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Furr v. TD Bank, N.A.

United States District Court, S.D. Florida

September 24, 2019

ROBERT C. FURR, Trustee for the Bankruptcy Estate of Rollaguard Security, LLC et al., Appellant,
v.
TD BANK, N.A, JPMORGAN CHASE BANK, N.A., and PNC BANK, N.A., Appellees.

          OPINION AND ORDER

          KENNETH A. MARRA, UNITED STATES DISTRICT JUDGE

         This cause is before the Court on the appeal by Robert C. Furr, the Chapter 7 Trustee, (“Appellant” “Trustee”) of the bankruptcy court’s October 1, 2018 Omnibus Order on Plaintiff’s Request for Leave to File Amended Complaints. The Court has carefully considered the appeal, the briefs of the parties, the entire record on appeal, and is otherwise fully advised in the premises.

         I. Background

         The facts, based upon Appellant and Appellee’s statement of facts in their appellate briefs and the appellate record, are as follows:

         On December 29, 2016, the Trustee (“Appellant” “Trustee”) sued Defendants TD Bank, N.A., JPMorgan Chase Bank N.A., PNC Bank, N.A. (“Appellees” “Defendants”) alleging they had knowingly facilitated the fraud of Anthony Simpson, an individual who controlled, in whole or in part, the debtors Rollaguard Security, LLC, Shamrock Jewelers, Inc., Shamrock Jewelers Loan & Guarantee, LLC. Count one and two of the complaints sought to recover the Debtors’ deposits with the Defendant banks as fraudulent transfers under the bankruptcy code and the Florida law. Counts three and four asserted claims for aiding and abetting conversion. Count five asserted a claim for negligence and wire transfer liability.

         On March 16, 2017, Defendants moved under Rule 12(b)(6) to dismiss the complaints, which the bankruptcy court dismissed with prejudice on July 27, 2017. On August 10, 2017, the Trustee filed an omnibus motion to reconsider and for leave to file proposed amended complaints. The bankruptcy court denied the Trustee’s motion on August 30, 2017.

         The Trustee appealed the bankruptcy court’s rulings to this Court and the Court entered an Order reversing the bankruptcy court, published as Furr v. TD Bank, N.A., 587 B.R. 743 (S.D. Fla. 2018), ruling that the bankruptcy court erred by failing to apply the correct standard for leave to amend and remanded the case for the bankruptcy court to consider the proposed pleading under the proper standard.

         After remand, the bankruptcy court again denied the Trustee leave to amend as futile. The bankruptcy court ruled that deposits to the Debtors’ own restricted accounts are not transfers, the allegations did not show that the alleged transfers were made with the intent to defraud creditors, and that the Trustee’s aiding and abetting claims did not support a plausible inference of Defendants’ knowledge or substantial assistance of Simpson’s fraud.

         II. Legal Standard

         The bankruptcy court denied the Trustee’s motion for leave to amend upon determining that the proposed amended complaints were futile. The Court reviews that determination de novo. Chang v. JPMorgan Chase Bank, N.A., 845 F.3d 1087, 1094 (11th Cir. 2017); Cockrell v. Sparks, 510 F.3d 1307, 1310 (11th Cir. 2007). The Court generally reviews a bankruptcy court’s decision to grant or deny leave to amend a deficient pleading for an abuse of discretion. In re Fundamental Long Term Care, Inc., 873 F.3d 1325, 1335 (11th Cir. 2017), cert. denied sub nom. Estate of Jackson v. Schron, 139 S.Ct. 210 (2018).

         III. Discussion

         The bankruptcy court held that the Debtors’ deposits into their own unrestricted bank accounts maintained at the Defendants’ banks do not constitute transfers within the meaning of that term under section 11 U.S.C. §101(54) or Florida Statute § 726.102(14) and therefore could not form the basis of the Trustee’s fraudulent transfer claims. The Trustee argues that the bankruptcy court erred in determining that the fraudulent transfer claims were futile.

         The Court agrees with the bankruptcy court that a transfer into a Debtor’s unrestricted bank account is not a transfer. Section 101(54) defines “transfer” in pertinent part, as any “mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing or parting with . . . property; or . . . an interest in property. 11 U.S.C. §101(54)(D)(i)-(ii). Florida law defines the term “transfer” as: “every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an asset or an interest in an asset.” Florida Statute § 726.102(14).

         When a debtor endorses a check for deposit or directs a wire by a third party into its own unrestricted bank account, the debtor has not “disposed” or “parted with” any interest in the right to payment or credit represented by the check or wire, and, therefore, no “transfer” has occurred. See Mayo v. Pioneer Bank & Tr. Co., 270 F.2d 823, 837 n.21 (5th Cir. 1959) (“Ordinarily a deposit in a bank is not a transfer”);[1]Ivey v. First Citizens Bank & Tr. Co. (In re Whitley), 848 F.3d 205, 210 (4th Cir. 2017) (holding that “when a debtor deposits or receives a wire transfer of funds into his own unrestricted checking account in the regular course of business, he has not transferred those funds to the bank that operates the account [because] the debtor is still free to access those funds at will”); Malloy, III v. Citizens Bank of Sapulpa (In re First Sec. Mortg. Co.), 33 F.3d 42, 44 (10th Cir. 1994) (no transfer under bankruptcy law because “the bank held the funds it received ‘only for the purpose of fulfilling an instruction to make the funds available to someone else’”); In re Prescott, 805 F.2d 719, 729 (7th Cir. 1986) (holding that “to the extent a deposit is made into an unrestricted checking account, in the regular course of business and withdrawable at ...


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