White v. Kar Smart of Lexington, Inc. et al

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF COLUMBIA
In re
CAMBRIDGE CAPITAL GROUP,
INC.,
Debtor.
____________________________
WILLIAM D. WHITE, as
trustee,
Plaintiff,
v.
KAR SMART OF LEXINGTON,
INC., a/k/a JNT, INC., et
al.,
Defendants.
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
Case No. 03-01178
(Chapter 7)
Adversary Proceeding No.
06-10011
Not for Publication in
West’s Bankruptcy Reporter
MEMORANDUM DECISION AND ORDER
In this adversary proceeding, the trustee of the estate of
the debtor, Cambridge Capital Group, Inc. (CCG), under chapter 7
of the Bankruptcy Code (11 U.S.C.) seeks to recover a $33,200
payment to the defendant, Kar Smart, Inc., as a fraudulent
conveyance. 	For the reasons explained below, the court will
grant the trustee’s motion for summary judgment in part, deny the
The document below is hereby signed.
Signed: November 16, 2009.
_____________________________
S. Martin Teel, Jr.
United States Bankruptcy Judge
Case 06-10011 Doc 55 Filed 11/16/09 Entered 11/16/09 13:17:13 Desc Main
Document Page 1 of 20

2
trustee’s motion in part, and deny the defendant’s cross-motion
for summary judgment.
I
The operative facts underlying these motions for summary
judgment revolve around the acquisition of a 1999 Range Rover by
Nancy Cummings, the wife of Eric Cummings, the 90% shareholder of
the debtor. 	In or about September of 2002, the defendant listed
for sale on E-bay a 1999 Land Rover Range Rover. 	Mrs. Cummings
placed the winning bid for the Range Rover and thereafter
executed a purchase order for the vehicle. 	On September 20,
2002, CCG, the debtor, issued a check in the amount of $33,200
payable to the defendant, noting in the memo line “RR 1999" and
the vehicle’s VIN number. 	The defendant deposited the check into
its account and transferred title to the car to Mrs. Cummings,
who thereafter took delivery.
In June of 2003, creditors initiated an involuntary chapter
7 proceeding against the debtor. 	In its schedules filed in
response to the chapter 7 petition, the debtor listed $931,000 of
its $16,211,015.20 in liabilities as incurred prior to 2002 (the
year of the transfer) and listed assets of $17,975 as of the
petition date. 	The debtor’s Statement of Financial Affairs also
discloses that in the 12 months prior to bankruptcy there were
transfers of $18,600 in bank garnishments and $200,000 in salary
Case 06-10011 Doc 55 Filed 11/16/09 Entered 11/16/09 13:17:13 Desc Main
Document Page 2 of 20

3
and disbursements to Mr. Cummings.
II
A party is entitled to summary judgment when there is no
“genuine issue of material fact” and the undisputed facts warrant
judgment for the moving party as a matter of law. 	Fed. R. Civ.
P. 56 (c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986).
In addressing a motion for summary judgment, “the court must view
the evidence in the light most favorable to the party against
whom summary judgment is sought and must draw all reasonable
inferences in [its] favor.” 	Matsushita Elec. Indus. Co. Ltd. v.
Zenith Radio Corp., 475 U.S. 574, 587 (1986). 	Whether any
disputed issue of fact exists is for the court to determine.
Balderman v. United States Veterans Admin., 870 F. 2d 57, 60 (2d
Cir. 1989). The moving party has the initial burden of
demonstrating the absence of a disputed issue of material fact.
Celotex v. Catrett, 477 U.S. 317, 323 (1986). 	Once such a
showing has been made, the non-moving party must present
“specific facts showing that there is a genuine issue for trial.”
Fed. R. Civ. P. 56(e). 	The party opposing summary judgment “may
not rely on conclusory allegations or unsubstantiated
speculation.” 	Scotto v. Almenas, 143 F. 3d 105, 114 (2d Cir.
1998). 	Moreover, not every disputed factual issue is material in
light of the substantive law that governs the case. 	“Only
Case 06-10011 Doc 55 Filed 11/16/09 Entered 11/16/09 13:17:13 Desc Main
Document Page 3 of 20

4
disputes over facts that might affect the outcome of the suit
under the governing law will properly preclude summary judgment.”
Anderson, 477 U.S. at 248.
III
The trustee seeks to avoid the transfer pursuant to the
constructive fraud provision of 11 U.S.C. § 548(a)(1)(B), arguing
that because the debtor wrote a check for a vehicle that was
delivered to Mrs. Cummings and because debtor’s schedules lead to
a “reasonable conclusion” that it was insolvent on the date of
the transfer this transaction is avoidable as a fraudulent
conveyance. 	The defendant opposes the trustee’s motion on three
grounds. 	First, the defendant contends that there is
insufficient evidence to show that the money transferred from the
debtor to the defendant was property of the debtor. 	Second, the
defendant argues that the trustee is not entitled to summary
judgment because the trustee has failed to establish the debtor’s
insolvency as of the date of transfer. 	Third, the defendant
argues alternatively that in the event the Court were to find
there were sufficient facts to establish that an interest in the
debtor’s property was transferred and the debtor was insolvent as
of the date of transfer, the court nonetheless should deny the
trustee’s motion and instead find that the defendant is entitled
to summary judgment because the debtor received “reasonably
Case 06-10011 Doc 55 Filed 11/16/09 Entered 11/16/09 13:17:13 Desc Main
Document Page 4 of 20

1 	In 2005 § 548 was amended to extend the fraudulent
conveyance period from 1 year to 2 years. 	Because the
transaction at issue occurred within 1 year of the filing of the
bankruptcy petition, which time period is applicable is
immaterial for purposes of the present motion.
2 	Section 548 provides, in relevant part:
The Trustee may avoid any transfer . . . of an interest of
the debtor in property . . . that was made or incurred on or
within 2 years before the date of the filing of the
petition, if the debtor voluntarily or involuntarily--
(A) made such transfer or incurred such obligation with
actual intent to hinder, delay, or defraud . . . ; or
(B) 	(i) received less than a reasonably equivalent
value in exchange for such transfer or obligation;
and
(ii)(I) was insolvent on the date that such
transfer was made or such obligation was incurred
. . . . 	11 U.S.C. § 548(a)(1).
5
equivalent value” on the transfer.
To prevail on a claim for fraudulent conveyance under
§ 548(a)(1)(B), the trustee has the burden of proving that within
2 years 1 prior to the filing of the bankruptcy petition there was
(1) a transfer of an interest in the debtor in property; (2) that
occurred when the debtor was insolvent; and (3) the debtor
received “less than reasonably equivalent value in exchange” in
the transfer. 2 	Dicello v. Jenkins, 160 B.R. 1, 10 (Bankr. D.D.C.
1993).
A.
A Transfer of an Interest of the Debtor in Property
To prevail under the constructive fraud provision of
§ 548(a)(1)(B), the trustee first has the burden of showing that
Case 06-10011 Doc 55 Filed 11/16/09 Entered 11/16/09 13:17:13 Desc Main
Document Page 5 of 20

6
it was an interest of the debtor in property that was
transferred. 	In support of this element of the test, the trustee
offers a cleared check drawn from the debtor’s account payable to
the defendant. 	In opposition to the trustee’s motion, the
defendant argues that the debtor was a mere conduit for the funds
ultimately sent to the defendant. 	In support of this argument,
the defendant notes that the debtor’s Schedule G filed in the
underlying proceeding shows deposits in the debtor’s account of
$30,000 on September 20 and $29,000 on September 23, five and two
days, respectively, before the car was purchased. 	The debtor
posits that this money could have been transferred by Mrs.
Cummings for the purpose of purchasing the vehicle. 	Whether
money deposited into an account of the debtor by a third party
for the purpose of paying that third party’s creditor is an
interest of the debtor in property for purposes of § 548 is an
issue of first impression for this court and this circuit.
Several other circuits have, however, addressed the issue.
The Eleventh Circuit, in In re Chase & Sandborn, Corp., 813
F.2d 1177 (1987) developed the relevant test followed by all
other courts addressing the issue today. 	There, the court
explains the public policy behind avoidance actions in
bankruptcy:
The 	purpose 	of 	both 	[preference 	actions 	and 	fraudulent
transfers] is to prevent the debtor from diminishing, to
the 	detriment 	of 	some 	or 	all 	creditors, 	funds 	that 	are
generally 	available 	for 	distribution 	to 	creditors.
Case 06-10011 Doc 55 Filed 11/16/09 Entered 11/16/09 13:17:13 Desc Main
Document Page 6 of 20

7
Consequently, any funds under the control of the debtor,
regardless of the source, are properly deemed to be the
debtor’s property, and any transfer that diminishes that
property are subject to avoidance. 	Id. at 1181.
Importantly, however, the court pointed out a “critical
difference” between preferences and fraudulent conveyances
regarding whether the debtor had control of the property
transferred:
Avoidable preferences arise in a situation in which it is
logical to presume that the debtor in fact controlled the
funds 	paid 	out: 	the 	debtor, 	after 	all, 	was 	under 	an
existing 	obligation 	to 	make 	payment. 	The 	presumption
that the debtor controlled the payment is not similarly
compelling 	where 	funds 	provided 	by 	a 	third 	party 	are
transferred 	to 	a 	noncreditor. 	By 	definition, 	such
transfers 	are 	not 	effected 	to 	repay 	an 	existing
obligation of the debtor. 	Indeed, such transfers do not
provide any benefit whatsoever to the debtor. 	Thus, as
a 	general 	matter, 	it 	is 	as 	likely 	that 	the 	party
providing the funds would instigate the transfer as it is
that the debtor would do so. 	Id.
The court then went on to conclude that the purpose of fraudulent
conveyance avoidance was to preserve assets of the debtor for the
benefit of all creditors and noted that “[p]resuming control from
the mere fact of transfer thus begs the essential question
presented by § 548 claims: Did the transfer diminish the assets
of the debtor?” 	Id. 	Ultimately, the Eleventh Circuit concluded
that “where a transfer is challenged as fraudulent, more is
necessary to establish the debtor’s control over the funds than
the simple fact that a third party placed the funds in an account
of the debtor with no express restriction on their use.” 	Id.
Case 06-10011 Doc 55 Filed 11/16/09 Entered 11/16/09 13:17:13 Desc Main
Document Page 7 of 20

8
Instead, the court stated, one must look to “the entire
circumstances” of the transaction. 	Id. at 1182.
In evaluating the entire circumstances of the transaction,
the Chase & Sandborn court weighed several factors: the amount of
time the deposited money spent in the account; when the account
was opened in relation to the deposits and when the account was
closed; 	and the name under which the account was opened. 	Id.
Other courts addressing the issue have found dispositive whether
a check sent to the debtor was simply endorsed over to the third
party’s creditor, 	A.W. Lawrence & Co., Inc. v. Burstein (In re
A.W. Lawrence & Co.), 346 B.R. 51, 28 (Bankr. N.D.N.Y. 2006), or
whether the deposited money was being held in trust for the third
party, Southmark Corp. v. Grosz (In re Southmark Corp.), 49 F.3d
1111, 1118 (5th Cir. 1995) (addressing in the § 547 context);
Yoder v. T.E.L. Leasing, Inc. (In re Suburban Motor Freight,
Inc.), 124 B.R. 984, 995–96 (Bankr. S.D. Ohio 1990).
In support of its motion, as stated above, the trustee has
presented a check, drawn on the debtor’s account, for the payment
of the Range Rover. 	The mere fact that the check was drawn from
the debtor’s account was sufficient to meet the trustee’s initial
burden under Celotex to show an absence of a material fact that
the money transferred was an interest of the debtor in property.
After the trustee made this showing, the ultimate burden of
demonstrating the existence of a genuine issue of material fact
Case 06-10011 Doc 55 Filed 11/16/09 Entered 11/16/09 13:17:13 Desc Main
Document Page 8 of 20

9
shifted to the defendant. 	Celotex, 477 U.S. at 322–23.
Particularly, “[w]hen the moving party has carried its burden
under Rule 56(c), its opponent must do more than simply show that
there is some metaphysical doubt as to the material facts . . . .
In the language of the Rule, the nonmoving party must come
forward with ‘specific facts showing that there is a genuine
issue for trial.’” Matushita Elec. Indus. Co. v. Zenith Radio
Corp., 475 U.S. 574, 586–87 (1986) (quoting Fed. R. Civ. Proc.
56(e))(emphasis added).
Here, the defendant has come forward with no particular
facts. 	Instead, the defendant merely “posits” that the money
deposited in the debtor’s account in the days prior to the
transfer could have come from Mrs. Cummings or someone paying on
her behalf. 	The defendant’s suppositions are insufficient to
carry its burden under the Celotex and Matushita standards.
The defendant goes on to ask the court to reopen discovery
for the limited purpose of finding the source of the funds
deposited in the debtor’s account in the days leading up to the
transfer. 	The defendant has had ample time to undertake
discovery in this matter, and has failed to allege facts showing
cause for extending the discovery deadline. 	The court declines
the defendant’s request to allow additional discovery.
Case 06-10011 Doc 55 Filed 11/16/09 Entered 11/16/09 13:17:13 Desc Main
Document Page 9 of 20

10
B. 	Insolvency
The next issue to address is whether the trustee has
submitted sufficient evidence to establish the absence of
material issues of disputed facts regarding the debtor’s
insolvency as of the transfer date. 	In support of a finding of
insolvency the trustee offers the debtor’s schedules and
statement of financial affairs filed in the underlying chapter 7
case. 	The schedules show that prior to 2002, the year the car
was purchased, the debtor had liabilities of $931,000 and that on
the date of petition the debtor had assets valued at $17,975.
The statement of financial affairs shows that during the 12
months preceding the filing of the chapter 7 petition, the debtor
had transfers of $18,600 in garnishments and $200,000 in wages to
Mr. Cummings. 	The defendant contends that these facts are
insufficient to establish the debtor’s insolvency as of the
transfer date. 	The court agrees.
Inferring insolvency over a period time from a proven date
of insolvency has been referred to by some courts as
“retrojection.” 	See Briden v. Foley, 776 F.2d 379, 382 (1st Cir.
1985). 	This court, along with other courts looking at the issue
of retrojection, has held that “evidence of insolvency on a date
significantly distant in time from the date of the transfer,
without more evidence, is insufficient to support a finding of
insolvency on the date of the transfer.” 	Washington
Case 06-10011 Doc 55 Filed 11/16/09 Entered 11/16/09 13:17:13 Desc Main
Document Page 10 of 20

11
Bancorporation v. Hodges (In re Washington Bancorporation), 180
B.R. 330, 333 (Bankr. D.D.C. 1995) (citing In re Auto-Pak, Inc.,
55 B.R. 403, 405 (Bankr. D.D.C. 1985)). 	To establish the
debtor’s insolvency as of the transfer date the trustee relies on
the debtor’s schedules and statement of financial affairs.
The schedules accompanying the debtor’s chapter 7 case show
that prior to 2002, nine months before the transfer at issue, the
debtor had liabilities totaling $931,000 that still existed at
the time of bankruptcy. 	Further, schedule B lists assets valued
at $18,000 as of the petition date. 	Finally, the statement of
financial affairs shows transfers of $218,600 within the one-year
period prior to the petition date. 	Taking these numbers
together, the trustee contends, leaves the debtor insolvent by at
least $694,400 as of the transfer date. 	These numbers, however,
do not provide a complete picture of the financial state of the
company on the date of the transfer at issue.
The statement of financial affairs asks the debtor to
disclose certain prepetition transfers——specifically, transfers
that a trustee could avoid as either preferential or fraudulent.
For example, question three requires the debtor to disclose
payments to all creditors within 90 days before the filing of the
petition and transfers to insider creditors within one year of
the date of filing. 	Question ten requires the debtor to disclose
transfers out of the ordinary course of business within one year
Case 06-10011 Doc 55 Filed 11/16/09 Entered 11/16/09 13:17:13 Desc Main
Document Page 11 of 20

3 	The court also notes that the debtor listed revenues in
the two years prior to petition of $1,200,000. 	If these revenues
were recognized prior to the purchase of the Range Rover, then
this could also provide further evidence of the debtor’s
solvency.
12
of the petition date. 	Finally, question twenty-three requires
the debtor to disclose withdrawals and distributions given to
insiders within one year before the petition date. 	Though
detailed, these questions leave out many prepetition transactions
that would provide the information necessary to retroject the
debtor’s insolvency as of the transfer date.
The statement of financial affairs, for example, sheds no
light on ordinary course transfers in the one-year period before
the petition date. 	Presumably, the debtor could have had
ordinary course transfers after the purchase of the Range Rover
that would have rendered the company insolvent as of the petition
date but that would not have affected the debtor’s solvency at
the date of purchase. 3 	Because the schedules and statement of
financial affairs do not present a complete financial picture as
of the transfer date, the court finds it impossible to retroject
the debtor’s insolvency based solely on this information.
Consequently, the court denies the trustee’s motion for summary
Case 06-10011 Doc 55 Filed 11/16/09 Entered 11/16/09 13:17:13 Desc Main
Document Page 12 of 20

4 	The trustee also notes in its motion a suit pending in
Georgia during the transfer period alleging $14 million in
damages. 	Even assuming, for the sake of argument, that this
contingent, non-liquidated claim were appropriately included as a
liability of the debtor as of the transfer date, the trustee’s
motion still suffers from the same deficiency: the schedules and
statement of financial affairs paint too incomplete a picture to
determine the debtor’s insolvency as of the transfer date.
13
judgment on this point. 4
Having determined that the trustee is not entitled to
summary judgment on the solvency prong of § 548(a)(1), the next
issue is whether the defendant can prevail on its cross-motion.
When a party moving for summary judgment on a claim does not bear
the ultimate burden at trial, that party can prevail by
“showing——that is, pointing out to the district court——that there
is an absence of evidence to support the non-moving party’s
case.” 	Celotex, 477 U.S. at 325. 	To make this showing, however,
the moving party must do more than conclusorily state that there
is an absence of evidence. 	Rather, the movant must “inform[] the
district court of the basis for its motion, and identify[] those
portions of ‘the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the
affidavits, if any,’ which it believes demonstrate the absence of
a genuine issue of material fact.” 	Id. at 323 (quoting
Fed.R.Civ.P. 56(c)). 	Although the defendant argues that there is
insufficient evidence to establish the debtor’s insolvency as of
the transfer date, it has failed to “inform” the court of the
Case 06-10011 Doc 55 Filed 11/16/09 Entered 11/16/09 13:17:13 Desc Main
Document Page 13 of 20

14
basis for its motion.
In its memorandum in support of its cross motion for summary
judgment, the defendant takes care to point out why the evidence
the trustee relied on in its motion is insufficient to
demonstrate insolvency. 	The defendant does not, however, provide
the court with enough information to determine that there is no
evidence of insolvency elsewhere. 	In making its motion for
summary judgment, the trustee relied exclusively on the debtor’s
schedules and statement of financial affairs. 	These are but two
limited pieces of evidence in a fraudulent conveyance action. 	To
prevail on its cross motion for summary judgment the defendant
must point to an absence of evidence in other areas, not just the
limited scope of the schedules and statement of financial
affairs. 	Rather, under Celotex, the defendant had the burden of
“identifying those portions of ‘the pleadings, depositions,
answers to interrogatories, and admissions on file, together with
the affidavits” that showed an absence of evidence of the
debtor’s insolvency. 	For these reasons the defendant’s cross
motion is appropriately denied.
C. 	Reasonably Equivalent Value
Having address the insolvency and interest of the debtor in
property prongs of the fraudulent conveyance section, the final
issue is whether the debtor received reasonably equivalent value
in exchange for tendering its check to the defendant.
Case 06-10011 Doc 55 Filed 11/16/09 Entered 11/16/09 13:17:13 Desc Main
Document Page 14 of 20

15
Section 548(d)(2) of the Bankruptcy Code defines value as
“property, or satisfaction or securing of a present or antecedent
debt of the debtor . . . .” 	In support of an absence of value to
the debtor, the trustee has presented several pieces of evidence.
First, Mrs. Cummings and the defendant were the only parties to
the purchase order. 	Second, CCG, the debtor, issued a check to
the defendant, noting in the memo line that the check was for a
“1999 Range Rover” and the car’s VIN. 	Third, the schedules
accompanying the debtor’s chapter 7 filing do not list the Range
Rover as an asset. 	Finally, the trustee noted that Mrs. Cummings
took title to and possession of the Range Rover. 	At first look,
these uncontroverted facts establish that the debtor paid for a
car that Mrs. Cummings owned and, therefore, no reasonably
equivalent value was exchanged for the check. 	These facts are
not in dispute and the defendant does not contend there are any
other facts outstanding. 	The defendant, however, relying
exclusively on Plotkin v. Pomona Valley Imports, Inc., 199 B.R.
709 (9th Cir. BAP 1996), contends that the debtor received a
brief property interest in the Range Rover that should constitute
value for the purposes of § 548.
In Plotkin, the debtor created a Ponzi scheme whereby he
offered to purchase luxury cars for prospective purchasers at a
wholesale price. 	Id. at 712. 	In a typical transaction the
debtor would take $80,000 from several purchasers and buy as many
Case 06-10011 Doc 55 Filed 11/16/09 Entered 11/16/09 13:17:13 Desc Main
Document Page 15 of 20

16
cars as he could at the sticker price, $114,500. 	Id. 	After he
signed the sales contract, the debtor would then direct the
dealer to deliver and title the car to specific, “lucky”
prospective buyers. 	Id. at 712—13. 	Because the debtor was
paying $34,500 more for each car than he collected from each
prospective purchaser, other purchasers’ money was used to make
up the shortfall until the scheme collapsed. 	Id. at 713.
In Plotkin, the Ninth Circuit Bankruptcy Panel found that
the transfers were not avoidable because the debtor qualified for
the safe harbor under § 548(c), which provides that a transferee
who takes in good faith and for value can retain the transferred
property notwithstanding the transaction’s otherwise fraudulent
status. 	Id. at 720. 	Integral to the court’s finding was that
the debtor had received value (i.e., property) in the
transaction. 	Id. 	Particularly, the court found that although
the debtor never received legal title to the cars, he did receive
equitable title. 	Id. at 714.
The Plotkin court went on to explain that the dominion and
control test informed its analysis. 	Id. at 715. 	The dominion
and control test “determines who is a transferee and requires, at
a minimum, dominion over the money or other asset, the right to
put the money [or asset] to one’s own purposes such as to invest
in lottery tickets or uranium stock.” 	Id. (citing Danning v.
Miller, 922 F.2s 544 548—49 (9th Cir. 1991)) (internal quotations
Case 06-10011 Doc 55 Filed 11/16/09 Entered 11/16/09 13:17:13 Desc Main
Document Page 16 of 20

5 	The defendant here makes a point of noting that it made
delivery of the car in accordance with the instructions of Eric
Cummings, the 90% owner of CCG and Mrs. Cummings husband.
However, Kar Smart makes no allegations that in so directing Mr.
Cummings was acting as an agent for CCG. 	And, in any event, even
if Mr. Cummings were acting as an agent for CCG he had no power
greater than that of CCG, which, as stated previously, had no
power at all as it was not a party to the contract.
17
omitted) (alterations in original). 	Based on this reasoning, the
Plotkin court found that the debtor was “plainly the dealers’
transferee of the vehicles. 	He had the exclusive power to
designate the persons to whom the vehicles would be delivered.”
Id. 	The present case is distinguishable from Plotkin.
The debtor in Plotkin was a contractual party to the
transaction: 	He entered into sales agreements with the dealers
for the purchase of the automobiles. 	Id. at 712. 	It was this
contract that gave the Plotkin debtor the right to direct the
disposition and delivery of the cars. 	This right to direct via
the contract was the debtor’s property interest, and therefore
value, for purposes of § 548. 	Here, the only party to the
contract was Mrs. Cummings: 	Mrs. Cummings won the auction on E-
Bay and Mrs. Cummings was the only party to the purchase order.
CCG had no right to direct any disposition or delivery of the
Range Rover. 	Presumably, if CCG had attempted to direct
disposition or delivery, Kar Smart would have been liable to Mrs.
Cummings for a breach of contract because CCG was neither her
agent nor had any rights under the contract. 5 	The mere payment
Case 06-10011 Doc 55 Filed 11/16/09 Entered 11/16/09 13:17:13 Desc Main
Document Page 17 of 20

18
of money by the debtor for the benefit of a third party without a
supporting contract giving the debtor some rights in the property
(e.g., to direct its ultimate disposition or delivery) is
insufficient, as a matter of law, to establish value for the
purposes of § 548. 	For these reasons Plotkin does not provide a
sound basis on which to contest the trustee’s motion for summary
judgment. 	Accordingly, the court finds the trustee has
established that there was no reasonably equivalent value to the
debtor on the transaction.
IV
Having determined that the transfer from the debtor to the
defendant is a fraudulent conveyance under § 548(a)(1)(B), the
next issue to address is whether the defendant is a entity from
which the trustee can recover. 	Section 550(a) empowers the
trustee to recover any transfer avoided under § 548 from either
the initial transferee or the immediate or mediate transferee of
the initial transferee. 	11 U.S.C. § 550(a). 	Section 550(b),
however, excepts from the reach of § 550(a) any immediate or
mediate transferee of the initial transferee who takes for value,
in good faith, and without knowledge of the avoidable nature of
the transfer. 	Id. § 550(b).
In support of its contention that the defendant was a
transferee for purposes of § 550, the trustee presents a check
Case 06-10011 Doc 55 Filed 11/16/09 Entered 11/16/09 13:17:13 Desc Main
Document Page 18 of 20

19
written from the debtor to the defendant. 	In opposition, the
defendant contends that it is not an initial transferee and
therefore eligible for the § 550(b) safe harbor. 	In its motion
in opposition the defendant asserts, based on its supposition
that the money deposited in the days leading up to the transfer
came from Mrs. Cummings or a party paying on her behalf, that the
defendant is an immediate transferee of the debtor in good faith
and for value and, therefore, eligible for the § 550(b)
safeharbor. 	Even assuming, for the sake of argument, that the
defendant’s supposition is true, the defendant still does not
qualify for the § 550(b) safeharbor.
Section 550(b) precludes the Trustee from recovering from a
good faith immediate or mediate transferee of the initial
transferee of the debtor. 	See 11 U.S.C. § 550 (allowing the
Trustee to recover to the extent a transfer is avoided under
§ 548, which has a scope limited to transfers of property from
the debtor). 	Here, the defendant is arguing that the debtor was
the initial transferee and the defendant was its immediate good
faith transferee for value. 	This, however, would only provide
relief if Mrs. Cummings were the debtor. 	Because CCG is the
debtor, however, § 550(b) provides no relief to the defendant.
Case 06-10011 Doc 55 Filed 11/16/09 Entered 11/16/09 13:17:13 Desc Main
Document Page 19 of 20

20	O:\TEEL\Garrett\Decisions\KARSMART v3.wpd
V
The trustee has made a sufficient showing for summary
judgment on the issues of whether an interest of the debtor in
property was transferred and whether the debtor failed to receive
reasonably equivalent value in the exchange. 	Regarding the
interest of the debtor in property, the defendant’s suppositions
are insufficient under Celotex and Matsushita to overcome the
trustee’s motion. 	Further, regarding the reasonably equivalent
value prong, the court finds Plotkin distinguishable from the
present case on the basis of no underlying contract between the
debtor and the defendant providing some value to the debtor. 	On
the issue of insolvency, however, both the trustee’s and the
defendant’s showing is insufficient to entitled either to summary
judgment. 	Finally, the court finds the defendant’s reliance on
§ 550(b)’s safeharbor misplaced: Mrs. Cummings is not the debtor
in this case and, therefore, CCG is not an initial transferee and
the defendant its immediate transferee. Accordingly, it is
ORDERED that the trustee’s motion for summary judgment is
granted in part and denied in part as set forth above, and that
the defendant’s motion for summary judgment is denied.
[Signed and dated above.]
Copies to: All counsel of record; Office of United States
Trustee.
Case 06-10011 Doc 55 Filed 11/16/09 Entered 11/16/09 13:17:13 Desc Main
Document Page 20 of 20