Opinion ID: 1269674
Heading Depth: 3
Heading Rank: 2

Heading: Judgment against Welbilt Holding

Text: The Trustee argues that the district court should have entered judgment against Welbilt Holding under 11 U.S.C. § 550(a)(1), which allows a trustee to recover transfers that have been avoided from the initial transferee of such transfers or the entity for whose benefit the transfers were made. The district court declined to enter judgment against Welbilt Holding on the grounds that judgment in the entire amount had been entered against Enodis and that 11 U.S.C. § 550(d) entitled the Trustee to only a single satisfaction of the judgment amount. Section 550(d) provides that [t]he trustee is entitled to only a single satisfaction under subsection (a) of this section. The Trustee contends that the district court misconstrued § 550(d) and that although § 550(d) precludes the Trustee from collecting more than once, it does not prevent a court from entering judgment against more than one party. There is some support for the Trustee's position. As defined in the Bankruptcy Code, or is not exclusive. See 5 COLLIER ON BANKRUPTCY ¶ 550.02[4] at 550-16 (Alan N. Resnick et al., eds., 15th ed. rev.2007) (citing 11 U.S.C. § 102(5)). Thus, the trustee can recover from any combination of the entities mentioned [in § 550] subject to the limitation of a single satisfaction. Id. Even if the district court erred, however, in order for the Trustee to be entitled to judgment against Welbilt Holding, he must establish that Welbilt Holding was an entity for whose benefit the transfers were made. The bankruptcy court found that [t]he record does not indicate that any of Consolidated's money went to [Welbilt] Holding. . . . None of the transfers from Consolidated to [Enodis] were advantageous to [Welbilt] Holding. Appellants' App. at 50. The Trustee does not challenge that finding, arguing that because the transfers were actually owed to Welbilt Holding, it is an entity for whose benefit they were made. Although a few courts have found that an entity need not actually obtain a benefit in order to be an entity for whose benefit a transfer was made, see, e.g., In re Richmond Produce Co., 118 B.R. 753 (Bankr.N.D.Cal.1990), requiring that the entity actually receive a benefit from the transfer is consistent with the well-established rule that fraudulent transfer recovery is a form of disgorgement, so that no recovery can be had from parties who participated in a fraudulent transfer but did not benefit from it. In re McCook Metals, L.L.C., 319 B.R. 570, 591 (Bankr. N.D.Ill.2005); see also In re Meredith, 527 F.3d 372, 376 (4th Cir.2008) ([A] person must actually receive a benefit from the transfer in order to be an `entity for whose benefit' the transfer was made.); In re Compton Corp., 831 F.2d 586, 595 (5th Cir.1987). Imposing liability on a nontransferee based on the debtor's intent to benefit him, without requiring proof that the nontransferee actually benefited from the transfer, bears no relationship to the theory of cancellation that historically underlies avoidance remedies. Larry Chek & Vernon O. Teofan, The Identity and Liability of the Entity for Whose Benefit a Transfer Is Made under Section 550(a): An Alternative to the Rorschach Test, 4 J. BANKR.L. & PRAC. 145, 156 (1995). Because Welbilt Holding did not derive a benefit from the transfers, we affirm the district court's refusal to enter judgment against Welbilt Holding.