Opinion ID: 3051676
Heading Depth: 3
Heading Rank: 1

Heading: Agretech.

Text: In Agretech, the debtor, Agretech, made a fraudulent transfer to one of its investors Palm Seedlings-A, (“Palm-A”). The bankruptcy trustee for Agretech brought an action against Palm-A, Palm-A’s general partner, and Palm-A’s limited partners to avoid transfers from the debtor to Palm-A pursuant to 11 U.S.C. § 544(b) and the applicable Hawaii state statutes. Agretech, 916 F.2d at 534. The district court found that Palm- A was a transferee in bad faith and avoided all of the transfers, ruling that the trustee could recover all monies from Palm-A and its limited partners. Id. at 531. On appeal, we agreed with the district court. We concluded that Agretech transferred money to Palm-A by means of a Ponzi scheme, and as a result, HAW. REV. STAT. § 651C- 4(a)(1), Hawaii’s equivalent of 11 U.S.C. § 548(a)(1)(A), applied. Id. at 531. We then analyzed the good faith exception under HAW. REV. STAT. § 651C-8, Hawaii’s equivalent of 11 U.S.C. § 548(c), and concluded also that the transferee, Palm- A, did not take in good faith. As a result, we held that the transfer of funds from Agretech to Palm-A was avoidable because the good faith exception did not apply. Id. at 539-40. The funds, however, had been passed from Palm-A to Palm-A’s limited partners relative to their capital contributions. In analyzing this subsequent transfer, we held that under 11 U.S.C. § 550(a)(1) and (2) and HAW. REV. STAT. § 651C-8 the trustee was permitted to recover the conveyed funds from the initial transferee and any subsequent transferees. We held further that the good faith exception did not apply because limited partnership interests are “equity securities” under 11 U.S.C. § 101(15)6 and not “value,” which is defined in the Code as securing or satisfaction of debt. Id. at 540. 6 Since changed to 11 U.S.C. § 101(16). 4090 IN RE AFI HOLDING, INC. At no time did we analyze the relationship between the limited partners and Palm-A, including any fraud that may or may not have taken place between the general partner and the limited partners. As a result, we addressed only “reasonably equivalent value” in terms of the “equity interest” created by the capital contributions made by the limited partners. We did not address any rescission or restitution rights held by the limited partners. In the end, we allowed the Trustee to avoid the transfers to the limited partners because the transfers were merely a receipt of money on account of the limited partners’ equity interests held because of their capital contributions.