Debt or/VT, an d t he n fr om Debt or/VT to SEG. The se co nd , andrel at ed , 3 Case: 11-12114 Date Filed: 07/13/2012 Page: 3 of 9tra ns act io n i nv ol ve s t he subs eque nttra ns fer o f a p ie ce o f pr op erty (th e “ Bal l Gro un d Ho m e”) f

ro m SEG to Alfo rd
. Sp eci fic al ly, on Decem

be r 10 , 20 04 , les s t ha n o ne y ear b efo re Deb to r fi le d hi s b an krup tc y

pe ti ti on , BW T wired$2 82 ,00 0 t o Deb to r/VT. W ithi n h ou rs aft er 1 th e wir e tr an sf

er was po st edto Debt or/VT’s ba nkacco un t, Al fo rdacco m pa ni ed Deb to r to a ba nkbra nc h a ndDebt orpu rch as edforDebt or/VT a $ 28 0,0 00
cas hi er’s ch eckpa y ab le to SEG. Debt or/VT d idno t re cei ve an yth in g i n e xc ha ng e fo r it s t ran sf

er o f $2 80 ,00 0 t o S EG. Sho rtl y aft er t he da te of t he wire tra ns fer, Alfo rdsi gn eda pu rch as e an d s al e ag reem en t wi th SEG forth e Bal l Gro un d Ho m e. Deb to r an d Al fo rdha d awrit te n a gr eem en t (t he “ 20 04 Agre em en t” ) rel at ed to th e tr an sf

er o f bo th th e m on ey

an d t he pro pe rty. T he ag reem en t, s ig ne d b y Alfo rdan d Deb to r/VT’s o wne r, pr ov id edth atAlfo rdag reedto len d Deb to r/VT $2 80 ,00 0 fo r th e ri gh t t o p ur ch as e th e Bal l Gro un d P ro pe rty. Und er t he ag reem en t, t he ti tl e to th e p ro pe rty woul d b e in Alfo rd ’s nam e u nt il he ha d
rece iv edrep aym en t i n fu ll . If th e m on ey ha d n otbe en ful ly repai d wi th in si xt y da y s, t he n Deb to r/VT fo rfei te d a ny rig htto th e p ro pe rty. H owe ve r, Deb to r di d n ot rep ay th e m on ey

in th e ag reed -upo n t im e. As a re su lt , Alfo rdto okti tl e to th e Bal l
The pa rties ac knowledg e that $2,000 is sales c ommissi on income, which is not in 1 dispute; thus, the disput ed amount is $280,000. 4

Case: 11-12114 Date Filed: 07/13/2012 Page: 4 of 9Gro un d P ro pe rty. A t t he ti m e o f tr ia l, Al fo rdha d t it le to th e Bal l Gro un d

Pro pe rty. A lt ho ug h Deb to r was li vi ng inth e p ro pe rty, he n ev er h adti tl e to it
. Alfo rdsubs eque nt ly sol d t he Bal l Gro un d P ro pe rty. App el la nt -Tru st ee cl ai m s t ha t ei th er t he $2 80 ,00 0 o r th e Bal l Gro un d P ro pe rty are pr op ert y of the Debt or ’s ba nk rupt cy

est at e. The ba nk rupt cy

co urt g ran te d re li ef t o Tru st ee o n m os t co un ts rel at in g t o t he ot he r in di vi du al s, b utdi sm is se d t he cla im s ag ai ns t Al fo rd . The b an krup tc y co urt sp eci fic al ly fou ndth atth e tr an sf er o f $2 80 ,00 0 fr om

Debt or/VT to SEG cou ldno t be av oi de d a s t o Al fo rdbe cau se (1) th e $ 28 0,0 00 was n ev er Deb to r’s pr op ert y , si nc e n ei th er Deb to r no r Deb to r/VT h ad“ co nt ro l” of t he se fun ds , and(2) th e $2 80 ,00 0 wen t t o S EG, andSEG hadun fet te redus e o f th es e fu nd s. App el la nt -Tru st ee ap pe al edth e b an krup tc y co urt’s ru li ng , arg ui ng th atth e ba nk rupt cy

co urt erredwhen itco nc lu de d t ha t n ei th er Deb to r no r Deb to r/VT ev er ha d c on tro l o f th e fu nd s. Th e d is tri ctco urt re ve rs edth e b an krup tc y co urt’s fin di ng as t o c on tro l o ve r th e $ 28 0,0 00 , con cl ud in g t ha t Al fo rdha d fa il edto reb ut th e p res um

pt io n t ha t t he fun ds in Debt or/VT’s ba nkacco un t b el on ge d t o t he Deb to r. Howev er, the di stric t co urt u lt im at el y affi rm edth e jud gm en t i n Al fo rd ’s fav or , st at in g t ha t t he Trus te e h adno t p ro ve n t he Debt or ’s in so lv en cy . App el la nt -Tru st ee b ro ug htth is ap pe al , arg ui ng th atbe cau se th e d is tri ct 5 Case: 11-12114 Date Filed: 07/13/2012 Page: 5 of 9co urt re ve rs edonth e co nt ro l i ss ue , th e cas e m us t b e rem an de d t o t he ba nk rupt cy co urt fo r itto reco ns id er t he frau du le ntco nv ey an ce co un ts ag ai ns t Al fo rd . On
cro ss -ap pe al , Alfo rd arg ue s t ha t t he di st ric t co urt erredin de te rm in in g tha t t he ba nk rupt cy

co urt was cle arl y

erro ne ou s i n fi nd in g t ha t n ei th er Deb to r no r Deb to r/VT h adco nt ro l o f th e m on ey in Debt or/VT’s ba nkacco un t. We ho ldth at th e b an krup tc y

co urt d idno t err in co nc lu di ng th atne it he r Deb to r no r Deb to r/VT ha d c on tro l o f th e fu nd s. Be cau se ou r ho ld in g o n the is su e o f co nt ro l re nd ers App el la nt -Tru st ee’s ap pe al m oo t, we d o n otad dr es s Ap pe ll an t-Trus te e’s cl ai m s. II . STANDARD OF REVIEW Thi s C ou rt r ev ie ws co nc lu si on s o f la w de no vo an d re vi ews fin di ng s o f fac ts fo r cl ear e rro r. In re I

nt ’l Ph ar m. &Dis c. II, In c. v. Ta ba s , 44 3 F .3d76 7, 7 70 (1 1t h C ir. 2 00 5) . A fin di ng of f actis no t cl earl y

erro ne ou s u nl es s, co ns id eri ng all of th e ev id en ce, t hi s C ou rt h as “ th e d efi ni te an d fi rm co nv ic ti on th ata m is ta ke ha s be en m ad e.” Id
. II I. DI SCUSSI ON App el la nt -Tru st ee fi le d a n a dv ers ary pr oc eed in g a ll eg in g s ev eral cau se s o f act io n fo r av oi da nc e o f frau du le nttra ns fers un de r 11 U.S.C. § 5 48 . The p ur po se of av oi di ng frau du le nttrans fers is to pre ve ntth e d eb to r fro m di m in is hi ng fun ds th atare g en eral ly avai labl e fo r di st rib ut io n t o c red it or s. Co ns eque nt ly, th ere i s a 6 Case: 11-12114 Date Filed: 07/13/2012 Page: 6 of 9pr es um

pt io n t ha t “ an y

fun ds un de r th e co nt ro l o f th e d eb to r, reg ard le ss of the
so ur ce,” a re t he de bt or ’s pro pe rty, “ an d a ny tran sf ers th atdi m in is h t ha t p ro pe rty
are s ub ject t o a vo id an ce.” In re S an bo rn & Ch as e Co rp . , 81 3 F .2d11 77 , 11 81 (1 1t h C ir. 1 98 7) . Howev er, p res um in g o wne rs hi p i n s itua ti on s o f al le ge d frau du le nttrans fers “po se s t he di st in ctda ng er t ha t cr ed it or s co ul d re cei ve a win df al l i n t he form

of f un ds th atsi m

pl y pa ss edth ro ug h t he de bt or ’s po ss es si on bu t i n fa ctwere n otpro pe rty of t he de bt or .” Id
. In In re C ha se & Sa nb or n C

or p. , th is Co urt es tabl is he d a“ co nt ro l t es t” for de te rm in in g wh enfun ds pro vi de d t o ade bt orby a thi rdpa rty beco m e p ro pe rty of th e d eb to r so th atanall eg ed ly fraudul en t t ran sf er o f th e fu nd s t o ano nc red it oris
subjec t t o a vo id an ce u nd er 1 1 U.S.C. § 54 8. 8 13 F.2dat 1 18 1– 82 . In a fr au du le nt tra ns fer s itua ti on , “ m or e is ne ces sa ry to est ab li sh th e d eb to r’s co nt ro l o ve r th e fu nd s tha n t he si m

pl e fac t t ha t a t hi rdpa rty pla cedth e fu nd s i n a n a cco un t o f th e de bt orwit h n o e xp res s re st ric ti on s o n t he ir u se . Id
. at11 81
. The co nt ro l t es t i s a “ ve ry fle xi bl e, pr ag m at ic on e; in de ci di ng whet he r th e de bt or s h adco nt ro ll edpro pe rty subs eque nt ly sou gh t b y th ei r trus te es , ‘ th e co urt
m us t l oo k b ey on d t he pa rti cu la r tr an sf ers in qu es ti on to th e en ti re ci rcu m st an ce[s ] of th e tr an sa ct io ns .’ ” No rd

be rg v. So ci et e Gen er al e , 84 8 F .2d11 96 , 11 99 (11 th Ci r. 19 88 ) (quo ti ng In re C ha se & Sa nb or n C

or p. , 81 3 F .2dat 1 18 1– 82 ). In 7 Case: 11-12114 Date Filed: 07/13/2012 Page: 7 of 9lo ok in g a t t he en ti re ci rcu m st an ces of t he trans act io ns , cou rts ha ve co ns id eredth e

so ur ce o f th e fu nd s, wh ic h p art y pri m ari ly ben efi ts fro m

th e ch al le ng ed tra ns act io ns , andwhet he r th e d eb to r ha s t he po wer t o d es ig na te whi ch pa rty will
rece iv e th e fu nd s an d t he po wer t o a ctua ll y di sb ur se th e fu nd s. Se e In re Ba nk es t Ca pi ta l Co rp . , 37 4 B R 3 33 , 33 8 (B an kr . S.D. Fla. 2 00 7) (fo ll owi ng an d app lying th e te stest ab li sh edin In re C ha se & Sa nb or n ). Afte r he ari ng all tes ti m on y an d e va lu at in g t he ev id en ce an d t he cred ib il it y of ke y wit ne ss es , th e b an krup tc y co urt co nc lu de d t ha t n ei th er t he Debt orno r Deb to r/VT h adsu ffi ci en t co nt ro l o f th e fu nd s. Th e b an krup tc y co urt fo un d t ha t th e $ 28 0,0 00 was o nl y

in Debt or/VT’s ba nkacco un t fo r a few h ou rs , th e ti m e it to okto ob ta in a cas hi er’s ch eckpa y ab le to SEG. The b an kr up tc y co urt re as on ed th atne it he r th e Deb to r no r Deb to r/VT h adth e p owe r to de si gn at e whi ch pa rty
wou ldrece iv e th e fu nd s, an d n ei th er h adth e p owe r to di sb ur se th e fu nd s b ecau se th e fu nd s wer e sp eci fic al ly des ig na te d u nd er t he term s o f th e 2 00 4 Ag reem en t. Fu rth er, t he ba nk rupt cy

co urt s pe ci fic al ly fou ndth atth e $ 28 0,0 00 was n otm on ey th atBWT owedto th e Deb to r orto Debt or/VT. BWT wire d t he m on ey

to Debt or/VT. Thu s, t he so ur ce o f th e fu nd s was BWT , Alfo rd ’s com

pa ny. Onc e th e fu nd s wer e in Debt or/VT’s acc ou nt , Debt or ob ta in eda cas hi er’s ch eckfor$2 80 ,00 0 p ay ab le to SEG, th e co ns tru ct io n b us in es s 8 Case: 11-12114 Date Filed: 07/13/2012 Page: 8 of 9in whi chAlfo rdha d a n i nt eres t. Deb to r/VT d idno t re cei ve an y co ns id erat io n fo r th is tra ns fer o f m on ey . Sh ortl y th erea fte r, Alfo rdrece iv eda qu it cl ai m de edto th e res id en ce. Hen ce, the ev en tu al us e o f th e fu nd s was to pu rch as e th e Bal l Gro un d re si de nc e. Alfo rdbe ne fit te d m os t fr om th e m on ey

tra ns fer, an d t he trans fer was do ne at h is di rect io n. Th e Deb to r an d Deb to r/VT m erel y faci li ta te d t he tra ns fer o f th e fu nd s an d t he “ actua l co nn ect io n b et ween th e fu nd s an d t he de bt orwas q ui te tan ge nt ia l.” In re C ha se & Sa nb or n , 81 3 F .2dat 1 18 2. The ba nk rupt cy

co urt co rrec tl y

ap pl ie d t he co nt ro l t es t. Ap pl y in g t he
co nt ro l t es t t o t he fact s fo un d b y th e b an krup tc y

co urt, t he tra ns fer i s n ot
av oi dabl e. Thu s, the ba nk rupt cy co urt co rrec tl y

de te rm in edth atth e fund s wer e ne ve r un de r th e Deb to r/VT’s co nt ro l an d wer e n otpa rt o f Deb to r’s es ta te . IV. CONCLUSI ON The Co urt REVERSES th e d is tri ctco urt o rd er wi th res pe ctto it s de te rm in at io n re ga rd in g t he is su e o f co nt ro l o ve r th e fu nd s an d re in st at es th e ba nk rupt cy

co urt ju dg m en t. Thu s, Ap pe ll an t-Trus te e’s ap pe al is di sm is se d a s m oo t.

9

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