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Senior Transeastern Lenders v. Official Comm. of Unsecured Creditors (In re TOUSA, Inc.) - 80 F.3d 1298 (11th Cir. 2012)

Rule:

As the second court to review the judgment of the bankruptcy court, an appellate court reviews the order of the bankruptcy court independently of the district court. The appellate court reviews determinations of law made by either court de novo. An appellate court reviews the findings of fact of the bankruptcy court for clear error. The factual findings of the bankruptcy court are not clearly erroneous unless, in the light of all the evidence, we are left with the definite and firm conviction that a mistake has been made. Neither the district court nor the appellate court is authorized to make independent factual findings; that is the function of the bankruptcy court. An appellate court reviews equitable determinations of the bankruptcy court for abuse of discretion.

Facts:

This bankruptcy appeal involves a transfer of liens by subsidiaries of TOUSA, Inc., to secure the payment of a debt owed only by their parent, TOUSA. On July 31, 2007, TOUSA paid a settlement of $421 million to the Senior Transeastern Lenders with loan proceeds from the New Lenders secured primarily by the assets of several subsidiaries of TOUSA. Six months later, TOUSA and the Conveying Subsidiaries filed for bankruptcy. In an adversary proceeding filed by the Committee of Unsecured Creditors of TOUSA, the bankruptcy court avoided the liens as a fraudulent transfer because the Conveying Subsidiaries did not receive reasonably equivalent value; ordered the Transeastern Lenders to disgorge $403 million of the loan proceeds because the transfer of the liens was for the benefit of the Transeastern Lenders; and awarded damages to the Conveying Subsidiaries. The Transeastern Lenders and the New Lenders, as intervenors, appealed. The district court quashed the judgment as to the Transeastern Lenders and stayed the appeal of the New Lenders. 

Issue:

Did the appellate court err when it affirmed the ruling of the bankruptcy court?

Answer:

No.

Conclusion:

The appellate court reversed the judgment of the district court, affirmed the liability findings of the bankruptcy court, and remanded for further proceedings consistent with this opinion. The appellate court held that bankruptcy court did not clearly err when it found that the subsidiaries did not receive reasonably equivalent value for the liens and ruled that the transferees were entities "for whose benefit" the liens were transferred. Finally, the appellate court would not consider, in the first instance, challenges to remedies the bankruptcy court imposed or issues of judicial assignment or consolidation of proceedings.

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