Opinion ID: 11666
Heading Depth: 1
Heading Rank: 1

Heading: analysis

Text: 15 There exists some disagreement, both within this circuit and among the circuits, as to whether the ultimate determination of reasonable equivalency is a question of law, subject to our de novo review, or a question of fact, subject to the clearly erroneous standard. 3 Recently in In re Fairchild Aircraft Corporation, 4 we applied a de novo standard of review, following our previous decision in Durrett v. Washington National Insurance Company. 5 In both cases, however, we noted that the result would have been the same regardless of whether we applied the de novo or the clear error standard. Later in In re Besing, 6 even though we declined to resolve the issue, 7 we recognized that the reasonable equivalency inquiry is ordinarily fact-intensive, as the court bases its determination upon subsidiary fact findings regarding the value of the property transferred and the value received in the exchange. 8 16 Long before we decided any of these cases, however, we verbalized the proper standard of review. In Mayo v. Pioneer Bank & Trust Company, 9 we stated that the question of [w]hether fair consideration [now 'reasonably equivalent value'] has been given for a transfer is 'largely a question of fact, as to which considerable latitude must be allowed to the trier of the facts.'  10 17 When these opinions are carefully analyzed against this backdrop, we are led to the conclusion that the clearly erroneous standard is proper. 11 Thus we join the majority of the circuits in embracing that standard.
18 As such, the issue in the instant case is whether the bankruptcy court clearly erred in accepting the appraisal of the more credible expert and determining on the basis of that appraisal that the transfer was made for less than a reasonably equivalent value. We conclude that the bankruptcy court did not err. 19 The bankruptcy court accorded great weight and probative value to the testimony of the highly qualified and credible appraiser, Phillips, and attributed little or no probative value to the appraisal of the largely inexperienced appraiser, Dohmeyer. We find no clear error in this call by the bankruptcy court. 20 Texas Truck does not challenge this decision; instead, it insists that the bankruptcy court erred in including the value of renewals in the value of the property transferred, as they were either the non-transferrable personal goodwill of Dunham or mere expectancies, which are not property. We disagree. Renewals are clearly property, and they are a transferrable asset of an insurance agency. 12 Texas Truck introduced no evidence that renewals could not be considered in appraising the value of the book of business. Indeed, Texas Truck's own expert included renewals in his valuation ---- albeit at a discount rate significantly greater than that assumed by Phillips ---- and he admitted that the renewal rate was the single most important factor in a comparison of his analysis and Phillips'. Thus the bankruptcy court did not clearly err in accepting Phillips' appraisal which included the value of renewals. 13 21 Texas Truck also argues that the bankruptcy court, in determining the value of the consideration given, ignored the $56,000 in commissions earned on DIA policies and paid to DIA's creditors. As the bankruptcy court clearly accounted for this income in calculating Texas Truck's cost to acquire DIA, Texas Truck cannot now be heard to complain on this point. 22 As we have concluded that the values assigned by the bankruptcy court to the property transferred and the consideration received are not clearly erroneous and that the court did not clearly err in determining that the transfer was made for less than a reasonably equivalent value, all that remains to be done is a simple arithmetic calculation to determine the amount, if any, that Texas Truck owes to the bankrupt estate. Our calculation is identical to the one performed by the bankruptcy court and affirmed by the district court. Consequently, Texas Truck must return to the bankrupt estate $160,000 plus pre-judgment interest at the rate of 4% per annum from April 15, 1994 to the date of this judgment and post-judgment interest at the fixed federal rate. 23 Concluding that the transfer is avoidable as one made for less than a reasonably equivalent value, we need not address whether the transfer is avoidable on the alternative ground that it was actual fraud. III