Opinion ID: 76965
Heading Depth: 2
Heading Rank: 4

Heading: Tracing of Funds

Text: 66 IBT and SCSD also argue that the Trustee failed to trace every penny deposited into the Van Dan accounts and transferred to IBT. Because the transactions associated with this case are numerous and difficult, we find it necessary to re-examine the chain of IAS funds to IBT: As part of the deferred compensation scheme, whereby IAS leased Givens' services from two of Tedder's entities, HAC Administrative Finance, (HAC) and TIPCO, IAS transferred funds to TIPCO and TIPCO then transferred monies to HAC. HAC, in turn, transferred the IAS funds to Eurokredit. Eurokredit then passed funds to Tedder's H.D., Inc. From H.D., Inc., the funds went to Van Dan, yet another of Tedder's companies. Finally, Tedder moved the funds from Van Dan to IBT. IBT and SCSD stipulated that IBT received $1,050,000 from these transfers, and admitted that IBT subsequently transferred the funds to an account held by SCSD to purchase units in the Guild. The Defendants contend that the monies sought by the Trustee have been commingled with unrecoverable monies. Furthermore, according to the Defendants, any funds included in the report for transfers occurring before June 20, 1992, are unreachable because of the Uniform Fraudulent Transfer Act's four-year statute of limitations. Finally, the Defendants point out that $659,000 of the money came from an entity called CJGO Canada, and not the Debtor. 67 In an action seeking recovery, the plaintiff has the burden of tracing funds it claims to be property of the estate. First Fed. of Michigan v. Barrow, 878 F.2d 912 (6th Cir.1989). Although we agree with this proposition, it is also true that proper tracing does not require dollar-for-dollar accounting. Id.; In re Fin. Federated Title & Trust, Inc., 273 B.R. 706 (Bankr.S.D.Fla.2001); In re Bridge, 90 B.R. 839 (Bankr.E.D.Mich.1988). The bankruptcy court determined that the Trustee successfully proved by a preponderance of the evidence that the $1.050 million transferred to IBT from the Van Dan accounts, originated solely with IAS. We cannot find that conclusion clearly erroneous. Givens and Tedder perpetrated a fraud that can only be described as massive. It is not fatal to the Trustee's case that dollar for dollar, the exact funds cannot be traced. 68 The evidence demonstrates that the funds used to purchase the Guild property originated in H.D., Inc. and Van Dan accounts, and the monies in those accounts originated with the Debtor. Tedder and Givens cycled substantial amounts of money through nearly two dozen entities on a regular basis. During that time, IAS' debt increased in lock-step with Givens' burgeoning treasure chest, all in an effort to hide assets from creditors. That money eventually found its way to IBT and SCSD. It is undeniable that equity will follow a fund through any number of transmutations, and preserve it for the owner as long as it can be identified. Bridge, 90 B.R. at 848 (citing Farmers & Mechanics' National Bank v. King, 57 Pa. 202 (1868) (quoted in National Bank v. Insurance Co., 104 U.S. 54, 69, 26 L.Ed. 693 (1881))). The Trustee has identified relevant pathways and properly traced the funds. 69 Furthermore, we find no merit in the Defendants' argument that the monies the Trustee seeks to recover have been commingled with funds that are not recoverable due to the operation of Florida's fraudulent transfer law. Under 11 U.S.C. § 544, a transfer may only be avoided within four years of the filing of bankruptcy petition per Fla. Stat. § 726.110(1). What Defendants fail to recognize is that the second clause of Fla. Stat. § 726.110(1), provides an exception to the general limitations period, where the claimant could not reasonably have discovered the relevant transfers. In such a case, avoidance actions may be brought for one year from the time the plaintiff discovers or reasonably could have discovered the fraudulent transfers. The overwhelming evidence demonstrates the pervasive fraud that took place in this case, which essentially paralyzed the Trustee's attempts to undo the tangled mess of transfers. Given the situation, the exception applies, and all transfers relevant to the Guild purchase were properly avoidable. 70 The Defendants' last stand with respect to challenging the avoidance of the transfers is the argument that some $659,000 of the funds that the Trustee sought for recovery came from a source other than the Debtor — CJGO Canada. Again, we harken back to the bankruptcy court's conclusion that the funds involved in the fraudulent transfer ... did not originate from any of Tedder's other clients or from Givens' other businesses. The money came from IAS alone. The Defendants have the burden of demonstrating clear error in this factual finding, In re JLJ, Inc., 988 F.2d 1112, 1116 (11th Cir.1993), but bring no support for this bare allegation. Hence, the bankruptcy court's finding stands.