Court Opinion

ID: 9909104
Source: CourtListenerOpinion
Date Created: 2023-12-12 17:01:04.673184+00
Date Added: 2024-06-11T12:50:03.630256
License: Public Domain

Appellate Case: 22-2073         Document: 010110967059   Date Filed: 12/12/2023    Page: 1
                                                                                  FILED
                                                                      United States Court of Appeals
                                          PUBLISH                             Tenth Circuit

                           UNITED STATES COURT OF APPEALS                   December 12, 2023

                                                                         Christopher M. Wolpert
                                 FOR THE TENTH CIRCUIT                       Clerk of Court
                             _________________________________

  In re: CHUZA OIL COMPANY,

         Debtor.

  --------------------------------

  PHILIP J. MONTOYA, Chapter 7 Trustee,

         Plaintiff - Appellee,

  v.                                                          No. 22-2073

  PAULA GOLDSTEIN; BOBBY
  GOLDSTEIN PRODUCTIONS INC.;
  ROBERT (BOBBY) GOLDSTEIN,

         Defendants - Appellants.
                        _________________________________

                         Appeal from the Bankruptcy Appellate Panel
                                   (BAP No. 21-029-NM)
                           _________________________________

 David C. Japha (Evan J. House, with him on the briefs), Levin Jacobson Japha, P.C.,
 Denver, Colorado, for Defendants-Appellants.

 Daniel A. White, Askew & White, LLC, Albuquerque, New Mexico, for Plaintiff-
 Appellee.
                       _________________________________

 Before TYMKOVICH, BACHARACH, and PHILLIPS, Circuit Judges.
                  _________________________________

 TYMKOVICH, Circuit Judge.
                   _________________________________
Appellate Case: 22-2073    Document: 010110967059         Date Filed: 12/12/2023        Page: 2

       Bobby Goldstein operated Chuza Oil Co., a New Mexico petroleum company.

 After encountering financial difficulties, he petitioned for Chapter 11 bankruptcy,

 which resulted in a plan establishing the order of priority for paying Chuza’s

 creditors. During reorganization, Mr. Goldstein and another company he owned

 infused additional capital into Chuza. Some of the funds transferred into Chuza were

 earmarked to pay interest on a promissory note held by Mr. Goldstein’s mother,

 Paula. After Chuza went into involuntary Chapter 7 bankruptcy, the trustee sought to

 claw back the payments to Paula because she was paid before creditors with higher

 priorities under the Chapter 11 plan.

       The bankruptcy court declined to avoid the payments because it concluded

 Chuza did not have an interest in the earmarked funds, a requirement for avoidance

 under the Bankruptcy Code. On appeal, the Bankruptcy Appellate Panel saw it

 differently, finding Chuza had a cognizable interest because the transfers depleted the

 bankruptcy estate by replacing subordinated debt (the debt on Paula’s note) with

 unsubordinated debt (debt from Mr. Goldstein’s loans). Because the bankruptcy

 court did not clearly err in its findings that Chuza did not have an interest in the

 earmarked funds and that the bankruptcy estate was not diminished, we disagree with

 the BAP and affirm the bankruptcy court.

                                    I. Background

       Chuza was a New Mexico petroleum production company that Mr.

 Goldstein controlled as shareholder, CEO, and director. He also operated another

 company, Bobby Goldstein Productions, Inc. (BGPI), which Mr. Goldstein used to

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 help run Chuza. In 2012, Mr. Goldstein’s father loaned Chuza $500,000 under a

 promissory note guaranteed by Mr. Goldstein and BGPI. The note was due in a

 year, although it could be (and was) extended. After his father died, his mother Paula

 held the note.

         In 2014, Chuza filed for Chapter 11 bankruptcy to reorganize its affairs. Its

 plan was confirmed in March 2016. The confirmed plan established the priority for

 Chuza to pay back its creditors, placing repayment to insider unsecured creditors, like

 Paula, below other creditors.

         But business did not improve. Beginning in September 2016 and continuing

 through December 2017, Mr. Goldstein, BGPI, and Paula loaned Chuza nearly

 $500,000 in additional funds in a futile effort to keep the business afloat.1 Contrary

 to the Chapter 11 plan, Chuza then transferred some of the money it received from

 Mr. Goldstein and BGPI to Paula as payment on the note even though it had not paid

 all remaining claims with higher priorities. The transfers to Paula totaled $46,885.

 According to the testimony of Mr. Goldstein, Chuza was loaned the $46,885 as long

 as the funds were used only to pay Paula.

         In July 2018, a Chapter 7 involuntary bankruptcy petition was filed against

 Chuza. The bankruptcy court granted the petition and appointed Philip Montoya as

 trustee. Using his power to set aside certain transfers of money, the trustee later filed

 an adversary proceeding to avoid (1) some transfers to Paula as preferential transfers

 1
     On appeal, the parties only contest the loans from Mr. Goldstein and BGPI.

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 under 11 U.S.C. § 547(b); (2) all the transfers as fraudulent under 11 U.S.C.

 § 548(a)(1)(A); and (3) all the transfers as constructively fraudulent under 11 U.S.C.

 § 548(a)(1)(B).

       The bankruptcy court refused to avoid the transfers. It concluded Chuza never

 had a cognizable interest in the challenged funds because they were earmarked for

 Paula’s benefit. It also found the preferential-transfer claim failed because the

 defendants—Mr. Goldstein, BGPI, and Paula—established the loans were part of a

 contemporaneous exchange for new value (a statutory exception), the actual-fraud

 claim failed because there was no intent to commit fraud, and the constructive-fraud

 claim failed because reasonably equivalent value was exchanged for the transfers

 (another statutory exception). The trustee appealed to the Bankruptcy Appellate

 Panel, challenging the court’s rulings on the preferential transfer and constructive

 fraud claims.

       The BAP reversed. It found Chuza had an interest in the funds because the

 transfers diminished the estate by impairing the interests of a preferred class of

 creditors established by the Chapter 11 plan. The transfers did so by replacing debt

 that was subordinated under the plan—the original debt on Paula’s note—with new,

 unsubordinated debt—debt to Mr. Goldstein and BGPI from the loans. The BAP also

 found the statutory exceptions were not satisfied.

                                     II. Analysis

       Mr. Goldstein, his mother, and BGPI contend that Chuza never had an

 interest in the transferred funds: Because the funds were always earmarked to

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 Paula, they never became part of Chuza’s estate. And, regardless, the defendants

 assert the transfers satisfied the relevant statutory exceptions.

       When a party appeals from the BAP, we “independently review[] the

 underlying bankruptcy court’s decision,” examining its legal conclusions de novo

 and its factual findings for clear error. In re Mkt. Ctr. E. Retail Prop., Inc.,

 730 F.3d 1239, 1244 (10th Cir. 2013). The BAP’s ruling—although not entitled

 to deference—may be and often is persuasive. In re Miller, 666 F.3d 1255, 1260

 (10th Cir. 2012).

       A. Jurisdiction

       Before we proceed to the merits, we must first ensure we have jurisdiction.

 See Bender v. Williamsport Area Sch. Dist., 475 U.S. 534, 541 (1986); First State

 Bank and Tr. Co. of Guthrie v. Sand Springs State Bank of Sand Springs,

 528 F.2d 350, 353 (10th Cir. 1976). A party can only appeal to us following a

 final BAP decision, judgment, order, or decree. 28 U.S.C. § 158(d); In re

 Farmland Indus., 567 F.3d 1010, 1015 (8th Cir. 2009). The BAP’s decision is

 final if it “does not remand for ‘significant further proceedings.’” In re

 Zwanziger, 741 F.3d 74, 75 n.1 (10th Cir. 2014) (quoting In re Buckner, 66 F.3d

 263, 265 (10th Cir. 1995)); see also Farmland Indus., 567 F.3d at 1015 (noting a

 BAP decision is final and appealable if it requires the bankruptcy court to

 perform only “ministerial duties”).

       The BAP remanded for the bankruptcy court to enter judgment for the

 trustee on the two claims at issue. Because the bankruptcy court only had to

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 perform that ministerial duty, the BAP’s decision was final and appealable. See

 Zwanziger, 741 F.3d at 75 n.1; In re Bryan, 857 F.3d 1078, 1081 (10th Cir. 2017)

 (finding a BAP order appealable when it remanded for “a task requiring little

 judicial discretion”).

         B. The Transfers

         The Bankruptcy Code allows a trustee to avoid—or, colloquially, claw

 back—certain transfers made by a bankrupt debtor, but only if the debtor had an

 “interest” in the transferred property. § 547(b); 2 § 548(a)(1)(B); 3 Mann v. LSQ

 Funding Grp., L.C., 71 F.4th 640, 645 (7th Cir. 2023). If the transfers are

 2
     The statute provides in part:

                (b) Except as provided in subsections (c) and (i) of this
                section, the trustee may, based on reasonable due diligence
                in the circumstances of the case and taking into account a
                party’s known or reasonably knowable affirmative defenses
                under subsection (c), avoid any transfer of an interest of the
                debtor in property--
                (1) to or for the benefit of a creditor * * *.

 § 547(b) (emphasis added).
 3
     The statute provides in part:

                The trustee may avoid any transfer (including any transfer
                to or for the benefit of an insider under an employment
                contract) of an interest of the debtor in property, or any
                obligation (including any obligation to or for the benefit of
                an insider under an employment contract) incurred by the
                debtor, that was made or incurred on or within 2 years
                before the date of the filing of the petition * * *.

 § 548(a)(1)(B) (emphasis added).

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 avoided, the property goes back into the bankruptcy estate. This “prevents

 individual creditors from dismembering the assets of the debtor in a manner that

 negatively impacts other creditors, and it allows all creditors to obtain a more

 equitable distribution of the assets of the debtor.” In re Ogden, 314 F.3d 1190,

 1196 (10th Cir. 2002).

       The trustee here sought to regain the funds Chuza transferred to Paula after

 the Chapter 11 plan became effective. He reasoned that Chuza had an interest in

 the transferred funds because the transfers replaced subordinated debt to Paula

 with unsubordinated debt to Mr. Goldstein and BGPI.

              1. Earmarking

       The defendants resist avoidance of the transfers, asserting the funds were

 properly earmarked for payment to Paula. In other words, Mr. Goldstein’s loans

 to Chuza included a condition that some of the funds be used only to pay portions

 of Paula’s note. Thus, Chuza could not use the funds for other corporate

 purposes.

       The earmarking doctrine is a judicially created mechanism to determine

 whether the debtor had an interest in transferred property. It allows a debtor to

 borrow money to pay an existing creditor without the payments being avoided

 and the money becoming part of the bankruptcy estate, but only if the borrowed

 money was “earmarked” for that purpose. See In re Marshall, 550 F.3d 1251,

 1254 (10th Cir. 2008); Nat’l Bank of Newport v. Nat’l Herkimer Cnty. Bank,

 225 U.S. 178, 185 (1912) (applying earmarking doctrine). To earmark funds, the

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 lender must condition the funds on payment to a specific creditor, and the debtor

 must abide by that condition. See 2 Bankruptcy Desk Guide § 18:9 (Mar. 2023

 update) (“There is an exception to the general rule that the use of borrowed funds

 to discharge a debt constitutes the transfer of property of the debtor and that is

 where borrowed funds have been specifically earmarked by a lender for payment

 to a designated creditor.”).

       Earmarking typically arises in co-debtor situations, where “the lender who

 provides the funds to the debtor to pay off the creditor was also obligated to the

 creditor either as a guarantor or surety.” Marshall, 550 F.3d at 1257 n.5; see also

 In re Bohlen Enters., Ltd., 859 F.2d 561, 565 (8th Cir. 1988). The doctrine

 ensures the funds will not be put into the estate, causing the guarantor or surety to

 lose that money and still be on the hook for the original debt. Even so, some

 courts have since extended earmarking beyond co-debtors. See In re Moses,

 256 B.R. 641, 646 (B.A.P. 10th Cir. 2000); Bohlen Enters., 859 F.2d at 566; In re

 Safe-T-Brake of S. Fla., Inc., 162 B.R. 359, 364 (Bankr. S.D. Fla. 1993).

 Typically, “replacing one creditor with another of equal priority does not

 diminish the estate.” Safe-T-Brake, 162 B.R. at 364; see also 2 Bankruptcy Desk

 Guide, supra, § 18:9 (noting that earmarking applies when “one creditor is simply

 substituted for another”).

       We have applied earmarking in several cases. For instance, in In re Ogden,

 314 F.3d at 1199, we briefly addressed and applied it when determining whether the

 debtor, who ran a Ponzi scheme, “retained an interest” in fraudulently obtained

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 funds. In that case, the debtor had induced certain parties to invest in his scheme,

 and then used money from another individual to pay back the initial investors. After

 the debtor went into involuntary Chapter 7 bankruptcy, the trustee sought to avoid

 these payments. We determined the debtor retained an interest in the transferred

 funds because there was “no indication that [the investors] had designated the

 purpose of the investment as repaying [another investor].” Id.

        In In re Marshall, 550 F.3d 1251, we acknowledged and applied earmarking

 with additional elaboration. In that case, the debtors used Capital One credit cards to

 pay down debt. After they went into Chapter 7 bankruptcy, the trustee sought to

 avoid those payments. The bankruptcy court concluded that the debtors lacked an

 interest in the payments, and the district court affirmed based on earmarking.

        On appeal to our court, we applied two methods to determine whether the

 debtors retained an interest in the transferred property. First, we looked to whether

 the debtors retained some control over the funds: “[A] transfer of property will be a

 transfer of ‘an interest of the debtor in property’ if the debtor exercised dominion or

 control over the transferred property.” Id. at 1255 (emphasis added). Second, we

 examined whether the transfers diminished the size of the bankruptcy estate. “Under

 this analysis, a debtor’s transfer of property constitutes a transfer of ‘an interest of

 the debtor in property’ if it deprives the bankruptcy estate of resources which would

 otherwise have been used to satisfy the claims of creditors.” Id. at 1256.

        Under both approaches, we concluded the debtors had an interest in the

 payments. They had an interest under the dominion/control test because “Capital

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  One placed no conditions on [their] use of the funds”—they controlled those funds

  without restriction. Id. at 1257. And they had an interest under the diminution test

  because “[t]he Capital One loan proceeds were an asset of the estate for at least an

  instant before they were preferentially transferred” to pay debt. Id. at 1258.

        We most recently considered earmarking in In re Wagenknecht, 971 F.3d 1209

  (10th Cir. 2020). There, we again applied both tests, except this time we concluded

  the debtor never had an interest in the funds under either. In that case, the debtor

  received a loan from his mother under a promissory note that did not place any

  conditions on the loan. But the mother later stated in an affidavit that she only

  loaned her son the money on the condition it be used to pay a specific creditor. She

  wrote a check from her bank account and delivered it directly to the creditor; her son

  never actually possessed the money.

        Applying the dominion/control test, we concluded the debtor did not control

  the funds because “he did not have ‘an ability to direct their distribution’”—he was

  bound by his mother’s condition. Id. at 1214 (quoting Marshall, 550 F.3d at 1256).

  Nor did he have an interest under the diminution test: The money was never in his

  account and he “played no role in delivering the funds.” Id.

        As established by Ogden, Marshall, and Wagenknecht, earmarking applies if

  the transfers can satisfy both the dominion/control and the diminution tests. See also

  Joan N. Feeney & Michael J. Stepan, 2 Bankruptcy Law Manual § 9:13 (5th ed.

  June 2023 update) (“Courts apply [earmarking] narrowly upon a showing of three

  elements: 1) an agreement between the party advancing funds and the debtor that the

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  new funds will be used to pay a specific debt; 2) implementation of the agreement;

  and 3) absence of any diminution of the estate.”). Although in Marshall and

  Wagenknecht we declined to say whether the doctrine applied beyond co-debtor

  situations, we employed both tests even though neither case involved co-debtors.4

  See Wagenknecht, 971 F.3d. at 1217 (Briscoe, J., dissenting). And we have

  established that transfers may be avoided if the debtor had an interest in the

  transferred property under either test. See id. at 1214 (applying diminution test after

  concluding the debtor did not have an interest under dominion/control test). In other

  words, a debtor must “pass” both tests for earmarking to apply and to avoid

  avoidance.

        We now proceed to the transfers at issue.

               2. Chuza’s Transfers

        The trustee sought to avoid Chuza’s payments to Paula because he believed

  Chuza had an interest in the funds. To do so, he invoked the two statutes at issue

  here: § 548(a)(1)(B) and § 547(b). Section 548(a)(1)(B) allows him to avoid

  transfers that occurred “on or within 2 years before the date of the filing of the

  [Chapter 7] petition.” In this case, that means the trustee can avoid all the

  transfers—$46,885 in total to Paula. By contrast, § 547(b) allows him to avoid only

  those transfers made “between ninety days and one year before the date of the filing

  of the petition.” Here, that is $15,635 of the $46,885.

  4
    Of course, here we address a traditional co-debtor situation because Mr. Goldstein
  and BGPI guaranteed the note.

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        Both statutes require that the debtor have an interest in the transferred

  property. And because nothing indicates the meaning of “interest” differs between

  the statutes, earmarking is available under both. See Mann, 71 F.4th at 646 (noting

  avoidance attempts under § 547(b) and § 548(a)(1) “turn[ed] on the same question:

  whether the payoff agreement constituted an ‘interest of the debtor in property’”);

  In re TriGem Am. Corp., 431 B.R. 855, 864 (Bankr. C.D. Cal. 2010) (acknowledging

  a “‘transfer of an interest of the debtor in property’ is equally a statutory requirement

  of an action under § 548(a)(1) as it is for preferences”); Antonin Scalia & Bryan A.

  Garner, Reading Law: The Interpretation of Legal Texts 172 (2012) (“The

  presumption of consistent usage applies also when different sections of an act or code

  are at issue.”). Accordingly, we analyze each of the transfers together.

        Whether the debtor had an “interest” in the property is a legal question.

  Marshall, 550 F.3d at 1254. The Bankruptcy Code does not define “an interest of the

  debtor in property,” but the Supreme Court has concluded the term is analogous to

  “property of the estate” as defined by § 541. Begier v. I.R.S., 496 U.S. 53, 58–59, 59

  n.3 (1990). Section 541(a)(1) defines “property of the estate” as “all legal or

  equitable interests of the debtor in property as of the commencement of the case.”

  Generally, state law creates and defines property interests for bankruptcy

  proceedings, but “[o]nce that state law determination is made,” we “look to federal

  bankruptcy law to resolve the extent to which that interest is property of the estate.”

  Ogden, 314 F.3d at 1197 (internal quotation marks omitted). New Mexico broadly

  defines “property” to include “every interest a person may have in a thing that can be

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  the subject of ownership, including the right to enjoy, use, freely possess and transfer

  that interest.” Muckleroy v. Muckleroy, 498 P.2d 1357, 1358 (N.M. 1972). Because

  New Mexico law does not specifically delineate whether Chuza had an interest here,

  we apply our two tests. See Marshall, 550 F.3d at 1255; Wagenknecht, 971 F.3d

  at 1214.

                    a. Dominion/Control

          At trial, Mr. Goldstein testified that the transferred funds were loaned to Chuza

  as long as they were only used to pay Paula,5 testimony the bankruptcy court deemed

  5
      His testimony went as follows,

                [Attorney]: Well, when money went into Chuza, was there
                a condition that Chuza spend that money to pay Paula?
                [Mr. Goldstein]: Yes. And that was the reason for the
                deposits.
                [Attorney]: Okay. And as head of Chuza, when you paid
                Paula, you were performing that condition, weren’t you?
                [Mr. Goldstein]: Yes.
                [Attorney]: Okay. What was your intention when you put
                all this money into Chuza?
                [Mr. Goldstein]: Which money are you referring to? The
                one for her deposits or the larger deposit from her?
                [Attorney]: In all of the other deposits that you made.
                [Mr. Goldstein]: The intention was to honor the obligation
                that Chuza, BPGI [sic], and BG had, pay interest on the note.
                So when I made a deposit, it was with the intention of
                covering that obligation.

  App., Vol. II, 233. He also testified,

                [Attorney]: Did Chuza perform its obligation to pay the
                deposits to Paula Goldstein?
                                           ***

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  “uncontradicted and plausible.” App., Vol. I, 151. The bankruptcy court concluded

  the evidence established that Mr. Goldstein placed a valid condition on the funds he

  loaned to Chuza. On clear-error review, we cannot disagree.

         That the condition was unwritten is of no moment. In Wagenknecht, we

  affirmed a binding condition that was unwritten and only surfaced after the fact.

  971 F.3d at 1212, 1214. Of course, this case differs slightly from Wagenknecht

  because the money here passed through Chuza’s account; the new creditors

               [Mr. Goldstein]: And when we made deposits through me or
               my other company, we did it with -- with the intent to cover
               its overhead, including those checks to Paula. When we
               made these deposits, I made them and earmarked the funds
               based on what I knew had to be paid, calculated in advance,
               put the money in, and the money would go out for Chuza’s
               operating expenses and plan payments. And I put additional
               sums in there with the intent to pay the interest on the
               $500,000 note, which was guaranteed.

  Id., 235–36. And,

               [Attorney]: And there wasn’t any -- there wasn’t any
               contract for that, right? That was just your intent?
               [Mr. Goldstein]: Well, it’s a contract amongst all the parties
               that we speak of, Chuza, BGPI, me, and Paula Goldstein.
               [Attorney]: When you say there’s a contract, you’re
               referring to the promissory note and personal guaranty or
               something else?
               [Mr. Goldstein]: I’m talking about the honor of
               performance, to me, is a contract.
               [Attorney]: But there’s no written document that says that
               when you deposited X dollars, that Y dollars had to go to
               Paula Goldstein, is there?
               [Mr. Goldstein]: There is nothing in writing to that effect.

  Id., 245.

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  (Mr. Goldstein and BGPI) did not directly pay the old creditor (Paula). But in

  Wagenknecht, we placed more significance on the debtor’s lack of control than the

  fact that the money was never in the debtor’s account. See id. at 1214. Likewise, in

  Marshall, we found it significant that the debtors had full, unconditional control of

  the funds. See 550 F.3d at 1257.

        And other courts have noted the materially significant difference between

  control and simple possession. See, e.g., In re Superior Stamp & Coin Co., 223 F.3d

  1004, 1009 (9th Cir. 2000) (“[T]he proper inquiry is not whether the funds entered

  the debtor’s account, but whether the debtor had the right to disburse the funds to

  whomever it wished, or whether their disbursement was limited to a particular old

  creditor or creditors under the agreement with the new creditor.”). Because Chuza

  could only use the transferred funds to pay Paula, we conclude it did not control the

  funds under our dominion/control test.

                  b. Diminution of the Estate

        We next turn to the diminution test, which looks to whether the transfers

  diminished the bankruptcy estate. The trustee asserts that the transfers diminished

  the estate by depriving it “of resources which would otherwise have been used to

  satisfy the claims of creditors.” Marshall, 550 F.3d at 1256. He points to the

  Chapter 11 plan, which restricted Chuza’s ability to pay Paula by requiring that it

  first pay back other creditors. He contends that because the new debt to Mr.

  Goldstein and BGPI was not restricted under the plan, Chuza could pay them before

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  paying others. In other words, he believes Chuza used the transfers to ensure

  insiders—Paula, Mr. Goldstein, and BGPI—received their money first.

        Turning to our precedent, we found a property interest in Marshall because the

  funds were part of the estate, as here, for an instant before they were transferred.

  550 F.3d at 1258. But we found no interest in Wagenknecht because the funds were

  never in the debtor’s account and were conditioned on paying a specific creditor.

  971 F.3d at 1214.

        This case differs from both, however, because at the time of the transfers,

  Chuza was subject to a Chapter 11 plan that required it to pay other debts before

  paying on the note. As the trustee argues and the BAP observed, Chuza’s transfers

  seemingly allowed it to replace debt subordinated by the Chapter 11 plan—debt to

  Paula—with unsubordinated debt—new debt to Mr. Goldstein and BGPI. In other

  words, it did not simply “replac[e] one creditor with another of equal priority.”

  Safe-T-Brake, 162 B.R. at 364 (emphasis added).

        Of course, because of the promised transfers Chuza received significantly

  more money than it paid out to Paula. Viewing the economic realities of this

  situation, it is hard to say the transfers diminished the estate under the diminution

  test. To be sure, the transfers may have done so by replacing subordinated debt

  under the Chapter 11 plan with new, unsubordinated debt. Cf. In re Davis, 319 B.R.

  532, 536 (Bankr. E.D. Mich. 2005) (concluding “[t]he estate was not diminished”

  when “[t]he [d]ebtor exchanged one secured debt for another”). Indeed, some of

  Chuza’s debt to Paula was replaced with debt to Mr. Goldstein and BGPI. But if

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  Chuza was also restricted in its ability to pay Mr. Goldstein and BGPI or if it did not

  benefit from their apparent status as unsubordinated creditors, then other creditors

  were not hurt, and there was no diminishment.

        On clear-error review, we cannot disagree with the bankruptcy court’s finding

  that the bankruptcy estate was not diminished by the combination of payments into

  and out of Chuza. A factfinder could reasonably view Chuza’s payments to Paula in

  one of two ways:

               (1) These payments harmed other unsecured creditors by
                   forcing them to compete against Bobby Goldstein and his
                   company for Chuza’s limited assets.
               (2) These payments didn’t harm other unsecured creditors
                   because the payments had been conditioned on the infusion
                   of extra cash into Chuza.
  The bankruptcy court took the second view. For this finding, the court pointed out

  that every payment to Paula had come soon after Mr. Goldstein or his company had

  loaned larger amounts to Chuza and Mr. Goldstein or his company had paid Chuza

  more than eight times what Chuza repaid Paula.

        When Chuza made the first of the transfers to Paula, Chuza was insolvent.

  Over the next two months, Mr. Goldstein paid over $76,000 to Chuza and it paid only

  $3,500 to Paula. In the next two months, Chuza received a net of $109,282 from Mr.

  Goldstein or his company. The pattern continued. All of Chuza’s payments to Paula

  came right after Mr. Goldstein or his company had put a greater amount into Chuza.

  All told, Paula received $46,885 but Chuza received a total of $442,548.09, less the

  payments to Paula for a net of $395,663.09. {Bankruptcy Order at 3–4}

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        Two possible inferences exist. One is harm to Chuza’s non-insider creditors

  from Chuza’s payments to Paula. But the bankruptcy court could also infer that the

  payments from Mr. Goldstein and his company had kept Chuza afloat so that it could

  pay at least something to the non-insider creditors. For that inference, a factfinder

  might reasonably have credited testimony by Mr. Goldstein, who explained that he

  had loaned the money to Chuza so that it could pay its other creditors.

        Either inference is reasonable. The bankruptcy court chose the second

  inference, which was permissible based on the evidence of cash infusions from

  Mr. Goldstein and his company. Given the reasonableness of that inference, the

  bankruptcy court’s finding is not clearly erroneous.6 Anderson v. City of Bessemer

  City, 470 U.S. 564, 574 (1985).

        The BAP disregarded these infusions, focusing only on the money paid out to

  Paula. This reasoning assumes that Chuza could decide how to spend the new

  money. But we have already pointed out that Chuza had to spend part of the new

  money to repay Paula. In similar circumstances, every circuit to address the issue has

  considered the infusion of new money into the bankruptcy estate when determining

  whether later payments had resulted in a diminution. See, e.g., In re Bohlen

  Enterprises, Ltd., 859 F.2d 561, 566 (8th Cir. 1988) (stating that the court assesses

  diminution by viewing the transaction as a whole, including a new creditor’s infusion

  6
    On these facts, we cannot say that the unsecured creditors were injured as a result
  of the transfers because the infusions into the estate were substantially greater than
  the transfers to Paula.

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  of funds to the debtor and the debtor’s later repayments to an old creditor); In re

  Winstar Commc’ns, Inc., 554 F.3d 382, 400 (3d Cir. 2009) (same); In re Superior

  Stamp & Coin Co., Inc., 223 F.3d 1004, 1008 (9th Cir. 2000) (same); First Nat. Bank

  v. Phalen, 62 F.2d 21, 22 (7th Cir. 1932) (“It is . . . well settled by the authorities that

  where a surety supplies out of his own funds the means for payment of an obligation

  whereon he is surety, the estate of his principal debtor is not thereby depleted.”).

         The trustee argues that we cannot consider the infusions into Chuza, relying on

  In re Marshall, 550 F.3d 1251 (10th Cir. 2008). This argument rests on a

  misapplication of Marshall. There the debtors indisputably had control over how to

  use the funds, id. at 1257, a point we also found significant in our analysis of the case

  above. Here, however, the bankruptcy court found that Chuza could not disregard the

  condition, which required Chuza to use a part of the loan proceeds to repay Paula.

         In sum, the bankruptcy court correctly concluded that the earmarking doctrine

  was an available defense for the transfers to Paula. Under clear-error review, the

  bankruptcy court did not err in finding that Chuza did not control the earmarked

  funds, nor did the transfers diminish the estate.

                   c. Statutory Exceptions

         The defendants also assert statutory exceptions to the trustee’s § 547(b)

  preferential-transfer and § 548(a)(1)(B) constructive-fraudulent-transfer claims.

         First, they contend that even if Chuza had an interest in the transferred

  property, the trustee cannot avoid the transfers under § 547(b) because the transferred

  funds were “(A) intended by the debtor and the creditor . . . to be [part of] a

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  contemporaneous exchange for new value given to the debtor; and (B) in fact [were

  part of] a substantially contemporaneous exchange.” § 547(c) (emphases added).

  And this is true even though Chuza received the funds from Mr. Goldstein and BGPI,

  not Paula. See In re ESA Env’t Specialists, Inc., 709 F.3d 388, 398 (4th Cir. 2013).

  Similarly, they note that the trustee cannot avoid a transfer under § 548(a)(1)(B) if

  Chuza “received . . . reasonably equivalent value in exchange for such transfer or

  obligation.” § 548(a)(1)(B)(i) (emphasis added).7 Whether the parties intended an

  exchange is a factual question that we review for clear error. See In re Spada,

  903 F.2d 971, 975 (3d Cir. 1990).

        The bankruptcy court concluded the exceptions were satisfied. It found there

  was a contemporaneous exchange for new value because Chuza received much more

  in loans from the defendants than it paid Paula. And the court determined there was

  an exchange for reasonably equivalent value because, again, Chuza received much

  more than it paid out and it was also able to pay down some antecedent debt on the

  note. The BAP disagreed. Among other reasons, it concluded neither exception

  applied because there was never any “exchange.”

  7
    This is less of an “exception” than it is an argument that a statutory requirement for
  avoidance is lacking. Compare § 548(a)(1)(B)(i) (noting the trustee may avoid a
  transfer if the debtor “received less than a reasonably equivalent value in
  exchange for such transfer or obligation”), with § 547(c) (providing when “[t]he
  trustee may not avoid . . . a transfer”). But the difference is immaterial here
  because the analysis for each statute turns on the same question: whether there was
  an “exchange.”

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        The defendants assert that the exceptions apply because, as the bankruptcy

  court observed, Chuza received far more than it paid Paula. Both exceptions require

  an “exchange,” which is “the act of giving or taking one thing in return for another”

  or “reciprocal giving and receiving.” Webster’s New Collegiate Dictionary 395

  (1979). The payments to Chuza were always contemporaneous with Chuza’s

  transfers to Paula. For example, Paula usually received money from Chuza on the

  same day that Mr. Goldstein or his company paid Chuza. This course of conduct

  suggests that Mr. Goldstein and his company had conditioned the loans on Chuza’s

  use of a portion to repay Paula.

        The bankruptcy court could rely not only on contemporaneity but also on Mr.

  Goldstein’s testimony that he had agreed to lend money to Chuza only if it paid some

  of the money to Paula. See supra note 5. The court regarded this testimony as

  “uncontradicted and plausible.” App., Vol. I, 151. It also found that the “value

  exchanged [had] not simply [been] the payment of subordinated debt [to Paula

  Goldstein].” Id., 152. Instead, Mr. Goldstein had “also transferred to [Chuza] a net

  of about $400,000, more than eight times the money paid to [Paula Goldstein]. For

  each of the 13 challenged payments to [Paula Goldstein], there was a

  contemporaneous exchange of new value.” Id., 152–53.

        The bankruptcy court thus interpreted Mr. Goldstein’s testimony to reflect his

  intent to pay the entire amount to Chuza in exchange for its promise to repay some of

  it to Paula, rather than the contrary interpretation that only part of the loan came with

  the condition to pay Paula. Given that the evidence allows two permissible

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  interpretations of the intent to exchange shared by Mr. Goldstein and Chuza, the

  bankruptcy court’s finding that there was an exchange was not clearly erroneous.

        In sum, the finding of an exchange satisfies the statutory exceptions that defeat

  the trustee’s § 547(b) preferential-transfer and § 548(a)(1)(B) constructive-

  fraudulent-transfer claims.

                                   III. Conclusion

        For these reasons, we affirm the bankruptcy court’s rejection of the trustee’s

  claims involving improper preference and constructive fraud.

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