Charles Ivey, III v. First Citizens Bank & Trust Company
848 F.3d 205
4th Cir.2017Background
- Debtor James E. Whitley ran a Ponzi-style scheme and filed bankruptcy after investors sued; a Chapter 7 trustee (Ivey) pursued avoidance claims.
- Trustee sued First Citizens Bank, asserting certain deposits, cashier checks, and wire transfers into Whitley’s personal checking account were fraudulent transfers avoidable under 11 U.S.C. § 548(a)(1)(A).
- Bankruptcy and district courts granted summary judgment for the bank, reasoning the deposits did not diminish the estate or place funds beyond creditors’ reach.
- The Fourth Circuit framed a threshold question: whether deposits into a debtor’s own unrestricted checking account constitute a "transfer" under § 101(54).
- The panel held the specific deposits and incoming wire transfers at issue were not "transfers" because the debtor retained possession, custody, and withdrawal rights; thus § 548 did not apply.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether deposits/wire-ins into debtor’s own unrestricted checking account are "transfers" under § 101(54) | Depositing or accepting funds into the account is a "parting with" property that satisfies § 101(54) | No parting occurred—depositor retained control and withdrawable credit; account funds remained part of estate | Deposits/wire-ins into an unrestricted checking account in the regular course are not "transfers" under § 101(54) |
| Whether § 548(a)(1)(A) requires diminution of the bankruptcy estate when actual fraudulent intent exists | If actual intent is shown, diminution is not required to avoid a transfer | § 548 requires an "interest of the debtor in property" to be transferred; courts interpret that to mean the estate must be diminished | Court did not reach this question; resolved appeal on threshold § 101(54) issue (no transfer) |
Key Cases Cited
- Citizens’ Nat. Bank of Gastonia v. Lineberger, 45 F.2d 522 (4th Cir. 1930) (ordinary deposit that leaves depositor free to withdraw is not a transfer)
- N.Y. Cty. Nat’l Bank v. Massey, 192 U.S. 138 (U.S. 1904) (deposit creates debtor-creditor relation; ordinary debt, not fiduciary interest)
- In re Consol. Pioneer Mortg. Entities, 211 B.R. 704 (S.D. Cal. 1997) (customer deposits into unrestricted checking accounts are not transfers under the Code)
- In re Prescott, 805 F.2d 719 (7th Cir. 1986) (unrestricted deposits withdrawable at will are not avoidable transfers)
- Katz v. First Nat’l Bank of Glen Head, 568 F.2d 964 (2d Cir. 1977) (deposits in unrestricted checking accounts do not constitute transfers under prior law)
- In re Schafer, 294 B.R. 126 (N.D. Cal. 2003) (contrasting view: deposits can be transfers; bank as immediate transferee)
- Redmond v. Tuttle, 698 F.2d 414 (10th Cir. 1983) (found deposits in debtors’ checking accounts to be transfers)