Commercial Banking, Collections, and Bankruptcy

Dist. Ct. erred in granting summary judgment in favor of plaintiff-Bankruptcy Trustee in action seeking to avoid pre-bankruptcy petition transfer made by debtor-investment management firm to defendant-debtor’s customer, as well as post-bankruptcy petition transfer of assets to said customer, where post-bankruptcy petition transfer had been approved by Bankruptcy Ct. Under 11 USC section 546(e), instant pre-petition transfer was exempted from avoidance provisions where: (1) defendant was commodity broker; and (2) instant transfer was “settlement payment” made in connection with securities contract, where transfer was essentially swap of customer’s securities for money pursuant to contract for purchase and sale of securities. Moreover, Trustee could not avoid post-bankruptcy petition transfer, since 11 USC section 549 precludes said avoidance, where Bankruptcy Ct. had originally approved said transfer. Fact that Bankruptcy Ct. had “clarified” said approval one year after original order by indicating that it had not actually authorized said transfer did not require different result.

In bankruptcy proceeding in which trustee sought to recover preferential-transfer payments debtor made to one creditor, Dist. Ct. erred in finding that creditor was entitled to said payments, even though: (1) debtor was merely giving creditor cash payments for creditor’s property that was sold to third-party; and (2) debtor never had any equitable or legal interest in said property. While debtor had held creditor’s property in bailment so as to potentially allow creditor to receive said payments, Bankruptcy Ct. failed to make requisite findings as to any potential defenses available to bankruptcy estate. Moreover, remand was required because debtor had commingled proceeds of sale of creditor’s property with other cash in debtor’s account, such that creditor was only entitled to return of lowest intermediate balance of said account following deposit of proceeds into said account.

In instant Chapter 11 proceeding, Bankruptcy Ct. did not err in disallowing claim against debtor-Archdiocese stemming from allegations of sexual abuse by priest, where claimant had previously signed release of said claim in exchange for $100,000 payment. While claimant, in attempting to set aside release, asserted that he had been fraudulently induced to sign release where representative of debtor gave him false information that no other individual had been abused by said priest, Bankruptcy Ct. could properly find that release was binding on claimant where, although claimant stated that information provided by representative was important emotionally, claimant never explained how such information actually factored into his decision to accept $100,000 settlement offer. Moreover, Bankruptcy Ct. could conclude that other factors led to claimant’s acceptance of settlement offer since, at time of settlement, it was questionable under Wisconsin law whether, because of statute of limitations problems, claimant had any cause of action against debtor for either negligent supervision or fraud.