RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit Rule 206

File Name: 09a0145p.06

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT _________________

In re: SHARRENE WELLS, 

Debtor.

____________________________________

MBNA AMERICA BANK, N.A., part of Bank

of America Corporation,

Appellant,

v.

MARCIA R. MEOLI, Trustee,

Appellee.

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No. 08-1381

Appeal from the Bankruptcy Appellate Panel of the Sixth Circuit.

No. 06-80634—Jeffrey R. Hughes, Bankruptcy Judge.

Argued: December 5, 2008

Decided and Filed: April 10, 2009 

Before: RYAN, SILER, and GRIFFIN, Circuit Judges. 

_________________

COUNSEL

ARGUED: Lawrence Gary Reinhold, WEINSTEIN & RILEY, Huntington Woods,

Michigan, for Appellant. Marcia R. Meoli, HANN, PERSINGER, P.C., Holland, Michigan,

for Appellee. ON BRIEF: Lawrence Gary Reinhold, WEINSTEIN & RILEY, Huntington

Woods, Michigan, for Appellant. Marcia R. Meoli, HANN, PERSINGER, P.C., Holland,

Michigan, for Appellee.

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OPINION

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RYAN, Circuit Judge. This appeal comes to this court from the Bankruptcy

Appellate Panel’s affirmance of the bankruptcy court’s decision to grant summary judgment

in favor of the bankruptcy trustee Meoli. The issue this case presents is whether two $5,000

“convenience checks” paid from the debtor’s Chase Bank account to offset the balance on

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No. 08-1381 In re Wells Page 2

her MBNA credit card account shortly before filing for bankruptcy are preferential transfers

within the meaning 11 U.S.C. § 547(b). We conclude that they are avoidable preferential

transfers and we affirm the bankruptcy court’s decision.

I.

In the 90-day period preceding her petition for bankruptcy protection, the debtor,

Sharrene Wells, wrote two convenience checks from her Chase Bank, USA, N.A. account

against the debt on her MBNA credit card account. Chase Bank offered these checks and

advertised that they could be used to “[t]ransfer balances, pay bills, make a purchase, [or]

get extra cash.” The convenience checks were made payable through First USA

Management Services, Inc.

On October 14, 2005, Wells filed her petition for relief under Chapter 7 of the

Bankruptcy Code. On August 25, 2006, the trustee commenced an adversary proceeding

against MBNA to avoid and recover, among other transfers, the amount of the two $5,000

convenience checks Wells wrote from her Chase Bank account to her MBNA account. The

trustee filed a motion for summary judgment arguing that these were preferential transfers

within the provisions of § 547(b). The bankruptcy court granted the trustee’s motion and on

April 19, 2007, entered a judgment against MBNA in the amount of $10,816.00, which

included other transfers that are not at issue in this appeal.

MBNA then appealed the bankruptcy court’s judgment to the Bankruptcy Appellate

Panel which in turn affirmed the bankruptcy court’s decision. MBNA now appeals to this

court.

II.

On appeal from a bankruptcy court’s decision granting summary judgment, we

review the bankruptcy court’s factual findings for clear error and its legal conclusions de

novo. In re Cannon, 277 F.3d 838, 849 (6th Cir. 2002). Summary judgment is appropriate

when the pleadings, the discovery and disclosure materials and affidavits show that there are

no genuine issues of material fact and that the moving party is entitled to judgment as a

matter of law. Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).
No. 08-1381 In re Wells Page 3

The section of the Bankruptcy Code that grants a bankruptcy trustee the authority

to initiate proceedings seeking to set aside preferential transfers is 11 U.S.C. § 547(b).

Specifically, § 547(b) states:

Except as provided in subsection (c) of this section, the trustee may

avoid any transfer of an interest of the debtor in property–

(1) to or for the benefit of a creditor;

(2) for or on account of an antecedent debt owed by the

debtor before such transfer was made;

(3) made while the debtor was insolvent;

(4) made–

(A) on or within 90 days before the date of the

filing of the petition; or

(B) between ninety days and one year before the

date of the filing of the petition, if such creditor at the time

of such transfer was an insider; and

(5) that enables such creditor to receive more than such

creditor would receive if–

(A) the case were a case under chapter 7 of this title;

(B) the transfer had not been made; and

(C) such creditor received payment of such debt to

the extent provided by the provisions of this title.

11 U.S.C. § 547(b) (Westlaw 2007).

Since this case was started prior to the effective date of the Bankruptcy Abuse

Prevention and Consumer Protection Act of 2005, all references to the Bankruptcy Code are

to the version in effect prior to these revisions. See BAPCPA, § 1501(b)(1), Pub. L.

No.109-8, 119 Stat. 23.

Neither party disputes that the five elements enumerated in § 547(b)(1)-(5) are

satisfied, and Wells does not contend that any exception provided by § 547(c) applies. The

only question is whether the two $5,000 convenience checks effected transfers of the

debtor’s interest in property.

III.

The answer seems self-evident, but apparently it is not. The leading case resolving

the question whether convenience checks constitute the transfer of the drawer’s interest in

her property is McLemore v. Third National Bank (In re Montgomery), 983 F.2d 1389 (6th

Cir. 1993). There, a panel of this court explained that cash equivalents, like credits in a bank
No. 08-1381 In re Wells Page 4

account, may constitute property of the bankrupt estate. Id. at 1393-94. The court also

explained that the degree of control a debtor exercises over the property transferred is the

principal determinant of whether the debtor has “‘an interest’” in the property such that its

transfer may be avoided under § 547(b). Id. at 1395 (citation omitted); see also In re

Dilworth, No. 08-3389, 2009 WL 790902 (6th Cir. Mar. 27, 2009).

Wells was free to use the convenience checks for any reason she chose, including

paying down her credit card balance with MBNA. In making her decision to do just that and

then drawing the checks on her Chase Bank credit card account, Wells exercised complete

control over the funds drawn, in which she had an ownership interest.

Contrary to MBNA’s contention, this is not a case of “earmarking” which has been

recognized as an equitable exception to the avoidance rule for preferential transfers, where

the borrowed funds used to discharge the debt are specifically earmarked by the lender for

payment to a designated creditor. See Mandross v. Peoples Banking Co. (In re Hartley), 825

F.2d 1067, 1069 (6th Cir. 1987). Here, the funds were not restricted by Chase to be paid

solely to MBNA to be credited against Wells’s credit card debt. The checks could have been

used to “[t]ransfer balances, pay bills, make a purchase, [or] get extra cash.” In such an

instance, the debtor possessed sufficient control over the funds to determine where they

would go once the credit was accessed.

IV.

For these reasons, we AFFIRM the bankruptcy court’s decision.