Jeremy Gugino v. Greater Rome Bank , 609 F. App'x 367 ( 2015 )

NOT FOR PUBLICATION FILED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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