Stettner v. Smith (In Re IFS Financial Corp.), 669 F.3d 255

Appellants appeal the district court's affirmation of a bankruptcy court judgment awarding Smith, the trustee, over $3 million for fraudulent transfers.
Interamericas, led by the Pimienta family, pooled investor funds into Integra Bank and INV Capital accounts in Texas; IFS controlled these funds through its officers despite lacking legal ownership or signature authority.
Investors deposited over $270 million into Integra and INV accounts from 1999–2001; funds were pooled and misrepresented through the Portia system.
AFL and other Interamericas entities funneled millions to IFS insiders, with transfers used to bolster IFS's finances as Blitz and other creditors pursued litigation.
IFS filed for bankruptcy in 2002; Smith filed eight adversary proceedings against Appellants; bankruptcy court found fraudulent transfers totaling $3,131,315.20 and the district court affirmed.
Texas law (Chapter 24 of the Texas Business and Commerce Code) and the federal bankruptcy framework §544/§550 were applied to determine ownership and whether transfers were fraudulent.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether IFS had de facto ownership of Integra and INV accounts.	Appellants argue no legal ownership; control is insufficient for ownership.	Smith argues control reflects ownership for estate purposes.	Yes; de facto ownership proven through IFS control.
Whether Smith established a fraudulent transfer under §544/§24.005.	Smith contends transfers were made to insiders with fraudulent intent.	Appellants contest actual intent to defraud and the timing of transfers.	Yes; transfers were fraudulent under Tex. Bus. & Com. Code §24.005.

Silsbee State Bank v. French Mkt. Grocery Co., 103 Tex. 629, 132 S.W. 465 (Tex. 1910) (Tex. 1910) (ownership may arise from control rather than legal title; focus on facts)
Southmark v. Grosz (In re Southmark), 49 F.3d 1111 (5th Cir.1995) (5th Cir. 1995) (control over funds central to determining ownership for estate purposes)
In re Moore, 608 F.3d 253 (5th Cir.2010) (5th Cir. 2010) (trustee uses §544(b) to reach property thwarted by debtor; estate proceeds distributed pro rata)
SEC v. Res. Dev. Int'l, LLC, 487 F.3d 295 (5th Cir.2007) (5th Cir. 2007) (transferees' knowing participation irrelevant for intent element under §24.005)
Coral Petroleum, Inc. v. Banque Paribas-London, 797 F.2d 1351 (5th Cir.1986) (5th Cir. 1986) (acknowledges earmarking concepts and control considerations in fraud context)
Caillouet v. First Bank & Trust (In re Entringer Bakeries, Inc.), 548 F.3d 344 (5th Cir.2008) (5th Cir. 2008) (debtors' control over loan proceeds can defeat earmarking defense; focus on control over assets)
Union Pac. Res. Group, Inc. v. Rhone Poulenc, Inc., 247 F.3d 574 (5th Cir.2011) (5th Cir. 2011) (courts may ignore corporate boundaries to identify true parties in interest and control)