In re: ALLONHILL, LLC, f/k/a Allon Hill, LLC v. Stewart Lender Services, Inc.

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
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No. 25-1810
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In re: ALLONHILL, LLC, f/k/a Allon Hill, LLC; f/k/a Allon Financial, LLC; f/k/a The
Murrayhill Company, LLC,
Debtor
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ALLONHILL, LLC
Appellee
v.
STEWART LENDER SERVICES, INC.,
Appellant
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Appeal from the United States District Court
for the District of Delaware
(Nos. 16-ap-50419, 14-10663, 1:19-cv-00879 & 1:19-cv-00938)
District Court Judge: Leonard P. Stark
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Argued March 2, 2026
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Before: SHWARTZ, BIBAS, and PHIPPS, Circuit Judges.
(Filed: May 22, 2026)
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Evan T. Miller
Saul Ewing
1201 N Market Street
Suite 2300
Wilmington, DE

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Pieter H.B. Van Tol, III [ARGUED]
Van Tol Law
199 8 th Avenue
Brooklyn, NY 11215
Counsel for Appellee
Nathaniel P. Bruhn
Andrew J. Gallo [ARGUED]
Michael K. Gocksch
Morgan Lewis & Bockius
One Federal Street
Boston, MA 02110
Kevin J. Mangan
Womble Bond Dickinson
1313 N Market Street
Suite 1200
Wilmington, DE 19801
James D. Nelson
Morgan Lewis & Bockius
1111 Pennsylvania Avenue NW
Suite 800 North
Washington, DC 20004
Counsel for Appellant
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AMENDED OPINION*
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SHWARTZ, Circuit Judge.
* This disposition is not an opinion of the full Court and, pursuant to I.O.P. 5.7,
does not constitute binding precedent.

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During its bankruptcy, Allonhill LLC initiated an adversary proceeding and
brought a preference claim under 11 U.S.C. § 547(b) against Stewart Lender Services
(“SLS”) (“Preference Claim”). Because the Bankruptcy Court did not clearly err in
concluding that Allonhill was solvent when it transferred funds to SLS, the Preference
Claim fails. As a result, we will reverse and remand.
I
Allonhill was hired by Aurora Bank, FSB to review its foreclosure practices. The
contract between Allonhill and Aurora included a $2 million “Limitation on Liability”
(“Liability Cap”) for “claims arising out of th[eir] agreement,” subject to exceptions not
relevant here. App. 981. In 2012, Aurora learned that Allonhill had failed to disclose
significant conflicts of interest and ended their relationship. Allonhill then sued Aurora
in Colorado state court for breach of contract for failure to pay Allonhill’s outstanding
invoices, and Aurora countersued for the return of the $24 million it had already paid,
alleging, among other things, that Allonhill had defrauded Aurora and breached the
parties’ contract by failing to disclose conflicts of interest (the “Aurora Claim”). A bench
trial was completed in 2013.
While the trial was ongoing that same year, SLS purchased almost all of
Allonhill’s assets, including all of Allonhill’s accounts receivable, pursuant to an Asset
Purchase Agreement (“APA”). The APA excluded any assets or liabilities that were the
subject of the then-ongoing litigation between Allonhill and Aurora. In accordance with
the APA, Allonhill transferred to SLS approximately $6.6 million (“Transfers”) over

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three different dates between January 13, 2014, and February 18, 2014 (“Transfer
Dates”).
Less than one month after the last transfer, the trial court (1) found that Allonhill
breached its contract and committed fraud, and (2) ordered Allonhill to pay Aurora
almost $25.9 million in damages (“Initial Aurora Judgment”). Allonhill thereafter
appealed the judgment and filed for bankruptcy. A bankruptcy confirmation plan was
entered in 2015.1
While the bankruptcy was pending, the state appellate court vacated the Initial
Aurora Judgment, held that the Liability Cap limited Aurora’s damages to $2 million, and
on remand the trial court entered a judgment in that amount in favor of Aurora (“Final
Aurora Judgment”). Aurora appealed, but in 2018, the parties settled Aurora’s claims for
$2.05 million (“Settlement Amount”).2
B
During the bankruptcy, Allonhill filed an adversary proceeding and asserted the
Preference Claim against SLS, alleging that the Transfers were improper preferences
1 The confirmation plan explicitly referenced Allonhill’s litigation with Aurora,
Third Amended Plan of Reorganization, Bankr. Dkt. No. 551 at §§ 5.09, 11.10(a)-(b),
and Allonhill explained in its disclosure statement that “success on the appeal may . . .
render[] the Estate solvent,” First Amended Disclosure Statement, Bankr. Dkt. No. 511,
at 15. 2 This amount also covered claims for interest and attorneys’ fees.

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under § 547(b).3 SLS asserted the defense that, because Allonhill was solvent on the
Transfer Dates, the Transfers were not improper preferences.
In support of its solvency defense, SLS introduced expert testimony by a forensic
accountant and corporate restructuring advisor who opined that Allonhill was solvent on
the Transfer Dates based on an examination of Allonhill’s post-sale balance sheet and
related records. Critical to this conclusion, the expert determined that the Aurora Claim
was worth $2.05 million on the Transfer Dates based on (1) the $2.05 million Settlement
Amount, (2) the $2 million Liability Cap, and (3) the fact that Allonhill had recorded the
Aurora Claim on its December 31, 2013 balance sheet (before the Transfer Dates) at $2
million. The expert opined that the Initial Aurora Judgment was an “errant judgment”
that “doesn’t affect what the claim really was worth as of the measurement date.” App.
573. Allonhill did not present a solvency expert and instead argued that the Initial Aurora
Judgment was the proper valuation for the Aurora Claim on the Transfer Dates because it
was a “contemporaneous judgment” that was “close in time to the transfers at issue.”
App. 662-66.
3 Section 547(b) allows for the bankruptcy estate to recover a transfer that the
debtor made to creditor within ninety days of filing a bankruptcy petition if, among other
things, the debtor was insolvent on the date of the transfer. 11 U.S.C. § 547(b). Section
547 “exists to prevent debtors from depleting the estate to pay favored creditors with
assets that otherwise would have been apportioned among creditors according to the
prioritization scheme of the Bankruptcy Code.” In re Am. Pad & Paper Co., 478 F.3d
546, 551 (3d Cir. 2007) (internal quotation marks omitted).

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The case proceeded to trial, and the Bankruptcy Court denied Allonhill’s
Preference Claim because it found that the Aurora Claim should be valued at $2.05
million based on the expert’s valuation and, as a result, Allonhill was solvent on the
Transfer Dates, so the Transfers were proper. In re Allonhill, LLC (“Allonhill I”), No.
14-10663 (KG), 2019 WL 1868610, at *48-51 (Bankr. D. Del. Apr. 25, 2019), aff’d in
part, remanded in part, No. 13-11482 (KG), 2020 WL 1542376 (D. Del. Mar. 31, 2020).
Allonhill appealed, and the District Court concluded that Allonhill was insolvent on the
Transfer Dates because the Aurora Claim should be valued “contemporaneously” based
on the Initial Aurora Judgment of $25.9 million. In re Allonhill, LLC (“Allonhill II”),
No. 13-11482 (KG), 2020 WL 1542376, at *8 (D. Del. Mar. 31, 2020). The District
Court ultimately concluded that “Allonhill’s contemporaneous method” was “based on
evidence available near the time of the Transfers” and was the “more appropriate”
method to value the Aurora Claim “[u]nder the circumstances” due to its “concern[]
about the consequences of upsetting settled expectations” of the parties who had “ordered
their affairs on the understanding that Allonhill was insolvent.” Id. at *8-9.
Following remand to the Bankruptcy Court, the parties agreed to forgo other
issues and file a direct appeal of the solvency ruling.
SLS appeals.

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II4
The question before us is whether the Bankruptcy Court clearly erred in
concluding that the debtor was solvent5 at the time of the challenged transfers. To make
this determination, we note that 11 U.S.C. § 547 authorizes the trustee to recover
transfers made to a creditor within 90 days of the filing of bankruptcy if, among other
things, the debtor was insolvent on the date of the transfer. 11 U.S.C. § 547 (b)(3); In re
Trans World Airlines, 134 F.3d 188, 193 (3d Cir. 1998). The debtor is presumed to have
been insolvent during the 90 days prior to the transfer, but this presumption can be
rebutted by the preference party with “nonspeculative evidence that is sufficient to permit
4 The Bankruptcy Court had jurisdiction under 28 U.S.C. §§ 1334(b) and 157(a).
The District Court had jurisdiction under 28 U.S.C. § 158(a)(1). This Court has
jurisdiction under 28 U.S.C. § 158(d)(2). On appeal, “we stand in the shoes of the
District Court and apply the same standard of review” which it was bound to apply,
meaning that “[w]e review the bankruptcy court’s legal determinations de novo, its
factual findings for clear error, and its discretionary decisions for abuse of discretion.” In
re Somerset Reg’l Water Res., LLC, 949 F.3d 837, 844 (3d Cir. 2020) (internal citation
omitted). “Whether a company is insolvent under the Bankruptcy Code is considered a
mixed question of law and fact.” In re Trans World Airlines, Inc., 134 F.3d 188, 193 (3d
Cir. 1998); Amerada Hess Corp. v. Comm’r, 517 F.2d 75, 82 (3d Cir. 1975) (noting what
“criteria” or “standard” to apply “in determining ‘value’” is a question of law, but a
“[c]ourt’s determination of value, the proper standard having been applied by it, is a
finding of fact” entitled to clear error review).
5 Under the Bankruptcy Code, insolvency is the “financial condition such that the
sum of such entity’s debts is greater than all of such entity’s property, at a fair valuation.”
11 U.S.C. § 101(32)(A).
Under the “balance sheet test,” courts determine the debtor’s insolvency by
tallying “[t]he debtor’s assets and liabilities . . . at fair valuation to determine whether the
corporation’s debts exceed its assets,” which would render the corporation insolvent.
Mellon Bank, N.A. v. Metro Commc’ns, Inc., 945 F.2d 635, 648 (3d Cir. 1991), as
amended (Oct. 28, 1991).

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a court to conclude that the debtor was indeed solvent at the time of the transfer.” In re
CVEO Corp., 327 B.R. 724, 729 (Bank. D. Del. 2005). If the preference party rebuts the
presumption, then “the burden of proof shifts back to the [trustee]” to affirmatively
demonstrate “that the debtor was, in fact, insolvent.” Id.
Because the solvency question here is based on the value of the Aurora Claim on
the Transfer Dates, we must first determine whether the claim is disputed or contingent.
A claim is disputed where all facts necessary to determine liability have occurred. Cf. 2
Collier on Bankruptcy ¶ 303.10 (“[W]hen the duty to pay does not rest upon a future
event, the claim is not contingent.”). A claim is contingent when the debtor’s liability
does not come into being until some future event occurs, even if the parties could have
predicted it. In re Mallinckrodt PLC, 99 F.4th 617, 620 (3d Cir. 2024). Here, no party
challenges the Bankruptcy or District Court’s treatment of the claim here as disputed.
This is not surprising because the events giving rise to the liability had occurred, and the
subsequent issuance of a judgment does not change that. See, e.g., In re Bradley, No. 07-
14607BF, 2008 WL 4065810, at *6 (Bankr. E.D. Pa. Aug. 26, 2008) (“Generally, the
pendency of a judicial ruling does not render a claim contingent within the meaning of
the Bankruptcy Code.”). The parties also agree that Allonhill would be deemed solvent if
the Aurora claim is valued in the amount of $2.05, rather than in the amount of the $25.9
million, which is the judgment the Colorado state trial court entered.
In this case, the Bankruptcy Court’s finding that $2.05 million is the proper
valuation is supported by the record. SLS introduced expert testimony that the Auora

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claim was worth $2.05 million based on: (1) the $2.05 million Settlement Amount;6 (2)
the $2 million liability cap in Allonhill’s contract with Aurora; and (3) the fact that
Allonhill valued the claim at $2 million on its December 31, 2013 balance sheet, which
was prepared before the Transfer Dates, App. 558, 566, 573. Together, these facts
provided a basis to conclude that Allonhill was solvent on the Transfer Dates. The
burden then shifted back to Allonhill to show it was insolvent. It, however, presented no
evidence beyond the state trial court’s $25.9 million judgment that was reversed on
appeal. Thus, the Bankruptcy Court had a basis to find that Allonhill did not satisfy its
burden of proof and thus the Court did not clearly err in concluding both that the value of
the disputed claim was $2.05 million and that Allonhill was solvent when the transfers
were made. Therefore, the Bankruptcy Court properly sustained SLS’s solvency defense
to the Preference Claim.
6 There is caselaw that supports considering a judgment that postdates the transfer
dates to evaluate a disputed claim, so we cannot say the Bankruptcy Court’s selection
constitutes an error of law given the record before it. In re Turner & Cook, Inc., 507 B.R.
101, 109 (Bankr. D. Vt. 2014) (“[A] court may permissibly use the judgment amount in
valuing the [] liability at the time of the transfers.”); In re Imagine Fulfillment Servs.,
LLC (“IFS”), 489 B.R. 136, 150 (Bankr. C.D. Cal. 2013) (holding that “the full amount
of the Judgment,” which was entered before the transfer and was pending appeal, should
be considered in solvency analysis), aff’d, 2014 WL 3867531 (B.A.P. 9th Cir. Aug. 6,
2014) (“IFS II”); S.E.C. v. Antar, 120 F. Supp. 2d 431, 443 (D.N.J. 2000) (determining
solvency in a fraudulent transfer case based on the dollar amount of the SEC’s
unliquidated claims on the relevant date, as reflected in the amount “ordered by [the]
court” on a later date), aff’d, 44 F. App’x 548 (3d Cir. 2002); In re Pilavis, 233 B.R. 1, 7-
8 (Bankr. D. Mass. 1999) (valuing disputed claim based on “hindsight from” a judgment
after the transfers); see also In re W.R. Grace & Co., 281 B.R. 852, 868 (Bankr. D. Del.
2002) (noting that the valuation of a claim and thus a debtor’s solvency at the time of the
transfer is “to be corrected to reflect the evidence”).

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III
For the foregoing reasons, we reverse the District Court and remand with
directions to vacate its ruling and further remand the case to the Bankruptcy Court.

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