On Tuesday, April 15, 2014, the Tenth Circuit Court of Appeals issued its opinion in C.W. Mining Co. v. Bank of Utah.
In this bankruptcy matter, the Chapter 7 Trustee filed a complaint with the bankruptcy court seeking to recover a post-petition transfer to the Bank of Utah. C.W. Mining had deposited $362,000 with the bank in exchange for a certificate of deposit. C.W. Mining then was subject to an involuntary Chapter 11 proceeding, which was converted to a Chapter 7 proceeding. The bank then liquidated the certificate of deposit, which had a value of $383,099. The bank applied the proceeds to the balance owing on two of three promissory notes executed by C.W. Mining in favor of the Bank in 2005, 2006, and 2007. Although the bank knew of the bankruptcy proceeding, it did not inform the trustee, who learned of the transfer when the bank sold its rights on the third promissory note to a third-party seller and the seller sought recovery from the estate. The trustee commenced an adversary proceeding to recover $383,099 from the bank and the parties filed cross-motions for summary judgment.
The bankruptcy court awarded summary judgment to the bank, reasoning that avoidance would be pointless because a transfer to a fully secured creditor cannot be avoided under 11 U.S.C. § 549 without also reviving the secured creditor’s lien. The trustee failed to allege any injury from the bank’s transfer.
The trustee appealed to the Bankruptcy Appellate Panel, which affirmed the bankruptcy court’s judgment. He appealed again to the Tenth Circuit, but the Tenth Circuit affirmed the BAP, finding that the bankruptcy court’s decision was thorough, well-reasoned, and correct.