Avoiding Powers — §§ 544, 546, 550

In re Taylor, 390 B.R. 654, 662 (9th Cir. BAP 2008)
    Court did not abuse its discretion under § 550 in awarding the trustee with a money judgment in the amount of a security interest’s value as of the petition date against the secured lender whose security interest was avoided under § 547, thus allowing the creditor to retain its security interest on the car and the debtor to retain the car.

In re AVI, Inc., 389 B.R. 721, 724 (9th Cir. BAP 2008)
    “We hold that a trustee, subject to the requirement of establishing avoidance, may prosecute an action to recover from a subsequent transferee under § 550 without having earlier avoided the initial transfer.” Bankruptcy court also correctly found that the good faith defense in § 550(b)(1) was not available to the law firm transferee.

In re Straightline Investments, Inc., 525 F.3d 870, 882 (9th Cir. 2008)
    Postpetition transfer of accounts receivable was properly avoided under § 549.  Under § 550 trustee was entitled to collect the entire amount factor recovered on the accounts, even though the factor had already paid the debtor, where the factor was fully aware of the bankruptcy when he advanced the money.

In re Deuel, 361 B.R. 509 (9th Cir. BAP 2006)
    Under § 544(a)(3), the trustee is not deemed to have constructive notice “as of commencement of the case” from bankruptcy documents filed after the case is commenced. Professional Investment Properties of America, 955 F.2d 623 (9th Cir. 1992) distinguished.,

In re Incomnet, Inc.,  463 F.3d 1064 (9th Cir. 2006)
    In one-step, non-conduit case, defendant was “initial transferee” even though it was heavily regulated by the FCC, and was thus subject to preference avoidance.

In re Cohen, 300 F.3d 1097 (9th Cir. 2002)
    Person listed as the purchaser on a cashier's check was not the initial transferee, where someone else was the actual purchaser. Payee of the check was the initial transferee, and as such, was strictly liable for the transfer under §§ 550 and 548.

In re First T.D. & Investment, Inc. 253 F.3d 520 (9th Cir. 2001)
    Assignment of collateral notes and trust deeds to investors may be perfected in California without possession and thus cannot be avoided under the strong arm clause.

In re Mizudo, 223 F.3d 1050 (9th Cir. 2000)
    Statute of limitations in pre-1994 § 546 did not begin to run until trustee appointed, where foreign estate administrator was neither a trustee nor debtor in possession.

In re Parmetex, Inc., 199 F.3d 1029 (9th Cir. 1999)
    Statute of limitations under pre-1994 version of Bankruptcy Code began running from date of appointment of interim trustee.

In re P.R.T.C., Inc., 177 F.3d 774 (9th Cir. 1999)
    Chapter 7 trustee can transfer avoiding actions to third parties, as long as they are acting in the common interests of all creditors.

In re Harvey, 222 B.R. 888 (9th Cir. B.A.P. 1998)
    Bankruptcy trustee as bona fide purchaser could avoid creditors’ unsecured and unrecorded interests in property where vague and inconsistent language in schedules failed to provide notice.

In re Sale Guaranty Corp., 220 B.R. 660 (9th Cir. B.A.P. 1998), aff’d, 199 F.3d 1375 (9th Cir. 2000)
    Property held in resulting trust, and trustee had constructive knowledge of trust.  Thus, transfers unavoidable under § 544 (a)(3)

In re Varner, 219 B.R. 867 (9th Cir. B.A.P. 1998)
    Creditor’s failure to include debtor in possession’s social security and driver’s license numbers on abstract of judgment did not render judgment lien avoidable
    We conclude as a matter of law that a debtor in possession cannot avoid a judgment creditor’s lien under § 544(a)(3) when the creditor recorded an abstract of judgment pursuant to California Code of Civil Procedure § 674(a), listed the debtor’s social security and driver’s license numbers as “unknown” and had no knowledge of the social security and driver’s license numbers at the time the abstract was recorded or at any time prior to the bankruptcy filing.  Accordingly, we reverse and direct the bankruptcy court to enter judgment I favor of the creditor.

In re Video Depot, 127 F.3d 1195 (9th Cir. 1997)
    The court of appeals affirmed a judgment of the district court.  The court held that under § 550(a) of the Bankruptcy Code, a bankruptcy trustee can recover a corporate debtor’s pre-petition payment by cashier’s check to a controlling principal’s creditor

In re Megafoods Stores, Inc., 210 B.R. 351 (9th Cir. B.A.P. 1997), aff’d in part, vacated in part, 163 F.3d 1063 (9th Cir. 1998)
    1.  Debtor’s commingling of unremitted retail sales taxes with personal funds no bar to creation of statutory trust in favor of taxing authority
    2.  § 550 and conduit theory
    3.  State law controls interest rate because property is not part of bankruptcy estate.

In re Hamilton Taft & Company, 114 F.3d 991 (9th Cir. 1997)
    Bankruptcy trustee cannot avoid stockbroker’s pre-petition transfer of security to third party in debtor’ direction in reverse repurchase transaction

In re Dominion Corporation, 199 B.R. 410 (9th Cir. B.A.P. 1996)
    Brokerage firm acted as conduit and not as transferee in principal’s diversion of bankruptcy estate assets

In re Marino (Dye v. Rivera), 193 B.R. 907 (9th Cir. B.A.P. 1996), aff’d 117 F.3d 1425 (9th Cir. 1997)
    Constructive notice - § 544

In re Lucas Dallas, Inc.,185 B.R. 801 (9th Cir. B.A.P. 1995)    §550
    “[T]he principal of a corporate debtor does not become a ‘transferee’ by the mere act of causing the debtor to make a fraudulent transfer.”    

In re Presidential Corporation, 180 B.R. 233 (9th Cir. B.A.P. 1995)
    Seller’s agent does not become “initial transferee” of purchase money received through escrow from corporate debtor for benefit of buyer - § 550

Loo v. Martinson (In re Skywalkers, Inc.), 49 F.3d 546 (9th Cir. 1995)
    Section 550(c) does not preclude trustee from both 1) avoiding vendor’s lien on liquor license and 2) recovering preferential payment made to vendor for the license.  Avoidance of the lien was not a satisfaction of preference claim.  Fact that the estate retained license and received proceeds of sale was of no consequence to preference action.  Vendor still retained an unsecured claim for the amount owed to her

In re Acequia, Inc. 34 F.3d 800 (9th Cir. 1994)
    Once a creditor with an allowable claim has been located, the trustee has an unlimited right to involve state law avoiding powers under 544(b).  The amount is governed by 550 and is not limited by what creditors will receive in a plan.

In re Weisman, 5 F.3d 417 (9th Cir. 1993)
    Inquiry or constructive notice - § 544(a)(3)

In re Software Centre Int’l Inc., 994 F.2d 682 (9th Cir. 1993)
    2 yr state of 546(a) applies to debtor-in-possession

In re Kim, 161 B.R. 831  (9th Cir. B.A.P. 1993)
    Actual knowledge by debtor-in-possession is irrelevant under 544(a)(3); no constructive notice given on abstract

In re Thomas, 147 B.R. 526 (9th Cir. B.A.P. 1992), aff’d. 32 F.3d 572 (9th Cir. 1994), cert. denied, 513 U.S. 1079 (1995)
    Huber also argues that § 544(a)(3) cannot apply because the property is impressed with a constructive trust and, as such, it is not property of the estate under § 541(d), to which a trustee’s avoidance powers may apply.    While some case authorities support Huber’s contentions, see In re Quality Holstein Leasing, 752 F.2d 1009, 1013 (5th Cir. 1985), the Ninth Circuit has specifically rejected this reasoning.  See Seaway Express, 912 F.2d at 1128-29, Tleel, 876 F.2d at 772-773.  Under the law in this circuit § 541(d) does not stand as a bar to the avoidance of an equitable interest, including a constructive trust interest, in real property under § 544(a)(3), id. Rather § 544 (a)(3) allows the trustee to avoid such interest to the same extent that they could be avoided by a bona fide purchaser under state law.
    Under California law, a bona fide purchaser without actual or constructive notice takes free of a prior equitable interest or constructive interest. Rafferty v.. Kirpatrick, 29 Cal. App. 2d 503, 507-508 (1938),      Tleel, 876 F.2d at 771-72.  Section 544(a)(3) makes a trustee’s actual knowledge irrelevant.  See Tleel; Constructive notice, however, will preclude avoidance under § 544(a)(3). In re Probasco, 839 . F.2d 1352, 1354-55 (9th Cir. 1988) Whether the trustee can avoid Huber’s constructive trust interest in the property under § 544(a)(3) therefore, turns upon whether the trustee had constructive or inquiry notice of that interest.
    Huber’s occupancy of the property did not provide constructive notice, since she occupied it with the debtor/titleholder

In re Raitan, 139 B.R. 931 (9th Cir. B.A.P. 1992)
    1. C.C.P. § 708.320 does create a lien on partnership property upon the issuance of a charging order
    2. Security interest in stock may have been perfected upon the holder of such stock; notice of plaintiff’s interest may have held it as a bailee

In re Professional Investment Properties of America, 955 F.2d 623 (9th Cir. 1992), cert. denied, 506 U.S. 818 (1992)
    Creditor’s filing of involuntary petition put trustee on inquiry notice of creditor’s interest in unrecorded instruments

In re Lendvest Mortgage, Inc., 119 B.R. 199 (9th Cir. B.A.P. 1990); see also In re Lendvest Mortgage, 42 F.3d 1181 (9th Cir. 1994)
    (Where the def/dtr assumed all risk of loss and only the right to proceeds ( but not the DOT) were assigned to plaintiff,  transaction was not a sale)

In re Dietz, 914 F.2d 161 (9th Cir. 1990)
    § 550(b)

In re Seaway Express Corp., 105 B.R. 28 (9th Cir. B.A.P. 1989), aff’d. 912 F.2d 1125 (9th Cir. 1990)
    (Constructive trusts - trustee has power to avoid notwithstanding 541(d))

In re Heides, 915 F.2d 531 (9th Cir. 1990)
    (Failure to perfect security interest in real estate contract subordinated interest to that of trustee)

In re Mill Street, Inc.. 96 B.R. 268 (9th Cir. B.A.P. 1989)
    Assignee of debt for collection is an “initial transferee” - § 550

In re Probasco, 839 F.2d 1352, 1354-55 (9th Cir. 1988)
    Under cal law, bfp takes free of prior equitable interest or constructive trust interest.  Section 544(a)(3) makes a trustee’s actual knowledge irrelevant - see Tleel, 876 F.2d 771-772.  Constructive notice, however, will preclude avoidance under section (a)(3) see in re Probasco, 839 F.2d 1352 (9th Cir. 1988).  Whether the Trustee can avoid Huber’s constructive trust interest in the property under 544(a)(3) turns upon whether the trustee had constructive or inquiry notice of the interest.  However, Huber’s occupancy of the property did not provide constructive notice because she occupied it with the debtor/title holder...In re Thomas,    (9th Cir. B.A.P. (1992)