Court Opinion

ID: 2816040
Source: CourtListenerOpinion
Date Created: 2015-07-09 20:03:47.167197+00
Date Added: 2024-06-11T11:30:37.609315
License: Public Domain

NOT FOR PUBLICATION                         FILED
                         UNITED STATES COURT OF APPEALS                      JUL 9 2015
                                                                         MOLLY C. DWYER, CLERK
                                                                          U.S. COURT OF APPEALS
                                 FOR THE NINTH CIRCUIT

 In re: PAYROLL AMERICA, INC., DBA                      No. 13-35903
 Payroll Associates,
                                                        D.C. No. 1:13-cv-00044-BLW
 ______________________________
 JEREMY GUGINO, Chapter 7 Bankruptcy
 Trustee,                                               MEMORANDUM*

             Plaintiff - Appellant,

   v.

 GREATER ROME BANK, a Georgia
 financial institution,

             Defendant - Appellee.

                        Appeal from the United States District Court
                                  for the District of Idaho
                      B. Lynn Winmill, Chief District Judge, Presiding

                                      Submitted July 7, 2015**
                                        Seattle, Washington

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
        **
             The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).

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Before: NGUYEN and FRIEDLAND, Circuit Judges and CARNEY,*** District
Judge.

      The Chapter 7 Trustee for Debtor Payroll America, Inc. (“PAI”) filed an

adversary proceeding against Greater Rome Bank (“GRB”) seeking to recover

funds from allegedly fraudulent transfers. The bankruptcy court granted summary

judgment in favor of GRB. Trustee appealed to the district court, which affirmed,

and then appealed to this court. We review the bankruptcy court’s grant of

summary judgment de novo, Caneva v. Sun Cmtys. Operating Ltd. P’ship (In re

Caneva), 550 F.3d 755, 760 (9th Cir. 2008) (per curiam), and we affirm.

      Under 11 U.S.C. § 550(a), Trustee may recover property fraudulently

transferred from (1) “the initial transferee,” (2) “the entity for whose benefit such

transfer was made,” and (3) subsequent transferees. GRB does not fit into any of

the categories of § 550(a).

      GRB was not an initial transferee of the cure wires. This circuit applies the

dominion test to determine whether an entity is an initial transferee. Universal

Serv. Admin. Co. v. Post-Confirmation Comm. of Unsecured Creditors of Incomnet

Comms. Corp. (In re Incomnet, Inc.), 463 F.3d 1064, 1070 (9th Cir. 2006). Under

the dominion test, “a transferee is one who . . . has dominion over the money or

      ***
             The Honorable Cormac J. Carney, District Judge for the U.S. District
Court for the Central District of California, sitting by designation.

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other asset, the right to put the money to one’s own purposes.” Id. (alteration in

original). The transfers at issue in this case were payments from PAI to another

entity, Data Processing Service of Georgia, Inc. (“DPS”). Trustee’s argument that

the cure wires were payments on account of a debt PAI owed GRB is contradicted

by the record. DPS had a separate contractual relationship with GRB that allowed

the bank to deduct from DPS any losses GRB incurred. GRB did so and left it up

to DPS to independently recover from its clients, including PAI. Therefore, when

the funds were transferred from PAI into DPS’s account, the payments were for

DPS, not GRB, and DPS had dominion over the money.

      Nor was GRB an entity for whose benefit the transfers were made. To fall

under this category of § 550(a), an entity must benefit from the initial transfer, not

as a result of a subsequent transfer. See Danning v. Miller (In re Bullion Reserve

of N. Am.), 922 F.2d 544, 547-48 (9th Cir. 1991). Because the cure wires were not

on account of a debt PAI owed GRB, the bank did not benefit from those transfers.

      Finally, GRB is not a subsequent transferee. GRB’s employee testified that

GRB collected from DPS immediately after determining it had incurred a loss.

The employee explained that it was up to DPS to collect from PAI, and the record

shows that DPS often recovered from PAI after GRB had recovered from DPS.

      AFFIRMED.

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