Opinion ID: 747564
Heading Depth: 2
Heading Rank: 2

Heading: Video Depot's Loan to Arlynn

Text: 26 Hilton next contends that the transfer of funds from Video Depot constituted a loan to Arlynn, giving Arlynn control over how the funds were spent and making him, not Hilton, the initial transferee. The bankruptcy court rejected this argument, citing insufficient evidence. Because we find nothing in the record to support a finding that Arylnn had dominion over the funds after they were disbursed by Video Depot, we agree with the bankruptcy court. 27 Hilton's argument rests on two documents that it submitted in support of its motion for summary judgment: excerpts from a ledger that appear to track payments by Video Depot on Arlynn's behalf and an affidavit from Arlynn. In the affidavit, Arlynn maintains: 28 On or about June 15, 1990, I borrowed the sum of $65,000.00 from Video Depot and caused this loan transaction to be recorded in the records of the corporation. The $65,000.00 in corporate funds was used to purchase a cashier's check in the amount of $65,000 made payable to the Las Vegas Hilton in partial satisfaction of a debt I owed.... Prior to the commencement of involuntary bankruptcy proceedings against Video Depot, I repaid this specific loan to the corporation. 29 The ledger lists payments to Jeffrey Arlynn in the amount of $10,000 and $65,000 on June 15. On the credit side of the ledger, a $75,000 payment from Arlynn is shown. 30 Simply referring to the transfer as a loan in the company ledger does not suffice, however, to demonstrate that at any point in time Arlynn exercised independent control over the funds. So long as the money remained in Video Depot's account, Arlynn's legal right to it was circumscribed by his duties to the corporation and its creditors. Once the funds were disbursed, Arlynn could use them only to pay Hilton. Regardless of how Hilton chooses to characterize the transfer, Hilton has failed to explain how Video Depot's issuance of a check earmarked expressly for the purchase of a cashier's check to the Las Vegas Hilton gave Arlynn dominion over the funds. 31 Arlynn was a courier, not a transferee. Particularly in view of the fact that Arlynn, as principal of Video Depot, could direct that the transfer be called anything he pleased in the company ledger, we require more substantial evidence that he exercised independent control over the funds after they left Video Depot's account. The bankruptcy court gave Hilton ample opportunity to present such evidence, and Hilton failed to do so.