Opinion ID: 4564821
Heading Depth: 1
Heading Rank: 7

Heading: The Predicate Creditor Issue.

Text: The Bankruptcy Code authorizes the Trustee to avoid a transfer of the debtor “that is voidable” by a creditor identified in 11 U.S.C. § 544(b)(1), commonly referred to as a “predicate creditor.” We have interpreted this provision to require the Trustee to “(1) identify an existing creditor; (2) with an allowable claim; (3) who under non-bankruptcy law could avoid the transfer, at least in part.” In re DLC, Ltd., 295 B.R. 593, 601-02 (B.A.P. 8th Cir. 2003), aff’d sub nom. Stalnaker v. DLC, Ltd., 376 F.3d 819 (8th Cir. 2004). These requirements “have been discussed at length by various courts.” In re Goodspeed, 535 B.R. 302, 306 & n.9 (Bankr. D. Minn. 2015) (collecting cases). In 2001, PCI began transitioning from individual lenders to large institutions. In 2008, PCI borrowed $60 million from Interlachen Harriet Investments, Limited (“Interlachen”), a Twin Cities hedge fund. On appeal, Boosalis argues the district court erred in ruling as a matter of law that Interlachen was a “predicate creditor.” Boosalis does not deny that Interlachen is an existing creditor with a claim under MUFTA that could avoid the transfers at issue. But he argues that Interlachen is not, at least as a matter of law, an unsecured creditor with an allowable fraudulent transfer claim based on actual fraud, because the claim would be barred by MUFTA’s statute -23- of limitations -- within six years of “the discovery . . . of the facts constituting the fraud.” Minn. Stat. § 541.05, subd. 1(6); Finn, 860 N.W.2d at 658. For a claw back claim under 11 U.S.C. § 544(b)(1), the Trustee must prove “that his predicate creditor did not know of or discover the fraud . . . at any time until within the six years before the date on which the bankruptcy petition was filed.” In re Petters Co., 495 B.R. at 9004. The district court concluded that Interlachen could not have had knowledge of the Ponzi scheme fraud more than six years before that date because Interlachen was not formed until 2008. Reviewing this issue de novo, we agree. Anderson v. Indep. Sch. Dist., 357 F.3d 806, 809 (8th Cir. 2004) (standard of review). Boosalis argues that an Interlachen executive, Lance Breiland, may have noticed “red flags” more than six years before the bankruptcy filing in 2008.9 Under Minnesota law, a corporation can be charged for statute of limitations purposes with constructive knowledge of material facts that its officers or agents acquire. See Day Masonry v. Indep. Sch. Dist. 347, 781 N.W.2d 321, 334 (Minn. 2010); Travelers Indem. Co. v. Bloomington Steel & Supply Co., 718 N.W.2d 888, 895-96 (Minn. 2006). In some circumstances, knowledge an agent acquired before the agency relationship will “be deemed notice to his principal, and will bind him.” PHL Variable Ins. Co. v. 2008 Christa Joseph Irrevocable Tr., 970 F. Supp. 2d 932, 944 (D. Minn. 2013), aff’d, 782 F.3d 976 (8th Cir. 2015), quoting Lebanon Sav. Bank v. Hallenbeck, 13 N.W. 145, 147 (Minn. 1882); see 3 Fletcher, Fletcher Cyclopedia of the Law of Private Corporations § 799 (rev. ed. 2018). But Boosalis has cited no authority providing that a principal may be charged, for statute of limitations 9 The district court observed that Breiland’s cross-designated deposition testimony concerned his work with Interlachen after 2002, within the six-year limitations period. -24- purposes, with knowledge an agent acquired at a time when neither the agency relationship nor the principal itself existed. We decline to adopt such a rule. Alternatively, Boosalis argues that deciding this issue as a matter of law deprived him of the opportunity to cross examine Interlachen representatives on whether they noticed “red flags,” and whether the Trustee acted inconsistently in treating Interlachen’s claim as valid while seeking to claw back interest PCI paid to him. But the predicate creditor issue turns on whether Interlachen discovered PCI’s Ponzi scheme fraud more than six years before the bankruptcy filing. As Boosalis did not identify disputed facts regarding that issue, the district court properly ruled on the issue as a matter of law.