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Whitlock v. Lowe

United States District Court, W.D. Texas, San Antonio Division

March 28, 2018

Cheri Ann Whitlock, Appellant,
v.
John Patrick Lowe, Trustee, Appellee.

          MEMORANDUM OPINION: DENYING THE APPELLANT'S MOTION FOR RECONSIDERATION OR, IN THE ALTERNATIVE, FOR A NEW TRIAL

          HONORABLE ROYCE LAMBERTH UNITED STATES DISTRICT JUDGE

         The appellant, Ms. Cheri Whitlock, asks the Court to reconsider its earlier opinion [ECF # 11 ] and order [ECF # 12] affirming the judgment of the bankruptcy court. While the Court agrees that its earlier opinion requires amendment, the Court again affirms the judgment of the Bankruptcy Court. Therefore, the appellant's motion [ECF #13] will be DENIED.

         BACKGROUND

         The Court's earlier opinion [ECF #11] contains a detailed account of the factual and procedural background of this case. Therefore, this opinion provides only a statement of those portions relevant to the current opinion.

         I. Factual Background

         This case arises from Mr. Curtis DeBerry's Chapter 7 bankruptcy. Prior to filing for bankruptcy, Mr. DeBerry and his wife, Mrs. Kathy DeBerry, transferred $275, 000 from a jointly owned bank account to an account owned and controlled by the appellant, Ms. Cheri Whitlock.

         After receiving the fraudulent transfer, Ms. Whitlock made two transfers relevant to the present motion. First, she transferred $32, 000 to Mrs. DeBerry. Second, she transferred $200, 000 to Masterbaiter Charters, LLC ("MBC"). These transfers were made before Mr. DeBerry filed for bankruptcy. The funds transferred to Mrs. DeBerry and to MBC were then spent, also before Mr. DeBerry filed for bankruptcy. For purposes of this opinion, the Court assumes without deciding that the funds transferred to MBC and to Mrs. DeBerry were in essence transferred to Mr. DeBerry, the debtor in this case, and would have been part of the bankruptcy estate had they not been spent prior to the bankruptcy petition being filed.[1] Therefore, the funds transferred from Ms. Whitlock to Mrs. DeBerry and to MBC were "returned" to what later became the bankruptcy estate.

         II. The Bankruptcy Court's Decisions

         After all of this transferring and spending, Mr. DeBerry finally filed for bankruptcy. The bankruptcy court first found that the initial transfer of funds to Ms. Whitlock was fraudulent and voidable under numerous federal and state statutes (including 11 U.S.C. § 544). Second, the bankruptcy court found that Ms. Whitlock was an "initial transferee" from whom the trustee could recover the funds under 11 U.S.C. § 550(a). Third, the bankruptcy court concluded that recovering from Ms. Whitlock the $232, 000 that Ms. Whitlock transferred to Mrs. DeBerry and to MBC did not violate the single-satisfaction rule set forth in 11 U.S.C. § 550(d).

         III. This Court's Initial Decision and the Motion for Reconsideration.

         In this Court's initial opinion, it affirmed all three of the bankruptcy court's conclusions. It appears to the Court that Ms. Whitlock, in her motion for reconsideration, only asks the Court to reconsider its decision to affirm the bankruptcy court's third conclusion. Therefore, the Court's earlier decisions affirming that the initial transfer to Ms. Whitlock was fraudulent and that Ms. Whitlock counts as an "initial transferee" for purposes of 11 U.S.C. § 550(a)-and the reasoning behind those decisions-remains intact.

         But upon consideration, the Court concludes that while its decision to affirm the bankruptcy court's third conclusion-that recovering $232, 000 from Ms. Whitlock does not violate the single-satisfaction rule-was correct, the reasoning behind the Court's initialdecision was faulty. Therefore, the Court issues this amended opinion.

         ANALYSIS

         I. Section 550 of the Bankruptcy Code Establishes the ...


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