In re: Mortgage Fund '08 LLC

FILED AUG 15 2016 1 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK 2 U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT 3 UNITED STATES BANKRUPTCY APPELLATE PANEL 4 OF THE NINTH CIRCUIT 5 In re: ) BAP No. NC-15-1415-JuKiTa ) 6 MORTGAGE FUND ‘08 LLC, ) Bk. No. 11-49803 ) 7 Debtor. ) Adv. No. 13-04190 ______________________________) 8 SUSAN L. UECKER, Liquidating ) Trustee of the Mortgage Fund ) 9 ‘08 Liquidating Trust, ) ) 10 Appellant, ) ) 11 v. ) M E M O R A N D U M* ) 12 ROBERT L. MONTGOMERY, ) ) 13 Appellee. ) ______________________________) — 14 — Argued and Submitted on July 28, 2016 15 at San Francisco, California 16 Filed - August 15, 2016 17 Appeal from the United States Bankruptcy Court for the Northern District of California — 18 — Honorable Roger L. Efremsky, Chief Bankruptcy Judge, Presiding 19 _________________________ 20 Appearances: Ben G. Young of Jeffer Mangels Butler and Mitchell LLP argued for appellant Susan L. 21 Uecker; Richard S. Miller argued for appellee Robert L. Montgomery. 22 _________________________ 23 Before: JURY, KIRSCHER, and TAYLOR, Bankruptcy Judges. — 24 — — 25 — 26 * This disposition is not appropriate for publication. 27 Although it may be cited for whatever persuasive value it may have (see Fed. R. App. P. 32.1), it has no precedential value. 28 See 9th Cir. BAP Rule 8024-1. -11 Appellant Susan L. Uecker is the liquidating trustee 2 (Trustee) appointed under the confirmed chapter 111 plan for 3 debtor, Mortgage Fund ‘08 LLC (MF08). Trustee filed an 4 adversary proceeding against appellee, Robert L. Montgomery 5 (Montgomery), seeking to avoid and recover as a fraudulent 6 transfer under § 544 and California state law a $150,000 payment 7 made to Montgomery by The Mortgage Fund, LLC (TMF).2 TMF was 8 the sole owner, manager, and member of MF08. 9 Montgomery answered the complaint and pleaded several 10 affirmative defenses, including settlement and release based 11 upon an agreement between MF08 and its affiliate, chapter 11 12 debtor R.E. Loans, LLC (REL). The agreement settled disputes 13 between the parties regarding MF08's $66 million proof of claim 14 (POC) filed in REL’s bankruptcy case that was commenced in 15 Texas. As an investor and noteholder in REL’s bankruptcy case, 16 Montgomery’s claim, and payment on that claim, was affected by 17 the settlement. The Texas bankruptcy court approved the 18 settlement agreement (SA), which was incorporated into REL’s 19 confirmed plan. 20 Trustee and Montgomery filed cross-motions for summary 21 judgment. Trustee moved for summary judgment on her — 22 — — 23 — — 1 — Unless otherwise indicated, all chapter and section 24 references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532 , “Rule” references are to the Federal Rules of Bankruptcy 25 Procedure, and “Civil Rule” references are to the Federal Rules 26 of Civil Procedure. — 2 — 27 On April 8, 2015, the bankruptcy court entered a scheduling order which consolidated this adversary with Uecker v. 28 Bennett, Adv. No. 13-04194, for purposes of trial. -21 constructive fraudulent transfer claim for relief, and 2 Montgomery moved for summary judgment on, among other things, 3 his affirmative defense of settlement and release. After a 4 hearing, the bankruptcy court took the matters under advisement. 5 The bankruptcy court subsequently issued a decision finding 6 that the SA covered Trustee’s fraudulent transfer claim against 7 Montgomery and that all other issues raised in the summary 8 judgment motions were moot. See Susan L. Uecker, Trustee of the 9 Mortgage Fund ‘08 Liquidating Trust v. Montgomery (In re 10 Mortgage Fund ‘08 LLC), 541 B.R. 467 (Bankr. N.D. Cal. 2015). 11 The court entered an order granting Montgomery’s motion for 12 summary judgment (MSJ) and denying Trustee’s MSJ. Trustee 13 appeals from that order.3 14 The SA provides that California law governs its 15 construction. Applying California law, we determine that the 16 record, when viewed in the light most favorable to the Trustee, 17 shows that there is no genuine issue of material fact as to the 18 proper construction of the terms “REL Transfer,” “Paid by REL,” 19 and “Any Third Party” as used in the SA. Therefore, Montgomery 20 was entitled to judgment as a matter of law. Accordingly, we 21 AFFIRM. — 22 — — 23 — — 24 — 25 3 Trustee also appealed the bankruptcy court’s order 26 granting summary judgment in favor of Bennett in the related adversary proceeding, BAP No. NC-14-1408. Trustee filed a notice 27 of related appeals and a request for consolidation of the two appeals for oral argument. On March 4, 2016, a one-judge order 28 set the related appeals before the same merits panel. -31 I. FACTS4 2 A. The MF08 and REL Bankruptcy Cases 3 On September 12, 2011, several investors filed a chapter 7 4 involuntary bankruptcy petition against MF08 in the bankruptcy 5 court for the Northern District of California. The bankruptcy 6 court converted the case to chapter 11 and entered an order for 7 relief on September 28, 2011. As of the petition date, MF08 had 8 about 472 noteholders who were owed approximately $80 million 9 and held a real estate portfolio valued at around $72 million. 10 The bankruptcy court approved MF08's disclosure statement 11 and confirmed its plan by order entered on February 3, 2012. 12 Among other things, the order established the MF08 liquidating 13 trust; Trustee has been in place since that time. 14 REL commenced its chapter 11 case in the Northern District 15 of Texas on September 13, 2011.5 At the time of its filing, REL 16 had about 2,900 noteholders who were owed approximately 17 $646 million (REL Noteholders). On September 22, 2011, the 18 United States Trustee appointed the Official Committee of 19 Noteholders (Noteholders Committee) in REL’s bankruptcy case. — 20 — 21 4 We borrow heavily from the comprehensive facts set forth 22 in the bankruptcy court’s published opinion on this matter, Susan L. Uecker, Trustee of the Mortgage Fund ‘08 Liquidating Trust v. 23 Montgomery (In re Mortgage Fund ‘08 LLC), 541 B.R. 467 (Bankr. N.D. Cal. 2015). — 24 — — 5 — Capital Salvage, a California corporation, and R.E. 25 Future, LLC (RE Future), also filed chapter 11 cases on the same 26 date as REL. Capital Salvage and RE Future were entities that owned most of the real property obtained through foreclosure 27 sales by REL. REL is the sole shareholder of Capital Salvage and the sole member of RE Future. Those cases were jointly 28 administered with REL’s case. -41 B. Ownership and Operation of MF08 and REL 2 Walter Ng and his sons, Kelly Ng and Barney Ng, owned, 3 managed, and controlled, directly or indirectly, MF08 and REL 4 and their related entities. 5 Walter and Kelly Ng formed REL in January 2002. REL was an 6 investment company that issued secured loans to real estate 7 developers. To raise money, REL sold unregistered securities to 8 investors in exchange for making the investors “members” of REL. 9 Montgomery was an investor and member in REL. 10 In 2007, REL faced liquidity problems due to decreasing 11 values in the real estate market. Its attorneys also advised 12 REL that that it had been violating state and federal securities 13 laws by selling securities without registration as required by 14 the Securities and Exchange Commission. Due to these 15 violations, the attorneys urged REL to immediately stop 16 soliciting new investments. As a result, by June 2007 REL had 17 $20 million in loan commitments, had only $1 million cash on 18 hand and could not meet the withdrawal requests from its 19 investors. 20 In November 2007, REL made its members into noteholders in 21 what is referred to as the “Exchange Transaction” and the 22 issuance of “Exchange Notes.” 23 To address REL’s severe cash flow problems, in December 24 2007, Walter and Kelly Ng, created MF08 for the stated purpose 25 of raising capital through the issuance of notes to investors 26 and making loans secured by real estate with the funds raised. 27 In reality, MF08 was part of a scheme perpetrated by the Ngs in 28 which investors’ money was funneled from MF08 to REL. According -51 to Trustee, MF08 transferred over $66 million of the 2 approximately $80 million raised from MF08 investors to REL. 3 As mentioned above, TMF was MF08's sole owner, manager, and 4 member. Walter Ng and Kelly Ng were the sole members of TMF and 5 thus controlled MF08. 6 C. MF08's $66 Million POC in the REL Case 7 Prior to Trustee’s appointment as liquidating trustee, MF08 8 filed a POC in the REL case for $66,226,496. The attachment to 9 the POC stated: 10 [B]etween December 4, 2007, and February 4, 2009, the Ngs caused the aggregate sum of $66,226,496 to be 11 transferred from MF08's bank account to [REL] (the “Cash Transfers”). The Cash Transfers were made 12 either (1) directly to [REL], (2) indirectly through [TMF] or Bar-K, or (3) to [REL’s] borrowers to enable 13 such borrowers to service or repay loans extended to them by [REL]. (Emphasis added). — 14 — 15 The POC alleged that the Ngs caused the “Cash Transfers” and 16 that they were made with the “actual intent to hinder, delay or 17 defraud entities to whom MF08 was or became, on or after the 18 dates that such transfer[s] were made, indebted.” Also included 19 with the POC was a “Table of Cash Transfers from MF08 to the 20 Debtor” which detailed the dates, check numbers, and amounts 21 purportedly transferred by MF08 to REL from December 4, 2007, to 22 February 4, 2009.6 Trustee continued to assert the POC in the — 23 — — 6 — 24 To be clear, the list of cash transfers showed only those transfers made from MF08 to REL and did not identify those 25 transfers that REL made to the holders of the Exchange Notes, 26 either directly or indirectly through TMF or Bar-K. MF08 maintained that if it could trace the funds to the holders of the 27 Exchange Notes, it might have the right to pursue recovery from them. Due to the settlement of its POC, tracing became 28 (continued...) -61 REL bankruptcy case after her appointment. 2 D. MF08's Settlement with REL and Confirmation of the REL Plan 3 REL informally objected to MF08's POC. On April 24, 2012, 4 Trustee, REL, and other principle stakeholders in the REL case - 5 Wells Fargo Capital Finances, LLC (REL’s secured lender) and the 6 Noteholders Committee (representing Montgomery’s interests as a 7 REL Noteholder), participated in a judicial mediation regarding 8 the dispute over the POC and other disputes related to 9 confirmation of a plan.7 The parties did not reach a settlement 10 on that date but continued to negotiate and eventually reached 11 an agreement regarding the validity and priority of MF08's POC. 12 Prior to the execution of the SA, the Noteholders Committee 13 sent a letter to the REL Noteholders, including Montgomery, 14 dated May 16, 2012. The committee recommended that the 15 noteholders vote to accept the plan, explaining: 16 [T]he Plan Compromise8 represents a favorable outcome for Noteholders when weighed against the risk, 17 uncertainty and potential cost of litigating against objections to the allowance or priority of the 18 Noteholders’ claims. The proposed Plan Compromise resolves the debtors’ and MF08's potential claims 19 against Noteholders to recover prepetition distributions as alleged fraudulent conveyances, 20 ensures that current Noteholders will not be at risk of being sued by the Liquidating Trustee for the — 21 — 22 6 (...continued) 23 unnecessary. To the extent that Trustee’s counsel asserted at oral argument that the list defined the universe of Noteholders 24 entitled to the waiver in question, the list could not do so, 25 since it showed transfers to, not from, REL. — 7 — 26 Development Specialists, Inc. (DSI) also participated in the all-day mediation. All the parties other than DSI agreed on 27 the terms of the modified plan and the SA. 28 8 The “Plan Compromise” is explained below. -71 recovery of distributions paid out years ago, and insulates Noteholders from the expense of defending 2 against such litigation. 3 The parties, including Trustee, executed the SA on May 30, 2012. 4 The SA allowed REL to proceed with confirmation of its plan. 5 REL filed a motion for approval of the SA under Rule 9019 6 (Motion). At the same time, REL filed its Modified Fourth 7 Amended Joint Chapter 11 Plan of Reorganization, dated June 1, 8 2012, which had been amended to comply with the requirements of 9 the SA with MF08. 10 In the Motion seeking approval, REL generally reiterated 11 the provisions set forth in the SA. REL stated that MF08 12 contended, based on various theories, including that the 13 transfers may have constituted intentional or constructive 14 fraudulent transfers, that REL was liable to it for the 15 $66 million received. The Motion defined the “REL Transfers” as 16 the transfer of $66 million made between December 2007 and 17 “approximately August of 2008” and REL’s commingling of that 18 amount in its general account with other REL funds. The Motion 19 also stated that MF08 contended that “if it [could] trace the 20 funds that it transferred to REL from REL to any given [REL] 21 Noteholder, MF08 might have the right to pursue recovery from 22 that [REL] Noteholder as a subsequent transferee pursuant to 23 Bankruptcy Code § 550(b).” This potential right to assert 24 claims against noteholders that received REL Transfers was 25 defined as the “MF08 Potential Avoidance Actions.” 26 The Motion then described the response by REL and the 27 Noteholders Committee to MF08's contentions: 28 [REL] and the Noteholders Committee contend that -81 Noteholders who received the REL Transfers who were not insiders of [REL] cannot be liable to MF08 because 2 (a) it is not possible to trace the dollars received from MF08 to any specific REL Transfer or transferee; 3 and (b) each [REL] Noteholder that received an REL Transfer, with the possible exception of insiders of 4 [REL], received any such REL Transfer on account of a debt payable by [REL] for value, in good faith, and 5 without knowledge of the voidability of the transfer from MF08 to [REL] (even assuming that transfer is 6 avoidable) and, therefore, would be shielded from liability pursuant to Bankruptcy Code § 550(b). — 7 — 8 The Motion also described the “prior plan compromise” which 9 had been negotiated by REL and the Noteholders Committee and the 10 change to it which was now required by the proposed settlement 11 with MF08. The prior plan compromise provided that if the REL 12 Noteholders voted to accept the plan, the REL Noteholders' lien 13 on REL assets would be released, they would share pro rata with 14 holders of general unsecured claims and their claims would not 15 be “subordinated or challenged,” but each REL Noteholders’ claim 16 would be reduced by 50% of any cash received after the November 17 2007 Exchange Transaction through the REL petition date. 18 The proposed agreement with MF08 made one change to the 19 “prior plan compromise.” Instead of the REL Noteholders sharing 20 pro rata with the REL general unsecured creditors, the first 21 $5 million distributed was to go to the REL general unsecured 22 creditors before the REL Noteholders would share pro rata. This 23 change increased the distribution to general unsecured 24 creditors, primarily benefitting MF08 as the largest such 25 creditor, and reduced the distribution to REL Noteholders 26 through reallocation of the first $5 million. In exchange for 27 this “enhancement,” MF08 agreed to vote its $66 million claim in 28 favor of the plan. Per the agreement, MF08 would also waive its -91 right to pursue all MF08 Potential Avoidance Actions against REL 2 Noteholders, and MF08 would be appointed to the trust oversight 3 committee of the liquidating trust to be created under the REL 4 Plan. 5 In seeking court approval for this agreement, REL explained 6 that, absent this agreement, the parties would be forced to 7 litigate the merits of the MF08 POC, the merits of the final 8 plan compromise, the relative priorities and rights as between 9 the holders of general unsecured claims and the REL Noteholders, 10 and the merits of the MF08 Potential Avoidance Actions. This 11 was an unattractive proposition because it would “consume 12 substantial cash that would otherwise be distributable to REL 13 Noteholders and MF08's creditors.” 14 As further support, REL mentioned that many REL Noteholders 15 were also investors in MF08 and paying the professionals to 16 redistribute the limited funds available as between MF08 and REL 17 would reduce the total amount received by all creditors. 18 Litigating MF08's Potential Avoidance Actions would also likely 19 be complex and could require expensive efforts to trace funds, 20 and every dollar spent on professionals would reduce the amount 21 available for distribution to creditors. The modified plan 22 eliminated these issues and was supported by all stakeholders, 23 including the committee of MF08's noteholders. 24 On June 18, 2012, the REL bankruptcy court confirmed REL’s 25 plan and approved the SA. 26 E. The Relevant Sections of the SA 27 The Recitals in section 2 of the SA state: 28 2.01. MF08 transferred cash in an amount equal to -101 $66,226,496 to R.E. Loans during the period from December of 2007 and through 2008. — 2 — 2.02. MF08 contends that R.E. Loans is liable to MF08 3 for the monies received on various theories, including without limitation based upon the contention that the 4 transfers may have constituted fraudulent transfers. 5 2.03. During the time period from December of 2007 through approximately August of 2008, R.E. Loans 6 received cash and deposited that cash into its general account from multiple sources, including without 7 limitation (a) the transfers from MFO8 described in 2.01, above, (b) payoffs by R.E. Loans’ borrowers of 8 principal and interest, (c) sales of assets, and (d) advances by Wells Fargo Capital Finance, LLC 9 (“Wells Fargo”). 10 2.04. During the time period from December of 2007 through approximately August of 2008, R.E. Loans made 11 payments out of its general account to many different parties, including without limitation payments to 12 various creditors, including without limitation the holders of Exchange Notes issued to R.E. Loans’ 13 Noteholders (REL Transfers). 14 2.05. MF08 contends that if it could trace the funds that it transferred to R.E. Loans as described in 15 Paragraph 2.01 from R.E. Loans to the holders of Exchange Notes, MF08 might have the right to pursue 16 recovery from the holders of Exchange Notes as “subsequent transferees” pursuant to Bankruptcy Code 17 § 550(d). R.E. Loans contends that holders of Exchange Notes who received the REL Transfers cannot 18 be liable to MF08 because (a) it is not possible to trace the dollars received from MF08 to any specific 19 REL Transfer; and (b) each holder of an Exchange Note that received an REL Transfer, with the possible 20 exception of insiders who may have received an REL Transfer, received any such REL Transfer on account of 21 a debt payable by R.E. Loans for value, in good faith, and without knowledge of the voidability of the 22 transfer from MF08 to R.E. Loans (even assuming that transfer is avoidable) and, therefore, would be 23 shielded from liability pursuant to Bankruptcy Code § 550(b). — 24 — 2.06. MF08's potential right to assert claims against 25 holders of Exchange Notes that received REL Transfers shall be referred to herein as “MFO8's Potential 26 Avoidance Actions”. 27 Section 3.01-3.03 of the SA dealt with the allowance of 28 MF08's claim in the REL case. If REL’s modified plan was -111 confirmed and the “Plan Compromise” approved by the Texas 2 bankruptcy court, then MF08's POC “shall be allowed as a general 3 unsecured claim against R.E. Loans in the amount of 4 $66,226,496. . . .” 5 Section 4 of SA, titled “Waiver of Right to Pursue MF08 6 Potential Avoidance Actions,” provides: 7 4.01. If the MF08 Claim is Allowed pursuant to Paragraph 3, above, MF08 waives the right to pursue 8 any MFO8 Potential Avoidance Actions; provided, however, that this Agreement shall not limit or 9 restrict the right of MF08 to bring any action against any third party, including any manager, member, 10 insider or professional of MF08. This provision shall be void and of no further force or effect if the MF08 11 Claim is not Allowed pursuant to Paragraph 3, above. 12 4.02. With respect to the claims released herein, MF08 acknowledges that it has been advised by its 13 attorneys concerning, and is familiar with, California Civil Code Section 1542 and it expressly 14 waives any and all rights under California Civil Code Section 1542 and under any other federal or state 15 statute or law of similar effect with respect to the claims released herein. Section 1542 of the 16 California Civil Code provides as follows: 17 A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT 18 TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM 19 OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR. — 20 — 21 Finally, section 8 provided that the SA be interpreted 22 according to California law. 23 F. The Transfer at Issue 24 As noted, Montgomery was an investor in REL, an affiliate 25 of MF08. Montgomery was not an investor in, or a creditor of, 26 MF08. 27 Montgomery had $924,887 invested in REL as of December 31, 28 2007. In February 2008, Montgomery submitted a written request -121 to REL to return $450,000, or half of his principal investment, 2 based on his decision to decrease his investment in real estate 3 as an asset class. REL then sold Montgomery’s ownership shares 4 in $150,000 increments, on June 17, 2008, July 23, 2008, and 5 August 21, 2008, for a total of $450,000 as requested. Checks 6 representing these distributions were sent directly to 7 Montgomery’s Wells Fargo IRA account, with a contemporaneous 8 statement indicating that all three payments came from REL. 9 Trustee seeks to recover the second $150,000 transfer because it 10 was made by a check written on TMF's bank account whereas the 11 other two payments were made from REL’s account. 12 The bank documents offered by both Trustee and Montgomery 13 show the following sequence of events: 14 1. On July 21, 2008, REL transferred $528,791 to MF08. 15 2. On July 21, 2008, MF08 transferred $528,791 to TMF. 16 3. On July 22, 2008, TMF wire transferred $400,000 to Troy 17 Demanes, another REL Noteholder. 18 4. On July 23, 2008, TMF wrote check no. 1020 for $150,000 19 made payable to “WFB IRA Services fbo Montgomery.” 20 4. On July 25, 2008, REL transferred $447,566 to MF08. 21 5. On July 28, 2008, MF08 transferred $447,566 to TMF. 22 6. On July 28, 2008, TMF's bank honored the $150,000 check 23 to Montgomery. Montgomery's IRA statement shows his account had 24 received this $150,000 as of July 31, 2008. 25 From this sequence of events, the record shows that it is 26 undisputed that in July 2008, REL transferred $528,791 to MF08 27 and then transferred $447,566 to MF08 and MF08 immediately 28 transferred these exact amounts to TMF. It is also undisputed -131 that when sufficient funds were in the TMF account, TMF's bank 2 honored the check to Montgomery and it was credited to his IRA 3 account on July 31, 2008. 4 G. The Underlying Adversary Proceeding 5 On October 6, 2014, Trustee filed an amended complaint 6 seeking to avoid and recover the $150,000, alleging that amount 7 was fraudulently transferred by MF08 to TMF and then paid to 8 Montgomery on July 23, 2008, with funds that could be traced to 9 MF08. The amended complaint further alleged that the $150,000 10 transfer to Montgomery was both intentionally and constructively 11 fraudulent under California law. 12 On October 23, 2014, Montgomery answered the complaint. 13 Montgomery denied that the $150,000 transfer to him by MF08 was 14 intentionally or constructively fraudulent and alleged seven 15 affirmative defenses. In his second affirmative defense, 16 Montgomery alleged that the court-approved SA in REL’s 17 bankruptcy case and REL’s confirmed plan operated as a 18 settlement and release of any fraudulent transfer claims MF08 19 could assert against him. He also maintained that since he 20 agreed under the SA to give up a valid claim of $450,000 in 21 favor of MF08 and other creditors in return for MF08 obtaining 22 priority repayment of the first $5 million in income from REL, 23 this constituted value or reasonably equivalent value for 24 purposes of § 548.9 — 25 — — 26 — — 9 — 27 Although the complaint did not assert fraudulent transfer claims under § 548, Montgomery mentioned this section in his 28 answer. -141 H. The MSJs 2 On August 3, 2015, Trustee filed a MSJ on the 3 constructively fraudulent claim under § 544 and Cal. Civ. Code 4 § 3439.04(a)(2)(A). Trustee argued that the undisputed facts 5 showed that MF08 was entitled to avoid the transfer of $528,791 6 from MF08 to TMF and may recover $150,000 of it from Montgomery 7 as either the initial transferee or the immediate transferee of 8 the initial transferee as permitted under § 550(a). Trustee 9 also asserted that she was entitled to summary judgment 10 disposing of Montgomery's affirmative defense under § 550(b) 11 because there is no evidence that he gave value to TMF or MF08 12 and his interpretation of the SA was incorrect. 13 In support of her interpretation of the SA, Trustee 14 maintained that the plain language of the SA showed that MF08 15 had released only a limited set of claims; i.e., claims against 16 REL Noteholders who were paid by REL. Because Montgomery 17 received the funds from TMF, Trustee asserted that under 18 section 4.01 of the SA, her right to “bring any action against 19 any third party” was preserved, and Montgomery qualified as a 20 “third party.” Finally, Trustee argued that there was nothing 21 in the SA evidencing that the intent of the parties was to 22 affect claims that were unknown at the time the SA was signed. 23 On August 17, 2015, Montgomery filed his MSJ, asserting 24 that Trustee was barred from bringing the fraudulent transfer 25 claim against him by MF08's prior settlement with REL in which 26 it waived its rights to bring an avoidance action against him. 27 He also argued that the actual source of the repayment of 28 $150,000 was REL monies as shown by his tracing. In support of -151 his MSJ, Montgomery requested the bankruptcy court to take 2 judicial notice of numerous documents, including: (1) his REL 3 investor portfolio account statement in which REL took credit 4 for the $150,000 payment TMF ostensibly made to him; (2) the 5 Noteholders’ Committee’s letter to the REL Noteholders; (3) the 6 findings of fact and conclusions of law in support of the REL 7 Confirmation Order; and (4) his Wells Fargo Bank IRA statement 8 indicating payments had come from REL. 9 Two weeks later, Montgomery filed his opposition to 10 Trustee’s MSJ basically reiterating what he argued in his 11 motion. 12 The bankruptcy court heard the motions on September 10, 13 2015. At the hearing, Trustee’s counsel asserted that the 14 primary question raised in the motions was whether MF08 released 15 the avoidance action claims against Montgomery under the SA. 16 Counsel argued that only a narrow category of claims were 17 settled through the SA as shown by sections 2.04 and 2.05 of the 18 SA. That is, only those avoidance claims that were paid by REL 19 and not claims paid by TMF. He also maintained that the release 20 in the SA under Cal. Civ. Code § 1542 was a “general release,” 21 and section 4.01 of the SA preserved unknown claims by 22 authorizing Trustee to file any action against any “third 23 party.” 24 Following argument, the bankruptcy court took the matter 25 under submission. On November 19, 2015, the bankruptcy court 26 issued its memorandum decision finding that the release in the 27 SA covered Trustee’s claims in the adversary proceeding and that 28 all other issues were moot. On the same day, the bankruptcy -161 court entered an order granting Montgomery’s MSJ and denying 2 Trustee’s MSJ. Trustee filed a timely notice of appeal from 3 that order. 4 II. JURISDICTION 5 The bankruptcy court had jurisdiction pursuant to 28 U.S.C. 6 §§ 1334 and 157(b)(2)(H). We have jurisdiction under 28 U.S.C. 7 § 158. 8 III. ISSUE 9 Whether the bankruptcy court erred in finding that the SA 10 between MF08 and REL barred MF08's fraudulent transfer claims 11 against Montgomery. 12 IV. STANDARDS OF REVIEW 13 We review de novo the bankruptcy court’s decision on cross14 motions for summary judgment, applying the same standard used by 15 the bankruptcy court. Brown v. City of L.A., 521 F.3d 1238 , 16 1240 (9th Cir. 2008); Furnace v. Sullivan, 705 F.3d 1021 , 1026 17 (9th Cir. 2013). 18 We also review de novo determinations of whether contract 19 language is ambiguous, Tyler v. Cuomo, 236 F.3d 1124, 1134 (9th 20 Cir. 2000), and “whether the written contract is reasonably 21 susceptible of a proffered meaning.” Brinderson-Newberg Joint 22 Venture v. Pac. Erectors, Inc., 971 F.2d 272 , 277 (9th Cir. 23 1992); see also Winet v. Price, 4 Cal.App.4th 1159, 1165 (1992) 24 (the court reviews determinations of whether contract language 25 is ambiguous de novo); Scheenstra v. Cal. Dairies, Inc., — 26 — 213 Cal.App.4th 370, 393 (2013) (even where uncontroverted 27 evidence allows for conflicting inferences to be drawn, 28 interpretation of contract is solely a judicial function); -171 Sunniland Fruit, Inc. v. Verni, 233 Cal.App.3d 892, 898 (1991) 2 (de novo review “where the interpretation [of the contract] does 3 not turn on the credibility of extrinsic evidence” and “where 4 the extrinsic evidence points only one way, or is 5 uncontested.”); Wolf v. Super. Ct., 114 Cal.App.4th 1343 , 1351 6 (2004) (where the extrinsic evidence points only one way, or is 7 uncontested, the meaning of the language in question may be 8 ascertained as a matter of law). 9 V. DISCUSSION 10 A. Legal Standards for Summary Judgment 11 “The court shall grant summary judgment if the movant shows 12 that there is no genuine dispute as to any material fact and the 13 movant is entitled to judgment as a matter of law.” Civil 14 Rule 56(a), made applicable here by Rule 7056. Material facts 15 are those necessary to establish the elements of a party’s cause 16 of action. Anderson v. Liberty Lobby, Inc., 477 U.S. 242 , 248 17 (1986). A genuine issue for trial exists only if “the evidence 18 is such that a reasonable jury could return a verdict” for the 19 party opposing summary judgment. Id. at 248 ; see also Aguilar 20 v. Atl. Richfield Co., 25 Cal.4th 826, 856 (2001) (on summary 21 judgment a court “does not decide on any finding of its own, but 22 simply decides what finding such a trier of fact could make for 23 itself.”). 24 When considering a motion for summary judgment, a court may 25 not weigh the evidence nor assess credibility; instead, “the 26 evidence of the non-movant is to be believed, and all 27 justifiable inferences are to be drawn in his [or her] favor.” — 28 — -181 Anderson, 477 U.S. at 255 .10 The court is not precluded from 2 drawing inferences against the non-moving party as long as the 3 underlying facts are viewed in the light most favorable to that 4 party. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., — 5 — 475 U.S. 574, 588 (1986). In the end, the court “must determine 6 whether the record, when viewed in the light most favorable to 7 the non-moving party, shows that there is no genuine issue of 8 material fact and that the moving party is entitled to judgment 9 as a matter of law.” Brown, 521 F.3d at 1240 . 10 A court may grant summary judgment regarding the 11 interpretation of ambiguous language in a contract if the 12 non-moving party fails to point to any relevant extrinsic 13 evidence supporting that party’s interpretation of the language. 14 Compagnie Financiere de CIC et de L'Union Europeenne v. Merrill 15 Lynch, Pierce, Fenner & Smith, Inc., 232 F.3d 153 (2nd Cir. 16 2000); see also Torres Vargas v. Santiago Cummings, 149 F.3d 29 , 17 33 (1st Cir. 1998) (summary judgment appropriate where extrinsic 18 evidence presented to the court supports only one of the 19 conflicting interpretations). 20 Under California law and summary judgment standards, 21 Montgomery had the burden of proof on his affirmative defense to 22 show that the SA operated as a complete defense to 23 MF08's/Trustee’s fraudulent transfer claims against him. — 24 — — 25 — 26 10 Trustee has not argued on appeal that the bankruptcy 27 court erred by weighing the extrinsic evidence. Accordingly, those arguments are deemed waived for purposes of this appeal. 28 Smith v. Marsh, 194 F.3d 1045, 1052 (9th Cir. 1999). -191 B. Is the SA ambiguous? 2 This appeal involves the interpretation of the SA under 3 California law. The threshold question is whether the SA is 4 ambiguous; that is, reasonably susceptible to more than one 5 interpretation. Winet, 4 Cal.App.4th at 1165 . The question of 6 ambiguity is a question of law subject to de novo review. Id. 7 “Whether the contract is reasonably susceptible to a 8 party’s interpretation can be determined from the language of 9 the contract itself,” United Teachers of Oakland v. Oakland 10 Unified Sch. Dist., 75 Cal.App.3d 322, 330 (1977), or from 11 extrinsic evidence of the parties’ intent. Winet, 4 Cal.App.4th 12 at 1165 . In California, courts are required to receive 13 provisionally any proffered extrinsic evidence that is relevant 14 to show whether the contractual language is reasonably 15 susceptible to a particular meaning. Pac. Gas & Elec. Co. v. 16 G.W. Thomas Drayage & Rigging Co., Inc., 69 Cal.2d 33 , 39–40 17 (1968) (rational interpretation of a contract requires at least 18 a preliminary consideration of all credible evidence offered to 19 prove the intention of the parties). Such extrinsic evidence 20 might expose a latent ambiguity when the contract appears 21 unambiguous on its face. Id. at 40 & n.8. “An appellate 22 analysis of the threshold question concerning whether the 23 contractual language is ambiguous—that is, reasonably 24 susceptible to more than one interpretation—usually involves the 25 examination of competing interpretations offered by the 26 parties.” Scheenstra, 213 Cal.App.4th at 393 . 27 In seeking reversal of the bankruptcy court’s order in 28 favor of Montgomery, Trustee repeats many of the arguments that -201 she made before the bankruptcy court. Trustee relies upon the 2 language of the SA itself for her interpretation and offers no 3 extrinsic evidence in support. In a nutshell, she contends that 4 Montgomery was not protected under the terms of the SA because 5 he was paid by TMF and not from REL’s general account. Thus, 6 according to Trustee, he was not part of the protected class of 7 REL Transferees under the SA, making MF08's waiver of avoidance 8 claims inapplicable as to him. 9 To support her argument, she urges us to look at the 10 defined terms in sections 2.04-2.06 of the SA. Section 2.04 11 defines a “REL Transfer” as payments made out of REL’s general 12 account to the holders of Exchange Notes issued to REL’s 13 Noteholders. Trustee asserts that this provision plainly shows 14 that MF08 released only its claims against REL Noteholders for 15 recovery of amounts paid by REL and that these are the MF08 16 Potential Avoidance actions MF08 agreed to release under section 17 2.06. She again also relies on section 4.01 which states that 18 “this Agreement shall not limit or restrict the right of MF08 to 19 bring any action against any third party.” (Emphasis added). 20 According to Trustee, the phrases “any action” and “any third 21 party” are broad and include her avoidance action against 22 Montgomery. 23 Montgomery also repeats his previous arguments in his 24 opposing brief. He claims he was an REL Transferee within the 25 meaning of the SA and, therefore, he is protected by MF08's 26 waiver of the avoidance claims. To support his interpretation, 27 he relies on extrinsic evidence such as the surrounding 28 circumstances under which MF08 and REL negotiated or entered -211 into the SA, including the SA’s relationship to REL’s confirmed 2 plan, and the language in MF08's POC. Montgomery points out 3 that the main objective of the SA was to avoid expensive and 4 uncertain litigation over whether MF08 had a legal basis to 5 claim REL Transferees had received $66 million of MF08's monies. 6 He further refers to MF08's admission in its POC that the Ng 7 family controlled the bank accounts of REL, MF08, and TMF, and 8 could have and did use MF08 monies to pay REL investors - the 9 “Ngs caused the transfer” of $66 million, the transfers were 10 made “either directly to REL, indirectly through TMF . . ., or 11 [directly] to REL’s borrowers.” 12 Montgomery also traces the monies coming from REL’s account 13 that flowed to MF08 and then to TMF, and ultimately to his IRA 14 account. Based upon this tracing, he contends that the $150,000 15 used to pay him was “directly” from the general account of REL. 16 In addition, Montgomery offered other extrinsic evidence to 17 shed light on the mutual intention of the parties: (1) his REL 18 investor portfolio account statement in which REL takes credit 19 for the $150,000 payment TMF ostensibly made to him; (2) the 20 Noteholders' Committee's letter to the REL Noteholders; and 21 (3) his Wells Fargo Bank IRA statement indicating payments had 22 come from REL. 23 In conducting our independent review into whether an 24 ambiguity exists, we examined the SA and the POC and considered 25 Montgomery’s proffered extrinsic evidence. Based upon our 26 review, we determine that the bankruptcy court did not err in 27 ruling that the SA was ambiguous with respect to the terms “REL 28 Transfer,” “Paid by REL,” or “Any Third Party,” as those terms -221 were reasonably susceptible to the parties’ competing 2 interpretations. Accordingly, the bankruptcy court properly 3 admitted all credible extrinsic evidence to aid it in 4 interpreting the SA. Pac. Gas & Elec. Co., 69 Cal.2d at 37 . 5 C. Interpretation of the SA 6 This determination does not end our inquiry. Although the 7 above-referenced terms are ambiguous, we still must consider 8 whether the bankruptcy court appropriately resolved the 9 ambiguity. The parties do not challenge the SA itself and 10 presented no extrinsic evidence as to their intent at the time 11 the SA was signed. This is not surprising since Montgomery was 12 not a party to the SA and the negotiations and as the court 13 ruled that the communications regarding the settlement of MF08's 14 POC made during the mediation held in REL’s bankruptcy case were 15 confidential.11 16 The extrinsic evidence presented by Montgomery presented 17 the context in which the contract arose and described the 18 conduct of the parties in connection with the SA which cast 19 light on their original intent. Although Trustee disputes the 20 inferences to be drawn from this extrinsic evidence, the 21 evidentiary facts themselves are not in conflict. The meaning 22 of the terms “REL Transfer,” “Paid by REL,” and “Any third 23 Party,” was not dependent on the credibility of conflicting 24 evidence. There were thus no factual issues for the bankruptcy 25 court to resolve. Accordingly, we review the SA in the context — 26 — — 11 — 27 Trustee filed a motion seeking to prohibit the use of mediation documents for any purpose in the litigation. The 28 bankruptcy court granted that motion. -231 of the extrinsic evidence presented and make our own independent 2 determination of its meaning. See Wolf, 114 Cal.App.4th at 3 1351; Scheenstra, 213 Cal.App.4th at 390 . 4 We determine the construction of the ambiguous language by 5 applying the appropriate canons of construction governing 6 contracts. “‘[W]here the language of the contract is ambiguous, 7 it is the duty of the court to resolve the ambiguity by taking 8 into account all the facts, circumstances and conditions 9 surrounding the execution of the contract.’” Frankel v. Bd. of 10 Dental Exam’rs, 46 Cal.App.4th 534, 544 (1996); Pac. Gas & Elec. 11 Co., 69 Cal.2d at 40 (court may consider the circumstances under 12 which the agreement was made, including its object, nature and 13 subject matter). The goal is to interpret it to give effect to 14 the mutual intent of the parties as it existed when they 15 contracted. Cal. Civ. Code § 1636 ; see also Pac. Gas & Elec. 16 Co., 69 Cal.2d at 38 . It is the outward expression of the 17 agreement, rather than a party's unexpressed intention, which 18 the court will enforce. Winet, 4 Cal.App.4th at 1165 . 19 1. “REL Transfer” and “Paid by REL” 20 We begin with the ambiguous terms “REL Transfer” and “Paid 21 by REL.” Relying on the plain language of the SA, Trustee 22 maintains that since Montgomery was paid by TMF from its bank 23 account, he was not “paid by REL.” Therefore, he did not 24 receive a “REL Transfer” within the meaning of the SA and is not 25 protected by MF08's waiver of avoidance actions. 26 This interpretation is not supported when we consider 27 Montgomery’s undisputed extrinsic evidence and the context under 28 which settlement of MF08's POC was reached. The undisputed -241 evidence shows - as the MF08 POC stated - that the Ngs 2 controlled MF08, TMF, and REL and had a pattern of treating them 3 as they wished: “the Ngs caused the $66 million in transfers to 4 be made, either directly or indirectly.” Thus, in this Ponzi5 like scheme, MF08 acknowledged in its POC that the Ngs did not 6 differentiate between REL, MF08, or TMF. 7 The evidence also shows that by all appearances, Montgomery 8 had been paid by REL and received a REL Transfer. As the 9 bankruptcy court properly noted, Montgomery was paid during the 10 time period described in the POC (i.e., December 2007 – February 11 2009), and in the time period in section 2.04 of the SA (i.e., 12 December 2007 – August 2008) and his investor portfolio account 13 statement showed REL took credit for making the $150,000 payment 14 when it was made. In other words, REL’s investor’s account 15 carried payment to Montgomery on its books. 16 In addition, the Noteholders’ Committee’s letter sent to 17 Montgomery and other REL Noteholders is consistent with the 18 documentation Montgomery received from REL before any 19 controversy arose. See S. Cal. Edison Co. v. Super. Ct., — 20 — 37 Cal.App.4th 839, 851 (1995) (“The rule is well-settled that 21 in construing the terms of a contract the construction given it 22 by the acts and conduct of the parties with knowledge of its 23 terms, and before any controversy has arisen as to its meaning, 24 is admissible on the issue of the parties’ intent.”). 25 In the end, the extrinsic evidence shows that the parties 26 to the SA necessarily intended that the waiver by MF08 of its 27 right to sue any REL investor who had been paid with MF08 funds 28 included anyone paid directly or indirectly by REL. Although -251 Trustee urges us to adopt her competing interpretation of the 2 SA, she has offered no evidence in support of her position. 3 Given the lack of evidence supporting Trustee’s inferences and 4 interpretation, the bankruptcy court reasonably concluded that 5 Montgomery was entitled to judgment as a matter of law. See 6 Anderson, 477 U.S. at 249 (holding that “there is no issue for 7 trial unless there is sufficient evidence favoring the nonmoving 8 party for a jury to return a verdict for that party”). 9 Indeed, the thrust of Trustee’s argument on appeal is that 10 the bankruptcy court misinterpreted or misused the extrinsic 11 evidence. First, she contends that the bankruptcy court applied 12 the wrong legal standard to interpret the SA based on improper 13 extrinsic evidence. In this regard, Trustee relies on the 14 bankruptcy court’s statement that “[t]he extrinsic evidence is 15 consistent on one essential point. By everything he was told by 16 REL, it is reasonable to interpret the Settlement Agreement as 17 Mr. [Montgomery] does.” Trustee maintains that the bankruptcy 18 court erroneously relied upon the statements of REL, only one 19 party to the agreement, and Montgomery, a stranger to the 20 agreement. Trustee contends that “at most” REL’s communications 21 to Montgomery show its subjective intent, but subjective intent 22 is irrelevant. At another point, Trustee maintains that the 23 Noteholders’ Committee’s letter is another example of their 24 subjective intent. Trustee asserts that the letter does not 25 evidence the mutual intent of the parties. Trustee contends — 26 — — 27 — — 28 — -261 therefore that the court should have ignored this evidence.12 2 We are not persuaded by these arguments. Error would 3 occur, if at all, if the bankruptcy court improperly admitted 4 extrinsic evidence showing only the undisclosed subjective 5 intent of REL or the Noteholders Committee, which is 6 inadmissable and incompetent under the objective theory of 7 contracts. Founding Members of the Newport Beach Country Club 8 v. Newport Beach Country Club, Inc., 109 Cal.App.4th 944 , 960 9 (2003) (“[U]ndisclosed statements regarding intent or 10 understanding of” the writing “are irrelevant to contract 11 interpretation under the objective theory of contracts”; 12 appellate court determines writing’s meaning de novo “[a]fter 13 winnowing out the extrinsic evidence that is irrelevant under 14 the objective theory of contracts.”). “While a party may not 15 testify to his undisclosed subjective intent in entering into an 16 agreement, the rule does not preclude admission of evidence of 17 the surrounding circumstances, usage and custom in the industry, 18 negotiations and discussion, or any other extrinsic evidence 19 which may shed light on the mutual intention of the parties.” 20 Pac. Gas & Elec. Co., 189 Cal.App.3d at 1141-42. 21 We conclude that REL’s statements to Montgomery and the 22 Noteholders’ Committee’s letter to Montgomery fall within the 23 latter type of evidence; i.e., the surrounding circumstances, 24 negotiations, and discussion, and were not the mere “undisclosed — 25 — — 12 — 26 Although MF08 did not author this letter, the compromise, which the letter urged the Noteholders to vote in favor of, was 27 with MF08 and benefitted its POC. MF08's silence as to the letter’s accuracy may be construed as an agreement with its 28 assertions. -271 subjective intent” of REL or the Noteholders’ Committee. Id. 2 In other words, this extrinsic evidence objectively “shed[s] 3 light on the mutual intent of the parties.” 4 Next, Trustee complains that the court erred by using the 5 extrinsic evidence to vary or modify the terms of the SA. 6 However, what Trustee characterizes as error is, in fact, her 7 disagreement over the bankruptcy court’s interpretation of SA 8 based upon the extrinsic evidence which we address in this 9 appeal. 10 Finally, Trustee challenges the bankruptcy court’s finding 11 that the payment to Montgomery was made by REL and contends that 12 this is not supported by the evidence. According to Trustee, 13 the undisputed evidence shows that Montgomery received a check 14 drawn on TMF’s bank account. Therefore, at the very least, this 15 creates a genuine issue of material fact, precluding at the 16 summary judgment stage a finding that the payment had been made 17 by REL. Trustee also maintains that the fact MF08 obtained the 18 funds from REL is irrelevant because there is no evidence that 19 MF08's control over the funds was restricted or conditioned in 20 any way. According to Trustee, funds which are transferred to a 21 debtor and are deposited into the debtor’s bank account become 22 property of the debtor unless the debtor’s right to use the 23 funds is restricted. Adams v. Anderson (In re Superior Stamp & 24 Coin Co.), 223 F.3d 1004, 1009 (9th Cir. 2000). 25 Again, we are not persuaded. The Ninth Circuit’s decision 26 in In re Superior Stamp & Coin Co. is not helpful to Trustee’s 27 argument. There, a bank loaned money to the debtor on the 28 express condition that the money was to be used to pay a -281 specific third-party creditor. The bank, a new creditor, 2 substituted itself in place of the old creditor that was paid 3 with the “earmarked” money. The Ninth Circuit defined the scope 4 of the “earmarking” defense: 5 [T]he proper inquiry is not whether the funds entered the debtor's account, but whether the debtor had the 6 right to disburse the funds to whomever it wished, or whether their disbursement was limited to a particular 7 old creditor or creditors under the agreement with the new creditor. — 8 — — 9 — 223 F.3d at 1009 . The earmarking doctrine is inapplicable to 10 this case since the record shows the Ngs were operating a Ponzi11 like scheme. Further, it is undisputed that the Ngs controlled 12 the funds that were transferred from REL’s general account to 13 MF08 and then to TMF and ultimately to Montgomery in the course 14 of this Ponzi-like scheme. Under these circumstances, it is 15 disingenuous for Trustee to claim MF08 had dominion and control 16 of the funds. 17 In sum, Trustee failed to raise a genuine issue of material 18 fact as to the proper interpretation of the terms “REL Transfer” 19 and “Paid by REL.” 20 2. “Any Third Party” 21 We next consider the term “any third party” as used in 22 section 4.01 of the SA. Trustee maintains the bankruptcy 23 court’s construction of the savings clause in this section was 24 erroneous. Under section 4.01 of the SA, MF08 waived the right 25 to pursue any MF08 Potential Avoidance Actions “provided, 26 however, that this agreement shall not limit or restrict the 27 right of MF08 to bring any action against any third party, 28 including any manager, member, insider or professional of MF08.” -291 Trustee argues that the bankruptcy court incorrectly 2 construed this provision to mean that she could commence an 3 action only against a “third party” that was a manager, member, 4 insider or professional. According to Trustee, the savings 5 clause in section 4.01 of the SA preserves all claims against 6 any third party, other than those against REL Noteholders who 7 were “paid by REL.” 8 Read naturally, the section’s use of the word “any” as in 9 “any action” has an expansive meaning. However, we cannot 10 construe the phrase as expansively as Trustee would like because 11 the preservation of “any action” would ordinarily mean those 12 claims not settled. Here, as discussed above, Montgomery was 13 included in the class of protected transferees since he received 14 a “REL Transfer” that was “Paid by REL,” albeit indirectly. 15 MF08 settled and released that potential avoidance action 16 against him under the terms of the SA. We thus read the savings 17 clause to preserve claims other than MF08 potential avoidance 18 claims against the REL Noteholders which were settled. Limiting 19 the types of claims, which were preserved in this manner, is not 20 inconsistent with a construction that the word “including” in 21 the phrase “any third party, including any manager, member, 22 insider or professional of MF08" is expansive in the sense that 23 the Trustee may pursue nonavoidance action claims against the 24 expansive class of third parties. 25 Further, the record shows that the undisputed objective of 26 the SA was (1) to resolve the issues regarding the validity and 27 priority of MF08's claim which was based on the alleged 28 fraudulent transfer of $66 million to REL where tracing was -301 problematic and the Ngs’ commingling was endemic; (2) to 2 eliminate the REL Noteholders’ risk of being sued by both MF08 3 and REL as the alleged recipients of fraudulent transfers in 4 order to ensure their support for REL's Plan; and (3) to 5 eliminate MF08's ability to impede confirmation because MF08's 6 $66 million claim made it the largest unsecured creditor in 7 REL's case. Trustee’s interpretation of “any third party” to 8 include REL Noteholders who were paid by MF08 or TMF 9 effectively would blunt these objectives. 10 As the bankruptcy court observed: 11 If there was an intent to carve this group of REL Noteholders out of the release, it had to be precisely 12 stated before the settlement was incorporated into REL's Plan. MF08 acknowledged from the start that the 13 ‘Ngs caused’ every payment by any of these affiliated entities to be made in a way that suited their designs 14 and the record shows the Trustee was in possession of records that would have enabled her to trace this 15 transfer before she signed the Settlement Agreement. To pretend otherwise endorses a fiction—that MF08 had 16 legitimate independent management. 17 The Trustee obtained the $5 million “enhancement” and the REL Noteholders agreed to reduce their claims by 18 50% of what they had been paid on their REL investments pre-petition. The REL Noteholders were 19 led to believe their risk of being sued—by MF08 and REL—as the recipients of allegedly fraudulent 20 transfers was eliminated. 21 In sum, Trustee failed to raise a genuine issue of material 22 fact as to the interpretation of the savings clause under 23 section 4.01 of the SA. In the words of the bankruptcy court: 24 “As a REL Noteholder, Mr. Montgomery is not the type of third 25 party the Trustee may sue” on an avoidance action. 26 VI. CONCLUSION 27 For the reasons stated, we AFFIRM. — 28 — -31-