*2 GARZA, Before REYNALDO G. HIGGINBOTHAM, DeMOSS, Circuit Judges.
PER CURIAM: Security First National Bank and the law Führer, Flournoy, firm of Hunter & Mor- appeal ton the decision of the district court payment by chapter 7 debtors Security unconditionally of a First note guaranteed by the law was an avoid- preference able under 547 of the Bank- § seq., 11 U.S.C. 101 et Code, ruptcy recov- erable from the bank as the initial transfer- 550(a)(1), and that the ee under U.S.C. § guaranty firm’s of the note was not extin- guished by payment. the voided We af- firm.
I.
Führer, Flournoy, is a Hunter & Morton personal injury To assist plaintiff’s firm. financially pending litigation, the its clients arrange Security First to firm would money, loan the clients with the serv- guarantor on the ing as unconditional These loans were made reliance notes. firm; of the the bank investigation into the creditworthi- made no loaned ness of the clients. The represented amounts which could ethically to clients be advanced of Profes- itself under the Louisiana Code sional Conduct. repre- Emogene Coutee were
Thelton
suit,
personal injury
sented
the firm a
$48,000judg-
II.
they
awarded a
in which
They
had
ment in
bor-
November
A.
$24,644
Security
1989 from
in June
rowed
Security First contends that the
arrangement described
First
it,
the initial transferee of the funds
*3
received the
When the Coutees
above.
the firm received the
direct-
of their
in
check in satisfaction
ly from the Coutees.
to
they endorsed it
the
December
firm,
into
deposited the funds
which
Bankruptcy
547 of the
Code
Section
firm then claimed its
trust
The
account.
part,
in
provides,
pertinent
that a trustee
funds,1 returned a
legal
out of the
fees
may
by
a
made
the debtor
avoid
transfer
Coutees,
portion of the award
days
filing
90
before the
thé
within
of
in
the
Security First note
full with
paid the
petition
bankruptcy
while the debtor was
marked
remaining money. Security First
solvent to a creditor on account of an ante
firm,
the
the
and delivered
to
note
debt if the transfer
cedent
enables the
to
in turn
the Coutees.
which
delivered
designated
a
creditor to receive more than
of the debtor’s estate.
Section
share
days
payment
of
of the
ninety
Within
the
550(a)(1)
may
provides that the
re
trustee
note,
voluntary petition
a
filed
the Coutees
preference
cover a
avoided under
547
§
In
Chapter
bankruptcy.
7
November
initial
of
from “the
transferee
such trans
bankruptcy
this ac-
the
trustee filed
entity
or
fer
the
for whose benefit such
First, seeking
against Security
to avoid
tion
noted,
transfer was made.”2
the dis
As
grounds
the note on
payment
the
of
that
trict court concluded that the bank was the
547 of the Bank-
preference
was a
§
funds,
of
that
initial transferee
the
the
First, having
ruptcy
Security
been
Code.
a mere
was
conduit. Because the
compel joinder of
a motion to
the
denied
in
essential facts of the case are not
dis
firm,
party
against
a
demand
the
filed third
regarding
pute, questions
legal
the
rela
firm, seeking recovery on the unconditional
tionship
parties
of the
is one of
so we
in
that the trustee
guaranty
the event
was
the district court’s determination de
review
avoiding
payment of the
in
the
successful
novo.
Horn C.L. Osborn Contract
See
note.
(5th Cir.1979).
Co.,
ing
591 F.2d
bankrupt-
The
case was
to
submitted
fully
cy
stipulated
Bankruptcy
facts. That
The
Code does not de
court
transferee,”
(1)
payment of the note
fine “initial
and this circuit
court held that
(2)
preference,
as a
the bank was
has not articulated a definition. Other cir
void
however,
550(a)(1)
have,
of
that
use a
the “initial transferee” under
cuits
dominion or
Code,
(3)
Bankruptcy
party
the firm’s
control test to determine whether a
See,
guaranty
payment
e.g.,
of
an
transferee.
Fi
had been satisfied
initial
Bonded
Services,
European
appeal
On
the dis- nancial
Inc. v.
Ameri
the note.
(7th Cir.1988);
Bank,
holding
that
principal III. Ann. arts. Civ.Code reasons, foregoing For the brings argu Instead, is AFFIRMED. 9:5001, under La.Rev.Stat.Ann. ments in favor privilege statutory creates a which FOR REHEARING ON PETITION their respect to fees attorneys with ethically as client amounts advanced March that under permitted. firm contends The PER CURIAM: statute, sta enjoys secured creditor Rehearing is DENIED. The Petition for from respect to the funds received tus with above, however, the As stated debtors. opinion, that “the In our we observed any funds to the not did advance any funds to did advance Coutees; therefore, statutory privilege Coutees; therefore, statutory privilege apply. does not By necessity apply.” we there does not *5 funds discussed in referred argue Additionally, the firm seems stipulations stipula- in the Those record. subject to it would not be because loan made to Coutees tions involved the if it preference action had advanced paid through by the and the funds alleged se- (by of its money itself virtue as to the bank the Coutees 9:5001), see 11 U.S.C. cured status express repayment loan. no of that We 547(b)(5), obligation its should opinion regarding other funds that the nothing in the privileged. There is also be Coutees, may nor the have advanced statute, however, to indicate that Louisiana regarding any firm’s status such advances. attorney applies to an obli- privilege attorney, op- as gation guaranteed contrary,
posed to him. To the to one owed privilege or this statute creates derogation rights, lien in common may not be strictly construed and should be by analogy implication. or Calk extended v. & Highland Construction Manufactur (La. Cir.), Inc., 3d
ing, 368 So.2d DEGARMO, Roger Leroy rev’d 376 So.2d grounds, on other Petitioner-Appellee, (La.1979).6 pay- its Finally, firm contends that Director, COLLINS, De- A. Texas James ment out of its trust account note Justice, partment Institu- of Criminal extinguish guaranty obligation should Division, Respondent-Appellant. tional concepts fair- violate because would require pay the firm to equity ness 92-2725. No. held, a second time. We have Appeals, United States Court of however, deposited in the that the Fifth Circuit. trust never the firm’s account was thus, all; never even the bank at Feb. 1993. risk of the precisely once. It was insolvency assumed clients’ signed guaranty. the unconditional
when it attempting that risk It cannot now avoid authority indicating Additionally, transfers to the bank. there no alleged that the firm's secured status somehow