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In re First Financial Lender

United States District Court, Ninth Circuit

May 16, 2013

In re: FIRST FINANCIAL LENDER, Debtor.
v.
TERI H. NGUYEN and VINH NGUYEN. Defendants. MOHAMED POONJA, Trustee, Plaintiff,

ORDER ADOPTING BANKRUPTCY COURT'S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW

CLAUDIA WILKEN, District Judge.

Defendant Teri H. Nguyen has filed objections to the bankruptcy court's proposed findings of fact and conclusions of law to support entry of judgment following trial. Plaintiff Mohamed Poonja has filed an opposition to the objections. Having considered the parties' papers and the entire record in this case, the Court adopts in full the bankruptcy court's proposed findings of fact and conclusions of law.

BACKGROUND

Debtor First Financial Lender was a correspondent lending business involved in the origination and funding of mortgage loans and sale of those loans to large lenders. Ms. Nguyen was the President and sole shareholder of Debtor. Her husband, Vinh Nguyen was the Chief Financial Officer of Debtor and was also a Defendant in the adversary proceeding. Defendant Vinh Nguyen does not object to the Bankruptcy Court's findings of facts and conclusions of law.

On May 14, 2010 Debtor filed for Chapter 7 bankruptcy in the Northern District of California Bankruptcy Court. The bankruptcy court appointed Plaintiff as trustee of Debtor's estate. On May 27, 2011, Plaintiff filed an adversary proceeding against Defendants. Plaintiff's Complaint for Avoidance and Recovery of Fraudulent Transfers alleges that Defendants received a fraudulent conveyance from the estate prior to the bankruptcy filing.

At issue in this appeal is the 2008 reclassification of a $422, 379 loan from Debtor to Ms. Nguyen as a $489, 233 distribution to Ms. Nguyen. Proposed Findings of Fact and Conclusions of Law at 4. Debtor's accountant testified that the effect of this distribution was that "as of the end of 2008, Debtor's loan to Teri Nguyen, an asset of $422, 379 on Debtor's books, has been eliminated." Id . The accountant stated, "Part of the distribution was offset by the loan the shareholder [Teri Nguyen] owed the company, so she did not have to bring cash back to the company because it was no longer in business." Id.

The bankruptcy court found that this reclassification met the required elements for a constructive fraudulent conveyance pursuant to 11 U.S.C. ยง 548(a)(2):

(1) the transfer must have involved the property of the debtor
(2) the transfer must have been made within two years of the filing of bankruptcy;
(3) the debtor must not have received reasonably equivalent value in exchange for the property transferred; and
(4) the debtor must have been insolvent, been made insolvent by the transaction, be operating or about to operate without property constituting sufficient capital, or be unable to pay debts as they become due.

In re United Energy Corp , 944 F.2d 589, 594 (9th Cir. 1991). Accordingly, the bankruptcy court found that judgment should enter in favor of Plaintiff against Ms. Nguyen in the amount of $422, 379 with prejudgment interest and that no judgment should issue against Vinh Nguyen. Proposed Findings of Fact and Conclusions of Law at 14.

Ms. Nguyen objects to four of the bankruptcy court's findings and conclusions related to its determination of a constructively fraudulent transfer. Specifically, Ms. Nguyen objects to the findings that: (1) Debtor was insolvent; (2) Debtor had other debts, independent of a claim by Lehman Brothers, that rendered it insolvent; (3) Plaintiff's expert Richard Pierotti's testimony and report were ...


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