My November 1, 2009 article highlighted the Chapter 7 bankruptcy case of real estate developer Michael R. Mastro. At “Trustee in Mastro bankruptcy goes after four new targets“, the Seattle Times too commented on Mr. Mastro and wrote about one of the latest lawsuits filed to recover Mr. Mastro’s bankruptcy estate assets.

The lawsuit was commenced by Mastro Trustee James F. Rigby, Jr. on March 9, 2010 and is actually an adversary proceeding within Mr. Mastro’s bankruptcy case. Trustee Rigby’s complaint in this adversary proceeding claimed that Mr. Mastro had made fraudulent and / or preferential asset transfers which the Court should set aside. E.g. 11 U.S.C. §§544, 547 & 548.

The complaint alleged that Mr. Mastro had conspired with others “to achieve the unlawful objective of hindering, delaying, or defrauding Mastro’s creditors“. It claimed that Mr. Mastro wrongfully transferred promissory notes of more than $50 million to his business partner John Mastandrea. The transfer of these promissory notes was memorialized by a June 24, 2009 agreement:


(Click On The June 24th Agreement For A Complete View)

The June 24th transfer also involved Mr. Mastro’s purported assignment of valuable accounts receivable to Mr. Mastandrea. These accounts receivable were listed in the June 24th agreement, at two exhibits labeled “B”:

Mr. Mastandrea however, recently stipulated that “[a]ny transfer or assignment from Mastro to Mastandrea pursuant to the June 24, 2009 agreement is avoidable and shall be avoided…”. March 24, 2010 Stipulation, at ¶2. As mentioned by the March 24th Stipulation and the “Agreed Judgment” related to it, assets transferred by the June 24th agreement are now re-vested in Mr. Mastro’s bankruptcy estate.

Copyright 2010 Fred L. Abrams