Ex-wife Not an ‘Insider,’ Needn’t Return Loan Payment

By Daniel Gill

The former wife of the president of a corporate debtor won’t be required to return a pre-bankruptcy loan repayment, the Bankruptcy Appellate Panel for the Eighth Circuit ruled June 12 ( Seaver v. Glasser (In re Top Hat 430, Inc.) , 2017 BL 197756, B.A.P. 8th Cir., Nos. 16-6034 and 16-6035, 6/12/17 ).

The ex-wife was not an insider of the debtor company, the opinion by Judge Arthur B. Federman said.

Pennie Glasser was married to David Pomije Sr. from 1985 to 1997.

In March 2011, Glasser and her current husband, David Glasser, loaned $200,000 to Top Hat 430, Inc. Pomije was president of the company, which operated retail jewelry stores. David negotiated the terms of the short-term bridge loan, which included a guaranty by Pomije. Shortly after the loan was made, Pennie went to work for the company, sorting jewelry in its corporate offices.

Top Hat paid off the Glassers on April 19, 2012. The company filed a Chapter 11 bankruptcy case on Feb. 12, 2013, which was converted to Chapter 7 a month later.

In Chapter 7, a trustee is appointed to maximize assets for the benefit of creditors. The trustee appointed for Top Hat filed suit to recover the loan payment as a preference—a pre-bankruptcy payment, made up to a year before the bankruptcy, benefitting a creditor unfairly over all other creditors.

But to recoup payments made more than 90 days prior to the bankruptcy, the transferee must be an “insider” of the debtor. The parties agreed that Pennie wasn’t a statutory insider. But she had sufficient closeness to and control over the company to qualify as an insider, and the loan and repayment weren’t arms-length transactions, the trustee argued.

The court disagreed. She had been divorced from Pomije, Top Hat’s president, for more than fifteen years prior to the loan, and their children were all grown. Although Pennie was employed by the company, there was no showing that she had any control over its operations.

The court also found the loan transaction to be arms-length. It made good business sense for the debtor to repay the Glassers, the court said.

Chief Judge Thomas L. Saladino and Judge Anita L. Shodeen joined in the decision.

Thomas Flynn, Minneapolis, represented Glasser. Seaver was represented by Chad Kelsch, Golden Valley, Minn.

To contact the reporter on this story: Daniel Gill in Washington at dgill@bna.com

To contact the editor responsible for this story: Jay Horowitz at JHorowitz@bna.com

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