Opinion
Not For Publication
Filed 1/3/08
Attorney(s) for Defendants: Al M. De La Cruz, Esq., Michael A. Weismantel, Esq., Tony F. Farmani, Esq., Manning & Marder Kass, Ellrod, Ramirez LLP.
Attorney(s) for Trustee: Oscar Garza, Esq., Solmaz Hamidian, Esq., Gibson, Dunn & Crutclier LLP.
MEMORANDUM DECISION
John J. Hargrove, United States Bankruptcy Judge
At issue is whether the trustee is entitled to summary judgment on the grounds there are no undisputed facts with respect to Defendant Anthony and Morgan Surety and Insurance Services, Inc.'s ("A&M Surety"), as the initial transferee, and Defendant Michael T. Anthony's ("Anthony"), as the subsequent transferee, good faith defense. This Court denies summary judgment because it finds there are material disputed issues of fact as set forth below.
This Court has jurisdiction to determine this matter pursuant to 28 U.S.C. §§ 1334 and 157(b)(1) and General Order No. 312-D of the United States District Court for the Southern District of California. This is a core proceeding pursuant to 28 U.S.C. §§ 157 (b) (2) (A) , (E) and (H) .
I.
FACTS
THE TRANSACTIONS BETWEEN DEBTORS AND DEFENDANTS
Debtors' business consisted of originating and selling at a discount to investors (usually Banks), "sub-prime" commercial equipment and automobile leases. To induce investors to purchase the leases, Debtors obtained surety bonds from sureties (the "Sureties") to guaranty the lease payments. Debtors packaged the insured leases into a "lease pool" and assigned the payment stream due under the leases along with the surety bonds to the investors. Debtors continued to service the leases, collecting the payments and remitting the promised monthly amounts to the investors.
A&M Surety acted as Debtors' exclusive agent in obtaining surety bonds from the various Sureties. In exchange for obtaining these bonds. Debtors paid to A&M Surety at least $3,750,100 in "commissions." The evidence submitted shows that A&M Surety devoted substantial time and resources in furtherance of its contractual obligations and it received commissions proportionate to those earned for similar services in the industry. [Anthony Decl. At ¶ ¶ 53-63]. A&M Surety also acted as an agent for the various Sureties and was compensated for these services, as is customary in the industry. [Id. at ¶ 65].
Debtors, in their capacity as the servicer, experienced a high default rate on the lease payments. Debtors did not notify the investors or the various Sureties of the collection shortfalls. Instead, Debtors made up the shortfall of the actual lease collections and the amounts promised to the investors through so-called "servicer advances." [Elledge Decl. at ¶ 12]. Debtors financed the servicer advances by selling new lease pools to new investors. [Id.] As the number of nonperforming leases grew, Debtors needed an increasing volume of lease pool sales proceeds to make up the shortfalls between the actual collections and the amounts due to investors. [Id.] In short. Debtors' business was a classic ponzi scheme, [id.]
II.
PROCEDURAL HISTORY OF SUMMARY JUDGMENT MOTION
Richard M. Kipperman, chapter 7 trustee ("trustee") for the jointly administered bankruptcy estates of Commercial Money Centers, Inc. and Commercial Servicing Corporation ("Debtors"), filed a first amended complaint ("Amended Complaint") against defendants A&M Surety, Anthony and Scott Morgan ("Morgan") (hereinafter collectively "Defendants") alleging, inter alia, claims to recover alleged fraudulent transfers pursuant to §§ 544(b), 548 and 550. The trustee seeks to recover broker commissions totaling at least $3,750,100 paid by Debtors to A&M Surety (and allegedly distributed to Anthony and Morgan) during the four-year period prior to the petition date. The trustee alleges that Debtors were operating a ponzi scheme and, therefore, the commissions paid by Debtors to A&M Surety in furtherance of the ponzi scheme are recoverable as a matter of law.
Unless otherwise indicated, all chapter, section and rule references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1330, and to the Federal Rules of Bankruptcy Procedure, Rules 1001-9036, as enacted and promulgated prior to the effective date of The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. 109-8, 119 Stat. 23, because the debtors filed their bankruptcy cases before its effective date (generally October 17, 2005) .
Trustee filed a motion for summary judgment on the Amended Complaint seeking a ruling in his favor based upon the following undisputed facts: 1) Debtors were operating a ponzi scheme; (2) Defendants actively participated in and provided services that perpetuated Debtors' ponzi scheme in return for their commissions; and (3) the admissions by Anthony that Defendants were, at an absolute minimum, on inquiry notice from Debtors' "infancy" that Debtors were operating a ponzi scheme yet, instead of performing the requisite due diligence, turned a complete blind eye.
The Amended Complaint alleges seven claims for relief: (1) against A&M Surety - avoidance of actual fraudulent transfers pursuant to § 544(b) (incorporating Cal.Civ.Code §§ 3439.04(a)(1) and 3439.07, and Nev. Rev. Stat. §§ 112.180(a)(1) and 112.220); (2) against A&M Surety - avoidance of constructively fraudulent transfers pursuant to § 544(b) (incorporating Cal.Civ.Code §§ 3439.04(a)(2), 3439.05 and 3439.07 and Nev. Rev. Stat. §§ 112.180 (1) (b) and 112.220); (3) against A&M Surety - avoidance of fraudulent transfers pursuant to § 548; (4) against A&M Surety - recovery of fraudulent transfers pursuant to § 550; (5) against A&M Surety - recovery of transfers due to unjust enrichment; (6) against individual defendants Anthony and Morgan - recovery of avoidable transfers pursuant to § 550; and (7) against all defendants - recovery of the transfers from Anthony and Morgan as the alter egos of A&M Surety.
At the hearing on December 11, 2 007, this Court found the undisputed evidence established Debtors operated a ponzi scheme and paid commissions to A&M Surety in furtherance of the scheme. The Court further found the trustee had identified evidence A&M Surety and Anthony had actual or constructive notice of the ponzi scheme, but the competing evidence presented a triable issue of fact for trial. Regarding the alter ego and unjust enrichment claims, the Court ruled that the trustee had not met his initial burden of proof and these claims remained for trial.
The Court denied the trustee's request for summary judgment against Morgan.
The Court took under submission for further briefing the issue of whether Defendant Anthony and Morgan, as the initial transferee, and Defendant Michael Anthony as the subsequent transferee, have met their burden of demonstrating their defense of good faith.
At the hearing, the trustee relied on Gredd v. Bear Sterns Sec. Corp. (In re Manhanttan Inv. Fund Ltd.), 359 B.R. 519 (S.D.N.Y. 2007) and In re Warfield, 436 F.2d 551, 560 {5th Cir. 2006) . These cases were not in the trustee's initial moving papers which is the reason why additional briefing was authorized.
III.
DISCUSSION
A. STANDARDS FOR SUMMARY JUDGMENT
Rule 56(c) of the Federal Rules of Civil Procedure, made applicable to adversary proceedings by Fed. R. Bankr. P. 7056, provides that summary judgment:
[S]hall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.
"The moving party bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of 'the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Hughes v. United States, 953 F.2d 531, 541 (9th Cir. 1992) citing Celotex Corp. v. Catrett. 477 U.S. 317, 323(1986). "After the moving party has met its initial burden, Rule 56(e) . . . requires the non-moving party to go beyond the pleadings and by her own affidavits, or by the 'depositions, answers to interrogatories, and admissions on file,' designate 'specific facts showing that there is a genuine issue for trial.'" Hughes, 953 F.2d at 541 (citation omitted).
The non-moving party is not required to produce evidence in a form that would be admissible at trial. Rule 56(e) permits a summary judgment to be opposed by any of the kinds of evidentiary materials listed in Rule 56(c) , except the mere pleadings themselves. Celotex Corp., 477 U.S. at 324. "The burden on the non-moving party is not a heavy one; the non-moving party simply is required to show specific facts, as opposed to general allegations, that present a genuine issue worthy of trial." Dark v. Curry County, 451 F.3d 1078, 1082 (9th Cir. 2006).
In contrast, if the non-moving party bears the burden of proof at trial on a dispositive issue, the moving party is not required to submit evidence negating the opponent's claim. Celotex, 477 U.S. at 323. Rather, the party opposing summary judgment (who bears the burden of proof at trial) is required to go beyond the pleadings and make an evidentiary showing sufficient to establish the existence of a genuine issue for trial. Id.; Hayes v. Palm Seedlings Partners (In re Agric. Research and Tech. Group), 916 F.2d 528, 533 (9th Cir. 1990). The non-moving party must present significant and probative evidence. "A mere scintilla of evidence is not sufficient to withstand the motion." Agric. Research, 916 F.2d at 533. Therefore, in ruling on summary judgment, "the question is whether a reasonable jury could find that the party which bears the evidentiary burden of proof at trial with respect to a claim or defense has proved its case 'by the quality and quantify of evidence required by [Rule 56].'" Id.
B. BROKER'S COMMISSIONS PAID IN FURTHERANCE OF A PONZI SCHEME ARE INTENTIONALLY FRAUDULENT PER SE
Trustee's first claim for relief against A&M Surety seeks to avoid the commissions pursuant to § 544(b) (incorporating Cal.Civ.Code §§ 3439.04(a)(1) and 3439.07) as intentionally fraudulent transfers. Trustee cites numerous cases finding the existence of a ponzi scheme is presumptive evidence of a debtor's actual intent to defraud. These cases include: Agricultural Research, 916 F.2d at 536 (noting that the mere existence of a ponzi scheme has been found to fulfill the requirement of actual intent [to defraud] on the part of debtor); Plotkin v. Pomona Valley Imports. Inc. (In re Cohen). 199 B.R. 709, 716-17 (9th Cir. BAP 1996) (finding that proof of a ponzi scheme is sufficient to establish the ponzi operator's actual intent to hinder, delay, or defraud creditors for purposes of actually fraudulent transfers); Martino v. Edison Worldwide Capital (In re Randy), 189 B.R. 425, 439 (Bankr. E.D. 111. 1995 (finding that operation of ponzi scheme fulfills the actual intent element); and In re Taubman. 160 B.R. 964, 983 (Bankr. S.D. Ohio 1993) (finding actual intent from the debtor's active participation in a ponzi scheme).
Trustee's "choice of law" analysis imports California law instead of Nevada law into the § 544(b). Trustee notes that California and Nevada have both adopted the Uniform Fraudulent Transfers Act ("UFTA"), and any difference in Nevada's adoption does not bear on the issues presented in the motion.
At the hearing on his motion, the trustee cited In re Manhanttan Inv. Fund Ltd., 359 B.R. at 510. In Manhattan, the bankruptcy court found that "acts taken in furtherance of the ponzi scheme, such as paying brokers commissions, are also [intentionally] fraudulent." Id. at 518 (emphasis added). "[W]hen a person running a ponzi scheme takes incoming funds and transfers them to early investors and brokers, he is making such transfers with the actual intent to hinder, delay or defraud later investors and creditors." Id. (emphasis added) (citation omitted). Thus, the Manhattan bankruptcy court held, as a matter of law, that commissions paid to brokers are "fraudulent transfers." Id.
Defendants' response is that "[f]raud is never presumed." Defendants' argument is not well taken. First, in Agricultural Research cited above, the Ninth Circuit addressed the issue of presumptive actual fraud in the context of a ponzi scheme. The Ninth Circuit recognized the "mere existence of a ponzi scheme, which can be established by circumstantial evidence, has been found to fulfill the requirement of actual intent on the part of the debtor." Agric. Research, 916 F.2d at 536. Second, in Balaber-Strauss v. Sixty-Five Brokers (In re Churchill Mortg. Inv. Corp.), 256 B.R. 664, 675-76 (Bankr. S.D.N.Y. 2000), a case relied upon by Defendants', also recognizes it has been generally held that a debtor who operates a ponzi scheme presumptively possesses the intent for actual fraud. Accordingly, this Court found as a matter of law, the commissions paid by Debtors to A&M Surety in furtherance of the ponzi scheme are intentionally fraudulent transfers pursuant to Cal.Civ.Code § 3439.04(a)(1) and § 544(b).
Because the trustee has prevailed under Civil Code § 3439.04(a)(1), the Court next examines whether the trustee is entitled to summary judgment on the Defendants' good faith defense.
C. THE GOOD FAITH DEFENSE UNDER CALIFORNIA CIVIL CODE SECTION 3439.08
A&M Surety is the initial transferee and Defendant Anthony is a subsequent transferee. Defendants have the burden of establishing the affirmative defense of good faith under Cal.Civ.Code § 3439.08. A&M Surety must establish 1) good faith and 2) reasonably equivalent value. Anthony, as the subsequent transferee, must establish 1) good faith or 2) that he took from A&M Surety who took in good faith and reasonably equivalent value. In re Cohen, 199 B.R. at 716.
The trustee contends that the record shows that the Defendants A&M Surety and Anthony "actively participated in" and "perpetrated" the Debtors' ponzi scheme. He alleges that they helped "sell the scheme" to the Banks and Sureties by traveling around the country making pitches. The trustee relies on the following facts to establish the Defendants' "active participation": 1) a Marketing Letter which Defendants prepared designed to bait Sureties which the trustee submits is evidence that the "the line" between Debtors and A&M Surety is "blurry, at best"; 2) without Defendants' services, there would be no leasing program because the surety bonds were essential to Debtors' equipment leasing scheme -evidence that shows Defendants were actively involved in perpetrating the scheme; and 3) Anthony's declaration which supports these facts at ¶ ¶56-58, 61. see Lewis v. Superior Court, 30 Cal.App.4th 1859, 37 Cal.Rptr.2d 63 (1994) (finding that a transferee lacks good faith only if he or she "colludes[s] with the debtor or otherwise actively participate [s] in the fraudulent scheme of the debtor.").
Alternatively, the trustee maintains that the Defendants were on inquiry notice, yet they failed to perform the requisite due diligence and, therefore, they cannot establish good faith. The trustee cites numerous cases in support of his due diligence argument. see Cohen, 199 B.R. at 709 (finding that a transferee lacks good faith when he or she is possessed of enough knowledge of the actual facts to induce a reasonable person to inquire further about the transaction); see also Breenden v. L.I. Bride Fund, LLC (In re Bennett Funding Group), 232 B.R. 565, 573 (N.D.N.Y. 1999); Aqric. Research, 916 F.2d at 535-36; Brown v. Third Nat'1 Bank (In re Sherman). 67 F.3d 1348, 1357 (8th Cir. 1995); Manhanttan Inv. Fund Ltd., 359 B.R. at 519. These cases stand for the proposition that good faith is measured against an objective standard and if a transferee possesses knowledge of facts that may suggest a transfer is fraudulent, and does not conduct any further inquiry into the matter, the good faith standard cannot be met.
Defendants contend that the inquiry notice standard espoused by Manhattan Inv. Fund is not the law in the Ninth Circuit and cite Lewis v. Superior Court, 30 Cal.App.4th 1859, 37 Cal.Rptr.2d 63 (1994) and CyberMedia, Inc. v. Symantec Corp., 19 F.Supp. 1070, 1075 (N.D. Cal. 1998) in support. In CyberMedia the district court found that the proper standard for good faith "for purposes of the UFTA, a transferee lacks good faith is he or she (1) colludes with the debtor or otherwise actively participates in the debtor's fraudulent scheme, or (2) has actual knowledge of facts which would suggest to a reasonable person that the transfer was fraudulent. Id. at 1075 (N.D. Cal. 1998) . However, these cases are consistent with the objective standard for measuring good faith.
The trustee relies on Manhattan Inv. Fund to establish Defendants' lack of good faith with respect to inquiry notice. In that case, the trustee sought to avoid, pursuant to § 548(a)(1)(A), $141.4 million in margin payments deposited into the ponzi scheme's fund account at Bear Sterns Securities ("Bear Sterns"). The eighteen transfers at issue were deposited by the ponzi operator in its account at Bear Sterns to allow it to continue short selling activities within a year prior to the petition date. Bear Sterns held a security interest in all the monies in the account and had sole discretion to prevent the operator from withdrawing any money credited to its account as long as any short positions remained open. The bankruptcy court found that Bear Sterns had sufficient dominion and control over the margin payments that it had to be regarded as the "initial transferee" rather than a "mere conduit." It should be noted, that the trustee in Manhattan Inv. Fund did not seek to recover from Bear Sterns (as the trustee in this case), the $2.4 million in revenue for services it earned over the course of its involvement with the ponzi operator.
This question is not at issue m the pending motion.
In December 1998, a senior managing director for Bear Sterns was told by an individual who worked for an investment management firm that had clients who invested in the fund, that the fund was reporting a 20% profit. The director was under the impression at that time that the fund was losing money based upon his participation in risk-related conference calls. The director relayed the information to his boss who then followed up with the investment management firm and inquired about whether the fund's performance matched Bear Stern's books and records.
The boss then confirmed from Bear Sterns personnel internally, that the fund was losing money. A further follow-up discussion resulted in an explanation from the ponzi operator and fund's creator (Berger) that the discrepancy in the fund's performance was due to the fact that Bear Sterns was only one of eight or nine brokers used by the fund. More time went by and after a few more incidents. Bear Sterns finally took steps to determine what was really going on. Management contacted two credit bureaus and called other prime brokers to determine their experience with the fund. In August 1999, the gap between the fund's purported performance as reported by Berger and what the actual performance was had grown to $367 million. A month later, the gap was nearly $399 million. By the time the last transfers took place in December 1999, the gap stood at $423 million. When Bear Sterns finally obtained the fund's financials, it was able to determine there was a problem after a ten minute review.
Based upon these facts, the court found that Bear Sterns was in inquiry notice from the time of the first conversation in December 1998 throughout the following year. Significantly, the court noted that Bear Sterns was required to do more than simply ask the wrongdoer if he was doing wrong.
The trustee urges that the facts in this case also show Defendants were in a position to be on inquiry notice from the "infancy" of Debtors' leasing program. The Defendants were experienced brokers, they knew Debtors had virtually no capital from their inception, the lessees were subprime credit risks, the leases were defaulting, the reserve account established by the Sureties was never tapped into, claims were not being made on the Surety Bonds, and the shortfall between the actual lease collections and amounts promised to the Bank were being made by the Debtors through "servicer advances." According to the trustee, the Defendants would be on inquiry notice of Debtors' fraud. The trustee offers a long list of "due diligence" activities that Defendants should have engaged in under the circumstances of the case. [Supp. Brief at 13].
In applying the standards for good faith to this case, the Court cannot grant the summary judgment requested by the trustee because there are disputed issues of material fact. First, the evidence submitted with this motion does not support a finding that Defendants actively participated in Debtors' ponzi scheme. Furthermore, with respect to inquiry notice, Manhattan Inv. Fund underscores the lack of a bright line test with application of the objective standard which would be difficult even without disputed facts. What types of facts are necessary to put a reasonable person on inquiry notice that a ponzi scheme is being accomplished? Bear Sterns, a securities broker, was in a different position from those of the Defendants, who were merely insurance brokers. The ponzi operator maintained its accounts at Bear Sterns. Bear Sterns management easily confirmed that the fund was losing money, shortly after being advised that the fund was reporting a 2 0% profit for the year. Bear Sterns had access to easily obtainable sources of information. Further, Bear Sterns was the only prime securities broker for the fund. Also, the trustee sued to recover the margin payments, held by Bear Sterns, not the $2.4 million in commissions it received for its services.
Here, the red flags that the trustee points out are negated by Defendants' evidence. There is some evidence that Debtors' provided financial statements to Defendants which demonstrated that their financial condition was strong. Further, the Sureties and the Banks would have been conducting their own due diligence. An anonymous letter from a disgruntled employee would not necessarily warrant more inquiry, than what Defendants engaged in. But this notice is a fact to be proved at trial.
Trustee's First Amended Complaint alleges that the debtors made transfers to Defendants of at least $3,750,000 between May 30, 1998 and May 30, 2002. The anonymous letter bears Defendants' fax receipt stamp dated February 13, 2001.
D. LACK OF REASONABLY EQUIVALENT VALUE
Besides good faith, A&M Surety must prove that it received the transfers (commissions) for reasonably equivalent value. Initially, the trustee relied on Martino v. Edison Worldwide Capital (In re Randy). 189 B.R. 425, 439 (Bankr. E.D. 111. 1995) for the proposition that brokers who perform services in furtherance of a ponzi scheme give no "value" as a matter of law. The bankruptcy court in Randy held that brokers provide no "value" as a matter of law because their commission contracts are legally unenforceable. According to the court, brokers' efforts assist the debtor's ponzi scheme and serve to perpetuate the scheme. As such, they are participants of the scheme and their contract for payment is illegal. Randy, 189 B.R. at 441 (citing Gibbs & Sterrett Mfg. Co. v. Brucker, 111 U.S. 597, 601 (1884) (stating the general principle that one who himself participated in a violation of law cannot be permitted to assert in a court of law rights arising from the illegal transaction). The Randy court recognized that if a party seeking enforcement of an illegal contract is innocent of any wrongdoing, the rationale for refusing to enforce the bargain is inapplicable. Id. at 441. Notwithstanding, the court concluded that in cases of a ponzi scheme, the interests of the public override the equitable standing of innocent parties. Id.
Many courts have rejected the Randy rationale. See e.g. Orlick v. Kozyak (In re Fin. Federated Title & Trust, Inc.), 309 F.3d 1325 (11th Cir. 2002) ; Solow v. Reinhardt (In re First Commercial Mgmt. Group, Inc., 279 B.R. 230 (Bankr. E.D. 111. 2002); Churchill Mortgage Inv. Corp., 256 B.R. 664 (Bankr. S.D.N.Y. 2000); Cuthi11 v. Greenmark, LLC (In re World Vision Entm't, Inc.), 275 B.R. 641 (Bankr. M.D. Fla. 2002) . These courts criticize Randy as "fatally flawed" because it focused on the significance of the broker's services in perpetuating the debtor's ponzi scheme instead of the specific consideration that was actually exchanged. First Commercial, 279 B.R. at 238.
This Court agrees that the reasoning of Randy is flawed. The Court must apply the statutory language of Civil Code § 3439.04(a)(2) and Ninth Circuit case law to the "value" inquiry. Civil Code § 3439.04(a)(2) provides an obligation is constructively fraudulent if the debtor made the transfer "[w]ithout receiving reasonably equivalent value in exchange for the transfer ...." Thus, Civil Code § 3439.04(a)(2) directs the inquiry to the specific transaction to determine the value exchanged.
The Ninth Circuit has confirmed the inquiry is directed to the specific transaction. United Energy, 944 F.2d at 596. Courts are to determine whether the debtor received reasonably equivalent value in making the payments. Id. at 597. The court explained that the analysis is "directed at what the debtor surrendered and what the debtor received irrespective of what any third party may have gained or lost." Id. Because the Randy rationale directs the inquiry to debtor's business enterprise and the impact on third parties, it is inconsistent with Ninth Circuit law.
The Ninth Circuit applied § 548(a)(2), but its "reasonably equivalent value" analysis is interchangeable with Cal.Civ.Code § 3439.04(a) (2) . United Energy, 944 F.2d at 594.
Taken to its logical extreme, the Randy rationale would avoid all payments made by Debtors during the course of their ponzi scheme. Debtors' landlord, salaried employees, accountants and attorneys, and utility companies all provided services to Debtors, and all would have assisted in furtherance of the ponzi scheme. Avoidance of all payments "as a matter of law' is absurd. Accord Financial Federated, 309 F.3d at 1332.
In his supplemental brief, the trustee primarily relies on Warfield v. Byron, 436 F.3d 551 (5th Cir. 2006) in support of his argument that there can be no reasonably equivalent value in a ponzi scheme. In Warfield the issue was whether the two defendants received the fraudulent transfers in question, in exchange for reasonably equivalent value for purposes of establishing an affirmative defense. The court found that both defendants, one an investor and the other an investor who provided broker services, failed to take the exchange for reasonably equivalent value. The Warfield court opined that "[t]he primary consideration in analyzing the exchange of value for any transfer is the degree to which the transferor's net worth is preserved. It takes cheek to contend that exchange for the payments he received, the [company's] ponzi scheme benefitted from his efforts to extend the fraud by securing new investment." Id. at 560. The Court finds that Warfield adds little to the analysis that Randy does not already state.
An evidentiary showing of "value" has been made where A&M Surety actually performed the services for which they were paid, and the commissions were proportionate to those paid in the industry. Furthermore, this Court has already indicated the Defendants' competing evidence presents a classic triable factual issue of good faith. See Waltuch v. ContiCommodity Serv., Inc. (In re Conticommidity Serv.. Inc.). 833 F.Supp. 302, 313 (S.D.N.Y. 1993) (determinations such as "good faith" are necessarily fact laden and for that reason they are rarely decided on summary judgment). Specifically, the Anthony Declaration at ¶ ¶ 3,6-8, 34, 41-47, 49-51, 56, 61, 64, and 66-71 evidences Defendants' lack of actual knowledge of a ponzi scheme and their good faith. [See also Anthony Deposition dated September 21, 2007 at 36-42] .
The Court concludes a triable issue of fact exists as to whether Debtors and A&M Surety exchanged reasonably equivalent value. Accordingly, trustee's motion for summary judgment regarding the Defendants' good faith defense is denied.
III.
CONCLUSION
For the reasons set forth above, the Court finds the transfers by Debtors were intentionally fraudulent transfers as a matter of law. The Court denies the balance of the motion.
This Memorandum Decision constitutes findings of fact and conclusions of law pursuant to Federal Rule of Bankruptcy Procedure 7052. Counsel for the trustee is directed to file with this Court an order in conformance with this Memorandum Decision within ten (10) days from the date of entry hereof.