Court Opinion

ID: 9384095
Source: CourtListenerOpinion
Date Created: 2023-03-31 19:00:53.155703+00
Date Added: 2024-06-11T17:17:49.675096
License: Public Domain

USCA11 Case: 22-12901   Document: 28-1    Date Filed: 03/31/2023    Page: 1 of 10

                                                 [DO NOT PUBLISH]
                                 In the
                 United States Court of Appeals
                        For the Eleventh Circuit

                         ____________________

                               No. 22-12901
                         Non-Argument Calendar
                         ____________________

        In re: 160 ROYAL PALM, LLC,
                                                               Debtor.
        ___________________________________________________
        _________________
        160 ROYAL PALM, LLC,
                                                    Plaintiff-Appellant,
        versus
        GLENN STRAUB,
        PALM BEACH POLO, INC.,

                                                Defendants-Appellees.
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        2                      Opinion of the Court                 22-12901

                             ____________________

                   Appeal from the United States District Court
                       for the Southern District of Florida
                      D.C. Docket No. 9:21-cv-81217-AMC
                            ____________________

        Before ROSENBAUM, JILL PRYOR, and GRANT, Circuit Judges.
        PER CURIAM:
                160 Royal Palm seeks to recoup $6.2 million the company
        transferred to Glenn Straub, claiming that it was a voidable
        fraudulent transfer. The bankruptcy court concluded that
        collateral estoppel barred this argument for part of the funds, and
        that, in any event, this claim failed because none of the funds were
        Royal Palm’s property. Because we spot no legal mistakes or clear
        factual errors, we affirm.
                                          I.
               In Palm Beach, Florida, stands an unfinished hotel known
        locally as the Palm House Hotel. This hotel has a “tortured
        history.” In re 160 Royal Palm, LLC, No. 18-19441, 2019 WL
        989829, at *1 (Bankr. S.D. Fla. Feb. 26, 2019), subsequently aff’d sub
        nom. In re KK-PB Fin., LLC, Nos. 20-12361, 20-12368, 2021 WL
        5605085 (11th Cir. Nov. 30, 2021). At one point in that history, the
        hotel was owned by 160 Royal Palm, which was in turn owned by
        Glenn Straub. Eventually, Straub sold Royal Palm (and thus the
        hotel) to a man named Robert Matthews for $36 million. Under
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        22-12901               Opinion of the Court                       3

        the August 30, 2013 sale agreement, Matthews would pay Straub
        about $6.2 million in cash and Royal Palm would issue a note—a
        promise to pay the rest over time—to an entity controlled by
        Straub, secured by a mortgage on the hotel. On September 11,
        2013, Royal Palm wired Straub $6,211,000.00 and on October 2,
        2013, it sent $8,718.32 to Palm Beach Polo, which was controlled
        by Straub.
               About five years later, Royal Palm declared bankruptcy. See
        id. During this original bankruptcy proceeding, Straub’s entity
        with the note and mortgage asked the court to recognize its claim
        to Royal Palm’s assets, which it asserted was worth close to $40
        million. The court refused. It held that Royal Palm had shown all
        the elements of fraudulent transfer under Florida Statutes
        § 726.106(1), so Straub’s claim was worth $0.
                 In analyzing the transfer, the bankruptcy court had to
        examine Royal Palm’s solvency around the time of Straub’s sale.
        Under § 726.106(1), a transfer is fraudulent only if “the debtor was
        insolvent at that time or the debtor became insolvent as a result of
        the transfer or obligation.” So the court performed a “balance
        sheet test” in which it estimated Royal Palm’s total assets and
        liabilities and compared the two. To do this test, the court had to
        categorize assets and liabilities, including a $2.6 million transfer
        that passed through Royal Palm’s bank account around the time of
        the sale. The court found that these $2.6 million in funds were “not
        assets of the Debtor [Royal Palm] but were parked with the Debtor
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        4                      Opinion of the Court                22-12901

        for later payment to Mr. Straub as part of the equity sale
        transaction.” Id. at *11.
               In 2019, this adversarial action began: Royal Palm sued
        Straub in bankruptcy court to recover the $6.2 million paid to
        Straub back in 2013. The bankruptcy court ultimately dismissed
        the claim because Royal Palm could not show that it owned the
        transferred cash.
               Three of its decisions are relevant to this appeal. First, the
        court said that Royal Palm was collaterally estopped from asserting
        that $2.6 million of the $6.2 million was its property given the
        court’s findings in the original bankruptcy case. Second, the court
        decided, on summary judgment, that there was an issue of fact
        about whether Royal Palm owned the remaining $3.6 million.
        Even though it presumed that money in Royal Palm’s account
        belonged to it, evidence about the method and amounts of the
        transfers countered this presumption.
              Third, the bankruptcy court concluded—after a bench
        trial—that the $6.2 million did not belong to Royal Palm. “Based
        on the overwhelming evidence,” it found that “all of the funds used
        to make the two wire transfers at issue in this case were merely
        parked in the debtor’s bank account to facilitate payment to Mr.
        Straub.” Indeed, Royal Palm “had no right to use them for a
        different purpose.” “Those funds were not the debtor’s property.”
              Royal Palm appealed to the district court, which affirmed,
        and then to this Court. It reiterates that the bankruptcy court made
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        22-12901                Opinion of the Court                           5

        two errors on summary judgment: applying collateral estoppel for
        $2.6 million and concluding that disputed facts prevented summary
        judgment for the remaining $3.6 million. Royal Palm also
        challenges the bankruptcy court’s finding—after a bench trial—
        that Royal Palm did not own any of the $6.2 million it transferred
        to Straub.
                                           II.
                When a district court affirms a bankruptcy court order, we
        review the bankruptcy court’s decision. L. Sols. of Chi. LLC v.
        Corbett, 971 F.3d 1299, 1304 (11th Cir. 2020). In so doing, we
        review the bankruptcy court’s factual findings for clear error and
        its legal conclusions de novo. Id.
                                          III.
                                           A.
               Collateral estoppel bars a party from relitigating an issue
        already decided in a prior suit. I.A. Durbin, Inc. v. Jefferson Nat.
        Bank, 793 F.2d 1541, 1549 (11th Cir. 1986). As the bankruptcy court
        correctly recited, the doctrine applies when the issue in the older
        proceeding was (1) identical; (2) actually litigated; (3) a “critical and
        necessary part” of the prior judgment; and (4) the party potentially
        precluded had a full and fair opportunity to litigate that issue.
        Christo v. Padgett, 223 F.3d 1324, 1339 (11th Cir. 2000) (quotation
        omitted). Applying this test, the court concluded that its finding in
        the original bankruptcy proceeding—that the $2.6 million in cash
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        6                       Opinion of the Court                 22-12901

        was not one of Royal Palm’s assets—precluded Royal Palm from
        claiming the funds as property in this adversarial bankruptcy suit.
               Royal Palm maintains that the court erred in deciding that
        the issue was both “identical” and “critical and necessary.” Both
        are “factual determinations underlying” the court’s collateral
        estoppel analysis, so we will not disturb them unless clearly
        erroneous. Richardson v. Ala. State Bd. of Educ., 935 F.2d 1240,
        1244 (11th Cir. 1991); see Islam v. Sec’y, Dep’t of Homeland Sec.,
        997 F.3d 1333, 1340–41 (11th Cir. 2021) (reviewing whether
        something was “actually litigated” for clear error). This is a
        deferential standard; we only reverse if we have “a definite and firm
        conviction that a mistake has been committed.” United States v.
        Rodriguez, 34 F.4th 961, 969 (11th Cir. 2022) (quotation omitted),
        cert. denied, 143 S. Ct. 580 (2023).
                We see no clear error. In assessing “identical,” the court
        reasoned that its earlier conclusion that the $2.6 million was not
        Royal Palm’s asset also meant it was not its property. That makes
        sense: the cash had value, and if it could not count as some sort of
        asset, then Royal Palm had no ownership interest. The relevant
        Florida Statutes confirm this commonsense conclusion, defining
        “asset” as “property of a debtor.” Fla. Stat. § 726.102(2).
               Royal Palm primarily argues that the issues were not
        “identical” because the burden of persuasion differed between the
        proceedings. It is true that issues are not identical if distinct legal
        standards apply, or evidentiary burdens differ in legally significant
        fashion. See B&B Hardware, Inc. v. Hargis Indus., Inc., 575 U.S.
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        22-12901                Opinion of the Court                         7

        138, 154 (2015); One Lot Emerald Cut Stones & One Ring v. United
        States, 409 U.S. 232, 235 (1972). Royal Palm asserts that the court
        in this proceeding had to apply a legal presumption that Royal
        Palm owned the funds. True enough, “funds in a debtor’s account
        are generally presumed to be the debtor’s property.” In re Int’l
        Pharmacy & Disc. II, Inc., 443 F.3d 767, 771 (11th Cir. 2005). But
        Royal Palm never claims that this presumption did not also apply
        in the original bankruptcy estimation proceeding. Given the broad
        framing of our caselaw, we do not see why the presumption would
        be limited to formally adversarial proceedings. We cannot say the
        court erred in finding the issues “identical.”
              Nor did it clearly err in concluding that the issue was “critical
        and necessary” to the earlier proceeding. The bankruptcy court
        reasoned—and the parties seem to agree—that an issue is critical
        and necessary if it “was actually recognized by the parties as
        important and by the trier as necessary to the first judgment.” See
        Restatement (Second) of Judgments § 27 cmt. j (1982). The court
        found that the parties and trier of fact (itself) did consider it
        important whether the $2.6 million was Royal Palm’s asset.
               Under that framing of “critical and necessary,” we see no
        clear error. In the original proceeding, Royal Palm successfully
        reduced Straub’s note-based claim to $0 based on fraudulent
        transfer. Under the relevant statute, Royal Palm had to show that
        it was “insolvent at that time” or “became insolvent as a result” of
        the transfer. Fla. Stat. § 726.106. And a debtor is insolvent “if the
        sum of the debtor’s debts is greater than all of the debtor’s assets at
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        8                      Opinion of the Court                 22-12901

        a fair valuation.” Id. § 726.103(1). As a result, the court had to
        estimate Royal Palm’s assets to produce its judgment—a judgment
        favorable to Royal Palm.
                Royal Palm argues that the issue was unnecessary because
        the $2.6 million would not have tipped the balance to solvency.
        True enough, removing the cash as an asset did not change the
        ultimate insolvency result. Still, computing assets and liabilities is
        indisputably necessary to the process described in Florida Statutes
        § 726.103. This statute requires courts to evaluate “all of the
        debtor’s assets” in assessing insolvency. In doing an insolvency
        analysis requiring numeric totals, it does not make sense to judge
        the importance of each number in isolation. After all, the trier of
        fact—the court—raised the $2.6 million because Royal Palm’s own
        expert had included it as an asset, suggesting that Royal Palm
        considered it important. See In re 160 Royal Palm, LLC, 2019 WL
        989829, at *10–11. Based on the record, we do not have a “definite
        and firm conviction” that the court erred in deciding that this issue
        was critical and necessary.
                                         B.
             We now turn to the bankruptcy court’s conclusions about
        whether the funds were Royal Palm’s property.
              Although Royal Palm urges us to review the court’s denial
        of summary judgment—and the district court improperly did so—
        we “will not review the pretrial denial of a motion for summary
        judgment after a full trial and judgment on the merits.” Lind v.
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        22-12901                   Opinion of the Court                               9

        United Parcel Serv., Inc., 254 F.3d 1281, 1286 (11th Cir. 2001). Here
        the court entered a “Final Judgment” dismissing Royal Palm’s
        complaint after a bench trial, so we will not reconsider its summary
        judgment denial.
               After the trial, the court decided based on “the
        overwhelming evidence” that none of the $6.2 million belonged to
        Royal Palm.1 Whether a “transfer involves the property of the
        Debtor is a finding of fact that is subject to review only for clear
        error.” In re Int’l Pharmacy & Disc. II, Inc., 443 F.3d at 771.
               We see no clear error. Despite the presumption that the
        funds belonged to Royal Palm, the court heard facts at trial that
        called into question whether it had “sufficient control over the
        funds to warrant a finding that the funds were the debtor
        corporation’s property.” In re Chase & Sanborn Corp., 813 F.2d
        1177, 1180 (11th Cir. 1987). Most importantly, as the court noted,
        the total amount of the funds transferred to Royal Palm and on to
        Straub “was exactly the sum owing to Mr. Straub when he sold his
        equity interest in the debtor.”
                Royal Palm’s forensic accounting expert, Marcie D. Bour,
        testified at trial that she traced the $6.2 million in cash transfers.
        Four transfers arrived in Royal Palm’s bank account from lawyer

        1 The court explicitly stated that its factual finding “includes the 2.6 million
        dollars the Court addressed at summary judgment.” So even if the bankruptcy
        court had erred in invoking collateral estoppel, the result for Royal Palm
        almost certainly would have been the same.
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        10                     Opinion of the Court               22-12901

        trust accounts: $2,600,000, $2,580,000, $150,920.08, and
        $890,000.78. Together, that is $6,220,920.86. Soon after, Royal
        Palm wired $6,211,000 to Straub and $8,718.32 to Palm Beach Polo,
        totaling $6,219,718.32. Based on the transfers’ path, timing, and
        total compared to the cash purchase price, we cannot conclude that
        the court clearly erred.
                Royal Palm repeatedly argues that neither Straub nor the
        bankruptcy court showed who owned the funds, so they must have
        belonged to it. This argument fails on two fronts. First, Straub did
        not necessarily need to prove who owned the funds to rebut the
        presumption that Royal Palm owned them. Put another way, the
        question was not who owned the funds, but whether Royal Palm
        in fact did. Regardless, Straub explicitly argues that he controlled
        and therefore owned the funds—not Royal Palm. Likewise, the
        court found that Royal Palm transferred the cash to “facilitate
        payment to Mr. Straub” and that Royal Palm “had no right to use
        them for a different purpose,” suggesting that he owned the funds.
                                  *      *      *
              We AFFIRM.