Court Opinion

ID: 4025161
Source: CourtListenerOpinion
Date Created: 2016-08-16 01:01:16.717563+00
Date Added: 2024-06-11T14:05:24.303297
License: Public Domain

FILED
                                                                   AUG 15 2016
 1                         NOT FOR PUBLICATION
                                                               SUSAN M. SPRAUL, CLERK
 2                                                               U.S. BKCY. APP. PANEL
                                                                 OF THE NINTH CIRCUIT
 3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                            OF THE NINTH CIRCUIT
 5   In re:                        )        BAP No. NC-15-1415-JuKiTa
                                   )
 6   MORTGAGE FUND ‘08 LLC,        )        Bk. No. 11-49803
                                   )
 7                  Debtor.        )        Adv. No. 13-04190
     ______________________________)
 8   SUSAN L. UECKER, Liquidating )
     Trustee of the Mortgage Fund )
 9   ‘08 Liquidating Trust,        )
                                   )
10                  Appellant,     )
                                   )
11   v.                            )        M E M O R A N D U M*
                                   )
12   ROBERT L. MONTGOMERY,         )
                                   )
13                  Appellee.      )
     ______________________________)
14
                     Argued and Submitted on July 28, 2016
15                       at San Francisco, California
16                          Filed - August 15, 2016
17             Appeal from the United States Bankruptcy Court
                   for the Northern District of California
18
      Honorable Roger L. Efremsky, Chief Bankruptcy Judge, Presiding
19                       _________________________
20   Appearances:     Ben G. Young of Jeffer Mangels Butler and
                      Mitchell LLP argued for appellant Susan L.
21                    Uecker; Richard S. Miller argued for appellee
                      Robert L. Montgomery.
22                         _________________________
23   Before:   JURY, KIRSCHER, and TAYLOR, Bankruptcy Judges.
24
25
26       *
          This disposition is not appropriate for publication.
27 Although it may be cited for whatever persuasive value it may
   have (see Fed. R. App. P. 32.1), it has no precedential value.
28 See 9th Cir. BAP Rule 8024-1.

                                      -1-
 1           Appellant Susan L. Uecker is the liquidating trustee
 2   (Trustee) appointed under the confirmed chapter 111 plan for
 3   debtor, Mortgage Fund ‘08 LLC (MF08).     Trustee filed an
 4   adversary proceeding against appellee, Robert L. Montgomery
 5   (Montgomery), seeking to avoid and recover as a fraudulent
 6   transfer under § 544 and California state law a $150,000 payment
 7   made to Montgomery by The Mortgage Fund, LLC (TMF).2      TMF was
 8   the sole owner, manager, and member of MF08.
 9           Montgomery answered the complaint and pleaded several
10   affirmative defenses, including settlement and release based
11   upon an agreement between MF08 and its affiliate, chapter 11
12   debtor R.E. Loans, LLC (REL).     The agreement settled disputes
13   between the parties regarding MF08's $66 million proof of claim
14   (POC) filed in REL’s bankruptcy case that was commenced in
15   Texas.     As an investor and noteholder in REL’s bankruptcy case,
16   Montgomery’s claim, and payment on that claim, was affected by
17   the settlement.     The Texas bankruptcy court approved the
18   settlement agreement (SA), which was incorporated into REL’s
19   confirmed plan.
20           Trustee and Montgomery filed cross-motions for summary
21   judgment.     Trustee moved for summary judgment on her
22
23
         1
          Unless otherwise indicated, all chapter and section
24 references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532,
   “Rule” references are to the Federal Rules of Bankruptcy
25 Procedure, and “Civil Rule” references are to the Federal Rules
26 of Civil Procedure.
         2
27        On April 8, 2015, the bankruptcy court entered a
   scheduling order which consolidated this adversary with Uecker v.
28 Bennett, Adv. No. 13-04194, for purposes of trial.

                                      -2-
 1   constructive fraudulent transfer claim for relief, and
 2   Montgomery moved for summary judgment on, among other things,
 3   his affirmative defense of settlement and release.     After a
 4   hearing, the bankruptcy court took the matters under advisement.
 5           The bankruptcy court subsequently issued a decision finding
 6   that the SA covered Trustee’s fraudulent transfer claim against
 7   Montgomery and that all other issues raised in the summary
 8   judgment motions were moot.     See Susan L. Uecker, Trustee of the
 9   Mortgage Fund ‘08 Liquidating Trust v. Montgomery (In re
10   Mortgage Fund ‘08 LLC), 541 B.R. 467 (Bankr. N.D. Cal. 2015).
11   The court entered an order granting Montgomery’s motion for
12   summary judgment (MSJ) and denying Trustee’s MSJ.     Trustee
13   appeals from that order.3
14           The SA provides that California law governs its
15   construction.     Applying California law, we determine that the
16   record, when viewed in the light most favorable to the Trustee,
17   shows that there is no genuine issue of material fact as to the
18   proper construction of the terms “REL Transfer,” “Paid by REL,”
19   and “Any Third Party” as used in the SA.     Therefore, Montgomery
20   was entitled to judgment as a matter of law.     Accordingly, we
21   AFFIRM.
22
23
24
25       3
          Trustee also appealed the bankruptcy court’s order
26 granting summary judgment in favor of Bennett in the related
   adversary proceeding, BAP No. NC-14-1408. Trustee filed a notice
27 of related appeals and a request for consolidation of the two
   appeals for oral argument. On March 4, 2016, a one-judge order
28 set the related appeals before the same merits panel.

                                      -3-
 1                                  I.   FACTS4
 2   A.       The MF08 and REL Bankruptcy Cases
 3            On September 12, 2011, several investors filed a chapter 7
 4   involuntary bankruptcy petition against MF08 in the bankruptcy
 5   court for the Northern District of California.      The bankruptcy
 6   court converted the case to chapter 11 and entered an order for
 7   relief on September 28, 2011.       As of the petition date, MF08 had
 8   about 472 noteholders who were owed approximately $80 million
 9   and held a real estate portfolio valued at around $72 million.
10            The bankruptcy court approved MF08's disclosure statement
11   and confirmed its plan by order entered on February 3, 2012.
12   Among other things, the order established the MF08 liquidating
13   trust; Trustee has been in place since that time.
14            REL commenced its chapter 11 case in the Northern District
15   of Texas on September 13, 2011.5      At the time of its filing, REL
16   had about 2,900 noteholders who were owed approximately
17   $646 million (REL Noteholders).       On September 22, 2011, the
18   United States Trustee appointed the Official Committee of
19   Noteholders (Noteholders Committee) in REL’s bankruptcy case.
20
21        4
          We borrow heavily from the comprehensive facts set forth
22 in the bankruptcy court’s published opinion on this matter, Susan
   L. Uecker, Trustee of the Mortgage Fund ‘08 Liquidating Trust v.
23 Montgomery (In re Mortgage Fund ‘08 LLC), 541 B.R. 467 (Bankr.
   N.D. Cal. 2015).
24
        5
          Capital Salvage, a California corporation, and R.E.
25 Future, LLC (RE Future), also filed chapter 11 cases on the same
26 date as REL. Capital Salvage and RE Future were entities that
   owned most of the real property obtained through foreclosure
27 sales by REL. REL is the sole shareholder of Capital Salvage and
   the sole member of RE Future. Those cases were jointly
28 administered with REL’s case.

                                         -4-
 1   B.   Ownership and Operation of MF08 and REL
 2        Walter Ng and his sons, Kelly Ng and Barney Ng, owned,
 3   managed, and controlled, directly or indirectly, MF08 and REL
 4   and their related entities.
 5        Walter and Kelly Ng formed REL in January 2002.       REL was an
 6   investment company that issued secured loans to real estate
 7   developers.   To raise money, REL sold unregistered securities to
 8   investors in exchange for making the investors “members” of REL.
 9   Montgomery was an investor and member in REL.
10        In 2007, REL faced liquidity problems due to decreasing
11   values in the real estate market.     Its attorneys also advised
12   REL that that it had been violating state and federal securities
13   laws by selling securities without registration as required by
14   the Securities and Exchange Commission.     Due to these
15   violations, the attorneys urged REL to immediately stop
16   soliciting new investments.   As a result, by June 2007 REL had
17   $20 million in loan commitments, had only $1 million cash on
18   hand and could not meet the withdrawal requests from its
19   investors.
20        In November 2007, REL made its members into noteholders in
21   what is referred to as the “Exchange Transaction” and the
22   issuance of “Exchange Notes.”
23        To address REL’s severe cash flow problems, in December
24   2007, Walter and Kelly Ng, created MF08 for the stated purpose
25   of raising capital through the issuance of notes to investors
26   and making loans secured by real estate with the funds raised.
27   In reality, MF08 was part of a scheme perpetrated by the Ngs in
28   which investors’ money was funneled from MF08 to REL.      According

                                     -5-
 1   to Trustee, MF08 transferred over $66 million of the
 2   approximately $80 million raised from MF08 investors to REL.
 3            As mentioned above, TMF was MF08's sole owner, manager, and
 4   member.      Walter Ng and Kelly Ng were the sole members of TMF and
 5   thus controlled MF08.
 6   C.       MF08's $66 Million POC in the REL Case
 7            Prior to Trustee’s appointment as liquidating trustee, MF08
 8   filed a POC in the REL case for $66,226,496.      The attachment to
 9   the POC stated:
10            [B]etween December 4, 2007, and February 4, 2009, the
              Ngs caused the aggregate sum of $66,226,496 to be
11            transferred from MF08's bank account to [REL] (the
              “Cash Transfers”). The Cash Transfers were made
12            either (1) directly to [REL], (2) indirectly through
              [TMF] or Bar-K, or (3) to [REL’s] borrowers to enable
13            such borrowers to service or repay loans extended to
              them by [REL]. (Emphasis added).
14
15   The POC alleged that the Ngs caused the “Cash Transfers” and
16   that they were made with the “actual intent to hinder, delay or
17   defraud entities to whom MF08 was or became, on or after the
18   dates that such transfer[s] were made, indebted.”     Also included
19   with the POC was a “Table of Cash Transfers from MF08 to the
20   Debtor” which detailed the dates, check numbers, and amounts
21   purportedly transferred by MF08 to REL from December 4, 2007, to
22   February 4, 2009.6     Trustee continued to assert the POC in the
23
          6
24          To be clear, the list of cash transfers showed only those
     transfers made from MF08 to REL and did not identify those
25   transfers that REL made to the holders of the Exchange Notes,
26   either directly or indirectly through TMF or Bar-K. MF08
     maintained that if it could trace the funds to the holders of the
27   Exchange Notes, it might have the right to pursue recovery from
     them. Due to the settlement of its POC, tracing became
28                                                      (continued...)

                                       -6-
 1   REL bankruptcy case after her appointment.
 2   D.       MF08's Settlement with REL and Confirmation of the REL Plan
 3            REL informally objected to MF08's POC.     On April 24, 2012,
 4   Trustee, REL, and other principle stakeholders in the REL case -
 5   Wells Fargo Capital Finances, LLC (REL’s secured lender) and the
 6   Noteholders Committee (representing Montgomery’s interests as a
 7   REL Noteholder), participated in a judicial mediation regarding
 8   the dispute over the POC and other disputes related to
 9   confirmation of a plan.7        The parties did not reach a settlement
10   on that date but continued to negotiate and eventually reached
11   an agreement regarding the validity and priority of MF08's POC.
12            Prior to the execution of the SA, the Noteholders Committee
13   sent a letter to the REL Noteholders, including Montgomery,
14   dated May 16, 2012.         The committee recommended that the
15   noteholders vote to accept the plan, explaining:
16            [T]he Plan Compromise8 represents a favorable outcome
              for Noteholders when weighed against the risk,
17            uncertainty and potential cost of litigating against
              objections to the allowance or priority of the
18            Noteholders’ claims. The proposed Plan Compromise
              resolves the debtors’ and MF08's potential claims
19            against Noteholders to recover prepetition
              distributions as alleged fraudulent conveyances,
20            ensures that current Noteholders will not be at risk
              of being sued by the Liquidating Trustee for the
21
22            6
         (...continued)
23 unnecessary. To the extent that Trustee’s counsel asserted at
   oral argument that the list defined the universe of Noteholders
24 entitled to the waiver in question, the list could not do so,
25 since it showed transfers to, not from, REL.
          7
26        Development Specialists, Inc. (DSI) also participated in
   the all-day mediation. All the parties other than DSI agreed on
27 the terms of the modified plan and the SA.
28        8
                  The “Plan Compromise” is explained below.

                                          -7-
 1        recovery of distributions paid out years ago, and
          insulates Noteholders from the expense of defending
 2        against such litigation.
 3   The parties, including Trustee, executed the SA on May 30, 2012.
 4   The SA allowed REL to proceed with confirmation of its plan.
 5        REL filed a motion for approval of the SA under Rule 9019
 6   (Motion).   At the same time, REL filed its Modified Fourth
 7   Amended Joint Chapter 11 Plan of Reorganization, dated June 1,
 8   2012, which had been amended to comply with the requirements of
 9   the SA with MF08.
10        In the Motion seeking approval, REL generally reiterated
11   the provisions set forth in the SA.   REL stated that MF08
12   contended, based on various theories, including that the
13   transfers may have constituted intentional or constructive
14   fraudulent transfers, that REL was liable to it for the
15   $66 million received.   The Motion defined the “REL Transfers” as
16   the transfer of $66 million made between December 2007 and
17   “approximately August of 2008” and REL’s commingling of that
18   amount in its general account with other REL funds.   The Motion
19   also stated that MF08 contended that “if it [could] trace the
20   funds that it transferred to REL from REL to any given [REL]
21   Noteholder, MF08 might have the right to pursue recovery from
22   that [REL] Noteholder as a subsequent transferee pursuant to
23   Bankruptcy Code § 550(b).”   This potential right to assert
24   claims against noteholders that received REL Transfers was
25   defined as the “MF08 Potential Avoidance Actions.”
26        The Motion then described the response by REL and the
27   Noteholders Committee to MF08's contentions:
28        [REL] and the Noteholders Committee contend that

                                    -8-
 1        Noteholders who received the REL Transfers who were
          not insiders of [REL] cannot be liable to MF08 because
 2        (a) it is not possible to trace the dollars received
          from MF08 to any specific REL Transfer or transferee;
 3        and (b) each [REL] Noteholder that received an REL
          Transfer, with the possible exception of insiders of
 4        [REL], received any such REL Transfer on account of a
          debt payable by [REL] for value, in good faith, and
 5        without knowledge of the voidability of the transfer
          from MF08 to [REL] (even assuming that transfer is
 6        avoidable) and, therefore, would be shielded from
          liability pursuant to Bankruptcy Code § 550(b).
 7
 8        The Motion also described the “prior plan compromise” which
 9   had been negotiated by REL and the Noteholders Committee and the
10   change to it which was now required by the proposed settlement
11   with MF08.   The prior plan compromise provided that if the REL
12   Noteholders voted to accept the plan, the REL Noteholders' lien
13   on REL assets would be released, they would share pro rata with
14   holders of general unsecured claims and their claims would not
15   be “subordinated or challenged,” but each REL Noteholders’ claim
16   would be reduced by 50% of any cash received after the November
17   2007 Exchange Transaction through the REL petition date.
18        The proposed agreement with MF08 made one change to the
19   “prior plan compromise.”   Instead of the REL Noteholders sharing
20   pro rata with the REL general unsecured creditors, the first
21   $5 million distributed was to go to the REL general unsecured
22   creditors before the REL Noteholders would share pro rata.    This
23   change increased the distribution to general unsecured
24   creditors, primarily benefitting MF08 as the largest such
25   creditor, and reduced the distribution to REL Noteholders
26   through reallocation of the first $5 million.   In exchange for
27   this “enhancement,” MF08 agreed to vote its $66 million claim in
28   favor of the plan.   Per the agreement, MF08 would also waive its

                                    -9-
 1   right to pursue all MF08 Potential Avoidance Actions against REL
 2   Noteholders, and MF08 would be appointed to the trust oversight
 3   committee of the liquidating trust to be created under the REL
 4   Plan.
 5        In seeking court approval for this agreement, REL explained
 6   that, absent this agreement, the parties would be forced to
 7   litigate the merits of the MF08 POC, the merits of the final
 8   plan compromise, the relative priorities and rights as between
 9   the holders of general unsecured claims and the REL Noteholders,
10   and the merits of the MF08 Potential Avoidance Actions.    This
11   was an unattractive proposition because it would “consume
12   substantial cash that would otherwise be distributable to REL
13   Noteholders and MF08's creditors.”
14        As further support, REL mentioned that many REL Noteholders
15   were also investors in MF08 and paying the professionals to
16   redistribute the limited funds available as between MF08 and REL
17   would reduce the total amount received by all creditors.
18   Litigating MF08's Potential Avoidance Actions would also likely
19   be complex and could require expensive efforts to trace funds,
20   and every dollar spent on professionals would reduce the amount
21   available for distribution to creditors.   The modified plan
22   eliminated these issues and was supported by all stakeholders,
23   including the committee of MF08's noteholders.
24        On June 18, 2012, the REL bankruptcy court confirmed REL’s
25   plan and approved the SA.
26   E.   The Relevant Sections of the SA
27        The Recitals in section 2 of the SA state:
28        2.01.   MF08 transferred cash in an amount equal to

                                    -10-
 1        $66,226,496 to R.E. Loans during the period from
          December of 2007 and through 2008.
 2
          2.02. MF08 contends that R.E. Loans is liable to MF08
 3        for the monies received on various theories, including
          without limitation based upon the contention that the
 4        transfers may have constituted fraudulent transfers.
 5        2.03. During the time period from December of 2007
          through approximately August of 2008, R.E. Loans
 6        received cash and deposited that cash into its general
          account from multiple sources, including without
 7        limitation (a) the transfers from MFO8 described in
          2.01, above, (b) payoffs by R.E. Loans’ borrowers of
 8        principal and interest, (c) sales of assets, and
          (d) advances by Wells Fargo Capital Finance, LLC
 9        (“Wells Fargo”).
10        2.04. During the time period from December of 2007
          through approximately August of 2008, R.E. Loans made
11        payments out of its general account to many different
          parties, including without limitation payments to
12        various creditors, including without limitation the
          holders of Exchange Notes issued to R.E. Loans’
13        Noteholders (REL Transfers).
14        2.05. MF08 contends that if it could trace the funds
          that it transferred to R.E. Loans as described in
15        Paragraph 2.01 from R.E. Loans to the holders of
          Exchange Notes, MF08 might have the right to pursue
16        recovery from the holders of Exchange Notes as
          “subsequent transferees” pursuant to Bankruptcy Code
17        § 550(d). R.E. Loans contends that holders of
          Exchange Notes who received the REL Transfers cannot
18        be liable to MF08 because (a) it is not possible to
          trace the dollars received from MF08 to any specific
19        REL Transfer; and (b) each holder of an Exchange Note
          that received an REL Transfer, with the possible
20        exception of insiders who may have received an REL
          Transfer, received any such REL Transfer on account of
21        a debt payable by R.E. Loans for value, in good faith,
          and without knowledge of the voidability of the
22        transfer from MF08 to R.E. Loans (even assuming that
          transfer is avoidable) and, therefore, would be
23        shielded from liability pursuant to Bankruptcy Code
          § 550(b).
24
          2.06. MF08's potential right to assert claims against
25        holders of Exchange Notes that received REL Transfers
          shall be referred to herein as “MFO8's Potential
26        Avoidance Actions”.
27        Section 3.01-3.03 of the SA dealt with the allowance of
28   MF08's claim in the REL case.   If REL’s modified plan was

                                     -11-
 1   confirmed and the “Plan Compromise” approved by the Texas
 2   bankruptcy court, then MF08's POC “shall be allowed as a general
 3   unsecured claim against R.E. Loans in the amount of
 4   $66,226,496. . . .”
 5        Section 4 of SA, titled “Waiver of Right to Pursue MF08
 6   Potential Avoidance Actions,” provides:
 7        4.01. If the MF08 Claim is Allowed pursuant to
          Paragraph 3, above, MF08 waives the right to pursue
 8        any MFO8 Potential Avoidance Actions; provided,
          however, that this Agreement shall not limit or
 9        restrict the right of MF08 to bring any action against
          any third party, including any manager, member,
10        insider or professional of MF08. This provision shall
          be void and of no further force or effect if the MF08
11        Claim is not Allowed pursuant to Paragraph 3, above.
12        4.02. With respect to the claims released herein,
          MF08 acknowledges that it has been advised by its
13        attorneys concerning, and is familiar with,
          California Civil Code Section 1542 and it expressly
14        waives any and all rights under California Civil Code
          Section 1542 and under any other federal or state
15        statute or law of similar effect with respect to the
          claims released herein. Section 1542 of the
16        California Civil Code provides as follows:
17              A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS
                WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT
18              TO EXIST IN HIS OR HER FAVOR AT THE TIME OF
                EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM
19              OR HER MUST HAVE MATERIALLY AFFECTED HIS OR
                HER SETTLEMENT WITH THE DEBTOR.
20
21        Finally, section 8 provided that the SA be interpreted
22   according to California law.
23   F.   The Transfer at Issue
24        As noted, Montgomery was an investor in REL, an affiliate
25   of MF08.   Montgomery was not an investor in, or a creditor of,
26   MF08.
27        Montgomery had $924,887 invested in REL as of December 31,
28   2007.   In February 2008, Montgomery submitted a written request

                                    -12-
 1   to REL to return $450,000, or half of his principal investment,
 2   based on his decision to decrease his investment in real estate
 3   as an asset class.   REL then sold Montgomery’s ownership shares
 4   in $150,000 increments, on June 17, 2008, July 23, 2008, and
 5   August 21, 2008, for a total of $450,000 as requested.   Checks
 6   representing these distributions were sent directly to
 7   Montgomery’s Wells Fargo IRA account, with a contemporaneous
 8   statement indicating that all three payments came from REL.
 9   Trustee seeks to recover the second $150,000 transfer because it
10   was made by a check written on TMF's bank account whereas the
11   other two payments were made from REL’s account.
12        The bank documents offered by both Trustee and Montgomery
13   show the following sequence of events:
14        1. On July 21, 2008, REL transferred $528,791 to MF08.
15        2. On July 21, 2008, MF08 transferred $528,791 to TMF.
16        3.   On July 22, 2008, TMF wire transferred $400,000 to Troy
17   Demanes, another REL Noteholder.
18        4. On July 23, 2008, TMF wrote check no. 1020 for $150,000
19   made payable to “WFB IRA Services fbo Montgomery.”
20        4. On July 25, 2008, REL transferred $447,566 to MF08.
21        5. On July 28, 2008, MF08 transferred $447,566 to TMF.
22        6. On July 28, 2008, TMF's bank honored the $150,000 check
23   to Montgomery.   Montgomery's IRA statement shows his account had
24   received this $150,000 as of July 31, 2008.
25        From this sequence of events, the record shows that it is
26   undisputed that in July 2008, REL transferred $528,791 to MF08
27   and then transferred $447,566 to MF08 and MF08 immediately
28   transferred these exact amounts to TMF.   It is also undisputed

                                    -13-
 1   that when sufficient funds were in the TMF account, TMF's bank
 2   honored the check to Montgomery and it was credited to his IRA
 3   account on July 31, 2008.
 4   G.       The Underlying Adversary Proceeding
 5            On October 6, 2014, Trustee filed an amended complaint
 6   seeking to avoid and recover the $150,000, alleging that amount
 7   was fraudulently transferred by MF08 to TMF and then paid to
 8   Montgomery on July 23, 2008, with funds that could be traced to
 9   MF08.      The amended complaint further alleged that the $150,000
10   transfer to Montgomery was both intentionally and constructively
11   fraudulent under California law.
12            On October 23, 2014, Montgomery answered the complaint.
13   Montgomery denied that the $150,000 transfer to him by MF08 was
14   intentionally or constructively fraudulent and alleged seven
15   affirmative defenses.      In his second affirmative defense,
16   Montgomery alleged that the court-approved SA in REL’s
17   bankruptcy case and REL’s confirmed plan operated as a
18   settlement and release of any fraudulent transfer claims MF08
19   could assert against him.      He also maintained that since he
20   agreed under the SA to give up a valid claim of $450,000 in
21   favor of MF08 and other creditors in return for MF08 obtaining
22   priority repayment of the first $5 million in income from REL,
23   this constituted value or reasonably equivalent value for
24   purposes of § 548.9
25
26
          9
27        Although the complaint did not assert fraudulent transfer
   claims under § 548, Montgomery mentioned this section in his
28 answer.

                                       -14-
 1   H.   The MSJs
 2        On August 3, 2015, Trustee filed a MSJ on the
 3   constructively fraudulent claim under § 544 and Cal. Civ. Code
 4   § 3439.04(a)(2)(A).   Trustee argued that the undisputed facts
 5   showed that MF08 was entitled to avoid the transfer of $528,791
 6   from MF08 to TMF and may recover $150,000 of it from Montgomery
 7   as either the initial transferee or the immediate transferee of
 8   the initial transferee as permitted under § 550(a).   Trustee
 9   also asserted that she was entitled to summary judgment
10   disposing of Montgomery's affirmative defense under § 550(b)
11   because there is no evidence that he gave value to TMF or MF08
12   and his interpretation of the SA was incorrect.
13        In support of her interpretation of the SA, Trustee
14   maintained that the plain language of the SA showed that MF08
15   had released only a limited set of claims; i.e., claims against
16   REL Noteholders who were paid by REL.   Because Montgomery
17   received the funds from TMF, Trustee asserted that under
18   section 4.01 of the SA, her right to “bring any action against
19   any third party” was preserved, and Montgomery qualified as a
20   “third party.”   Finally, Trustee argued that there was nothing
21   in the SA evidencing that the intent of the parties was to
22   affect claims that were unknown at the time the SA was signed.
23        On August 17, 2015, Montgomery filed his MSJ, asserting
24   that Trustee was barred from bringing the fraudulent transfer
25   claim against him by MF08's prior settlement with REL in which
26   it waived its rights to bring an avoidance action against him.
27   He also argued that the actual source of the repayment of
28   $150,000 was REL monies as shown by his tracing.   In support of

                                    -15-
 1   his MSJ, Montgomery requested the bankruptcy court to take
 2   judicial notice of numerous documents, including:   (1) his REL
 3   investor portfolio account statement in which REL took credit
 4   for the $150,000 payment TMF ostensibly made to him; (2) the
 5   Noteholders’ Committee’s letter to the REL Noteholders; (3) the
 6   findings of fact and conclusions of law in support of the REL
 7   Confirmation Order; and (4) his Wells Fargo Bank IRA statement
 8   indicating payments had come from REL.
 9         Two weeks later, Montgomery filed his opposition to
10   Trustee’s MSJ basically reiterating what he argued in his
11   motion.
12         The bankruptcy court heard the motions on September 10,
13   2015.   At the hearing, Trustee’s counsel asserted that the
14   primary question raised in the motions was whether MF08 released
15   the avoidance action claims against Montgomery under the SA.
16   Counsel argued that only a narrow category of claims were
17   settled through the SA as shown by sections 2.04 and 2.05 of the
18   SA.   That is, only those avoidance claims that were paid by REL
19   and not claims paid by TMF.   He also maintained that the release
20   in the SA under Cal. Civ. Code § 1542 was a “general release,”
21   and section 4.01 of the SA preserved unknown claims by
22   authorizing Trustee to file any action against any “third
23   party.”
24         Following argument, the bankruptcy court took the matter
25   under submission.   On November 19, 2015, the bankruptcy court
26   issued its memorandum decision finding that the release in the
27   SA covered Trustee’s claims in the adversary proceeding and that
28   all other issues were moot.   On the same day, the bankruptcy

                                    -16-
 1   court entered an order granting Montgomery’s MSJ and denying
 2   Trustee’s MSJ.   Trustee filed a timely notice of appeal from
 3   that order.
 4                               II.    JURISDICTION
 5        The bankruptcy court had jurisdiction pursuant to 28 U.S.C.
 6   §§ 1334 and 157(b)(2)(H).         We have jurisdiction under 28 U.S.C.
 7   § 158.
 8                                 III.     ISSUE
 9        Whether the bankruptcy court erred in finding that the SA
10   between MF08 and REL barred MF08's fraudulent transfer claims
11   against Montgomery.
12                         IV.    STANDARDS OF REVIEW
13        We review de novo the bankruptcy court’s decision on cross-
14   motions for summary judgment, applying the same standard used by
15   the bankruptcy court.   Brown v. City of L.A., 521 F.3d 1238,
16   1240 (9th Cir. 2008); Furnace v. Sullivan, 705 F.3d 1021, 1026
17   (9th Cir. 2013).
18        We also review de novo determinations of whether contract
19   language is ambiguous, Tyler v. Cuomo, 236 F.3d 1124, 1134 (9th
20   Cir. 2000), and “whether the written contract is reasonably
21   susceptible of a proffered meaning.”           Brinderson-Newberg Joint
22   Venture v. Pac. Erectors, Inc., 971 F.2d 272, 277 (9th Cir.
23   1992); see also Winet v. Price, 4 Cal. App. 4th 1159, 1165 (1992)
24   (the court reviews determinations of whether contract language
25   is ambiguous de novo); Scheenstra v. Cal. Dairies, Inc.,
26   213 Cal. App. 4th 370, 393 (2013) (even where uncontroverted
27   evidence allows for conflicting inferences to be drawn,
28   interpretation of contract is solely a judicial function);

                                          -17-
 1   Sunniland Fruit, Inc. v. Verni, 233 Cal. App. 3d 892, 898 (1991)
 2   (de novo review “where the interpretation [of the contract] does
 3   not turn on the credibility of extrinsic evidence” and “where
 4   the extrinsic evidence points only one way, or is
 5   uncontested.”); Wolf v. Super. Ct., 114 Cal. App. 4th 1343, 1351
 6   (2004) (where the extrinsic evidence points only one way, or is
 7   uncontested, the meaning of the language in question may be
 8   ascertained as a matter of law).
 9                             V.   DISCUSSION
10   A.   Legal Standards for Summary Judgment
11        “The court shall grant summary judgment if the movant shows
12   that there is no genuine dispute as to any material fact and the
13   movant is entitled to judgment as a matter of law.”   Civil
14   Rule 56(a), made applicable here by Rule 7056.   Material facts
15   are those necessary to establish the elements of a party’s cause
16   of action.   Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
17   (1986).   A genuine issue for trial exists only if “the evidence
18   is such that a reasonable jury could return a verdict” for the
19   party opposing summary judgment.   Id. at 248; see also Aguilar
20   v. Atl. Richfield Co., 25 Cal. 4th 826, 856 (2001) (on summary
21   judgment a court “does not decide on any finding of its own, but
22   simply decides what finding such a trier of fact could make for
23   itself.”).
24        When considering a motion for summary judgment, a court may
25   not weigh the evidence nor assess credibility; instead, “the
26   evidence of the non-movant is to be believed, and all
27   justifiable inferences are to be drawn in his [or her] favor.”
28

                                     -18-
 1   Anderson, 477 U.S. at 255.10    The court is not precluded from
 2   drawing inferences against the non-moving party as long as the
 3   underlying facts are viewed in the light most favorable to that
 4   party.   Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp.,
 5   475 U.S. 574, 588 (1986).   In the end, the court “must determine
 6   whether the record, when viewed in the light most favorable to
 7   the non-moving party, shows that there is no genuine issue of
 8   material fact and that the moving party is entitled to judgment
 9   as a matter of law.”   Brown, 521 F.3d at 1240.
10        A court may grant summary judgment regarding the
11   interpretation of ambiguous language in a contract if the
12   non-moving party fails to point to any relevant extrinsic
13   evidence supporting that party’s interpretation of the language.
14   Compagnie Financiere de CIC et de L'Union Europeenne v. Merrill
15   Lynch, Pierce, Fenner & Smith, Inc., 232 F.3d 153 (2nd Cir.
16   2000); see also Torres Vargas v. Santiago Cummings, 149 F.3d 29,
17   33 (1st Cir. 1998) (summary judgment appropriate where extrinsic
18   evidence presented to the court supports only one of the
19   conflicting interpretations).
20        Under California law and summary judgment standards,
21   Montgomery had the burden of proof on his affirmative defense to
22   show that the SA operated as a complete defense to
23   MF08's/Trustee’s fraudulent transfer claims against him.
24
25
26       10
          Trustee has not argued on appeal that the bankruptcy
27 court erred by weighing the extrinsic evidence. Accordingly,
   those arguments are deemed waived for purposes of this appeal.
28 Smith v. Marsh, 194 F.3d 1045, 1052 (9th Cir. 1999).

                                     -19-
 1   B.   Is the SA ambiguous?
 2        This appeal involves the interpretation of the SA under
 3   California law.    The threshold question is whether the SA is
 4   ambiguous; that is, reasonably susceptible to more than one
 5   interpretation.    Winet, 4 Cal. App. 4th at 1165.   The question of
 6   ambiguity is a question of law subject to de novo review.      Id.
 7        “Whether the contract is reasonably susceptible to a
 8   party’s interpretation can be determined from the language of
 9   the contract itself,” United Teachers of Oakland v. Oakland
10   Unified Sch. Dist., 75 Cal. App. 3d 322, 330 (1977), or from
11   extrinsic evidence of the parties’ intent.     Winet, 4 Cal. App. 4th
12   at 1165.    In California, courts are required to receive
13   provisionally any proffered extrinsic evidence that is relevant
14   to show whether the contractual language is reasonably
15   susceptible to a particular meaning.    Pac. Gas & Elec. Co. v.
16   G.W. Thomas Drayage & Rigging Co., Inc., 69 Cal. 2d 33, 39–40
17   (1968) (rational interpretation of a contract requires at least
18   a preliminary consideration of all credible evidence offered to
19   prove the intention of the parties).    Such extrinsic evidence
20   might expose a latent ambiguity when the contract appears
21   unambiguous on its face.    Id. at 40 & n.8.   “An appellate
22   analysis of the threshold question concerning whether the
23   contractual language is ambiguous—that is, reasonably
24   susceptible to more than one interpretation—usually involves the
25   examination of competing interpretations offered by the
26   parties.”    Scheenstra, 213 Cal. App. 4th at 393.
27        In seeking reversal of the bankruptcy court’s order in
28   favor of Montgomery, Trustee repeats many of the arguments that

                                     -20-
 1   she made before the bankruptcy court.   Trustee relies upon the
 2   language of the SA itself for her interpretation and offers no
 3   extrinsic evidence in support.    In a nutshell, she contends that
 4   Montgomery was not protected under the terms of the SA because
 5   he was paid by TMF and not from REL’s general account.    Thus,
 6   according to Trustee, he was not part of the protected class of
 7   REL Transferees under the SA, making MF08's waiver of avoidance
 8   claims inapplicable as to him.
 9        To support her argument, she urges us to look at the
10   defined terms in sections 2.04-2.06 of the SA.   Section 2.04
11   defines a “REL Transfer” as payments made out of REL’s general
12   account to the holders of Exchange Notes issued to REL’s
13   Noteholders.   Trustee asserts that this provision plainly shows
14   that MF08 released only its claims against REL Noteholders for
15   recovery of amounts paid by REL and that these are the MF08
16   Potential Avoidance actions MF08 agreed to release under section
17   2.06.   She again also relies on section 4.01 which states that
18   “this Agreement shall not limit or restrict the right of MF08 to
19   bring any action against any third party.”   (Emphasis added).
20   According to Trustee, the phrases “any action” and “any third
21   party” are broad and include her avoidance action against
22   Montgomery.
23        Montgomery also repeats his previous arguments in his
24   opposing brief.   He claims he was an REL Transferee within the
25   meaning of the SA and, therefore, he is protected by MF08's
26   waiver of the avoidance claims.    To support his interpretation,
27   he relies on extrinsic evidence such as the surrounding
28   circumstances under which MF08 and REL negotiated or entered

                                      -21-
 1   into the SA, including the SA’s relationship to REL’s confirmed
 2   plan, and the language in MF08's POC.   Montgomery points out
 3   that the main objective of the SA was to avoid expensive and
 4   uncertain litigation over whether MF08 had a legal basis to
 5   claim REL Transferees had received $66 million of MF08's monies.
 6   He further refers to MF08's admission in its POC that the Ng
 7   family controlled the bank accounts of REL, MF08, and TMF, and
 8   could have and did use MF08 monies to pay REL investors - the
 9   “Ngs caused the transfer” of $66 million, the transfers were
10   made “either directly to REL, indirectly through TMF . . ., or
11   [directly] to REL’s borrowers.”
12        Montgomery also traces the monies coming from REL’s account
13   that flowed to MF08 and then to TMF, and ultimately to his IRA
14   account.   Based upon this tracing, he contends that the $150,000
15   used to pay him was “directly” from the general account of REL.
16        In addition, Montgomery offered other extrinsic evidence to
17   shed light on the mutual intention of the parties:   (1) his REL
18   investor portfolio account statement in which REL takes credit
19   for the $150,000 payment TMF ostensibly made to him; (2) the
20   Noteholders' Committee's letter to the REL Noteholders; and
21   (3) his Wells Fargo Bank IRA statement indicating payments had
22   come from REL.
23        In conducting our independent review into whether an
24   ambiguity exists, we examined the SA and the POC and considered
25   Montgomery’s proffered extrinsic evidence.   Based upon our
26   review, we determine that the bankruptcy court did not err in
27   ruling that the SA was ambiguous with respect to the terms “REL
28   Transfer,” “Paid by REL,” or “Any Third Party,” as those terms

                                    -22-
 1   were reasonably susceptible to the parties’ competing
 2   interpretations.    Accordingly, the bankruptcy court properly
 3   admitted all credible extrinsic evidence to aid it in
 4   interpreting the SA.    Pac. Gas & Elec. Co., 69 Cal. 2d at 37.
 5   C.    Interpretation of the SA
 6         This determination does not end our inquiry.   Although the
 7   above-referenced terms are ambiguous, we still must consider
 8   whether the bankruptcy court appropriately resolved the
 9   ambiguity.   The parties do not challenge the SA itself and
10   presented no extrinsic evidence as to their intent at the time
11   the SA was signed.    This is not surprising since Montgomery was
12   not a party to the SA and the negotiations and as the court
13   ruled that the communications regarding the settlement of MF08's
14   POC made during the mediation held in REL’s bankruptcy case were
15   confidential.11
16         The extrinsic evidence presented by Montgomery presented
17   the context in which the contract arose and described the
18   conduct of the parties in connection with the SA which cast
19   light on their original intent.    Although Trustee disputes the
20   inferences to be drawn from this extrinsic evidence, the
21   evidentiary facts themselves are not in conflict.    The meaning
22   of the terms “REL Transfer,” “Paid by REL,” and “Any third
23   Party,” was not dependent on the credibility of conflicting
24   evidence.    There were thus no factual issues for the bankruptcy
25   court to resolve.    Accordingly, we review the SA in the context
26
          11
27        Trustee filed a motion seeking to prohibit the use of
   mediation documents for any purpose in the litigation. The
28 bankruptcy court granted that motion.

                                      -23-
 1   of the extrinsic evidence presented and make our own independent
 2   determination of its meaning.   See Wolf, 114 Cal. App. 4th at
 3   1351; Scheenstra, 213 Cal. App. 4th at 390.
 4        We determine the construction of the ambiguous language by
 5   applying the appropriate canons of construction governing
 6   contracts.    “‘[W]here the language of the contract is ambiguous,
 7   it is the duty of the court to resolve the ambiguity by taking
 8   into account all the facts, circumstances and conditions
 9   surrounding the execution of the contract.’”     Frankel v. Bd. of
10   Dental Exam’rs, 46 Cal. App. 4th 534, 544 (1996); Pac. Gas & Elec.
11   Co., 69 Cal. 2d at 40 (court may consider the circumstances under
12   which the agreement was made, including its object, nature and
13   subject matter).   The goal is to interpret it to give effect to
14   the mutual intent of the parties as it existed when they
15   contracted.   Cal. Civ. Code § 1636; see also Pac. Gas & Elec.
16   Co., 69 Cal. 2d at 38.   It is the outward expression of the
17   agreement, rather than a party's unexpressed intention, which
18   the court will enforce.   Winet, 4 Cal. App. 4th at 1165.
19        1.    “REL Transfer” and “Paid by REL”
20        We begin with the ambiguous terms “REL Transfer” and “Paid
21   by REL.”   Relying on the plain language of the SA, Trustee
22   maintains that since Montgomery was paid by TMF from its bank
23   account, he was not “paid by REL.”     Therefore, he did not
24   receive a “REL Transfer” within the meaning of the SA and is not
25   protected by MF08's waiver of avoidance actions.
26        This interpretation is not supported when we consider
27   Montgomery’s undisputed extrinsic evidence and the context under
28   which settlement of MF08's POC was reached.     The undisputed

                                     -24-
 1   evidence shows - as the MF08 POC stated - that the Ngs
 2   controlled MF08, TMF, and REL and had a pattern of treating them
 3   as they wished:   “the Ngs caused the $66 million in transfers to
 4   be made, either directly or indirectly.”    Thus, in this Ponzi-
 5   like scheme, MF08 acknowledged in its POC that the Ngs did not
 6   differentiate between REL, MF08, or TMF.
 7        The evidence also shows that by all appearances, Montgomery
 8   had been paid by REL and received a REL Transfer.    As the
 9   bankruptcy court properly noted, Montgomery was paid during the
10   time period described in the POC (i.e., December 2007 – February
11   2009), and in the time period in section 2.04 of the SA (i.e.,
12   December 2007 – August 2008) and his investor portfolio account
13   statement showed REL took credit for making the $150,000 payment
14   when it was made.    In other words, REL’s investor’s account
15   carried payment to Montgomery on its books.
16        In addition, the Noteholders’ Committee’s letter sent to
17   Montgomery and other REL Noteholders is consistent with the
18   documentation Montgomery received from REL before any
19   controversy arose.    See S. Cal. Edison Co. v. Super. Ct.,
20   37 Cal. App. 4th 839, 851 (1995) (“The rule is well-settled that
21   in construing the terms of a contract the construction given it
22   by the acts and conduct of the parties with knowledge of its
23   terms, and before any controversy has arisen as to its meaning,
24   is admissible on the issue of the parties’ intent.”).
25        In the end, the extrinsic evidence shows that the parties
26   to the SA necessarily intended that the waiver by MF08 of its
27   right to sue any REL investor who had been paid with MF08 funds
28   included anyone paid directly or indirectly by REL.    Although

                                     -25-
 1   Trustee urges us to adopt her competing interpretation of the
 2   SA, she has offered no evidence in support of her position.
 3   Given the lack of evidence supporting Trustee’s inferences and
 4   interpretation, the bankruptcy court reasonably concluded that
 5   Montgomery was entitled to judgment as a matter of law.    See
 6   Anderson, 477 U.S. at 249 (holding that “there is no issue for
 7   trial unless there is sufficient evidence favoring the nonmoving
 8   party for a jury to return a verdict for that party”).
 9        Indeed, the thrust of Trustee’s argument on appeal is that
10   the bankruptcy court misinterpreted or misused the extrinsic
11   evidence.    First, she contends that the bankruptcy court applied
12   the wrong legal standard to interpret the SA based on improper
13   extrinsic evidence.    In this regard, Trustee relies on the
14   bankruptcy court’s statement that “[t]he extrinsic evidence is
15   consistent on one essential point.     By everything he was told by
16   REL, it is reasonable to interpret the Settlement Agreement as
17   Mr. [Montgomery] does.”    Trustee maintains that the bankruptcy
18   court erroneously relied upon the statements of REL, only one
19   party to the agreement, and Montgomery, a stranger to the
20   agreement.   Trustee contends that “at most” REL’s communications
21   to Montgomery show its subjective intent, but subjective intent
22   is irrelevant.   At another point, Trustee maintains that the
23   Noteholders’ Committee’s letter is another example of their
24   subjective intent.    Trustee asserts that the letter does not
25   evidence the mutual intent of the parties.    Trustee contends
26
27
28

                                     -26-
 1   therefore that the court should have ignored this evidence.12
 2        We are not persuaded by these arguments.   Error would
 3   occur, if at all, if the bankruptcy court improperly admitted
 4   extrinsic evidence showing only the undisclosed subjective
 5   intent of REL or the Noteholders Committee, which is
 6   inadmissable and incompetent under the objective theory of
 7   contracts.   Founding Members of the Newport Beach Country Club
 8   v. Newport Beach Country Club, Inc., 109 Cal. App. 4th 944, 960
 9   (2003) (“[U]ndisclosed statements regarding intent or
10   understanding of” the writing “are irrelevant to contract
11   interpretation under the objective theory of contracts”;
12   appellate court determines writing’s meaning de novo “[a]fter
13   winnowing out the extrinsic evidence that is irrelevant under
14   the objective theory of contracts.”).   “While a party may not
15   testify to his undisclosed subjective intent in entering into an
16   agreement, the rule does not preclude admission of evidence of
17   the surrounding circumstances, usage and custom in the industry,
18   negotiations and discussion, or any other extrinsic evidence
19   which may shed light on the mutual intention of the parties.”
20   Pac. Gas & Elec. Co., 189 Cal. App. 3d at 1141-42.
21        We conclude that REL’s statements to Montgomery and the
22   Noteholders’ Committee’s letter to Montgomery fall within the
23   latter type of evidence; i.e., the surrounding circumstances,
24   negotiations, and discussion, and were not the mere “undisclosed
25
         12
26        Although MF08 did not author this letter, the compromise,
   which the letter urged the Noteholders to vote in favor of, was
27 with MF08 and benefitted its POC. MF08's silence as to the
   letter’s accuracy may be construed as an agreement with its
28 assertions.

                                    -27-
 1   subjective intent” of REL or the Noteholders’ Committee.     Id.
 2   In other words, this extrinsic evidence objectively “shed[s]
 3   light on the mutual intent of the parties.”
 4        Next, Trustee complains that the court erred by using the
 5   extrinsic evidence to vary or modify the terms of the SA.
 6   However, what Trustee characterizes as error is, in fact, her
 7   disagreement over the bankruptcy court’s interpretation of SA
 8   based upon the extrinsic evidence which we address in this
 9   appeal.
10        Finally, Trustee challenges the bankruptcy court’s finding
11   that the payment to Montgomery was made by REL and contends that
12   this is not supported by the evidence.     According to Trustee,
13   the undisputed evidence shows that Montgomery received a check
14   drawn on TMF’s bank account.   Therefore, at the very least, this
15   creates a genuine issue of material fact, precluding at the
16   summary judgment stage a finding that the payment had been made
17   by REL.    Trustee also maintains that the fact MF08 obtained the
18   funds from REL is irrelevant because there is no evidence that
19   MF08's control over the funds was restricted or conditioned in
20   any way.    According to Trustee, funds which are transferred to a
21   debtor and are deposited into the debtor’s bank account become
22   property of the debtor unless the debtor’s right to use the
23   funds is restricted.   Adams v. Anderson (In re Superior Stamp &
24   Coin Co.), 223 F.3d 1004, 1009 (9th Cir. 2000).
25        Again, we are not persuaded.      The Ninth Circuit’s decision
26   in In re Superior Stamp & Coin Co. is not helpful to Trustee’s
27   argument.   There, a bank loaned money to the debtor on the
28   express condition that the money was to be used to pay a

                                     -28-
 1   specific third-party creditor.    The bank, a new creditor,
 2   substituted itself in place of the old creditor that was paid
 3   with the “earmarked” money.    The Ninth Circuit defined the scope
 4   of the “earmarking” defense:
 5        [T]he proper inquiry is not whether the funds entered
          the debtor's account, but whether the debtor had the
 6        right to disburse the funds to whomever it wished, or
          whether their disbursement was limited to a particular
 7        old creditor or creditors under the agreement with the
          new creditor.
 8
 9 223 F.3d at 1009.    The earmarking doctrine is inapplicable to
10   this case since the record shows the Ngs were operating a Ponzi-
11   like scheme.    Further, it is undisputed that the Ngs controlled
12   the funds that were transferred from REL’s general account to
13   MF08 and then to TMF and ultimately to Montgomery in the course
14   of this Ponzi-like scheme.    Under these circumstances, it is
15   disingenuous for Trustee to claim MF08 had dominion and control
16   of the funds.
17        In sum, Trustee failed to raise a genuine issue of material
18   fact as to the proper interpretation of the terms “REL Transfer”
19   and “Paid by REL.”
20        2.   “Any Third Party”
21        We next consider the term “any third party” as used in
22   section 4.01 of the SA.    Trustee maintains the bankruptcy
23   court’s construction of the savings clause in this section was
24   erroneous.   Under section 4.01 of the SA, MF08 waived the right
25   to pursue any MF08 Potential Avoidance Actions “provided,
26   however, that this agreement shall not limit or restrict the
27   right of MF08 to bring any action against any third party,
28   including any manager, member, insider or professional of MF08.”

                                      -29-
 1        Trustee argues that the bankruptcy court incorrectly
 2   construed this provision to mean that she could commence an
 3   action only against a “third party” that was a manager, member,
 4   insider or professional.   According to Trustee, the savings
 5   clause in section 4.01 of the SA preserves all claims against
 6   any third party, other than those against REL Noteholders who
 7   were “paid by REL.”
 8        Read naturally, the section’s use of the word “any” as in
 9   “any action” has an expansive meaning.   However, we cannot
10   construe the phrase as expansively as Trustee would like because
11   the preservation of “any action” would ordinarily mean those
12   claims not settled.   Here, as discussed above, Montgomery was
13   included in the class of protected transferees since he received
14   a “REL Transfer” that was “Paid by REL,” albeit indirectly.
15   MF08 settled and released that potential avoidance action
16   against him under the terms of the SA.   We thus read the savings
17   clause to preserve claims other than MF08 potential avoidance
18   claims against the REL Noteholders which were settled.    Limiting
19   the types of claims, which were preserved in this manner, is not
20   inconsistent with a construction that the word “including” in
21   the phrase “any third party, including any manager, member,
22   insider or professional of MF08" is expansive in the sense that
23   the Trustee may pursue nonavoidance action claims against the
24   expansive class of third parties.
25        Further, the record shows that the undisputed objective of
26   the SA was (1) to resolve the issues regarding the validity and
27   priority of MF08's claim which was based on the alleged
28   fraudulent transfer of $66 million to REL where tracing was

                                    -30-
 1   problematic and the Ngs’ commingling was endemic; (2) to
 2   eliminate the REL Noteholders’ risk of being sued by both MF08
 3   and REL as the alleged recipients of fraudulent transfers in
 4   order to ensure their support for REL's Plan; and (3) to
 5   eliminate MF08's ability to impede confirmation because MF08's
 6   $66 million claim made it the largest unsecured creditor in
 7   REL's case.   Trustee’s interpretation of “any third party” to
 8   include REL Noteholders who were paid by MF08 or TMF
 9   effectively would blunt these objectives.
10        As the bankruptcy court observed:
11        If there was an intent to carve this group of REL
          Noteholders out of the release, it had to be precisely
12        stated before the settlement was incorporated into
          REL's Plan. MF08 acknowledged from the start that the
13        ‘Ngs caused’ every payment by any of these affiliated
          entities to be made in a way that suited their designs
14        and the record shows the Trustee was in possession of
          records that would have enabled her to trace this
15        transfer before she signed the Settlement Agreement.
          To pretend otherwise endorses a fiction—that MF08 had
16        legitimate independent management.
17        The Trustee obtained the $5 million “enhancement” and
          the REL Noteholders agreed to reduce their claims by
18        50% of what they had been paid on their REL
          investments pre-petition. The REL Noteholders were
19        led to believe their risk of being sued—by MF08 and
          REL—as the recipients of allegedly fraudulent
20        transfers was eliminated.
21        In sum, Trustee failed to raise a genuine issue of material
22   fact as to the interpretation of the savings clause under
23   section 4.01 of the SA.   In the words of the bankruptcy court:
24   “As a REL Noteholder, Mr. Montgomery is not the type of third
25   party the Trustee may sue” on an avoidance action.
26                             VI.   CONCLUSION
27        For the reasons stated, we AFFIRM.
28

                                     -31-