4th Circuit: Goldman v. Capital City Mortgage- Definition of "Knowledge" under § 550(b)(1) for Good Faith Defense to Fraudelent Transfer‏

Following Smith v. Mixon, 788 F.2d 229, 232 (4th Cir. 1986),  the 4th Circuit ruled that knowledge,  for purposes of the good faith defense under  § 550(b)(1) to a fraudulent conveyance claim, "does not mean ‘constructive notice.’"   Nor,  however,  does this  actual notice standard, therefore, require actual knowledge of the transfer’s voidability. Instead,  actual knowledge of facts that would lead a  reasonable person to believe that the transferred property was voidable is all that is required to show knowledge.  An objective good faith analysis asks if the transferee possesses actual knowledge that would lead a reasonable person to inquire into the public record to see if the transferred property is voidable.  The willful ignorance of a party cannot allow it to make transfer of property in good faith.   Goldman.pdf