Finn v. Alliance Bank
838 N.W.2d 585
Minn. Ct. App.2013Background
- This is a consolidated MUFTA clawback action by a receiver against Alliance Bank and several respondent banks arising from First United Funding's Ponzi scheme (2002–2009).
- The receiver seeks to claw back payments First United made to Alliance and banks, alleging actual and constructive fraud and unjust enrichment.
- The district court dismissed the constructive-fraud claims as time-barred and dismissed MUFTA claims against banks as untimely under Minn. Stat. § 541.05(1)(2).
- The district court allowed the receiver to pursue actual-fraud claims for transfers after May 11, 2005 and dismissed pre-May 11, 2005 transfers as time-barred; it granted partial summary judgment against Alliance and denied it against banks on the merits.
- The court applied a Ponzi-scheme presumption to determine intent and value in Alliance’s favor, and rejected it as to Alliance on appeal, while keeping the banks’ pleading alive.
- On review, the Minnesota Court of Appeals reverses in part: actual-fraud claims against banks are not time-barred as to pre-May 11, 2005 transfers and may proceed, the Alliance summary judgment is reversed, and the Ponzi presumption cannot be extended to Alliance.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| What limitations apply to MUFTA claims? | Receiver: actual claims governed by 541.05(1)(6), constructive by 541.05(1)(2). | Banks: 541.05(1)(2) applies to both, time-barred pre-2005; MUFTA creates new liabilities. | Actual claims governed by 541.05(1)(6); constructive claims by 541.05(1)(2); pre-2005 transfers may survive as to actual claims. |
| Did the district court err in ruling on the merits of MUFTA claims against Alliance and banks? | Receiver: genuine issues on actual/constructive fraud and value survive; Ponzi presumption supports fraud. | Alliance: summary judgment proper; banks: claims fail to state a claim or are time-barred. | District court erred in applying Ponzi presumption to Alliance; Alliance entitled to summary judgment; banks’ claims survive dismissal. |
| Is the Ponzi-scheme presumption appropriate under MUFTA for these claims? | Presumption may be integrated as a rational inference of intent and lack of assets. | Presumption extends Minnesota law beyond MUFTA and is improper for Alliance's claims. | Presumption cannot be extended to Alliance; not applicable to its MUFTA claims; improper extension of law. |
Key Cases Cited
- McDaniel v. United Hardware Distributing Co., 469 N.W.2d 84 (Minn. 1991) (distinguishes liabilities created by statute vs. common-law liabilities)
- Olesen v. Retzlaff, 238 N.W.2d 12 (Minn. 1931) (limits of statute-of-limitations for statutory offenses without common-law fraud)
- Lind v. O.N. Johnson Co., 282 N.W.667 (Minn. 1938) (broad definition of creditor under MUFCA)
- Underleak v. Scott, 134 N.W.731 (Minn. 1912) (fraud implications from debtor insolvency evidence)
- Butler v. Dumont, 552 N.W.2d 226 (Minn. 1996) (PU short excerpt on intent to defraud and MUFTA interpretation)
- Cmty. First Bank v. First United Funding, LLC, 822 N.W.2d 306 (Minn. App. 2012) (recognizes Ponzi scheme context in MUFTA-related clawbacks)
- Donell v. Koweit, 533 F.3d 762 (9th Cir. 2008) (Ponzi scheme presumption guiding fraud transfers)