In the Matter of WallDesign, No. 15-56220 (9th Cir. 2017)
Annotate this CaseThe Ninth Circuit affirmed the district court's reversal of the bankruptcy court's grant of summary judgments for defendants in two adversary proceedings seeking recovery of fraudulent transfers. The panel applied the dominion test and held that defendants were initial transferees under 11 U.S.C. 550(a)(1) and thus not entitled to the safe harbor under section 550(b)(1) for subsequent transferees. Therefore, the Committee could recover the funds from both the corporate cheat and those parties to whom he first made payments from the corporate account. The panel remanded for further proceedings.
Court Description: Bankruptcy The panel affirmed the district court’s reversal of the bankruptcy court’s summary judgments in favor of the defendants in two adversary proceedings seeking recovery of fraudulent transfers. Applying the “dominion test,” the panel held that creditors who received misappropriated funds from the debtor corporation’s sole shareholder, director, and president were initial transferees under 11 U.S.C. § 550(a)(1). They therefore were not entitled to the safe harbor of § 550(b)(1) for subsequent transferees, and the Committee of Unsecured Creditors could recover the funds both from the corporate cheat and those parties to whom he first made payments from the corporate account. The panel affirmed the district court’s judgments in favor of the Committee and remanded with instructions to remand both cases to the bankruptcy court for further proceedings. Dissenting, Judge Nguyen wrote that the result of the majority’s decision was not equitable. She wrote that the court should consider adopting the “control test” used by other circuits, or at least returning to a hybrid “dominion and control” approach. In addition, even applying the dominion test, the defendants were not initial transferees.
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.