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Bankruptcy: Voidable Transfers Recoverable from All who Benefited

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The bankruptcy trustee sued to recover certain transfers that he alleged were fraudulent conveyances and/or preferences. The bankruptcy court ruled that the transfers were voidable, but limited recovery solely against the transferees of the funds. On appeal, the district court held that recovery may be had, under 11 U.S.C. §550, not simply against the persons or entities to whom the transfers were made, but also against those who benefited from the transfers. In the present case, recovery was allowed, inter alia, against guarantors whose liability had been relieved by the transfers.

In the Matter of Fred Sanders, Inc.; Jay Alix v Beim, et al, Civ Nos. 97-71736 and 97-72020 (consolidated cases), ED Mich, 10/27/97, Gilmore, J. (dkt #12 – 20 pages)

This article was written by Mark A. Goldsmith, a partner in our Litigation Department, and previously appeared in the February 1998 edition of the Michigan Bar Journal.

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