* 

### This order and judgment is not binding precedent, except under the doctrines of

law of the case, res judicata, and collateral estoppel. This court generally disfavors the citation of orders and judgments; nevertheless, an order and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.

UNITED STATES COURT OF APPEALS Filed 4/22/96 TENTH CIRCUIT

In Re: TANSET RESOURCES AND SERVICES, INC., Debtor,

__________________________________ ENVIROCARE OF UTAH, INC., Defendant-Appellee. No. 95-4097 (D.C. No. 94-CV-945-S) (D. of Utah)



### v. HARRIET E. STYLER, Trustee, Plaintiff-Appellant.

ORDER AND JUDGMENT *

Before PORFILIO , ANDERSON , and TACHA , Circuit Judges.- 2 -

After examining the briefs and the appellate record , this three-judge panel has determined unanimously that o ral argument would not be of material assistance in the determin ation of this appeal. SeeFed.R.App.P. 34(a); 10th Cir.R. 34.1.9. The cause is therefore ordered submitted without oral argument. Harriet E. Styler, Trustee for the Chapter 7 bankru ptcy estate of Tanset Resources and Services, Inc., appeals the decision of the United States District Court for the District of Ut ah reversing an order of the bankruptcy court. The bankruptcy cour t granted summary judgment to Ms. Styler in her action to avo id prepetition transfers made by Tanset Resources to appellee, Env irocare of Utah, Inc. The transfers were payments upon a dishonoredcheck given by the debtor to Envirocare. The district court rever sed, rejecting Ms. Styler’s argument that the payments were made t o benefit Paul Holt, an insider of the debtor. We affirm. The facts in this case are undisputed. The debtor, Tanset Resources, was in the business of buying, selling, and brokering precious metals, precious stones, and rare coins. Paul Holt was the president, a director, and the sole shareholder of Tanset, and thus, an insider of the debtor. Mr. Holt was ultim ately in charge of the financial affairs of the debtor, overseeing deposits, payments, and loans. However, the debtor did not m aintain current accurate ledgers for its checking account. In January 1990, Envirocare agreed to purchase goldcoins from- 3 -

the debtor for $49,932, and by the end of the month , delivered that amount to the debtor as payment for the coins. The funds were deposited into the debtor’s bank account and used i n the operation of its business. Mr. Holt made no personal use of the money. Envirocare and the debtor eventually decided to can cel the transaction, and on March 2, the debtor delivered a check, signed by Mr. Holt, in the amount of $49,932, to Envirocar e. The check was dishonored on presentment because of insufficie nt funds. It is undisputed Mr. Holt believed there were funds in th e account sufficient to honor the check when it was delivered
. Over the next two months, the debtor made five paym ents to Envirocare which totaled $49,932, and fully repaid the debt owed for the returned check. On December 20, 1990, the debtor filed a petition for relief under Chapter 11 of the Bankrup tcy Code which was later converted to a case under Chapter 7. The refore, the payments to Envirocare were made between 90 days an d one year before the date of the filing of the petition for b ankruptcy. As trustee for the debtor, Ms. Styler filed a compl aint in the bankruptcy court under 11 U.S.C. § 547(b)(1) to avo id the payments made by the debtor to Envirocare. That provision o f the Bankruptcy Code allows a trustee to avoid a transfer made by t he debtor during insolvency “to or for the benefit of a creditor” in payment of an antecedent debt. The bankruptcy court granted the trustee’s subsequent motion for summary judgment, and Enviroc are appealed to- 4 -

the district court. In an oral ruling, the district court reversed the bankruptcy court, holding Mr. Holt was not a creditor of the d ebtor within the meaning of 11 U.S.C. § 547(b)(1). The court accord ingly concluded the repayment of funds to Envirocare to cover the d ishonored check did not constitute an illegal preference. Ms. Styl er appeals from that judgment. Ms. Styler raises three issues. First, she questio ns whether the district court properly concluded the extended reach back period for preference recovery under 11 U.S.C. § 54 7(b)(4)(B) should not apply because Mr. Holt was open to poten tial liability and statutory penalty for signing the returned chec k. Second, she argues the district court erred in concluding Mr. H olt was not a creditor of Tanset, claiming Holt was liable to Env irocare for the returned check under U TAH C ODE ANN . § 7-15-1 and, therefore, had a contingent right of reimbursement against Tanset. Third, Ms. Styler argues 11 U.S.C. § 547 does not limit the e xtended reach back period for preferences solely to those cases i nvolving contractual guarantees. We need only consider whet her Mr. Holt was benefited by the transfers as required by § 547(b)( 1). Under 11 U.S.C. § 547(b)(1) and (4), the BankruptcyCode extends the preference period to one year when paym ents are made for the benefit of a creditor who was an insider at the time of the transfer. To prove the transfers benefited Mr. Hol t, Ms. Styler- 5 -

relies upon U TAH C ODE ANN . § 7-15-1(1) which states: “[a]ny person who makes, draws, signs, or issues any check, ... w hether as corporate agent or otherwise, ... is liable to the holder of the check” if the check is not honored and returned for insufficient funds. Assuming Mr. Holt and the debtor were joint ly liable to Envirocare, Ms. Styler argues Mountain States Tel. & Tel. Co. v. Payne , 782 P.2d 464 (Utah 1989), supports her applicatio n of the
Utah “bad check” statute. The essence of Mountain States Tel. , however, is that U TAH C ODE
ANN . § 7-15-1 does not impose strict liability on the check signer. Although Ms. Styler exerts great effort distinguish ing the facts to make her case, she is unpersuasive.
In Mountain States Tel., a secretary who routinely signed checks at the direction of her employer signed late r dishonored checks. The secretary had no knowledge or reason t o believe the checks were drawn on insufficient funds, and she ha d no interest, beneficial or otherwise, in the account. The court found it unjust to hold the secretary liable for the company’s chec ks. Drawing a contrasting analogy, Ms. Styler argues Mr . Holt was the debtor’s corporate officer and ultimately respo nsible for all its activities. His financial prospects were tied to the debtor, and he was responsible for the checking account. T hus, Ms. Styler argues Mr. Holt’s actions fit squarely into the sco pe of the statute because of its broad language.- 6 -

Yet, Mountain States Tel. held § 7-15-1 does not impose such strict liability on the signatory. The court notes the statute, as originally enacted, required proof of intent to def raud before liability attached. Mountain States Tel. , 782 P.2d at 466. When the statute was amended in 1979, the words “willful ly with intent to defraud” were eliminated. However, the court co ncluded knowledge and intent were still inherent in the sta tute because when “uncertainty exists as to the interpretation a nd application of a statute, it is appropriate to look to its purp ose in the light of its background in history, and also to the effec t it will have in practical application ....” Id. (quotingStanton Transp. Co.
v. Davis , 341 P.2d 207, 209 (Utah 1959)). Because the stat ute’s history included an “intent” element, and strict li ability would “subject innocent employees who sign checks at the direction of their employers to personal liability,” the court c oncluded the statute still requires knowledge or intent. Id. “[W]e may construe section 7-15-1 to require that the signator [sic] o f a bad check personally receive benefits, services, or money tra nsfer or, in the alternative, have actual knowledge that the check i s drawn on insufficient funds in order to be held liable.” Id. at 467. Thus, liability would not attach unless the signatory act ually received financial benefit or knew the check was bad. It is undisputed at the time the bad check was deli vered to Envirocare, Mr. Holt believed there were sufficient funds in the- 7 -

account to cover the check. Moreover, as acknowled ged by Ms. Styler, the debtor, not Mr. Holt, received the bene fit from the transaction. Nonetheless, Mountain States Tel. makes clear, in the absence of proof of his actual knowledge of the ins ufficiency of the check, Mr. Holt is not liable under § 7-15-1. C onsequently, the transfers made to Envirocare could not inure to his benefit as required by 11 U.S.C. § 547(b)(1). Having arrived at this conclusion, it is unnecessary to consider the other arguments raised by the trustee.

AFFIRMED .

ENTERED FOR THE COURT

John C. Porfilio Circuit Judge