Opinion ID: 3051676
Heading Depth: 3
Heading Rank: 2

Heading: United Energy.

Text: In United Energy, United Energy Corporation (“UEC”) manufactured and marketed solar modules to the public. From 1982 to 1985, UEC sold 5,323 modules to 4,500 purchasers for $30,000 to $40,000 each. Roughly one third of the purchase price was a down payment, and the remaining balance was paid in installments secured by the modules themselves. United Energy, 944 F.2d at 591. At the time of each sale, purchasers were offered a contract called a “Power Purchase Agreement,” to sell the electric and thermal power generated by the modules to Renewable Power Corporation (“RPC”). RPC was owned by the same individual as UEC. The modules only produced a negligible amount of power. However, to attract more purchasers, UEC and RPC made it appear that the business venture was a success. The two companies fabricated fictitious kilowatt hours of production for each module. RPC then paid module owners for the phony production. Id. After bankruptcy proceedings commenced, the trustee for UEC and RPC filed adversary proceedings against many module purchasers seeking to avoid the fictitious power payIN RE AFI HOLDING, INC. 4091 ments. In each of the adversary proceedings, partial summary judgment was granted by the bankruptcy court allowing the trustee to recover the power payments as fraudulent transfers under CAL. CIV. CODE § 3439.04, California’s equivalent of 11 U.S.C. § 548(a)(1)(B). The bankruptcy court concluded as a matter of law that neither UEC nor RPC received reasonably equivalent value, or any value, in property or satisfaction of a present or antecedent debt, in exchange for the power payments paid to the module purchasers. Id. at 592. The BAP consolidated the cases and reversed the bankruptcy court. In re United Energy Corp., 102 B.R. 757 (9th Cir. BAP 1989). The BAP held that the power payments given to the defrauded investors would be deemed to partially satisfy or release fraud or restitution claims. The trustee then appealed to this court. We noted, “the only issue for our determination, in connection with the fraudulent transfer question, is whether the investors gave reasonably equivalent value in exchange for the power payments they received.” United Energy, 944 F.2d at 594-95. We then focused directly on the language of 11 U.S.C. § 548(d)(2)(A), which defines “value.” See id. at 595. We found that the investors were duped into buying modules, and because of that, they had claims for rescission and restitution which arose at the time of purchase. Id. at 596. In the end, we did not allow the Trustee to avoid the transfers made on account of the power payments because the “investors exchanged reasonably equivalent value when their rights to restitution were proportionately reduced by the power payments they received.” Id.