Rosen v. Dahan et al

Filing 11

MEMORANDUM OPINION. Signed by Chief Judge Deborah K. Chasanow on 3/9/12. (sat, Chambers)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
IN RE: MINH VU HOANG and
THANH HOANG
______________________________
GARY A. ROSEN, Trustee
Appellant
v.

:
:
:
:

DAVID DAHAN, et al.
Appellees

Civil Action No. DKC 11-2320

:
:
MEMORANDUM OPINION

Pending before the court is an appeal from an order entered
by United States Bankruptcy Judge Thomas J. Catliota on June 28,
2011, partially dismissing the trustee’s amended complaint in
this

adversary

proceeding.

Because

the

facts

and

legal

arguments are adequately presented in the briefs and record,
oral argument is deemed unnecessary.
Local Rule 105.6.

See Fed.R.Bankr.P. 8012;

For the reasons that follow, the order of the

bankruptcy court will be affirmed.
I.

Background
On May 10, 2005, Debtor Minh Vu Hoang filed a voluntary

petition under chapter 11 of the bankruptcy code in the United
States

Bankruptcy

Court

for

the

District

of

Maryland.

She

served as debtor-in-possession until Appellant Gary A. Rosen was
appointed chapter 11 trustee on August 31, 2005.

The case was

converted to chapter 7 on October 28, 2005, and Appellant was

named chapter 7 trustee shortly thereafter.

He has served in

that capacity ever since.1
A.

The Adversary Complaint

Appellant commenced this adversary proceeding on February
6,

2011

–

attempting
debtor.

one
to

of

many

recover

such

actions

assets

brought

fraudulently

by

the

concealed

trustee
by

the

According to the amended complaint, from 1998 to 2005,

Debtor purchased a large number of properties at foreclosure
sales

through

various

business

entities

under

her

control.

These entities were mere “instrumentalities and alter egos” of
Debtor (ECF No. 6-1 ¶ 52) – they were nominally partnerships or
limited liability companies governed by one or more agreements
naming either fictitious partners/members or Debtor as the only
partner/member; they generally kept no financial records and had
no

tax

identification

numbers;

their

assets

were

routinely

commingled at the behest of Debtor and for her sole benefit; and
they

existed

for

no

purpose

other

properties purchased by Debtor.

than

holding

title

to

After acquiring a distressed

property and titling it in the name of one business entity,
Debtor

typically

made

renovations

1

and

sold

the

property

for

Debtor’s husband, Thanh Hoang, separately filed a
voluntary chapter 11 petition on July 12, 2005.
That case was
also converted to chapter 7, and Mr. Rosen was appointed as the
trustee.
On September 28, 2005, the bankruptcy court ordered
that Mr. and Mrs. Hoang’s bankruptcy estates be jointly
administered.
2

substantial profit, often using a portion of the sale proceeds
to purchase another property in the name of a different business
entity.
many

This process, or something similar to it, was repeated

times;

Debtor

used

literally

hundreds

of

entities to “flip” hundreds of properties.

sham

business

Her interest in

those entities and the associated properties, however, was not
reflected in her bankruptcy schedules or statement of financial
affairs and, on April 11, 2007, she was criminally indicted on
charges related to bankruptcy and tax fraud.2
According to Appellant, the filing of a bankruptcy petition
and

the

Debtor’s

pendency

of

criminal

scheme.

Among

charges

those

who,

did

little

post-petition,

to

deter

“acted

in

concert with [Debtor] to help her conceal her assets” (id. at ¶
73) was Appellee David Dahan.

Upon the request of Debtor, Mr.

Dahan created Appellee Maia, LLC (“Maia”), for the purpose of
“funnel[ing]” proceeds of the sale of properties “as part of
[Debtor’s] scheme to hide her assets from the Trustee.”
¶ 75).

(id. at

Two other business entities “owned (in whole or in

substantial part) and controlled” by Mr. Dahan (id. at ¶¶ 15,
16)

–

Appellees

Rokama,

LLC

(“Rokama”),

and

Raymonde,

LLC

(“Raymonde”) – were also used by Debtor for similar purposes.
2

On October 13, 2010, Debtor was convicted, upon her guilty
plea, of conspiracy to defraud an agency of the United States,
in violation of 18 U.S.C. § 371. She was sentenced to a term of
imprisonment of sixty months, which she is presently serving.
3

The amended complaint raises nine sets of counts, each of
which relates to the post-petition purchase and subsequent sale
or refinancing of a parcel of real property.

The allegations

and causes of action set forth with respect to six of those
properties are relevant to the instant appeal.
The

first

property,

located

at

3119

Parkway,

Cheverly,

Maryland (“Parkway”), was purchased at a foreclosure sale on
December 15, 2005.

The successful bidder was Rokoma, LLC, a

business entity created and controlled by Debtor.3
HUD-1

settlement

statement

identified

“Rokoma,

While the

LLC,”

as

the

purchaser, title to the property was conveyed to Rokama, an
entity controlled Mr. Dahan.

On or about March 7, 2007, Rokama

sold Parkway for $371,000, receiving a total of $338,518.78 from
the sale.

Of that amount, $146,000 was used to pay down a home-

equity line of credit in the name of Mr. Dahan and his wife,
Appellee Sarit Dahan (together, “the Dahans”).4

On or about May

3, 2007, Mr. Dahan drew $146,000 from the same line of credit to
obtain a cashier’s check, which, in turn, was used by ASA, LLC –

3

According to the complaint, the purchase funds derived
from “three cashier’s checks payable to [Rokoma], LLC: one in
the amount of $228,899.56, another in the amount of $45,316.89,
and the third in the amount of $17,604.84.”
(ECF No. 6-1 ¶
102).
4

The Dahans’ daughter, Karin Dahan, is also named as an
appellee, but there are no substantive allegations against her
with respect to the six properties at issue in this appeal.
4

another

of

Annapolis,

Debtor’s

entities

Maryland.

The

–

to

remainder

purchase
of

a

the

property

sale

in

proceeds,

$192,518.78, was deposited into a bank account in the name of
Rokama.

Mr. Dahan used $180,000 of those funds to purchase a

quantity of diamonds from his brother, a diamond merchant in
Israel, which he then delivered to Debtor.

An additional amount

of $7,914.59 was distributed to Maia.
The second property, 6304 Kenhowe Drive, Bethesda, Maryland
(“Kenhowe”), was purchased for $525,000 by Rokama at an auction
on December 14, 2005.

Debtor signed the memorandum of purchase

at the auction on behalf of Rokama, listing her home address as
Rokama’s business address.

At closing, the HUD-1 settlement

sheet

as

identified

the

conveyed to Rokama.
$484,589

of

the

buyer

“Rokoma,

LLC,”

but

title

was

According to the complaint, approximately

purchase

funds

for

Kenhowe

is

traceable

to

proceeds from the sale of three other properties, each of which
was

titled

in

the

name

established by Debtor.
checks

payable

to

a

different

business

entity

The remaining amounts were derived from

Debtor,

with Debtor, and Rokama.
sold for $640,000.

of

another

business

entity

associated

On September 21, 2006, Kenhowe was

Rokama received $596,547.25 from the sale,

but immediately transferred that amount to an account in the
name of Maia.

The complaint recites that $165,566.09 of the

sale proceeds was used to purchase a property in the District of
5

Columbia, which is currently titled in the name of Raymonde.

An

additional amount of $78,000 was deposited into an account in
the name of the Dahans, but $77,126 was transferred back to Maia
and used to make various payments.
used

for

the

purchase

of

a

Approximately $172,500 was

property

in

Fort

Washington,

Maryland, by another of Debtor’s business entities.5
The third property, 13416 Sherwood Forest Drive, Bethesda,
Maryland (“Sherwood”), was purchased at an auction on May 19,
2006, by Kashan, LLC, an entity associated with Debtor, for
$467,000.
Sherwood

At least ninety percent of the funds used to purchase
were

traceable

to

proceeds

from

the

sale

of

other

properties by a number of Debtor’s business entities or from
accounts associated with those entities.

Pursuant to an order

of the Circuit Court for Montgomery County, Maryland, Maia was
later substituted as the purchaser.

Prior to recordation of the

deed, Maia obtained a line of credit, secured by a deed of trust
on Sherwood, in the amount of $400,000.

Virtually the entire

amount available on the line of credit was subsequently drawn,
and the traceable funds were disbursed as follows: $230,500 was
used to pay down the balance on another line of credit in the
name of the Dahans, from which funds had previously been paid to
Debtor; $29,000 was paid to Maia; $34,475 was deposited into an

5

This property, referred to as “300 Foundry Lane,” is the
ninth property at issue in the adversary complaint.
6

account in the name of the Dahans; $10,000 was used by Maia to
pay an architect working on a property owned by Maia; $4,000 was
used by Mr. Dahan to pay a contractor for work on a property
that he owned; and $41,451.65 was used to pay taxes and loan
fees.
The fourth property, 7654 Bay Street, Pasadena, Maryland
(“Bay”), was purchased on September 16, 2005, by “Ballinger GP,”
another business entity established by Debtor, for approximately
$475,000.

The purchase funds for this property consisted of

$438,618.72

from

a

bank

account

in

the

name

of

Rocky

LLC,

another of Debtor’s business entities; $1,125 from a check drawn
on an account in the name of Minbilt Co., a real estate company
established

by

Debtor;

and

a

$35,000

Debtor.

The

Bay

property

was

$620,000,

and

the

proceeds

were

account.

sold

check
on

made

July

deposited

payable

18,

into

to

2007,

for

a

Ballinger

On or about July 25, 2007, $150,000 of those funds was

used to pay down the balance on the same line of credit, in the
name of the Dahans, as the proceeds from the sale of Sherwood.
The

fifth

property,

6700

Sundown

Road,

Gaithersburg,

Maryland (“Sundown”), was purchased on December 8, 2006.

This

property was titled in the name of Elite Realty, LLC, an entity
associated with Debtor.
least

$271,541.54

derived

Of the $409,000 purchase price, at
from

proceeds

of

a

prior

sale

by

another of Debtor’s business entities, a check payable to a
7

different entity associated with Debtor, and a cashier’s check
made payable to Debtor or her business associate.
was sold on June 8, 2007, for $390,000.

The property

From the proceeds,

$362,315.31 was deposited into an account in the name of Elite
Realty, and $56,000 of that amount was later wired to Maia.
The sixth property, 11819 Milbern Drive, Potomac, Maryland
(“Milbern”), was purchased on September 19, 2005, in the name of
Regency General Partnership, another of Debtor’s entities, for
$621,617.37.

The purchase funds are traceable to checks made

payable

to

various

other

business

entities

associated

Debtor.

On or about June 29, 2006, Milbern was refinanced, and

the loan was secured by a deed of trust on the property.

with

Of the

loan amount, $101,500 was disbursed to “J. Noda Remodeling,” a
business entity owned by an associate of Debtor’s, and later
deposited into an account in the name of “Noda LLC,” another of
Debtor’s business entities.

On or about August 8, 2006, $15,000

was disbursed to Rokama from this account and, on September 19,
2006,

Rokama

transferred

this

money

to

a

business

entity

associated with Debtor’s son.
Appellant

sought

to

recover

the

money

distributed

to

Appellees from the sale or refinance of these properties under
three

separate

received

these

theories.

First,

distributions

as

he

alleged

“conduits,

that

Appellees

nominees,

and/or

agents” of Debtor, and that they were “obligated to turn them
8

over

to

[Appellant]

or

to

account

pursuant to 11 U.S.C. § 542(a).

.

.

.

for

their

(ECF No. 6-1 ¶ 96).

value”

Appellant

further alleged that Appellees’ acts “constituted conversion of
property belonging to the bankruptcy estate[.]”
In

the

alternative,

he

asserted

that

the

(Id. at ¶ 129).
distributions

to

Appellees were unauthorized post-petition transfers subject to
avoidance under 11 U.S.C. § 549.6
B.

The Motion to Dismiss

Appellees moved to dismiss all counts related to these six
properties for failure to state a claim.

With regard to the

turnover counts, they argued that “Section 542 is only available
[to] obtain turnover of assets that were in the hands of a
defendant pre-petition . . . [and] does not apply to assets that
came into the hands of [Appellees] post-petition” (ECF No. 6-2,
at 2 (emphasis removed)), relying principally on Deckelbaum v.
Cooter, Mangold, Tompert & Chapman, PLLC, 275 B.R. 737 (D.Md.
2001).

They contended that the conversion claims could not be

sustained

because

tangible

personal

“[t]he

tort

of

property,”

and

conversion
“money

–

only

applies

which

is

to

what

[Appellant] alleges was converted – is not tangible personal
property.”

(ECF No. 6-2, at 2).

6

Finally, Appellees argued that

The complaint also included a count alleging conversion of
a promissory note associated with Kenhowe.
That count is not
relevant to the instant appeal.
9

Appellant’s claims for avoidance of unauthorized post-petition
transfers under 11 U.S.C. § 549 were time-barred.
Appellant

opposed

this

motion,

insisting

that

Appellees

“are subject to liability under § 542(a) even though (1) they
first obtained possession of the property at issue after the
petition was filed and (2) they no longer possessed the property
when this [adversary] proceeding was commenced.”
at 11).
the

(ECF No. 6-5,

As support for this proposition, Appellant pointed to

legislative

history

of

§

542,

which

reflects

that

“any

entity, other than a custodian, is required to deliver property
of the estate to the trustee or debtor in possession whenever
such property is acquired by the entity during the case.”
at 13 (internal citation and emphasis removed)).

(Id.

To the extent

that Deckelbaum held otherwise, Appellant argued, it was wrongly
decided.7
The parties appeared before Judge Catliota for a hearing on
June 15, 2011.

At the outset of the hearing, Appellant conceded

that his § 549 claims were time-barred, but maintained that a
turnover order pursuant to § 542(a) was the proper remedy under
the circumstances presented.

Following extensive argument, the

court granted Appellees’ motion with respect to the conversion

7

Appellant further argued that he sufficiently pleaded a
claim for conversion because the money at issue was specifically
identifiable.
He
did
not,
however,
address
Appellees’
limitations defense with respect to the § 549 claims.
10

counts, dismissing those claims without prejudice to Appellant’s
right to amend.

As to the turnover claims, the court explained

that it would issue an opinion and order granting the motion
based

on

opinion,

the

reasoning

however,

Judge

of

Deckelbaum.

Catliota

expressed

In

his

subsequent

reservations

regard to this outcome:
This Court will follow Deckelbaum and
dismiss [Appellant’s] §542 claims. However,
if the Court were writing on a clean slate,
it might well reach a different result. The
Deckelbaum court focused on the structure of
the Bankruptcy Code, and in particular, the
interplay between §542 and §549.
But the
plain language of §542 does not limit its
application to recovery of property that is
in a defendant’s possession only as of the
petition date.
See United States v. Ron
Pair Enters., 489 U.S. 235, 109 S.Ct. 1026
(1989) (courts should interpret a statute in
accordance with its plain meaning).
To the
contrary, §542 recovery can be sought from
“an entity . . . in possession, custody, or
control during the case of property . . . .”
11 U.S.C. §542 (emphasis added).
The
specific application of the section to
property that is in the possession, custody
or control of a defendant “during the case”
would seem contrary to a determination that
it only applies to pre-petition transfers.
. . .
The courts that conclude that §542 is
limited to cases where the defendant is in
possession of recoverable property as of the
petition date do so based on §549. . . .
They reason that §549 specifically addresses
post-petition
transfers
and
contains
important limitations that would not apply
to a post-petition §542 action. . . .

11

with

On their face at least, §542(a) and
§549
address
different
circumstances.
Section 542(a) addresses cases where the
defendant is or has been in possession of
property of the estate, while §549 addresses
unauthorized
post-petition
transfers
of
property. Nevertheless, generally speaking,
because one can be in possession of property
only where one has received a transfer of
property,
there
is
substantial
overlap
between the two provisions.
But merely
because
there
may
be
overlap
in
the
application of the two statutory provisions
does not mean that one, §549, limits the
other, §542. . . .
(ECF

No.

6-11,

at

7-9)

(emphasis

in

original;

footnotes

omitted).
C.

The Appeal

Appellant filed a timely motion for leave to appeal and
concomitantly moved to stay the proceedings in the adversary
case pending resolution of the prospective appeal.
did not oppose these motions.

Appellees

The bankruptcy court issued an

order granting a stay pending appeal on August 19, 2011.
court granted leave to appeal on August 26.

This

(ECF No. 3).

Appellant filed his brief on September 9, presenting the
following questions:
(1) whether [11 U.S.C. § 542(a)] applies
when the property at issue is acquired by
the defendant after the bankruptcy has
commenced, and
(2) whether, assuming this provision applies
when the property at issue is transferred to
the defendant by the debtor after the
bankruptcy has commenced, it also applies
12

when the property is acquired by the
defendant post-petition and the defendant
acquired the property on behalf of the
debtor rather than as a transferee.
(ECF No. 4, at 6).
October

21

(ECF

Appellees filed a brief in opposition on

No.

9);

Appellant

filed

a

reply

brief

on

November 3 (ECF No. 10).
II.

Standard of Review
A district court reviews a bankruptcy court’s dismissal for

failure to state a claim under a de novo standard of review.
See Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir.
1993).
Federal

Rule

of

Civil

Procedure

12(b)(6)

applies

to

adversary proceedings in a bankruptcy cases pursuant to Federal
Rule of Bankruptcy Procedure 7012(b).

The purpose of a motion

to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) is to test the
sufficiency

of

Charlottesville,

the
464

complaint.
F.3d

480,

See
483

Presley
(4th

Cir.

v.

City

2006).

of
A

plaintiff’s complaint need only satisfy the standard of Rule
8(a), which requires a “short and plain statement of the claim
showing that the pleader is entitled to relief.”

Fed.R.Civ.P.

8(a)(2).

requires

Nevertheless,

“Rule

8(a)(2)

still

a

‘showing,’ rather than a blanket assertion, of entitlement to
relief.”

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 n. 3

(2007).

That showing must consist of more than “a formulaic

13

recitation

of

the

elements

of

a

cause

of

action”

or

assertion[s] devoid of further factual enhancement.”

“naked

Ashcroft

v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949 (2009) (internal
citations omitted).
At this stage, the court must consider all well-pleaded
allegations in a complaint as true, Albright v. Oliver, 510 U.S.
266, 268 (1994), and must construe all factual allegations in
the

light

most

favorable

to

the

plaintiff,

see

Harrison

v.

Westinghouse Savannah River Co., 176 F.3d 776, 783 (4th Cir.
1999) (citing Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134
(4th Cir. 1993)).

In evaluating the complaint, the court need

not accept unsupported legal allegations.

See Revene v. Charles

Cnty. Comm’rs, 882 F.2d 870, 873 (4th Cir. 1989).

Nor must it

agree with legal conclusions couched as factual allegations, see
Iqbal,

129

devoid

of

S.Ct.
any

at

1950,

reference

to

or

conclusory

actual

factual

events,

see

allegations

United

Firefighters v. Hirst, 604 F.2d 844, 847 (4th Cir. 1979).

Black
See

also Francis v. Giacomelli, 588 F.3d 186, 193 (4th Cir. 2009).
“[W]here the well-pleaded facts do not permit the court to infer
more than the mere possibility of misconduct, the complaint has
alleged, but it has not ‘show[n] . . . that the pleader is
entitled

to

relief.’”

Fed.R.Civ.P. 8(a)(2)).

Iqbal,

129

S.Ct.

at

1950

(quoting

Thus, “[d]etermining whether a complaint

states a plausible claim for relief will . . . be a context14

specific task that requires the reviewing court to draw on its
judicial experience and common sense.”

Id.

III. Analysis
Many courts have struggled in construing the turnover and
avoidance provisions of the bankruptcy code.

See, e.g., Dunes

Hotel Associates v. Hyatt Corp., 245 B.R. 492,492 (D.S.C. 2000)
(describing

the

task

as

“an

Odyssean

journey

through

[an]

analytical labyrinth,” an “intractable and complex set of legal
issues”).

Some of these difficulties arise from what appears to

be a conflict in the application of two fundamental principles
of statutory construction.

Courts are advised, on one hand,

that “[t]he plain meaning of legislation should be conclusive,
except in the rare cases in which the literal application of a
statute will produce a result demonstrably at odds with the
intentions

of

its

drafters.”

United

States

v.

Ron

Pair

Enterprises, Inc., 489 U.S. 235, 242 (1989) (internal marks and
citation omitted).

At the same time, they must be mindful that

[s]tatutory construction . . . is a holistic
endeavor.
A
provision
that
may
seem
ambiguous in isolation is often clarified by
the remainder of the statutory scheme –
because
the
same
terminology
is
used
elsewhere in a context that makes its
meaning clear, or because only one of the
permissible meanings produces a substantive
effect that is compatible with the rest of
the law.

15

United Sav. Ass’n of Texas v. Timbers of Inwood Forest Assocs.,
Ltd., 484 U.S. 365, 371 (1988).
The question of how to give effect to the plain language of
the

relevant

provisions

concomitantly

reading

those

of

the

bankruptcy

provisions

in

code

harmony

with

statutory scheme is at the heart of this appeal.
relied upon by the bankruptcy court –

while
the

The case

Deckelbaum v. Cooter,

Mangold, Tompert & Chapman, P.L.L.C., 275 B.R. 737 (D.Md. 2001)
– “focused on the structure of the Bankruptcy Code, and, in
particular, the interplay between [11 U.S.C.] § 542 and § 549.”
In re Minh Vu Hoang, 452 B.R. 902, 907 (Bankr.D.Md. 2011).8
Specifically, the Deckelbaum court found that if the trustee
were

permitted

to

recover

property

transferred

post-petition

under § 542(a), which has no statute of limitations, then the
two-year “statute of limitations contained within § 549(d) would
be rendered meaningless[.]”

Deckelbaum, 275 B.R. at 741.

As

the bankruptcy court noted, however, “[t]he plain language of §
542(a) does not limit its application to recovery of property
that is in a defendant’s possession only as of the petition
date.”
Enters.,

In re Minh Vu Hoang, 452 B.R. at 907 (citing Ron Pair
489

U.S.

at

242,

for

8

the

proposition

that

“courts

For ease of exposition, all references to provisions of
the bankruptcy code will be referred to by section number only.
These sections are all found in Title 11 of the United States
Code.
16

should

interpret

meaning”).

a

statute

in

accordance

with

its

plain

“The specific application of the section to property

that is in the possession, custody or control of a defendant
‘during the case’ would seem contrary to a determination that it
only

applies

to

pre-petition

transfers.”

Id.

Thus,

the

bankruptcy court saw a conflict between its reading of the plain
language of § 542(a) and the relationship between that provision
and the avoidance statute set forth in § 549.
On appeal, as in the court below, the parties do not make a
meaningful

attempt

to

resolve

this

conflict.

Rather,

they

merely stake their respective claims on each side of the fence.
In

arguing

distributed

that
to

the

property

Appellees

from

in

question

proceeds

–

of

i.e.,
the

money

sale

or

refinancing of property that was acquired and sold post-petition
–

is

subject

to

turnover

under

§

542(a),

Appellant

relies

principally on the plain language of the statute, arguing that
Deckelbaum was wrongly decided because it “is inconsistent with
the statutory text and the legislative history[.]”
at 12).

(ECF No. 4,

Appellees argue, on the other hand, that the bankruptcy

court’s decision was “completely in harmony with the statutory
scheme established by Congress for recovery of estate property
under Subchapter III of Chapter 5 of the Bankruptcy Code.”
No. 9, at 11).

17

(ECF

Ultimately,

neither

of

these

arguments

is

particularly

persuasive because the parties fail to address the key concept
of “property of the estate,” which both instructs as to the
meaning of § 542(a) and facilitates an understanding of its role
within the statutory scheme.

Upon full analysis, the proper

outcome in this case is compelled by the following logic: (1) §
542(a) entitles the trustee to possession of property of the
estate; (2) property that is transferred is not property of the
estate;

and

transferred.
follows

(3)

the

property

at

issue

in

this

case

was

If each of these premises is shown to be true, it

necessarily

that

the

property

at

issue

cannot

be

Possession

of

recovered pursuant to § 542(a).
A.

§ 542(a) Entitles the
Property of the Estate

The

filing

of

a

creation of an estate.

bankruptcy
See

Trustee

petition

§ 541(a).

to

gives

rise

to

the

As relevant to the

instant case, the bankruptcy estate is “comprised of all the
following property, wherever located and by whomever held”:
(1) Except
and (c)(2)
equitable
property as
. . . .

as provided in subsections (b)
of this section, all legal or
interests
of
the
debtor
in
of the commencement of the case.

(3) Any interest in property that the
trustee
recovers
under
section
329(b)
[excess attorney’s fees], 363(n) [damages
from improper sale], 543 [property turned
over by custodian], 550 [property from
avoided transfer], 553 [property recovered
18

from offset], or 723 [property recovered
from general partners] of this title. . . .
(6) Proceeds, product, offspring, rents, or
profits of or from property of the estate,
except such as are earnings from services
performed by an individual debtor after the
commencement of the case.
(7) Any interest in property that the estate
acquires after the commencement of the case.
Id.

Thus,

“property

of

the

estate”

consists

of

every

conceivable interest of the debtor in property as of the time
the

bankruptcy

case

possession of it.

is

commenced,

regardless

of

who

has

See United States v. Whiting Pools, Inc., 462

U.S. 198, 205 (1983) (Congress intended the bankruptcy estate to
be comprised of “any property made available to [it] by other
provisions of the Bankruptcy Code,” including “property in which
the debtor did not have a possessory interest at the time the
bankruptcy proceedings commenced”); In re Barringer, 244 B.R.
402, 406 (Bankr.E.D.Mich. 1999) (“it is obvious from a cursory
reading of § 541(a) that the bankruptcy estate is not limited to
those interests held by the debtor when the case commenced.
Indeed,

the

whole

point

of

sub-paragraphs

(3)

through

(7)

clearly is to bring into the estate other kinds of interests.”)
(emphasis in original).
In a chapter 7 case, the trustee becomes the representative
of the estate upon his appointment and qualification.
323.

See §

It is often said that the trustee essentially steps into
19

the shoes of the debtor with respect to her interests at the
time the petition is filed:
[It is a] basic tenant of bankruptcy law
that a bankruptcy trustee succeeds only to
the title and rights in property that the
debtor had at the time she filed the
bankruptcy petition. 11 U.S.C. § 541; In re
Schauer, 835 F.2d 1222, 1225 (8th Cir. 1987;
[In
re]
Groves,
120
B.R.
[956,
966
(Bankr.N.D.Ill. 1990)]. Filing a bankruptcy
petition does not expand or change a
debtor’s interest in an asset; it merely
changes the party who holds that interest.
See [In re] Sildorff, 96 B.R. [859, 866
(C.D.Ill. 1989)].
Further, a trustee takes
the
property
subject
to
the
same
restrictions
that
existed
at
the
commencement of the case.
“‘To the extent
that an interest is limited in the hands of
a debtor, it is equally limited as property
of the estate.’”
[In re] Balay, 113 B.R.
[429, 445 (Bankr.N.D.Ill. 1990)] (quoting 4
Collier on Bankruptcy § 541.06 (15th ed.
1989)).
In re Sanders, 969 F.2d 591, 593 (7th Cir. 1992).

Generally, it

is the responsibility of the trustee to “marshal and consolidate
the debtor’s assets into a broadly defined estate from which, in
an

equitable

and

orderly

process,

the

debtor’s

unsatisfied

obligations to creditors are paid to the extent possible.”
re

Andrews,

80

F.3d

906,

909-10

(4th

Cir.

1996)

In

(footnotes

omitted).
Given that the trustee is tasked with consolidating the
“property
necessarily

of
in

the
the

estate,”
debtor’s

and

that

these

possession,

20

assets

“there

must

are

not

be

some

mechanism for acquiring control of them.”
B.R. 294, 299 (D.Md. 2002).
is one such mechanism.

Walker v. Weese, 286

The turnover provision of § 542(a)

See Whiting Pools, 462 U.S. at 205.

It

provides:
Except as provided in subsection (c) or (d)
of this section, an entity, other than a
custodian,
in
possession,
custody,
or
control, during the case, of property that
the trustee may use, sell, or lease under
section 363 of this title, or that the
debtor may exempt under section 522 of this
title, shall deliver to the trustee, and
account for, such property or the value of
such property, unless such property is of
inconsequential value or benefit to the
estate.
§ 542(a).
Explicitly

referenced

in

the

statute

is

§

363,

which

authorizes the trustee to “use, sell, or lease . . . property of
the estate,” § 363(b)(1), and § 522, which permits the debtor to
exempt

certain

“property

absent

exceptions

not

of

the

relevant

estate,”
here,

§

§522(b)(1).
542(a)

Thus,

requires

an

“entity” – i.e., a “person, estate, trust, governmental unit,
[or]

United

States

trustee,”

§

101(15)9

–

in

possession

of

“property of the estate” at any point during the bankruptcy case
to deliver such property, or the value of such property, to the
trustee.

See In re Pyatt, 486 F.3d 423, 427 (8th Cir. 2007) (“By

referring to § 363 . . . the drafters of § 542(a) made it clear
9

Pursuant to 11 U.S.C. § 101(41), a “person” includes an
“individual, partnership, and corporation.”
21

that

the

turnover

obligation

applies

to

property

of

the

estate.”); In re Coomer, 375 B.R. 800, 803-04 (Bankr.N.D.Ohio
2007) (“although not specifically stated in § 542, fundamental
to the concept of ‘Turnover’ is that the asset to be turned over
must be property of the debtor’s bankruptcy estate”) (citing In
re Sims, 278 B.R. 457, 475 (Bankr.E.D.Tenn. 2002)); Dunes Hotel,
245 B.R. at 505 (“§ 542 mandates only the turnover of ‘property
of

the

estate’

to

a

bankruptcy

trustee”)

(quoting

In

re

Springfield Furniture, Inc., 145 B.R. 520, 529 (Bankr.E.D.Va.
1992)) (internal marks omitted).

“By its express terms, section

542(a) is self-executing, and does not require that the trustee
take any action or commence a proceeding or obtain a court order
to compel the turnover.”

Collier on Bankruptcy ¶ 542.02, p.

542-6 (16th ed. 2010) (footnotes omitted).

Consistent with that

reading, courts generally agree that the turnover provision “is
not intended as a remedy to determine disputed rights of parties
to property[,] [but] . . . to obtain what is acknowledged to be
property

of

Associates,

the
Nos.

estate.”

In

98-10537-BKC-AJC,

re

Suncoast

Towers

98-1451-BKC-AJC-A,

South

1999

549678, at *10 (Bankr.S.D.Fla. June 17, 1999) (citing

WL

In re

Julien Co., 128 B.R. 987, 993 (Bankr.W.D.Tenn. 1991)); see also
In re Knight, Bankr. No. 04-85036, Adv. No. 06-8001, 2006 WL
3147714, at *3 (Bankr.C.D.Ill. 2006) (same).

22

The first premise, then, is unquestionably true.

The only

property subject to turnover under § 542(a) is “property of the
estate.”

The bankruptcy estate includes not just property in

which

debtor

the

has

a

possessory

interest

at

the

time

the

bankruptcy case is commenced, but also property that is later
“recovered”

by

the

bankruptcy code.

trustee

through

See § 541(a)(3).

other

provisions

of

the

As the representative of the

estate, the chapter 7 trustee is responsible for collecting all
“property
equitably

of

the

distributed

responsibility,
entity

in

trustee.

estate”

§

to

542(a)

possession

so

of

that

it

may

creditors.

creates
such

an

be
In

liquidated
aid

affirmative

property

to

of

duty

deliver

it

As the Eighth Circuit succinctly stated,
The principle is simply this: that a person
holding property of a debtor who files
bankruptcy proceedings becomes obligated,
upon
discovering
the
existence
of
the
bankruptcy
proceedings,
to
return
that
property to the debtor (in chapter 11 or 13
proceedings) or his trustee (in chapter 7
proceedings).
Otherwise, if persons who
could make no substantial adverse claim to a
debtor’s property in their possession could,
without cost to themselves, compel the
debtor or his trustee to bring suit as a
prerequisite to returning the property, the
powers of the bankruptcy court and its
officers to collect the estate for the
benefit
of
creditors
would
be
vastly
reduced.
The general creditors, for whose
benefit the return of property is sought,
would have needlessly to bear the cost of
its return.
And those who unjustly retain

23

and
that

of

any

to

the

possession of such property might do so with
impunity.
In re Knaus, 889 F.2d 773, (8th Cir. 1989).10
B.

Property that Is Transferred Is Not Property of the
Estate

While the bankruptcy estate defined in § 541(a) has been
described as “broad and all-embracing,” In re Cordova, 73 F.3d
38,

42

(4th

Cir.

1996)

(internal

marks

omitted),

it

is

not

without limits.

One such limit is implicit in the fact that §

541(a)(3)

an

makes

interest

in

property

that

the

trustee

“recovers” under enumerated provisions “property of the estate.”
The word “recover” is not defined in the bankruptcy code, but is
generally understood as meaning “to get or obtain again, to
collect,

to

get

renewed

possession

of;

to

win

back[;]

[t]o

regain, as lost property, territory, appetite, health, courage.”
In

re

Krueger,

No.

98-18686,

2000

WL

895601,

at

*5

(Bankr.N.D.Ohio June 30, 2000) (quoting Black’s Law Dictionary
1147 (5th ed. 1979)), abrogated on other grounds by In re Burns,
10

The Fourth Circuit has interpreted the language of §
542(a) calling for the turnover of property “or the value of
such property” as requiring any entity that possessed estate
property at any time after the commencement of the bankruptcy
case, with knowledge of the case, to pay the trustee the value
of the property if it is no longer in its possession. See In re
Shearin, 224 F.3d 353, 356-57 (4th Cir. 2000) (citing In re USA
Diversified Prods., Inc., 100 F.3d 53, 56-57 (7th Cir. 1996)).
More recently, the Eighth Circuit has advanced – persuasively,
in this court’s view – a different interpretation.
See In re
Pyatt, 486 F.3d at 428-29.
Because the Appellees in this case
never possessed “property of the estate,” however, the court
need not decide whether they are liable for its value.
24

322 F.3d 421 (6th Cir. 2003)).

Consistent with that definition,

the provisions set forth in § 541(a)(3) permit the trustee to
draw back into the bankruptcy estate that which has somehow made
its

way

out.

See

Dunes

Hotel

Associates,

245

B.R.

at

504

(“[T]he inclusion of property recovered by the trustee pursuant
to his avoidance powers in a separate definitional paragraph
[i.e., § 541(a)(3)] clearly reflects the congressional intent
that

such

property

is

not

to

be

considered

property

of

the

estate until it is recovered.”) (quoting In re Sanders, 101 B.R.
303,

305

(Bankr.N.D.Fla.

1989))

(internal

marks

and

footnote

omitted); In re Maxim Truck Co., Inc., 415 B.R. 346, 357 n. 4
(Bankr.S.D.Ind. 2009) (“the Trustee’s remedy under § 542 for
turnover . . . ripens upon a determination by the Court that the
property in dispute is, in fact, property of the estate”).
Among the sections referenced in § 541(a)(3) is § 550,
which provides, subject to exceptions not relevant here:
to the extent that a transfer is avoided
under section 544, 545, 547, 548, 549,
553(b), or 724(a) of this title, the trustee
may recover, for the benefit of the estate,
the property transferred or, if the court so
orders, the value of such property, from –
(1) the initial transferee of such
transfer or the entity for whose benefit
such transfer was made; or
(2) any immediate or mediate transferee
of such initial transferee.

25

11 U.S.C. § 550(a).

Among the provisions referenced in § 550,

in turn, is § 549, entitled “Postpetition transactions.”

That

statute provides, in pertinent part, that “the trustee may avoid
a transfer of the estate . . . that is not authorized under this
title

or

by

the

court.”

§

549(a).

Notably,

for

present

purposes, § 549 requires that an “action or proceeding under
this section may not be commenced after the earlier of . . . two
years after the date of the transfer sought to be avoided[,] or
. . . the time the case is closed or dismissed.”

§ 549(d).

In the legal context, the term “avoid” means “[t]o render
void” or “to make void or of no effect; invalidate.”

In re

Coleman, 426 F.3d 719, 726 (4th Cir. 2005) (internal citations
and marks omitted).

A “transfer” under the bankruptcy code is

defined

mode,

as

conditional,

“every

voluntary

or

direct

or

involuntary,

indirect,
of

absolute

disposing

of

or
or

parting with property or with an interest in property, including
retention of title as a security interest and foreclosure of the
debtor’s equity of redemption.”

§ 101(54).

Like “property of

the estate,” the definition of “transfer” is broad in scope:
Congress intended this definition to be allinclusive and as broad as possible to
encompass any surrender of an interest in
property, whether the transfer is of legal
title or of possession, custody or control.
Senate Report No. 95-989, 95th Cong. 2d Sess.
26-27 (1978); House Rep. No. 95-595, 95th
Cong. 1st Sess. 373 (1977), U.S.Code Cong. &
Admin.News, 1978 p. 5787; See In re Wey, 78
26

B.R. 892, 894 (C.D.Ill. 1987); In [re]
Lemley Estate Business Trust, 65 B.R. 185,
189 (Bkrtcy.N.D.Tex.[] 1986); In [re] Queen
City
Grain,
Inc.,
51
B.R.
722,
726
(Bkrtcy.S.D.Ohio[] 1985).
In re E-Tron Corp., 141 B.R. 49, 55 (Bankr.D.N.J. June 4, 1992)
(quoting In re Carmel, 92 B.R. 778, 780 (Bankr.N.D.Ill. 1988)).
It follows, then, that an interest in what was at some
point after commencement of the bankruptcy case “property of the
estate” may, without authorization, leave the estate, and that,
pursuant to § 549(a), the trustee may seek to “make void” such a
transfer.

If successful, an avoidance action would “recover”

the property such that it would be drawn back into the estate,
thereby becoming “property of the estate” under § 541(a)(3) via
§ 550(a).

See In re Missouri River Sand & Gravel, Inc., 88 B.R.

1006, 1012 (Bankr.D.N.D. 1988) (“It is by virtue of section
550(a)

and

section

541(a)(3)

that

interests

in

property

successfully recovered by the trustee are brought back into the
estate.”).

The statute of limitations provided in § 549(d),

however, makes clear that any such action must be brought within
two years of the date of transfer.
untimely

or

unsuccessful,

the

If an avoidance action is

property

in

question

is

not

property of the estate, so the turnover provision cannot be used
to recover it.
This construction gives effect to the plain meaning of the
relevant statutes, if not the plain language, and is entirely
27

consistent with the statutory scheme.
supported by case law.
F.2d

797,

transfers

See Vogel v. Russell Transfer, Inc., 852

800

(4th

of

property

commencement

of

Cir.

the

It is, moreover, amply

1988)
of

(“A

the

bankruptcy

trustee’s
estate

case

power

that

is

to

avoid

occur

generally

after

given

in

section 549.”) (emphasis in original); see also In re Pyatt, 486
F.3d at 429 n. 4 (“11 U.S.C. § 549(a)(2)(A) . . . is further
evidence that the § 542(a) turnover obligations are distinct
from a trustee’s rights.

For even though such a transfer is

exempted from the turnover duty, the trustee nevertheless has
the

power

to

avoid

the

transfer”);

In

re

Knight,

2006

WL

3147714, at *3 (“Section 549 is intended to be the exclusive
power by which a postpetition transfer may be avoided.
542(a)

should

not

be

interpreted

or

used

in

a

Section

manner

that

overlaps or conflicts with Section 549.”) (citing In re Pyatt,
348 B.R. 783 (8th Cir.BAP 2006)); In re Shuman, 277 B.R. 638, 654
n.

8

(Bankr.E.D.Pa.

2001)

(“decisions

which

have

interpreted

section 542(a) have held that this provision applies only to
prepetition transfers or property which would become property of
the estate upon recovery.
involved,
Thornton’s

then

only

Millwork,

If a post-bankruptcy transfer is

section
Inc.,

549

209

applies.”)

B.R.

645,

647

(citing

In

re

(Bankr.M.D.Pa.

1997); In re 31-33 Corp., 100 B.R. 744, 747-48 (Bankr.E.D.Pa.
1989)).
28

Deckelbaum, the case relied upon by the bankruptcy court in
this case, is not to the contrary.
in-possession

paid,

There, a chapter 11 debtor-

post-petition,

legal fees to a law firm.

approximately

$483,000

in

A trustee was subsequently appointed

and brought an adversary proceeding against successor law firms
to

recover

the

fees,

bankruptcy estate.”

claiming

this

was

“property

Deckelbaum, 275 B.R. at 740.

of

the

The trustee

alleged, inter alia, that the money at issue was subject to
turnover under § 542(a) and avoidance under § 549.

In finding

that “section 542 is [] an inappropriate means for Plaintiff’s
attempt to recover the post-petition legal fees,” id. at 741,
Judge Nickerson explained:
Courts have concluded that section 542
provides for the turnover of pre-petition
transfers,
while
section
549
is
the
appropriate means to attack post-petition
transfers. See, e.g., Vogel [852 F.2d at
800](“trustee's power to avoid transfers of
property of the estate that occur after
commencement
of
a
bankruptcy
case
is
generally given in section 549”); In re 31–
33 Corp., 100 B.R. [at 747] (Ҥ 549 appears
to be the sole provision addressing avoiding
powers of the trustee to avoid or set aside
post-petition transfers”); Miller v. Lane,
167 B.R. 729 (Bankr.D.Mass. 1994). But see
In re Shepherd, 12 B.R. 151, 153–54 (E.D.Pa.
1981)
(suggesting
that
post-petition
transfers may be attacked under either § 542
or § 549).
Several policy reasons support the
confinement
of
actions
based
on
postpetition transfers to section 549, rather
than section 542. For example, if both
29

section 542 and 549 were available to avoid
post-petition transfers, the statute of
limitations contained within § 549(d) would
be rendered meaningless, since a trustee who
is time-barred by § 549(d) could merely
invoke § 542. See In re 31–33 Corp., 100
B.R. at 747–48; Burtch v. Hydraquip, Inc.,
227 B.R. 244, 260 (Bankr.E.D.Pa.1998).
Id. at 741.
In arguing that Deckelbaum was wrongly decided, Appellant
initially mischaracterizes the holding as being that Ҥ 542 does
not apply to cases where the defendant received property of the
estate after the bankruptcy petition was filed.”
7).

(ECF No. 4, at

In fact, what Deckelbaum says is that § 542 does not apply

to cases where the defendant received a transfer of property
after the bankruptcy petition was filed.

Indeed, to the extent

that a transfer occurred, the property in question could not be
fairly characterized as property of the estate, and thus, could
not be subject to turnover.

To be certain, property of the

estate may be received by a defendant (most often the debtor),
post-petition,

without

a

transfer

having

occurred.

In

such

cases, the property, or its value, is subject to a turnover
order to the extent that the debtor had an interest at the time
the bankruptcy case commenced.
F.3d

at

356-57

(holding

See, e.g., In re Shearin, 224

that

the

portion

of

a

year-end

partnership distribution attributable to pre-petition work, but
distributed post-petition, was subject to turnover pursuant to §

30

542(a)).

A “transfer,” on the other hand, involves “disposing

of or parting with property or with an interest in property[.]”
§

101(54).

In

the

context

of

a

pre-petition

transfer,

the

trustee may seek avoidance of a preferential transfer under §
547 and of a fraudulent transfer under § 548.

With respect to

post-petition transfers, “‘[t]he intent of the parties effecting
the transfer is irrelevant,’” In re Brooks-Hamilton, 348 B.R.
512, 523 (Bankr.N.D.Cal. 2006) (quoting In re Dreiling, 233 B.R.
848, 876 (Bankr.D.Col. 1999)), but § 549 provides the exclusive
means for bringing such property back into the estate.
Appellant further argues that

Deckelbaum

is inconsistent

with the text of § 542, which makes clear “that the duty to turn
over

property

of

the

estate

applies

to

anyone

who

is

in

possession, custody, or control of such property ‘during the
case[.]’”

(ECF No. 4, at 8).

What he fails to recognize is

that, absent a successful avoidance action, property that has
been transferred post-petition is not property of the estate.
According to Appellant, “[t]he legislative history of § 542(a)
shows

that

conscious

the

language

decision

not

to

enacted

by

limit

the

Congress
duties

represented
and

a

liabilities

imposed by that section to cases where the defendant possessed
the

property

when

the

petition

was

filed.”

(Id.

at

10).

Deckelbaum, however, is not is disharmony with this statement.

31

Finally,

Appellant’s

attempt

to

distinguish

relied upon in Deckelbaum is unpersuasive.

the

cases

He argues that Vogel

“did not involve § 542 or even cite it,” but “dealt with a
trustee’s efforts to avoid the grant of a security interest
under 11 U.S.C. § 547 on the grounds that it constituted a
preference.”
Nickerson,

(Id. at 12).
just

as

it

Vogel, however, was cited by Judge

is

cited

in

this

opinion,

for

the

proposition that § 549 generally governs post-petition transfers
of property.

See Vogel, 852 F.2d at 800.

Appellant argues that

the court in In re 31-33 Corp. “erroneously relied on portions
of § 542(a)’s legislative history that related to the provision
as it was originally written rather than as it was subsequently
amended,” i.e., to include the “during the case” language.
No. 4, at 12).

(ECF

Be that as it may, the property at issue in that

case was unauthorized post-petition payments of compensation to
professionals,

which

the

court

found

to

transfers subject to avoidance under § 549.
Corp., 100 B.R. at 748.11

be

post-petition

See In re 31-33

According to Appellant, In re Miller,

167 B.R. 729, “held that because the defendant obtained the

11

To the extent that the court found that § 542(a) “is
properly interpreted as being confined to actions against
parties ‘holding property of the estate on the date of the
filing of the petition,’” In re 31-33 Corp., 100 B.R. at 747
(emphasis in original), the court agrees with Appellant that
this construction is too narrow.
Nevertheless, insofar as the
property involved was clearly transferred post-petition, the
proper result obtained.
32

property

at

issue

postpetition,

recovery

under

§

542(a)

was

unavailable because an avoidance action under § 549 was timebarred.”
saying

(ECF No. 4, at 13).

that

where

a

But this is just another way of

post-petition

transfer

of

property

has

occurred, the transfer must be avoided under § 549 before § 542
could have any application.

It follows logically that where a

transfer

because

cannot

be

avoided

it

is

time-barred,

turnover provision could have no application.

the

Thus, although §

542 does not include a statute of limitations, it is effectively
subject to the limitations period provided in § 549(d) with
respect to property transferred post-petition that might have
otherwise been drawn back into the estate.

See generally In re

Sanabria, Bankruptcy No. 02-34621 (DHS), Adversary No. 06-01337
(DHS), 2007 WL 2746802, at *4-5 (Bankr.D.N.J. Sept. 19, 2007)
(finding turnover barred by laches where claim was time-barred
under § 549).
In sum, the second premise is also true: Property that has
been

transferred

is

not

property

of

the

estate.

More

specifically, property that the estate “recovers,” under § 550,
becomes “property of the estate,” under § 541(a)(3), only after
a transfer has been “avoided” under § 549(a).

Where a post-

petition transfer is not avoided, however, it is not “property
of the estate,” and because § 542(a) entitles the trustee to
possess only property of the estate, the transferred property
33

may not be recovered by way of the turnover provision.

Despite

Appellant’s arguments to the contrary, Deckelbaum is entirely
consistent with this construction and was correctly decided.
C.

The Property at Issue Was Transferred

Appellant

insists

that

“[e]ven

if

one

assumes

that

Deckelbaum was correct, its holding should not be applied here
because the counts at issue here allege that [Appellees] took
possession of the funds, not as transferees against whom an
avoidance action under § 549 could be brought, but as conduits
who are subject to the turnover obligation under § 542(a).”
(ECF No. 4, at 17) (footnote omitted).
Circuit,”
without

he

argues,

more,

transferee.”

is

“is

not

that

enough

(Id. at 14).

“The rule in the Fourth

receipt
to

of

render

estate
the

property,

recipient

a

“Rather, a recipient is a transferee

only if he has legal dominion and control over the property such
that he can use it for his own benefit.”

(Id.).

Because he

alleges in the complaint that “the Dahan Defendants obtained
possession of estate property as conduits,” Appellant contends
that Appellees “are not transferees.”

(Id. at 15).

Notably implicit in this argument is recognition of the
third premise set forth by the court, i.e., that if the property
in question was transferred, then it could not be subject to
turnover.

It is clear, however, based on the allegations in the

complaint

that

the

property

Appellant
34

seeks

to

recover

was

transferred

on

multiple

occasions.

Even

assuming,

arguendo,

that the vast majority of the purchase funds for the properties
at issue constituted “property of the estate” under an alter ego
theory, three of the properties themselves – Parkway, Kenhowe,
and Sherwood – were actually titled in the name of Appellees
Rokama and Maia.

Appellant observes in passing that the Fourth

Circuit has adopted the “dominion and control” test established
by the Seventh Circuit in Bonded Financial Services, Inc. v.
European American Bank, 838 F.2d 890, 893 (7th Cir. 1988), to
determine whether a transfer has occurred, holding that “the
minimum requirement of status as a ‘transferee’ is dominion over
the money or other asset, the right to put the money to one’s
own

purposes.”

See

In

re

Southeast

Hotel

Properties

Partnership, 99 F.3d 151, 154-55 (4th Cir. 1996).

Ltd.

It strains

credulity to suggest that an entity holding title to property
does not exercise “dominion and control” over it, and Appellant
does not bother to explain how this could be the case.
As to the other amounts allegedly received by Appellees as
distributions of proceeds from the sale of properties, $150,000
from the sale of the Bay property was used to pay down a line of
credit from which the Dahans had made payments to Debtor.

There

is no allegation that the Dahans actually possessed these funds
and, even if they did, the complaint actually alleges that this
was re-payment of a prior loan to Debtor.
35

(ECF No. 6-1 ¶ 255).

Appellant further alleges in the complaint that $56,000 from the
sale of Sundown was distributed to Maia.

There is no indication

that Maia was not free to do with this money as it wished, nor
does Appellant make clear exactly how it was a “conduit,” rather
than a “transferee.”
distribution
transfer.
property

from

Similarly, it is unclear how the $15,000

the

sale

of

Milbern

to

Rokama

was

not

a

In each case, Debtor appears to have “part[ed] with
or

with

an

interest

in

property,”

which

is

the

definition of a “transfer” pursuant to § 101(54).
Because the allegations in the complaint demonstrate that
the

property

in

question

was

transferred,

Appellant’s

characterization of Appellees as “conduits” is at best a factual
allegation devoid of reference to actual events, and is not
controlling.

Rather, as transferred property, it cannot have

been obtained by the trustee pursuant to the turnover provision
of § 542(a).
IV.

Conclusion
For

the

foregoing

reasons,

the

order

of

the

bankruptcy

court partially dismissing the complaint will be affirmed.
separate order will follow.

________/s/_________________
DEBORAH K. CHASANOW
United States District Judge

36

A