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Facts: After Jennings was found liable in a California civil action, but before the California court awarded damages, Jennings transferred $130,000 (the "Payment") to a builder in advance payments on a hangar Jennings was building located on his Florida property. After damages were awarded in the California case, Jennings declared bankruptcy and claimed the hangar and property as a homestead in his bankruptcy. The bankruptcy court found that Jennings transferred the money with the intent to hinder or defraud his creditors. The district court affirmed and Jennings appealed on the basis that the courts below erred in finding fraudulent intent since the bankruptcy code specifically allowed the conversion of non-exempt assets to exempt assets prior to filing bankruptcy in order to take advantage of available exemptions.
Issues: Despite the fact that Jennings conveyed non-exempt assets to exempt assets, "[w]hether Jennings made the $130,000 transfer to Baker Builders with intent to hinder, delay, or defraud his creditors, and whether the record contains sufficient evidence to deny Jennings a discharge under § 727(a)(2)(A) because of that transfer."
Holding: Affirmed.
Rules: A debtor can convert non-exempt assets to exempt assets unless the debtor makes the conversion with the intent to hinder, delay, or defraud his creditors. The Eleventh Circuit articulated six badges of fraud a court could use in determining whether a person's intent was fraudulent.
Reasoning: The bankruptcy court did not err when it found that Jennings paid $85,000 more than he was required to contractually pay at that point in time nine days before filing for bankruptcy and after he had been found liable in the California action. Moreover, the bankruptcy court did not err in finding that Jennings' intent was fraudulent by the fact that Jennings' testimony with regard to the Payment at a hearing before the bankruptcy court was contradicted by the recipient of the Payment and the fact that all of Jennings' non-fraudulent explanations for the Payment were not credible. Also, the bankruptcy court did not err in finding that Jennings began contemplating bankruptcy after the finding of liability but before the entry of damages in the California action. Notably, the Eleventh Circuit found it important that the bankruptcy court's finding that it was Jennings' lack of candor (rather than the sequence of the events that led to the Payment) that was the crux of its finding of bad intent. Ultimately, it was Jennings' decision to falsify his motives for making the Payment that was indicative of his fraudulent intent.
Facts: Pacific Dunlop Holdings (USA), Inc. ("PDH USA") and four of its foreign affiliates (the "PDH Foreign Entities," and, together with PDH USA, "PDH") entered into a pre-petition sale contract with Exide Technologies ("Exide USA" or the "Debtor") and a number of Exide's foreign entities (the "Exide Foreign Entities," and, together with Exide USA, "Exide") in which Exide purchased PDH's interests in GNB Companies ("GNB"). Exide and PDH entered into a series of separate sales contracts (the "Contracts") where PDH USA sold its interests to Exide and the PDH Foreign Entities sold their interests to the Exide Foreign Entities. Each of the Contracts provided that the Buyers (as that term was defined in the Contracts) indemnification responsibilities were set forth in the Coordinating Agreement, and any amendments thereto. The Contracts also had a forum selection clause pursuant to which any claims arising from the Contracts were to be filed in a state or federal court in the County of Cook, State of Illinois. Inevitably, after the sale, PDH sued Exide (the "Claims") in the Circuit
