11 U.S.C. §544(b); Fraudulent Conveyance
Westgate Vacation Villas, Ltd. v. Tabas, 158 Fed.Appx. 257, 2005 U.S. App. LEXIS 27738 (11t Cir. December 12, 2005)
The trustee of Debtor “International Pharmacy & Discount II, Inc.” filed suit to recover fraudulent transfers under Florida state law. The defendants argued that the payments were made from an account in the name of “Internacional Pharmacy, Inc. II,”and therefore were not transfers of property of the debtor. The Bankruptcy Court held that the transfers could be avoided, finding that there was no corporation registered or incorporated in Florida with the Debtor’s name, the difference in names of the two entities was slight, the federal tax ID of the Debtor was the same as the number on the bank account, and the payments were authorized by one of the same principals who controlled the debtor. The District Court reversed, finding insufficient evidence to conclude that there was clearly a misnomer, and because the trustee did not establish that Internacional actually controlled the funds in the account.
The Eleventh Circuit reversed. Whether the transferred funds were property of the debtor was a question of fact subject to review for clear error. Here, any lack of certainty in the relationship between the two entities did not render the Bankruptcy Court’s findings clearly erroneous. Additionally, the trustee was required to prove the transfer involved the debtor’s property by a preponderance of the evidence, and it is presumed that funds in a debtor’s account are presumed to be the debtor’s property. Evidence was presented that the account was in fact the debtor’s account, and one of debtor’s principals did in fact control the account. This was sufficient evidence to reinstate the Bankruptcy Court’s judgment.