## Facts

- Positive Health Management, Inc. operated pain-management clinics in Texas; its president and sole shareholder owned a separate entity that owned a building in Garland, Texas used by Positive Health.
- First National Bank made a refinance loan in 2005 to the building-owning entity; the loan was secured by the building.
- Positive Health was not an obligor on the loan but paid First National about $367,681.35 from February 2007 to March 2008, recorded as “rent.”
- After the payments stopped, First National foreclosed on the building; Positive Health later filed Chapter 7 bankruptcy.
- The Chapter 7 trustee sued to avoid and recover the payments as intentionally fraudulent transfers under 11 U.S.C. § 548(a); the bank/FDIC was treated as a good-faith transferee.
- The bankruptcy court found actual intent to hinder, delay, or defraud creditors, but concluded Positive Health received reasonably equivalent value through continued use of the premises and the bank’s forbearance from earlier foreclosure; the district court adopted those findings.

## Issues

1. Under 11 U.S.C. § 548(c), may a good-faith transferee retain all funds received from an intentionally fraudulent transfer if the debtor received “reasonably equivalent value,” or must retention be limited by netting to the amount of “value” actually given by the transferee?
2. How is “value” measured for § 548(c): by the overall fairness of the exchange or by the quantifiable consideration the transferee gave up?

## Decision

- The Fifth Circuit held that § 548(c) does not incorporate a “reasonably equivalent value” standard to determine the defense’s scope.
- A good-faith transferee may retain transfers only “to the extent” it gave value to the debtor in exchange, requiring dollar-for-dollar netting between value given and amount received.
- The court reversed the judgment to the extent it allowed retention of the entire $367,681.35 without limiting the defense to the value actually conferred, and required application of the netting limitation on remand.

## Legal Principles

- A trustee may avoid transfers made with actual intent to hinder, delay, or defraud creditors under 11 U.S.C. § 548(a).
- Under 11 U.S.C. § 548(c), a good-faith transferee may retain a fraudulent transfer only “to the extent” the transferee gave value to the debtor in exchange.
- The phrase “to the extent” imposes a quantitative limitation; the defense covers only the amount of value actually given, not any excess received.
- “Reasonably equivalent value” is a § 548(a) concept for constructive fraud analysis and should not be imported into § 548(c).
- In the Fifth Circuit, “value” for § 548(c) is measured from the transferee’s perspective—what the transferee gave up—rather than solely by the debtor’s characterization or the transfer’s nominal form.

## Conclusion

The Fifth Circuit limited the § 548(c) good-faith transferee defense to the amount of value the transferee actually provided, requiring netting and rejecting the view that an overall reasonably equivalent exchange permits a transferee to keep the full amount received from an intentionally fraudulent transfer.


In re Positive Health Mgmt., Inc., 769 F.3d 899 (5th Cir. 2014)