Ella Coney v. Harvey Sender

NOT FOR PUBLICATION1
UNITED STATES BANKRUPTCY APPELLATE PANEL
OF THE TENTH CIRCUIT
_________________________________
IN RE MICHAEL GIBSON,
Debtor.
__________________________________
ELLA CONEY,
Defendant - Appellant,
v.
HARVEY SENDER, Chapter 7 Trustee,
Plaintiff - Appellee.
BAP No. CO-25-023
Bankr. No. 22-14730
Adv. No. 24-01018
Chapter 7
OPINION
_________________________________
Appeal from the United States Bankruptcy Court
for the District of Colorado
_________________________________
Before SOMERS, PARKER,2 and HERREN, Bankruptcy Judges.
_________________________________
1 This unpublished opinion may be cited for its persuasive value but is not
precedential, except under the doctrines of law of the case, claim preclusion, and issue
preclusion. 10th Cir. BAP L.R. 8026-6.
2 Although Judge Parker was necessarily absent from the courtroom during oral
argument, she will continue to participate on the panel with the aid of the oral argument
recording and has received all the benefit of counsel’s advocacy. See Whitehall Tenants
Corp. v. Whitehall Realty Co., 136 F.3d 230, 233 (2d Cir. 1998); United States v. Cato, 9
F.3d 1546 (5th Cir. 1993).
FILED
U.S. Bankruptcy Appellate Panel
of the Tenth Circuit
October 23, 2026
Anne M. Zoltani
Clerk
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SOMERS, Bankruptcy Judge.
_________________________________
I. 	Background3
Michael Gibson (“Debtor”) sued John Callahan and others in the District Court for
Arapahoe County, Colorado (“State Court”) asserting various claims, including
intentional infliction of emotional distress, which were ultimately dismissed. On March
15, 2018, the State Court awarded Callahan $5,116.50 plus interest for attorney’s fees
and costs in connection with the State Court litigation. Debtor appealed to the Colorado
Court of Appeals, which affirmed. On January 4, 2022, the State Court awarded Callahan
$17,224.87 (“Second Award”) for fees and costs related to the appeal.
Debtor owns real property in Colorado (“Property”). Ella Coney, Debtor’s mother
(“Appellant”), periodically loaned Debtor money primarily through cashier’s checks or
cash. On January 27, 2022, approximately three weeks after the Second Award, Debtor
signed a promissory note in favor of Appellant for $45,000 secured by the Property
(“Promissory Note”) with a deed of trust that was recorded that same day (collectively,
“Home Loan Transaction”). The Promissory Note provides that Debtor “promises to pay”
Appellant $45,000 “with interest accruing on the unpaid balance at a rate of five percent
(5%) per annum.”4 To arrive at the $45,000 amount, Debtor explained that he and
Appellant totaled the value of cashier’s check receipts, signed handwritten receipts, and
3 The Bankruptcy Court’s Memorandum Opinion After Trial [Bankr. ECF No. 99]
contains a comprehensive review of the factual and procedural background of this matter.
4 Promissory Note, Ex. 9 to Complaint [Bankr. ECF No. 1-9].
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cash exchanges.5 In her deposition, Appellant addressed the need for security given that
Debtor owed her “a lot of money.”6
Debtor gave Appellant $5,000 in November of 2022 (“November 2022 Transfer”).
On December 2, 2022, Debtor filed a chapter 7 petition along with statements and
schedules valuing the Property at $615,000. Harvey Sender (“Appellee”) was appointed
as chapter 7 trustee. Less than a week postpetition, on December 7, 2022, Debtor gave
Appellant another $5,000 (“December 2022 Transfer”). On March 21, 2023, the 341
Meeting of Creditors (“341 Meeting”) was held.
On January 25, 2024, Appellee commenced the underlying adversary proceeding7
to (i) avoid transfers from Debtor to Appellant (the Home Loan Transaction, the
November 2022 Transfer, and the December 2022 Transfer) under 11 U.S.C. § 549(a),8
§ 547(b), § 548(a)(1), § 544, and Colorado law; (ii) recover all transferred property or the
value of such property under § 550(a); (iii) preserve any avoided transfer or avoided lien
for the benefit of the estate under § 551; and (iv) disallow Appellant’s claims against the
bankruptcy estate under § 502(d).
5 Tr. at 19 in Appellant’s App. at 324 (“[Appellant] has cashier’s checks receipts
and . . . signed hand[written] receipts. We added all of that up and it was $45,000. And
that’s not really including, I know she gave me, you know, $500 here, $500. [Appellant]
gave me cash, too. So I couldn’t argue that I owed her at least this much money.”).
6 Dep. at 99 in Appellant’s App. at 134 (“[Debtor] was given the money in
increments, and he told me that he would pay it back, and he was trying to pay it back.
And at some point, when he needed more money, then . . . we were adding up the
amounts that he had been given. . . . [A]nd that’s a lot of money, and I need security for
this.”). 7 Case No. 24-01018-TBM.
8 Unless otherwise noted, all references to “Section,” “§,” “Bankruptcy Code,” and
“Code” refer to the U.S. Bankruptcy Code, 11 U.S.C. § 101, et seq.
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During the adversary proceeding, the Bankruptcy Court denied Appellant’s motion
for summary judgment and two motions to dismiss. The Bankruptcy Court held trial on
May 12–13, 2025 (“Trial”), which Appellant’s counsel attended but Appellant did not.
Following post-trial briefing, the Bankruptcy Court entered its Memorandum Opinion
After Trial (“Opinion”) and accompanying Judgment (“Judgment”) on August 25, 2025.
Appellant appealed the Opinion and Judgment on September 5, 2025.
In its Opinion, the Bankruptcy Court concluded the following regarding the Home
Loan Transaction:
• 	The transfer was actually fraudulent under § 548(a)(1)(A) and Colorado
law and constructively fraudulent under § 548(a)(1)(B) and Colorado law,
and Appellant did not establish the good faith defense under § 548(c).9
• 	The transfer was preferential under § 547(b) and neither the
contemporaneous exchange of new value nor the ordinary course defenses
of § 547(c) were established.10
As to the November 2022 Transfer, the Bankruptcy Court concluded the following:
• 	The transfer was not preferential under § 547(b).11
• 	The transfer was actually fraudulent under § 548(a)(1)(A) and Colorado
law and constructively fraudulent under § 548(a)(1)(B) and Colorado law,
and Appellant did not establish the good faith defense under
§ 548(c).12
As to the December 2022 Transfer, the Bankruptcy Court concluded the following:
• 	The transfer was an unauthorized postpetition transfer under § 549(a).13
9 See Opinion at 38 in Appellant’s App. at 294.
10 Id.
11 Id. at 41 in Appellant’s App. at 297.
12 Id.
13 Id. at 41–42 in Appellant’s App. at 297–98.
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As a result of these rulings, the Bankruptcy Court concluded Appellee could recover the
Home Loan Transaction, the November 2022 Transfer, and the December 2022 Transfer
or the value thereof for the bankruptcy estate under § 550. The Bankruptcy Court then
concluded the avoided transfers were automatically preserved for the bankruptcy estate
under § 551 and any claim Appellant filed against the estate was disallowed under
§ 502(d). Finally, the Bankruptcy Court denied Appellee’s request for multiplied
damages under Colorado law.14
II. 	Jurisdiction
This Court has jurisdiction to hear timely filed appeals from “final judgments,
orders, and decrees” of bankruptcy courts within the Tenth Circuit unless a party elects to
have the district court hear the appeal.15 No party elected to have the district court hear
the appeal. Appellant timely filed her notice of appeal from the Opinion and Judgment,
which are final orders.16 Accordingly, this Court has jurisdiction to review the Opinion
and Judgment.
III. 	Issues on Appeal and Standard of Review
Appellant presents five issues on appeal,17 which we have distilled as follows:
14 Id. at 44–45 in Appellant’s App. at 300–01.
15 28 U.S.C. § 158(a)(1), (b)(1), (c)(1); Fed. R. Bankr. P. 8003, 8005.
16 Adelman v. Fourth Nat’l Bank and Tr. Co., N.A., of Tulsa (In re Durability,
Inc.), 893 F.2d 264, 265–66 (10th Cir. 1990) (“[A]n order is final if it ends the litigation
on the merits. . . . [T]he appropriate ‘judicial unit’ for application of these finality
requirements in bankruptcy is . . . the particular adversary proceeding.”).
17 Appellant did not appear for oral argument, so the Court could not clarify her
arguments. Appellant lists the following issues in her brief: “1. The bankruptcy court
abused its discretion in disallowing Appellants evidence regarding consideration given
for the Home Loan Transaction. . . . 2. The bankruptcy court abused its discretion when it
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1. 	Did the Bankruptcy Court abuse its discretion in excluding Appellant’s
evidence related to the Home Loan Transaction?
2. 	Did the Bankruptcy Court make erroneous factual findings?
a. 	Did the Bankruptcy Court base its ruling on clearly erroneous factual
findings by (a) reducing the amount of consideration given for the
Home Loan Transaction, (b) discrediting Debtor’s testimony and
finding him not credible, and (c) disallowing Appellant’s good faith
defense concerning the Home Loan Transaction and the November 2022
Transfer?
b. 	Did the Bankruptcy Court clearly err in its factual finding regarding the
date of Debtor’s chapter 7 petition in its discussion of the Home Loan
Transaction?
c. 	Did the Bankruptcy Court clearly err in finding fraudulent intent in its
conclusions concerning the Home Loan Transaction and the November
2022 Transfer?
3. 	Did the Bankruptcy Court err in its application of §§ 550 and 551 as to the
Home Loan Transaction, the November 2022 Transfer, and the December 2022
Transfer?
relied upon clearly erroneous factual findings to: a. Further reduce the amount of
consideration given for the Home Loan Transaction to the point where it could not be
considered as reasonable; b. Discredit the Debtors testimony and find him not credible
and; c. Disallow Appellant[’]s claimed ‘Good Faith’ defense. . . . 3. The bankruptcy court
erred in its factual finding regarding the date the Debtor filed his Petition for Chapter 7. .
. . 4. The bankruptcy court abused its discretion in turning a blind eye to evidence and a
deaf ear to testimony negativing fraudulent intent by the Debtor. . . . [and] 5. The
bankruptcy court abused its discretion in its application of 11 U.S.C. § 550 and § 551.”
Appellant’s Br. at 2–4. Appellant proceeds pro se on appeal, and her briefing is often
unclear as to whether she is challenging only the conclusions involving the Home Loan
Transaction, the November 2022 Transfer, or the December 2022 Transfer. Often,
Appellant’s arguments about the Bankruptcy Court’s factual findings could, at least
potentially, implicate all the conclusions of the Bankruptcy Court. The Court therefore
addresses Appellant’s issues on appeal as they relate to each transfer, where applicable.
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“[T]he trial judge’s decision to exclude the evidence is reviewed for an abuse of
discretion.”18 Under the abuse of discretion standard, this Court will not disturb a
bankruptcy court’s decision unless the Court has “a definite and firm conviction that the
lower court made a clear error of judgment or exceeded the bounds of permissible choice
under the circumstances.”19 A clear example of abuse of discretion occurs when a trial
court “commits a legal error or relies on clearly erroneous factual findings.”20
This Court “review[s] the factual findings of the bankruptcy court for clear
error”21 and “review[s] the bankruptcy court’s findings regarding intent under a clearly
erroneous standard. Review under the clearly erroneous standard is significantly
deferential, requiring a definite and firm conviction that a mistake has been
committed.”22 ‘“[W]here there are two permissible views of the evidence, the factfinder’s
choice between them cannot be clearly erroneous,’” and ‘“an appellate court may not
reverse the findings . . . even though convinced that had it been sitting as the trier of fact,
it would have weighed the evidence differently.’”23 This Court is to be “especially wary
of finding clear error when the bankruptcy court’s factual findings are based on the
18 Perkins v. Silver Mountain Sports Club and Spa, LLC, 557 F.3d 1141, 1146
(10th Cir. 2009). See also Cartier v. Jackson, 59 F.3d 1046, 1048 (10th Cir. 1995) (“We
review a [trial] court’s exclusion of evidence for an abuse of discretion.”).
19 United States v. Ortiz, 804 F.2d 1161, 1164 n.2 (10th Cir. 1986).
20 Cruz v. Farmers Ins. Exch., 42 F.4th 1205, 1210 (10th Cir. 2022) (internal
citation omitted).
21 Fowler Bros. v. Young (In re Young), 91 F.3d 1367, 1370 (10th Cir. 1996).
22 In re Stewart, Nos. CO-09-026, CO-09-027, 2009 WL 3724977, at *2 (10th Cir.
BAP Nov. 9, 2009) (unpublished) (internal quotation omitted).
23 In re Harmsen, 320 B.R. 188, 200–01 (10th Cir. BAP 2005) (quoting Anderson
v. City of Bessemer City, 470 U.S. 564, 574 (1985)).
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credibility of witness testimony.”24 Matters of law, including statutory interpretation, are
reviewed de novo.25
IV. 	Discussion
As a preliminary matter, we are not persuaded by Appellee’s argument that the
Court should reject Appellant’s issues on appeal involving review of the Bankruptcy
Court’s factual findings because Appellant failed to provide a complete record on appeal.
Local Rule 8018-1(e) provides in part that “[t]he appendix must contain all transcripts
necessary for this Court’s review.”26 Here, Appellant has included the Opinion and
Judgment in her Appendix along with the transcript from the second day of the Trial, and
no party or witness testified on the first day of Trial. Thus, the Court has an adequate
record to evaluate the issues raised on appeal.
A. 	The Bankruptcy Court did not abuse its discretion in excluding
Appellant’s evidence.
At the Trial, Appellant attempted to admit copies of signed receipts (Exhibits J and
K), to which Appellee objected. Appellee’s counsel confirmed that the documents she
received from Appellant were copies27 despite having asked for originals and, as such,
24 J&R Inv. v. Anthony (In re Anthony), 658 F. App’x 924, 926–27 (10th Cir.
2016) (unpublished) (citing Mason v. Young (In re Young), 237 F.3d 1168, 1176 (10th
Cir. 2001) (“[A] credibility determination . . . is properly the province of the trier of
fact—in this case the bankruptcy court—, and we may not disturb that trier of fact’s
credibility determinations on appeal.”)).
25 First Nat’l Bank of Durango v. Woods (In re Woods), 743 F.3d 689, 693–94
(10th Cir. 2014).
26 10th Cir. BAP L.R. 8018-1(e).
27 Tr. at 49 in Appellant’s App. at 354.
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Appellee’s counsel could not verify the receipts.28 The Bankruptcy Court noted that the
objection involved the best evidence rule, which requires originals to be submitted.29 The
Bankruptcy Court did not admit Exhibits J and K pursuant to Federal Rules of Evidence
1002 and 1003 because Appellant did not produce the original documents.30
On appeal, Appellant frames her primary argument as follows:
because [Appellee] had seen the receipts numerous times before the trial,
because the receipts were already in the record multiple times, because
[Appellee] was afforded sufficient discovery, because [Appellee] did not
offer any cogent or compelling evidence that the documents were not
authentic, and because [Appellee] objected to the documents solely for the
sake of gamesmanship, Appellant respectively moves this court to overrule
the bankruptcy court and to consider the documents as part of Appellant’s
$45,000 consideration for the Home Loan Transaction.31
Alternatively, Appellant asks this Court to consider Debtor’s testimony supporting the
existence of the alleged loans.32
Federal Rule of Evidence 901(a) provides that to authenticate evidence, “the
proponent must produce evidence sufficient to support a finding that the item is what the
proponent claims it is.”33 Pursuant to Federal Rule of Evidence 1003, a duplicate is
admissible unless a party raises a genuine question as to authenticity or any unfair
circumstances.34
28 Id. at 39 in Appellant’s App. at 344.
29 Id. at 41 in Appellant’s App. at 346.
30 Id. at 54, 56 in Appellant’s App. at 359, 361.
31 Appellant’s Br. at 7.
32 Id. (footnote omitted).
33 Fed. R. Evid. 901(a).
34 Fed. R. Evid. 1003. Further, the Tenth Circuit has held that “evidence offered to
prove the contents of an original writing, recording, or photograph is not admissible,
unless the original itself is also admitted.” United States v. Chavez, 976 F.3d 1178, 1194
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Here, by not providing the original documents, Appellant did not meet her burden
of satisfying the applicable evidentiary rules when the authenticity of the documents was
questioned. Thus, the Bankruptcy Court did not abuse its discretion in excluding Exhibits
J and K.
B. 	The Bankruptcy Court did not make erroneous factual findings.
1. 	Debtor’s Credibility and the Home Loan Transaction Consideration
In the Opinion, the Bankruptcy Court noted the following:
The Debtor testified at trial that, prior to January 27, 2022, he made periodic
payments to [Appellant] in the amount of $238, and that he started making
such payments in March 2021. He said [he] had repaid $25,000 of the amount
owed to [Appellant] by the time they signed the Promissory Note and Deed
of Trust. But he signed the documents to ‘make it official.’
. . .
When asked why, if the Debtor had already repaid $25,000 to [Appellant],
he agreed in the Promissory Note to repay her $45,000 plus interest, the
Debtor testified that, in addition to the transfers evidenced by the cashiers’
checks, [Appellant] had given him cash ‘here and there’ and he knew he
owed her at least $45,000, though he could not say or show how much cash
[Appellant] had given him nor provide documentation showing that the cash
transfers were loans. The Court finds that the Debtor’s testimony that
[Appellant] provided consideration to him above the $28,896.00 evidenced
by the cashiers’ checks (Exs. C-I) cannot be credited, as [Appellant] failed at
trial to provide evidence containing specific details about any alleged cash
transfers, such as testimony regarding the dates or amounts of any such cash
transfers, let alone any corroborating documentary evidence, such as copies
of bank account records. The Court also found the Debtor not to be credible.35
(10th Cir. 2020). See also Fed. R. Evid. 1002 (“An original writing, recording, or
photograph is required in order to prove its content unless these rules or a federal statute
provides otherwise.”).
35 Opinion at 16 in Appellant’s App. at 272.
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Appellant takes issue with the Bankruptcy Court’s finding that Debtor had repaid
$25,000 to Appellant by the time they signed the Promissory Note and deed of trust;
rather, Appellant argues Debtor’s testimony signifies that $25,000 was paid at the time
the testimony was given, not by the date the Promissory Note and deed of trust were
signed.36 Additionally, Appellant disagrees with the Bankruptcy Court’s finding that
Debtor is not credible and argues the Bankruptcy Court misconstrued Debtor’s testimony
when it stated in the Opinion that “[Debtor] said [he] had repaid $25,000 of the amount
owed to [Appellant] by the time they signed the Promissory Note and Deed of Trust. But
he signed the documents to ‘make it official.’”37 Appellant argues the above statement
used to discredit Debtor is erroneous and unsupported by the record.38 Appellant adds
that “it appears that most, if not all, of [] Debtor’s testimony does have record support.”39
Here, the evidence demonstrates the Bankruptcy Court did not clearly err in
finding that Debtor was not credible. Based on the record in its entirety, including
Debtor’s conflicting testimony at the Trial and 341 Meeting40 along with insufficient
corroborating evidence regarding money transfers, the Bankruptcy Court’s credibility
36 Appellant’s Br. at 10–11.
37 Id. at 9 (citing Opinion at 16 in Appellant’s App. at 272).
38 Id. at 12.
39 Id.
40 At the 341 Meeting, when asked about the $5,000 cash advance from Rocky
Mountain Law Enforcement Credit Union from December 1, 2022, Debtor answered by
stating that the “money is being held by [Appellant].” Ex. B at 12:22–24, Response to
Defendant’s Motion for Summary Judgment [Bankr. ECF No. 61-2]. At the Trial, Debtor
stated that he “took a cash advance on December 1st to pay some other creditors.” Tr. at
75 in Appellant’s App. at 380.
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determinations are plausible. Although there may be two permissible views of this
evidence, the Bankruptcy Court’s choice between them cannot be clearly erroneous.41
At the Trial, Appellant’s counsel questioned Debtor as follows:
Q. And to make it clear, you began repaying the $45,000 after you
entered into this promissory note? Or were you paying before then?
A. I was paying her back before we made that $45,000 loan.
Q. Okay.
A. Because she had given me money all throughout that year. I just,
we just made it official, and then, you know, a repayment plan was
set, an interest rate was set. All of that stuff was, like, official at that
point. So I was paying her back before we even did that.
Q. Before that.
A. Yeah.
Q. So in your estimation, you’ve repaid roughly $25,000.
A. At this point, yes.42
The testimony shows Appellant’s counsel asked Debtor whether he began repaying
Appellant after the Promissory Note, to which Debtor clarified that he “was paying
[Appellant] back before [they] even did that,”43 referring to the Promissory Note. Given
the above, the record indicates the Bankruptcy Court did not clearly err in finding that
Debtor had paid Appellant $25,000 by the time they signed the Promissory Note and
deed of trust. “Where there are two permissible views of the evidence,” here being
41 See Anderson v. City of Bessemer City, 470 U.S. 564, 573–74 (1985) (“If the
[trial] court’s account of the evidence is plausible in light of the record viewed in its
entirety, the court of appeals may not reverse it even though convinced that had it been
sitting as the trier of fact, it would have weighed the evidence differently. Where there
are two permissible views of the evidence, the factfinder’s choice between them cannot
be clearly erroneous.”).
42 Tr. at 62–63 in Appellant’s App. at 367–68.
43 Id. at 63 in Appellant’s App. at 368.
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whether Debtor had paid Appellant $25,000 by the time of the Home Loan Transaction,
“the factfinder’s choice between them cannot be clearly erroneous.”44
2. 	Good Faith Defense
The Bankruptcy Court noted that good faith should be measured objectively, and
the determination requires a two-part inquiry into “whether the circumstances would
place a reasonable person on inquiry of a debtor’s fraudulent purpose” and “whether a
diligent inquiry would have discovered the fraudulent purpose.”45 The Bankruptcy Court
applied a “reasonable person” standard and “determine[d] that the good faith defense is
not available to [Appellant]”46 under § 548(c) and Colo. Rev. Stat. § 38-8-109(1) based in
part on the following circumstances:
[Appellant] is well-educated and, as a realtor, is quite familiar with the ins
and outs of real estate transactions such as the Home Loan Transaction. She
was aware that the Debtor was struggling financially and, as his mother,
agreed to help him. In her prior dealings with the Debtor, [Appellant] gave
the Debtor gifts and made him loans based on mere promises to repay. She
did not document the transactions at all (aside from keeping copies of
cashier’s checks) or require him to provide security for the loans. Indeed, it
seems there was no need for security, as the Debtor repaid $25,000 of the
$28,896 loaned to him by [Appellant] within the same year. It was only after
the second judgment entered in favor of Mr. Callahan that [Appellant]
demanded that the Debtor provide her with security, in the form of the Deed
of Trust, before she would agree to make him another loan. The Court does
not believe this is a mere coincidence. To the contrary, [the] Court believes
and finds that [Appellant] required the Debtor to sign the Promissory Note
and Deed of Trust precisely because she had a general knowledge about his
financial troubles, including the judgments, and knew that, by doing so, the
Debtor 	would 	both 	protect 	her 	claim 	and 	ensure 	that 	the 	previously
unencumbered value of the Property was protected from the Debtor’s
creditors. The Court also finds that [Appellant] knew that the Debtor had
44 Anderson, 470 U.S. at 574.
45 Opinion at 33–34 in Appellant’s App. at 289–90 (citation modified).
46 Id. at 35 in Appellant’s App. at 291.
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repaid her $25,000 such that the value provided in exchange for the Home
Loan Transaction was substantially less than the value of the obligation
incurred by the Debtor in signing the Promissory Note and Deed of Trust.47
The Bankruptcy Court relied on the same analysis in rejecting the good faith defense in
the § 548(a)(1)(A) analysis for the November 2022 Transfer.48
Appellant argues that, but for the Bankruptcy Court’s determinations on
consideration, Appellant should have been allowed to invoke the good faith defense.49
Appellant adds that the only factor in support of denying the good faith defense was that
Appellant indirectly knew Debtor was struggling financially but that this factor is
insufficient to support the Bankruptcy Court’s ruling.
The good faith defense standard is set forth in both the Code and Colorado law
and provides that certain transfers are not voidable when the transferee or obligee acted in
good faith.50 Further,
47 Id. at 34–35 in Appellant’s App. at 290–91.
48 Id. at 40 in Appellant’s App. at 296 (“For the same reasons the Court found that
the good faith defense did not shield the Home Loan Transaction from avoidance as an
actual fraudulent transfer, the Court finds that the November 29, 2022 Transfer is not
shielded.”).
49 Appellant’s Br. at 15 (“[A]bsent the bankruptcy court’s manufactured statement
by the Debtor, applied to defeat both requisite prongs of the good faith defense, the
bankruptcy court has not and cannot deny Appellant’s invoked good faith defense with
any other evidence and for any other reason.”).
50 See 11 U.S.C. § 548(c) (“Except to the extent that a transfer or obligation
voidable under this section is voidable under section 544, 545, or 547 of this title, a
transferee or obligee of such a transfer or obligation that takes for value and in good faith
has a lien on or may retain any interest transferred or may enforce any obligation
incurred, as the case may be, to the extent that such transferee or obligee gave value to
the debtor in exchange for such transfer or obligation.”); see also Colo. Rev. Stat. § 38-8-
109(1) (“A transfer or obligation is not voidable under section 38-8-105 (1)(a) against a
person who took in good faith and for a reasonably equivalent value or against any
subsequent transferee or obligee.”).
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[i]n the Tenth Circuit, ‘good faith under [11 U.S.C.] § 548(c) should be
measured objectively.’ Determining whether a transferee has established
good faith under Section 548(c) requires a two-part inquiry: the Court must
determine whether the ‘circumstances would place a reasonable person on
inquiry of a debtor’s fraudulent purpose,’ and if so, whether ‘a diligent
inquiry would have discovered the fraudulent purpose.’ In applying the
‘reasonable 	person’ 	standard, 	the 	Court 	must 	take 	into 	account 	the
transferee’s individual circumstances, including their sophistication as an
investor and whether they had actual knowledge of the fraud.51
Here, the Bankruptcy Court did not clearly err in finding that (1) Appellant “is
well-educated and, as a realtor, is quite familiar with the ins and outs of real estate
transactions such as the Home Loan Transaction[,]” (2) Appellant “was aware that the
Debtor was struggling financially and, as his mother, agreed to help him[,]” and (3)
Appellant “required the Debtor to sign the Promissory Note and Deed of Trust precisely
because she had a general knowledge about his financial troubles, including the
judgments.”52 The record shows Appellant is a well-educated realtor53 and knew that
Debtor had financial troubles54 according to Appellant’s deposition. Further, the record
supports the finding that prior to the entry of the Second Award, transactions between
Debtor and Appellant lacked formal documentation,55 whereas for the Home Loan
51 Wagner v. Ultima Homes, Inc. (In re Vaughan Co., Realtors), 493 B.R. 597, 610
(Bankr. D.N.M. 2013) (quoting In re M & L Bus. Mach. Co., 84 F.3d 1330, 1338–39
(10th Cir. 1996)).
52 Opinion at 34–35 in Appellant’s App. at 290–91.
53 Dep. at 13 in Appellant’s App. at 113 (Appellant stated the following: “I have
my own real property management and property renovation business. . . . I have an
associate’s degree, two bachelor’s degrees, and some master’s study.”).
54 Id. at 79 in Appellant’s App. at 129 (Appellant stated that “[Debtor] was having
a hard time paying these expenses with the divorce and the child custody” and noted that
in 2021 she “could tell [Debtor] was struggling financially.”).
55 See Tr. at 12–13 in Appellant’s App. at 317–18. The following excerpt is from
Debtor’s direct examination: “Q. [] In December of 2021, when you asked her for
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Transaction, which took place shortly after issuance of the Second Award, Appellant
required security. Additionally, even if the Bankruptcy Court’s findings regarding the
consideration provided in the Home Loan Transaction were erroneous, the Bankruptcy
Court’s previously mentioned findings are sufficient to determine that “the circumstances
would place a reasonable person on inquiry of a debtor’s fraudulent purpose” and “a
diligent inquiry would have discovered the fraudulent purpose.”56 The same conclusions
apply to the November 2022 Transfer.
3. 	Petition Date Reference
The Bankruptcy Court stated that the Debtor “filed for Chapter 7 protection on
December 2, 2020” and “[a]t the time [Debtor] filed for bankruptcy relief, Colo. Rev.
Stat. § 38-41-201(1)(b) provided for a general homestead exemption in the amount of
$105,000.”57 Appellant argues the Bankruptcy Court erred by stating the incorrect filing
$10,000, she told you that would be the terms on which she would lend additional monies
to you? A. Yes. Q. Okay. What about monies that she had lent to you before December?
A. Before December, I mean, like I said, I think maybe she just felt bad for me. So she
gave me $5,000 here, you know, $2,000 there, $4,000 there. Q. That she gave you, or did
she loan you money? A. She gave it to me and she loaned it to me. Q. Okay. And how
were those transactions memorialized or covered? A. Those transactions were just a, I
promise I will pay you back. Q. Is it, is it verbal? A. Just a verbal transaction, yeah.”
56 In re M & L Bus. Mach. Co., 84 F.3d at 1338. Appellant denies knowing that the
First Award and Second Award were recorded. Dep. at 75 in Appellant’s App. at 128
(Counsel for Appellee asked Appellant, “Did you know that Mr. Callahan recorded these
judgments in the County of Adams?” Appellant answered, “Like I said, I’ve heard that
name. Never met him. Don’t know who he is.” Counsel for Appellee then continued: “All
I’m asking is did you know these documents were recorded. If you don’t know, you don’t
know.” Appellant responded by saying “I don’t know.”). However, “a diligent inquiry”
could have revealed the recorded judgments, and coupled with Appellant’s sophistication
in real estate, would have led to the discovery of Debtor’s fraudulent purpose.
57 Opinion at 22 n.8 in Appellant’s App. at 278 (emphasis added).
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date and appears to contend that this error led to an erroneous finding regarding the
available equity in Debtor’s real property for creditors, thus demonstrating the
Bankruptcy Court’s bias.58
Admittedly, the Bankruptcy Court’s statements regarding Debtor’s bankruptcy
filing date (December 2020 instead of December 2022) and homestead exemption
amount of $105,000 instead of $250,000 are incorrect.59 However, even if Debtor were
entitled to a different value of the homestead exemption,60 this does not affect whether
the Home Loan Transaction and November 2022 Transfer were properly avoidable. Thus,
the Bankruptcy Court’s errors here are harmless.61
4. 	Fraudulent Intent
The Bankruptcy Court outlined the following badges of fraud under § 548:
whether the transfer was to an insider; whether the debtor retained possession
or control of the property after the transfer; concealment of the transfer;
pending or threatened litigation against the debtor at the time of transfer; a
transfer of substantially all of the debtor’s assets; absconding by the debtor;
removal or concealment of assets; reasonably equivalent value in exchange
for the transfer; the debtor’s insolvency at the time of the transfer; the
proximity in time of the transfer to the incurrence of a substantial debt; and
58 Appellant’s Br. at 17 (“Appellant respectfully moves this Court to see the error
for what it is, prejudice. The bankruptcy court’s Opinion has numerous factual findings
that are in error and all of them, unsurprisingly, favor the Trustee. Appellant contends it
can, therefore, be said that the mindset of the bankruptcy court is not objective, and/or
unprejudiced, but quite the contrary.”).
59 On the date of Debtor’s bankruptcy filing, the homestead exemption under Colo.
Rev. Stat. § 38-41-201(1)(a) was $250,000 if owner-occupied and $350,000 under Colo.
Rev. Stat. § 38-41-201(1)(b) if occupied by an owner who is elderly or disabled.
60 Marcus v. Zeman (In re Marcus), 1 F.3d 1050, 1051 (10th Cir. 1993)
(Generally, “the law applicable at the date of filing controls exemptions.”).
61 “A harmless error is one that does not have a substantial influence on the
outcome of the trial; nor does it leave one in grave doubt as to whether it had such
effect.” United States v. Jones, 44 F.3d 860, 873 (10th Cir. 1995).
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a transfer of substantial business assets to a lienor followed by a subsequent
transfer of such assets to an insider of the debtor.62
In its analysis, the Bankruptcy Court held that the following factors supported finding
fraud as to the Home Loan Transaction:
1. 	the Home Loan Transaction was a transfer to an insider;
2. 	the transfer was made within two years prior to Debtor’s bankruptcy
filing;
3. 	there was concealment and dishonesty in disclosures related to the Home
Loan Transaction;
4. 	there was pending or threatened litigation against Debtor at the time of
the transfer along with proximity in time of the transfer to the incurrence
of a substantial debt;
5. 	there was inadequate consideration in exchange for the transfer;63 and
6. 	Debtor was insolvent at the time of the Home Loan Transaction.64
62 Zubrod v. Kelsey (In re Kelsey), 270 B.R. 776, 782 (10th Cir. BAP 2001) (citing
Taylor v. Rupp (In re Taylor), 133 F.3d 1336, 1338–39 (10th Cir. 1998)).
63 “Debtor allegedly executed the Promissory Note and Deed of Trust as
consideration for amounts still owed [from] the loans made to him by [Appellant] in
2021, and also as consideration for the $10,000 loan made on January 27, 2022. But,
[Appellant] was able to offer documentary evidence of only $28,896 in loans made in
2021, and the Debtor testified that, by the time he executed the Promissory Note and
Deed of Trust, he had repaid $25,000 of that amount, leaving only $3,896 due at the time
that he executed documents in the Home Loan Transaction. To the extent that the
$3,896.00 remained due to [Appellant], and to the extent that [Appellant] provided the
Debtor with the additional $10,000.00 on January 27, 2022, in exchange for the
Promissory Note and Deed of Trust, such amount ($13,896) was not adequate
consideration in exchange for the $45,000 Promissory Note secured by the Deed of
Trust.” Opinion at 29 in Appellant’s App. at 285.
64 See id. at 27–30 in Appellant’s App. at 283–86. The Bankruptcy Court
recognized that the following factors are not applicable or determinative: “absconding by
the debtor, removal or concealment of assets, and transfer of substantial business assets to
a lienor followed by a subsequent transfer of such assets to an insider of the debtor.” Id.
at 27 n.11 in Appellant’s App. at 283 (internal quotations omitted). The Bankruptcy
Court also recognized that whether the transfer was of substantially all of Debtor’s assets
“does not weigh in favor or against a finding of fraudulent intent.” Id. at 28–29 in
Appellant’s App. at 284–85.
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The Bankruptcy Court held “that the Debtor’s conduct evidences an intention to avoid
providing accurate information about his financial circumstances, an intention to avoid
paying Mr. Callahan’s judgments, and an intention to prevent Mr. Callahan from
collecting on his judgments”65 and that the Home Loan Transaction was a fraudulent
transfer.66
As to the November 2022 Transfer, the Bankruptcy Court incorporated its findings
on actual fraud from the Home Loan Transaction and also noted the following:
The November 2022 Transfer was to an insider, the Debtor’s mother. (Badge
1.) The Debtor made the transfer to [Appellant] with the intention and
expectation that she would hold it for him to use at a later time, after the
bankruptcy, so he effectively maintained control of the $5,000.00 after the
transfer. (Badge 2.) The Debtor concealed the November 2022 Transfer by
omitting mention of it from his Statement of Financial Affairs and schedules,
by not documenting the transfer, and by providing the cash proceeds from
the cash advance to his mother. (Badges 3 and 7.) The November 2022
Transfer occurred at a time when State Court Litigation remained active for
purposes of collection, and was of substantially all of his liquid cash assets.
(Badges 4 and 5.) [Appellant] did not provide new value in exchange for the
transfer at the time of the transfer. (Badge 6.) And, the debtor was insolvent
at the time of the November 2022 Transfer. (Badge 7.)
The Debtor’s conduct prior to the transfer is also evidence of fraudulent
intent. In particular, the Debtor’s refusal to cooperate in discovery in the State
Court Litigation and his use of the Dave Ramsey cash management system
so as to evade record keeping strongly suggests that the Debtor intended to
avoid providing a clear picture of his assets and financial transactions so as
to avoid detection by his creditors and the Trustee. And the Debtor’s lack of
transparency in his bankruptcy case, including his omission of Rocky
Mountain as a creditor from his Amended Schedule D, his omission of the
November 2022 Transfer to his mother in his Statement of Financial Affairs,
and his omission of any mention of the $5,000.00 cash asset derived from the
cash advance, are powerful evidence of fraudulent intent.67
65 Id. at 14 in Appellant’s App. at 270.
66 Id. at 30 in Appellant’s App. at 286.
67 Id. at 39–40 in Appellant’s App. at 295–96 (internal footnote omitted).
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On appeal, Appellant asserts the Bankruptcy Court’s findings regarding fraudulent
intent are erroneous. Appellant challenges the Bankruptcy Court’s reliance on Appellee’s
evidence and alleges it failed to objectively consider additional evidence, such as factors
negating fraudulent intent.68 Appellant also disagrees with the Bankruptcy Court’s
assessment of Debtor’s behavior in the State Court litigation and its findings pertaining to
fraudulent intent.69
Here, the Bankruptcy Court did not err in its factual findings supporting fraudulent
intent as to either the Home Loan Transaction or the November 2022 Transfer. Under the
standard outlined by the Tenth Circuit in Taylor, “[w]hen one or more of these badges [of
fraud] are present fraudulent intent can be inferred.”70 A review of the factors the
Bankruptcy Court considered and its analysis reflects no error.
68 Appellant’s Br. at 22 (Appellant argues “the bankruptcy court relies solely on
the evidence introduced by the Trustee, and that evidence which may indicate fraudulent
intent, rather than objectively considering all of the evidence, as well as the surrounding
circumstances, or the facts or factors that negated any fraudulent intent.”).
69 Id. at 23–29. Appellant additionally lists factors pertaining to the State Court
litigation and the Bankruptcy Court’s fraudulent intent assessment that allegedly should
have been considered: Appellee’s “shifting stories,” that the “transfer was made within
two years prior to Debtor’s bankruptcy filing,” Debtor’s “concealment and dishonesty in
disclosures related to the Home Loan Transaction,” “pending or threatened litigation
against the Debtor at the time of transfer and the proximity in time of the transfer to the
incurrence of a substantial debt,” and “reasonably equivalent value in exchange for the
transfer.” Id. at 29–32.
70 In re Taylor, 133 F.3d at 1339 (addressing the badges of fraud in Utah Code
Ann. § 25–6–5(2) (1988), which are like those that bankruptcy courts consider under 11
U.S.C. § 548(a)(1)).
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a. 	Both the Home Loan Transaction and the November 2022
Transfer were transfers to an insider.
Section 101(31)(A)(i) provides that “insider” includes “relative of the debtor” if
the debtor is an individual,71 and Colo. Rev. Stat. § 38-8-102(8)(a)(I) contains a similar
provision.72 Here, Appellant is Debtor’s mother, and Debtor transferred an interest in the
Property to her through the Home Loan Transaction and $5,000 to her in the November
2022 Transfer.
b. 	The transfers were made within two years prior to Debtor’s
bankruptcy filing.
The record shows that the Home Loan Transaction was made on January 27, 2022,
within two years prior to Debtor’s bankruptcy filing, which occurred just over ten months
later on December 2, 2022. The November 2022 Transfer was made days before Debtor’s
bankruptcy filing.
c. 	There was concealment and dishonesty in disclosures related
to the Home Loan Transaction and the November 2022
Transfer.
The record shows (1) Debtor stated on his Amended Schedule D that he owed
$45,000.00 to “Coney Management”73 when the Promissory Note lists “Ella M. Coney,”
(2) Debtor did not list any payments to Appellant pertaining to the Home Loan
Transaction in his Statement of Financial Affairs,74 and (3) Debtor did not list on his
71 11 U.S.C. § 101(31)(A)(i).
72 Colo. Rev. Stat. § 38-8-102(8)(a)(I) (“(8) ‘Insider’ includes: (a) If the debtor is
an individual: (i) A relative of the debtor or of a general partner of the debtor.”).
73 Case No. 22-14730-TBM, Schedule D [Bankr. ECF No. 40].
74 Case No. 22-14730-TBM, Statement of Financial Affairs [Bankr. ECF No. 14].
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Schedule J any payments due to Appellant pursuant to the Promissory Note.75 Regarding
the November 2022 Transfer, the record supports the findings of Debtor omitting the
transfer from his bankruptcy filings and not documenting the transfer. The Bankruptcy
Court’s findings regarding Debtor actively evading discovery in the State Court litigation
and operating with a cash system to avoid detection are also supported.
d. 	There was pending or threatened litigation against Debtor at
the time of the Home Loan Transaction and November 2022
Transfer along with proximity in time of the Home Loan
Transaction and November 2022 Transfer to the incurrence
of a substantial debt.
The State Court entered the Second Award on January 4, 2022, and the Home
Loan Transaction took place on January 27, 2022. The November 2022 Transfer occurred
while collection efforts were ongoing.
e. 	There was inadequate consideration in exchange for the
transfers.
Here, assuming Debtor had not begun paying Appellant back by January 27, 2022,
the record shows that Debtor owed Appellant $28,896 before Appellant “handed [Debtor]
a check for $10,000” that same day.76 Whether Debtor paid Appellant $25,000 by the
Home Loan Transaction date or the date of the Trial does not impact the Bankruptcy
Court’s finding that there was insufficient consideration behind the Home Loan
Transaction: $28,896 or $38,896 (when including the check given on the day of the
75 Case No. 22-14730-TBM, Schedule J [Bankr. ECF No. 2].
76 The cashier’s checks from 2021 total $28,896 worth of transfers from Appellant
to Debtor. Appellant testified that she “handed [Debtor] a check for $10,000” on January
27, 2022. Dep. at 129 in Appellant’s App. at 142.
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Home Loan Transaction) is still less than $45,000 and, thus, fails to be a “reasonably
equivalent value in exchange for the transfer.”77 No new value at all was given in
exchange for the November 2022 Transfer.
f. 	Debtor was insolvent at the time of the Home Loan
Transaction and the November 2022 Transfer.
According to Debtor’s amended schedules, Debtor accumulated $504,179.75 in
liabilities,78 and all listed debts were incurred prior to the Home Loan Transaction date
(except for a $1,901.88 claim from Kendrick Legal Family Solutions, LLC).79 Debtor
claimed $270,102.15 in assets.80
g. 	Conclusion
The above badges of fraud provide sufficient support for finding fraudulent intent.
As such, the Bankruptcy Court did not clearly err in finding Debtor acted with fraudulent
intent in entering into the Home Loan Transaction and the November 2022 Transfer.
* * *
77 Zubrod v. Kelsey (In re Kelsey), 270 B.R. 776, 781–82 (10th Cir. BAP 2001)
(outlining the badges of fraud, defining value as “property, or satisfaction or securing of a
present or antecedent debt of the debtor, but does not include an unperformed promise to
furnish support to the debtor or to a relative of the debtor,” and noting that value must be
quantified). The Supreme Court has clarified that “the inquiry under § 548[] [is] whether
the debtor has received value that is substantially comparable to the worth of the
transferred property” and noted that “reasonably equivalent” means “approximately
equivalent” or “roughly equivalent.” BFP v. Resol. Tr. Corp., 511 U.S. 531, 538 n.4, 548
(1994). See also In re Adam Aircraft Indus., Inc., 805 F.3d 888, 897–98 (10th Cir. 2015)
(quoting BFP, 511 U.S. at 538 n.4, 548).
78 Case No. 22-14730-TBM, Summary of Your Assets and Liabilities and Certain
Statistical Information [Bankr. ECF No. 40].
79 Case No. 22-14730-TBM, Schedule E/F: Creditors Who Have Unsecured
Claims [Bankr. ECF No. 40].
80 Case No. 22-14730-TBM, Schedule A/B: Property [Bankr. ECF No. 40].
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To sum, the Bankruptcy Court did not abuse its discretion in its evidentiary rulings
or make clearly erroneous findings of fact in support of its conclusions that (1) the Home
Loan Transaction should be avoided as actually and constructively fraudulent under
§§ 548(a)(1)(A), 548(a)(1)(B), and Colorado law; (2) the Home Loan Transaction was a
preferential transfer under § 547(b); and (3) Appellant did not establish the good faith
defense of § 548(c) or the defenses of § 547(c). The Bankruptcy Court also did not abuse
its discretion or make clearly erroneous findings of fact in support of its conclusions that
the November 2022 Transfer was actually and constructively fraudulent under
§§ 548(a)(1)(A), 548(a)(1)(B), and Colorado law and Appellant did not establish the
good faith defense under § 548(c).
To the extent the challenged factual findings informed the Bankruptcy Court’s
decision on the December 2022 Transfer, the factual findings supporting the conclusion
that the December 2022 Transfer was an unauthorized postpetition transfer under
§ 549(a) are also not clearly erroneous. The disallowance of any claim by Appellant
under § 502(d) was not challenged on appeal.
C. 	The Bankruptcy Court erred in its application of §§ 550 and 551.
1. 	Bankruptcy Court Ruling
The Bankruptcy Court concluded that because it determined the Home Loan
Transaction, the November 2022 Transfer, and the December 2022 Transfer are avoided,
under § 550, the Trustee could recover the value of the transfers for the benefit of the
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estate.81 Additionally, the Bankruptcy Court noted because the transfers have been
avoided, “the preservation of such transfers is automatic under Section 551.”82 The
Bankruptcy Court held that “judgment shall enter in favor of the Trustee in the amounts
of $45,000; $5,000, and $5,000 respectively” pursuant to § 550.83 The Bankruptcy Court
also held that the avoided transfers are preserved for the benefit of the estate under
§ 551.84
In the Judgment, the Bankruptcy Court ordered and adjudged, in part, the
following:
5. 	Judgment is entered in favor of the Plaintiff and against the Defendant in
the amount of $45,000, the value of the Home Loan Transaction, pursuant
to 11 U.S.C. § 551.
6. 	Judgment is entered in favor of the Plaintiff and against the Defendant in
the amount $5,000, the value of the November 2022 Transfer, pursuant
to 11 U.S.C. § 551.
7. 	Judgment is entered in favor of the Plaintiff and against the Defendant in
the amount $5,000, the value of the December 2022 Transfer, pursuant to
11 U.S.C. § 551.
8. 	Judgment is entered in favor of the Plaintiff and against the Defendant on
the Plaintiff’s claims to preserve the avoided Home Loan Transaction, the
avoided November 2022 Transfer, and the avoided December 2022
Transfer, pursuant to 11 U.S.C. § 551.85
In other words, paragraphs five, six, and seven of the Judgment erroneously refer to § 551
rather than § 550. The Bankruptcy Court did not reference § 550 in the Judgment, and
81 Opinion at 38, 41–42 in Appellant’s App. at 294, 297–98.
82 Id. at 42 in Appellant’s App. at 298.
83 Id. at 44 in Appellant’s App. at 300.
84 Id. See also id. at 42 in Appellant’s App. at 298 (“Since the Court has ordered
avoidance of such transfers, the preservation of such transfers is automatic under Section
551.”).85 Judgment at 2 in Appellant’s App. at 303.
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there appears to be nothing in the Judgment or Opinion suggesting that the Trustee may
only elect one remedy.
2. 	Parties’ Arguments
Appellant raises three arguments. First, as to the Home Loan Transaction,
Appellant contends the Bankruptcy Court erred by both avoiding the lien and awarding
the value of the transfer, which is prohibited by § 550(d). Second, Appellant notes the
Judgment erroneously only refers to § 551 and not § 550. Third, Appellant argues the
value of the avoided Home Loan Transaction should be $13,896 because the Bankruptcy
Court found that to be the value of the consideration exchanged for the Promissory Note.
Although Appellee agrees with Appellant’s position that Appellee is entitled to a
single satisfaction pursuant to § 550(d), Appellee disagrees with how Appellant construes
the Code. Appellee notes “the Bankruptcy Court left the election of the remedy up to
[Appellee]. Consequently, [Appellee] may collect the Note (including foreclosing on the
Debtor’s Property) or, enforce the money judgment for $45,000 against [Appellant].”86
Given that Appellee has not made an election, Appellee contends “[Appellant’s]
arguments are premature.”87
3. 	Legal Standard
Once a transfer is avoided, that transfer is automatically preserved for the estate
under § 551, which provides that “[a]ny transfer avoided under section 522, 544, 545,
86 Appellee’s Br. at 26.
87 Id. at 26–27 (citing Morris v. St. John Nat’l Bank (In re Haberman), 347 B.R.
411, 415 (10th Cir. BAP 2006)).
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547, 548, 549, or 724(a) of this title, or any lien void under section 506(d) of this title, is
preserved for the benefit of the estate but only with respect to property of the estate.”88 In
addition to these remedies, § 550(a) provides “to the extent that a transfer is avoided . . .
the trustee may recover, for the benefit of the estate, the property transferred, or, if the
court so orders, the value of such property.” However, “[t]he trustee is entitled to only a
single satisfaction,”89 i.e., the property or the value of the property. Although each
remedy is distinct, preservation and recovery of avoided transfers “serve the same
purpose of placing the estate in the position it would have been in had the avoided
transfer not been made.”90
The Tenth Circuit has held that Ҥ 550(a) provides the bankruptcy court with
flexibility to fashion a remedy so as to return the estate to its pre-transfer position.”91 “In
the case of an avoided lien, the estate will be returned to its previous position by simply
avoiding the preferential [and, under § 551, automatically preserved] lien and no further
recovery will be necessary, but there may be circumstances where that remedy will be
insufficient and recovery under § 550 [will be] needed instead.”92 Whether § 550
88 11 U.S.C. § 551.
89 Id. § 550(d).
90 Rodriguez v. Daimlerchrysler Fin. Servs. Ams. LLC (In re Bremer), 408 B.R.
355, 359 (10th Cir. BAP 2009), aff’d sub nom. Rodriguez v. Drive Fin. Servs., L.P. (In re
Trout), 609 F.3d 1106 (10th Cir. 2010).
91 In re Trout, 609 F.3d at 1111 (“A lien interest is ‘property’ under the Code . . .
and § 550 permits recovery of transferred ‘property’ or its value.”).
92 Id. See also In re Bremer, 408 B.R. at 360 (“[W]hen the Trustee avoided the []
liens, they were automatically preserved for the benefit of the estate under § 551. This
preservation had the same effect as recovering those liens under § 550(a): the estates
received the liens.”).
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recovery is warranted depends on whether § 551 preservation is sufficient; recovery is
necessary only when the remedy of preservation and avoidance is insufficient.93 In sum,
“the default rule is the return of the property itself, whereas a monetary recovery is a
more unusual remedy to be used only in the court’s discretion.”94
The Tenth Circuit has identified circumstances in which § 551 preservation alone
is insufficient and § 550 recovery is appropriate as to an avoided lien:
When the record is devoid of evidence on the property’s market value or
when conflicting evidence exists on the value of the transferred property, . .
. [w]here the property is unrecoverable or its value diminished by conversion
or depreciation, . . . when the value is readily determinable and a monetary
award would work a savings for the estate. . . . [or] when the collateral
securing the lien is gone or the lien itself has been paid in full.95
Thus, where § 551 preservation has already placed the estate in its pretransfer position,
ordering an additional § 550 monetary recovery as to the avoided lien would give the
estate a double recovery, an outcome which is prohibited by § 550(d).
4. 	Discussion
As to Appellant’s first argument, the Court concludes the Bankruptcy Court erred
in awarding Appellee both a monetary award and avoidance of the Home Loan
Transaction.96 While the Tenth Circuit has held that Ҥ 550(a) provides the bankruptcy
93 In re Trout, 609 F.3d at 1112 (“[T]here may be situations in which the
avoidance of the lien will not suffice to restore the estate to a pre-transfer situation. . . .”);
In re Bremer, 408 B.R. at 359 (“Recovery is necessary only when the remedy of
avoidance, and therefore of preservation, is inadequate.”).
94 In re Trout, 609 F.3d at 1113.
95 Id. at 1112 (citation omitted).
96 See id. at 1108 n.2 (“Although in the complaint the Trustee appears to seek both
the lien and a monetary award of the value of the lien, the Trustee acknowledges on
appeal that under § 550(d)—which permits only a single recovery—it cannot receive both
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court with flexibility to fashion a remedy so as to return the estate to its pre-transfer
position,”97 in avoiding the Home Loan Transaction, the estate was returned to its
previous position, and no further recovery was appropriate.
As to Appellant’s second argument, the Bankruptcy Court referred to § 551 in
numbers five, six, and seven of the Judgment instead of § 550. Although this may be a
harmless error given that the Opinion is clear, the Judgment should accurately refer to
each respective statute.
As to Appellant’s third argument, the Bankruptcy Court did not err in valuing the
Home Loan Transaction at $45,000. The “property” that was transferred here was the
Home Loan Transaction—a $45,000 lien.98
Thus, the Court reverses and remands on this issue. The Bankruptcy Court must
enter an award consistent with the Tenth Circuit’s direction in Trout.
and acknowledges it would have to abandon the § 551 preserved lien if it obtained a
monetary award for the value of that lien under § 550.”); see also Parks v. Brooks (In re
Brooks), 452 B.R. 809, 817 n.32 (Bankr. D. Kan. 2011) (“The Trustee may obtain the
avoided and preserved lien or the value of the avoided lien, but not both.” (citing In re
Trout, 609 F.3d at 1108 n.2; § 550(d))).
97 In re Trout, 609 F.3d at 1111 (“A lien interest is ‘property’ under the Code . . .
and § 550 permits recovery of transferred ‘property’ or its value.”).
98 See 11 U.S.C. § 101(54)(A) (defining the term “transfer” as including the
creation of a lien). Here, the Home Loan Transaction involved the execution of the
Promissory Note and deed of trust, which was recorded, and as such created a lien in
favor of Appellant.
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V. 	Conclusion
Accordingly, we AFFIRM in part as to the Bankruptcy Court’s evidentiary
determinations and factual findings and REVERSE and REMAND in part for further
determinations consistent with this Opinion.
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