451 B.R. 485
Bankr. D. Minn.2011Background
- Debtors Corbin and Laura Lacina deposited a $26,606.33 NFL annuity payment into Lois K. Gergen's bank account on May 4, 2009.
- Lacinas filed for Chapter 7 on January 21, 2010; funds were used for their personal expenses and Lacinas had access to the funds via Gergen.
- Transfer occurred within one year of filing and debtors had large, recent judgments against them totaling over $1,000,000.
- Trustee moved for summary judgment to avoid the transfer under 11 U.S.C. § 548 and to recover under § 550; Gergen contested the fraudulent-intent and conduit arguments.
- Court finds no genuine dispute on material facts, determines Gergen was an insider transferee with dominion and control, and holds the transfer was fraudulent and recoverable.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the transfer was fraudulent under § 548(a)(1)(A). | Trustee established a presumption of fraud via badges of fraud. | Gergen argues lack of fraudulent intent and contested facts. | Yes; presumption established; transfer avoided. |
| Whether Gergen was an initial transferee with dominion and control or mere conduit. | Gergen had dominion and control over funds. | Gergen acted as conduit with no dominion. | Gergen was initial transferee with dominion and control. |
| Whether the trustee may recover from the initial transferee under § 550(a). | Initial transferee liable to estate. | § 550(a) does not impose liability on conduit or lack of dominion. | Yes; trustee may recover from Gergen. |
| Whether § 550(b) defenses apply to shield mediate/immediate transferees. | Not applicable since initial transferee is liable. | § 550(b) provides protection to certain transferees. | Not dispositive here; initial transferee liability remains. |
Key Cases Cited
- In re Patch, 526 F.3d 1176 (8th Cir. 2008) (summary judgment standard and related principles cited)
- In re Northgate Computer Systems, Inc., 240 B.R. 328 (Bankr. D. Minn. 1999) (badges of fraud and presumptions of intent; insider considerations)
- In re Sherman, 67 F.3d 1348 (8th Cir. 1995) (badges of fraud and initial transferee concepts; circuit guidance)
- Kelly v. Armstrong, 141 F.3d 799 (8th Cir. 1998) (presumption of fraud; standards for shifting burden)
- In re Hurtado, 342 F.3d 528 (6th Cir. 2003) (mere conduit vs. initial transferee; dominion and control test)
- In re Circuit Alliance, Inc., 228 B.R. 225 (Bankr. D. Minn. 1998) (initial vs. mediate transfers; bona fide purchaser-like defense)