* This order and judgment is not binding precedent, except under the doctrines of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.
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After examining the briefs and the appellate record, this

three-judge panel has determined unanimously that oral argument

would not be of material assistance in the determination of this

appeal. See Fed.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 bankruptcy estate

of Tanset Resources and Services, Inc., appeals the decision of the

United States District Court for the District of Utah reversing an

order of the bankruptcy court. The bankruptcy court granted

summary judgment to Ms. Styler in her action to avoid prepetition

transfers made by Tanset Resources to appellee, Envirocare of Utah,

Inc. The transfers were payments upon a dishonored check given by

the debtor to Envirocare. The district court reversed, rejecting

Ms. Styler’s argument that the payments were made to 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 ultimately in charge

of the financial affairs of the debtor, overseeing deposits,

payments, and loans. However, the debtor did not maintain current

accurate ledgers for its checking account.

In January 1990, Envirocare agreed to purchase gold coins from
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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 in the operation

of its business. Mr. Holt made no personal use of the money.

Envirocare and the debtor eventually decided to cancel the

transaction, and on March 2, the debtor delivered a check, signed

by Mr. Holt, in the amount of $49,932, to Envirocare. The check

was dishonored on presentment because of insufficient funds. It is

undisputed Mr. Holt believed there were funds in the account

sufficient to honor the check when it was delivered.

Over the next two months, the debtor made five payments 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 Bankruptcy Code which

was later converted to a case under Chapter 7. Therefore, the

payments to Envirocare were made between 90 days and one year

before the date of the filing of the petition for bankruptcy.

As trustee for the debtor, Ms. Styler filed a complaint in the

bankruptcy court under 11 U.S.C. § 547(b)(1) to avoid the payments

made by the debtor to Envirocare. That provision of the Bankruptcy

Code allows a trustee to avoid a transfer made by the 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 Envirocare appealed to
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the district court.

In an oral ruling, the district court reversed the bankruptcy

court, holding Mr. Holt was not a creditor of the debtor within the

meaning of 11 U.S.C. § 547(b)(1). The court accordingly concluded

the repayment of funds to Envirocare to cover the dishonored check

did not constitute an illegal preference. Ms. Styler appeals from

that judgment.

Ms. Styler raises three issues. First, she questions whether

the district court properly concluded the extended reach back

period for preference recovery under 11 U.S.C. § 547(b)(4)(B)

should not apply because Mr. Holt was open to potential liability

and statutory penalty for signing the returned check. Second, she

argues the district court erred in concluding Mr. Holt was not a

creditor of Tanset, claiming Holt was liable to Envirocare for the

returned check under UTAH CODE 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 extended reach

back period for preferences solely to those cases involving

contractual guarantees. We need only consider whether Mr. Holt was

benefited by the transfers as required by § 547(b)(1).

Under 11 U.S.C. § 547(b)(1) and (4), the Bankruptcy Code

extends the preference period to one year when payments are made

for the benefit of a creditor who was an insider at the time of the

transfer. To prove the transfers benefited Mr. Holt, Ms. Styler
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relies upon UTAH CODE ANN. § 7-15-1(1) which states: “[a]ny person

who makes, draws, signs, or issues any check, ... whether 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 jointly liable to

Envirocare, Ms. Styler argues Mountain States Tel. & Tel. Co. v.

Payne, 782 P.2d 464 (Utah 1989), supports her application of the

Utah “bad check” statute.

The essence of Mountain States Tel., however, is that UTAH CODE

ANN. § 7-15-1 does not impose strict liability on the check signer.

Although Ms. Styler exerts great effort distinguishing 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 later dishonored

checks. The secretary had no knowledge or reason to believe the

checks were drawn on insufficient funds, and she had no interest,

beneficial or otherwise, in the account. The court found it unjust

to hold the secretary liable for the company’s checks. 

Drawing a contrasting analogy, Ms. Styler argues Mr. Holt was

the debtor’s corporate officer and ultimately responsible for all

its activities. His financial prospects were tied to the debtor,

and he was responsible for the checking account. Thus, Ms. Styler

argues Mr. Holt’s actions fit squarely into the scope of the

statute because of its broad language.
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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 defraud before

liability attached. Mountain States Tel., 782 P.2d at 466. When

the statute was amended in 1979, the words “willfully with intent

to defraud” were eliminated. However, the court concluded

knowledge and intent were still inherent in the statute because

when “uncertainty exists as to the interpretation and application

of a statute, it is appropriate to look to its purpose in the light

of its background in history, and also to the effect it will have

in practical application ....” Id. (quoting Stanton Transp. Co.

v. Davis, 341 P.2d 207, 209 (Utah 1959)). Because the statute’s

history included an “intent” element, and strict liability would

“subject innocent employees who sign checks at the direction of

their employers to personal liability,” the court concluded the

statute still requires knowledge or intent. Id. “[W]e may construe

section 7-15-1 to require that the signator [sic] of a bad check

personally receive benefits, services, or money transfer or, in the

alternative, have actual knowledge that the check is drawn on

insufficient funds in order to be held liable.” Id. at 467. Thus,

liability would not attach unless the signatory actually received

financial benefit or knew the check was bad.

It is undisputed at the time the bad check was delivered to

Envirocare, Mr. Holt believed there were sufficient funds in the
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account to cover the check. Moreover, as acknowledged by Ms.

Styler, the debtor, not Mr. Holt, received the benefit from the

transaction. Nonetheless, Mountain States Tel. makes clear, in the

absence of proof of his actual knowledge of the insufficiency of

the check, Mr. Holt is not liable under § 7-15-1. Consequently, 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