In re Moses

1 Analyses of this case by attorneys

  1. Seventh Circuit: No Avoidance of Preferential or Fraudulent Transfer Absent Diminution of the Estate

    Jones DayPatrick LombardiOctober 3, 2023

    the Debtor in Property?Notably, the plain language of sections 544(b), 547(b), and 548(a)(1) contains a fundamental limitation on their application: Only a transfer "of an interest of the debtor in property" is avoidable. The Bankruptcy Code does not define the phrase "an interest of the debtor in property." The U.S. Supreme Court, however, provided guidance on this point, concluding that "an interest of a debtor in property" is "best understood as that property that would have been part of the estate had it not been transferred before the commencement of bankruptcy proceedings." Begier v. IRS, 496 U.S. 53, 58 (1990). Thus, the Court viewed "property of the estate" as an appropriate postpetition analog to "interest of the debtor in property." Id. at 59. Consistent with the Supreme Court's analysis, courts have construed "an interest of the debtor in property" very broadly, mirroring the reach of property of the estate to "all legal and equitable interests of property." SeeIn re Moses, 256 B.R. 641, 645 (B.A.P. 10th Cir. 2000).Courts have developed two tests to analyze whether a transfer is avoidable as an interest of the debtor in property. The first test focuses on a debtor's dominion/control over the property prior to the transfer. See In re Marshall, 550 F.3d 1251, 1255 (10th Cir. 2008) ("Under [the dominion/control test], a transfer of property will be a transfer of 'an interest of the debtor in property' if the debtor exercised dominion or control over the transferred property."); accordIn re Clink, 643 B.R. 522, 526 (Bankr. D. Mass. 2022). The dominion/control tests is grounded in the concept that a debtor's "right to use an item or control its use" is a property interest. Marshall, 550 F.3d at 1255. Therefore, courts find that sufficient dominion or control over an item is all that is required to establish a property interest in the item. See, e.g., Gladstone v. U.S. Bancorp., 811 F.3d 1133, 1139 (9th Cir. 2016);Riley v. Nat. Lumber Co. (In re Reale), 584 F.3d 27, 31 (1st Cir. 2009); MBNA Am. Bank,