Walters v. Stevens, Littman, Biddison, No. 19-1206 (10th Cir. 2020)
Annotate this CaseEric Wagenknecht and his wife, Susan Colbert, filed for relief under Chapter 13 of the Bankruptcy Code in January 2016 (the “Petition Date”). The case was converted to Chapter 7 in April 2017. Jared Walters was appointed as the Chapter 7 trustee for the estate (the “Trustee”). Prior to the Petition Date, the Law Firm provided legal services to Eric. By the end of 2015, Eric owed the law firm of Stevens, Littman, Biddison, Tharp & Weinberg, LLC (the “Law Firm”) over $20,000. Eric borrowed money from his mother to pay the Law Firm, and executed a promissory note to repay her. In January 2018, the Trustee initiated an adversary proceeding against the Law Firm. The Trustee alleged that the payment to the Law Firm was a preferential transfer under 11 U.S.C. 547. The Trustee therefore sought to avoid and recover the payment under 11 U.S.C. sections 547 and 550. The parties cross-moved for summary judgment, and the bankruptcy court entered an order denying the Law Firm’s motion for summary judgment and granting the Trustee’s cross-motion for summary judgment. The Tenth Circuit reversed, finding that because Eric did not exercise control or dominion over the payment to the Law Firm, and because the payment did not diminish Eric’s bankruptcy estate, the payment did not constitute a “transfer of an interest of the debtor in property” under section 547(b). Therefore, the bankruptcy court erred in entering summary judgment in favor of the Trustee.
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