In the

United States Court of Appeals

For the Seventh Circuit ____________

No. 05-2764

R. DAVID BOYER, Chapter 7 Trustee,

Plaintiff-Appellee,

v.

DIMITRIOS MICHAEL BELAVILAS, et al.,

Defendants-Appellants.

____________

Appeal from the United States District Court for the

Northern District of Indiana, Fort Wayne Division.

No. 1:03-CV-480—Theresa L. Springmann, Judge.

____________

ARGUED DECEMBER 1, 2006—DECIDED JANUARY 5, 2007

____________

Before EASTERBROOK, Chief Judge, and RIPPLE and

MANION, Circuit Judges.

EASTERBROOK, Chief Judge. Dimitrios Belavilas and his

wife Maria Belavilas each owned 50% of the stock in

D-Man, Inc. When that firm received about $370,000 in

insurance proceeds, Dimitrios and Maria deposited the

checks into custodial accounts (under the Uniform Transfers to Minors Act) for their two children, Angelo and

Nickolas. Maria was the custodian who controlled these

accounts. Instead of using the money for the children’s

benefit, Maria soon transferred it to Gyros Express and

Vlako, Inc., entities that Dimirtios and Maria had formed

and controlled.
2 No. 05-2764

Dimitrios then filed a bankruptcy petition. He claimed

that he had owned only 2% of D-Man and that the insurance proceeds had come to only $2,000. When the Chapter

7 Trustee discovered the truth, he filed an adversary

proceeding under 11 U.S.C. §548 to undo these fraudulent

conveyances. Dimitrios and Maria maintained, however,

that the Trustee could not recover anything, because none

of the recipients is a transferee within the scope of 11

U.S.C. §550(a). The children, as minors, could not be

treated as transferees, they maintained, because minors

do not control UTMA accounts. And Maria could not be a

transferee because she was the funds’ custodian and had

no legal right to the money, and could not be directed to

return the money as custodian because the children’s

accounts were empty. In other words, Dimitrios and Maria

argued that a second unlawful transfer (the movement

of money from the UTMA accounts to Gyros Express

and Vlako) prevented redress of the first unlawful transfer

(the placement of D-Man’s funds in the children’s accounts).

Bankruptcy Judge Grant had none of this and entered

a judgment making Maria, Angelo, Nickolas, and Vlako

jointly and severally responsible for paying $183,130 to the

bankruptcy estate. (The rest of Dimitrios’s 50% share of

the insurance proceeds was to come from Dimitrios

himself, because he controlled the money in the Gyros

Express account.) District Judge Springmann affirmed.

Maria, Angelo, and Nickolas have appealed; Dimitrios,

Vlako, and Gyros Express have not. We infer that

Dimitrios and Maria have caused Vlako to re-transfer the

funds to hide them from creditors; otherwise the judgment

would have been satisfied by now, and Maria and the

children would have no remaining liability. (Dimitrios

has pleaded guilty to two counts of bankruptcy fraud and

is in prison.)

Maria’s situation is straightforward. The initial transfer

was to the UTMA accounts; Maria was the custodian but
No. 05-2764 3

not the “transferee.” (One major difference between UTMA

custodial accounts and common-law trusts is that a

trustee acquires legal title to the assets, while title under

the UTMA vests in the beneficiary, though control remains with an adult custodian under §§ 9 and 12, enacted

in Indiana as Ind. Code §30-2-8.5-24 and -27.) Section

550(a)(1) of the Bankruptcy Code allows recovery from “the

initial transferee of such transfer or the entity for whose

benefit such transfer was made”. The bankruptcy judge

did not commit a clear error in determining that Maria

is “the entity for whose benefit” the transfer to the UTMA

accounts was made. Maria demonstrated as much by

treating the funds as her own—for instead of devoting

the money exclusively to the children’s welfare, as the

UTMA requires, Maria routed most of the cash to Vlako.

The whole point of these maneuvers was to keep

Dimitrios’s share of the insurance proceeds out of his

creditors’ hands and devote it to the family’s benefit.

If Maria had removed only 50% of the balances from the

UTMA accounts, she might have been able to demonstrate

that this was her share of the insurance money. (We say

“might” not only because D-Man was the insured entity—shareholders cannot deal with corporate funds as if

they were their own money—but also because money is

fungible. Bills did not come color-coded for “Maria’s share”

and “Dimitrios’s share.”) But she exercised dominion over

all of the money, in despite of both the creditors’ rights

and those of the children under the UTMA. This was

quite enough to incur liability under the “benefit” clause

of §550(a)(1).

Maria’s argument that the Trustee did not adopt this

theory until late in the litigation is unavailing. Pleadings

need not specify legal theories, see Bartholet v. Reishauer

A.G. (Zürich), 953 F.2d 1073 (7th Cir. 1992), and courts

award the relief to which the prevailing party is entitled

even if the appropriate theory is not articulated until the
4 No. 05-2764

last minute. See Fed. R. Bankr. P. 7054(a) (incorporating

Fed. R. Civ. P. 54(c)); Chicago United Industries, Ltd. v.

Chicago, 445 F.3d 940 (7th Cir. 2006). Maria has not

identified any prejudice that the Trustee’s delay may

have caused; her appeals to the district court and this

court have enabled her to make all appropriate arguments

about the effect of the “benefit” clause in §550(a)(1).

Making Angelo and Nickolas personally liable for the

balances that passed quickly through the UTMA accounts

is more problematic. They were “transferees” in the sense

that they (rather than Maria) were the legal owners, but

they lacked any effective control over the funds’ disposition. Section 13 of the UTMA gives the custodian complete authority over the funds, subject to the fiduciary

duty imposed by §12 (a duty that Maria violated by

transferring the money to Gyros Express and Vlako).

Angelo and Nickolas rely on Bonded Financial Services,

Inc. v. European American Bank, 838 F.2d 890 (7th Cir.

1988), which held that a person who lacks authority to

control the disposition of funds cannot be an “initial

transferee” for the purpose of §550(a). The entity at issue

in Bonded Financial was a bank, which was legally

required to follow its client’s directions about how funds on

account should be used. The bank could not put the money

to its own purposes but had to follow orders. Angelo and

Nickolas, unlike the bank, were beneficial owners of the

money in the UTMA account, so Bonded Financial is not

dispositive. Still, the minors’ lack of control over the

custodian does make it hard to equate them with the

prototypical transferee. See also In re Baker & Getty

Financial Services, Inc., 974 F.2d 712 (6th Cir. 1992).

Once again, however, recovery of a fraudulent conveyance is not limited to a “transferee”; it is enough if the

transfer is for a person’s benefit. Angelo and Nickolas

were—at least initially—beneficiaries of the money
No. 05-2764 5

transferred into the UTMA accounts. The problem is not

so much with the idea that minors can be “beneficiaries”

even though adults control the purse strings as it is with

the consequence of the bankruptcy court’s joint-andseveral-liability judgment. Debts attributable to actual

fraud cannot be discharged in bankruptcy, see 11 U.S.C.

§523(a)(2)(A), so Angelo and Nickolas may be stuck with

this obligation for life and must pay from income they

earn as adults, even though they never saw a penny of

the money from D-Man’s insurance and never had a

chance to prevent their parents’ financial chicanery. (We

say “may be stuck” rather than “would be stuck” because

the effect of §523(a)(2)(A) on multi-party money shuffling

with intent to defraud a creditor was reserved in

McClellan v. Cantrell, 217 F.3d 890 (7th Cir. 2000).)

Although no case that we have been able to find addresses how preference recovery under §550 relates to

minors’ custodial accounts, §17(c) of the UTMA addresses

the problem of lifetime liability arising from events a

minor cannot control: “A minor is not personally liable

for an obligation arising from ownership of custodial

property or for a tort committed during the custodianship unless the minor is personally at fault.” The children’s obligation to return the fraudulent conveyance is

one “arising from ownership of custodial property”. Unless

a minor is “at fault”—and the bankruptcy judge held

that neither Angelo nor Nickolas bears any fault—all

obligations that relate to the UTMA account must be

satisfied either from the custodial assets under §17(a) or

by the custodian. Maria is personally liable on account

of her personal misconduct; that much was settled above.

The obligations of Angelo and Nickolas are limited to the

custodial property under §17(a). This means all of the

custodial funds—not only what came from Dimitrios’s

50% of D-Man but also what came from Maria’s share.

Maria’s obligation to repay what she and her husband
6 No. 05-2764

jointly stole from their creditors must be satisfied before

anything may be left sheltering for the children’s benefit.

So if any money is retrieved from Vlako (or wherever it

has gone from there), Maria and the children must satisfy

the judgment before they can restore anything to the

UTMA accounts.

The judgment is modified to provide that Angelo and

Nickolas are not personally liable, and that their obligations are limited to funds in or traceable to the custodial

accounts. As so modified the judgment is affirmed.

A true Copy:

Teste: 

 ________________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit 

USCA-02-C-0072—1-5-07