Case No. 94-21918, ADV. PRO. 96-0200.United States Bankruptcy Court, W.D. Tennessee, Western Division.
September 17, 1997
AMENDED MEMORANDUM OPINION AND ORDER RE DEFENDANTS’ PARTIAL MOTION TO DISMISS
GEORGE BOSWELL, Bankruptcy Judge
The trustee in this matter, George W. Stevenson, filed the present adversary proceeding against the defendants on February 23, 1996. In Count VIII of this complaint, the trustee is seeking to avoid certain transfers made by the debtor, William Dunlap Cannon, III., to the defendants out of the debtor’s client escrow account. The trustee alleges that these transfers are avoidable as fraudulent conveyances pursuant to 11 U.S.C. § 548.
The defendants filed this partial motion to dismiss count VIII of the complaint on July 30, 1997. In opposing count VIII, the defendants assert that the money transferred to them by Cannon was not the transfer of “an interest of the debtor” and, therefore, is not the proper subject of the trustee’s avoidance powers under 11 U.S.C. § 548.
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The Court conducted a hearing on this matter on September 2, 1997. FED. R. BANKR. P. 9014. Pursuant to section 157(b)(2) of Title 28 of the United States Code, this is a core proceeding. After reviewing the testimony from the hearing and the record as a whole, the Court makes the following findings of facts and conclusions of law. FED. R. BANKR. P. 7052.
The phrase “an interest of the debtor” is not defined by the Bankruptcy Code. In the case of Bergier v. I.R.S., however, the United States Supreme Court interpreted the term to mean “that property that would have been part of the estate had it not been transferred before the commencement of bankruptcy proceedings.”Bergier, 496 U.S. 53, 58, 110 S.Ct. 2258, 2263, 110 L.Ed.2d 46
(1990). In another Supreme Court decision, the Court held that “property interests are created and defined by state law.”Butner v. U.S., 440 U.S. 48, 55 (1979). Under Tennessee law, one who acquires property through fraud acquires voidable title to such property. Tenn. Code Ann. § 47-2-403.
Because this Court must view the allegations of a complaint in the light most favorable to the plaintiff when considering a motion to dismiss, the Court must assume, for purposes of ruling on this motion only, that Cannon fraudulently obtained the money in his client escrow account to use for his own benefit. As a result of this “fraud,” therefore, Cannon obtained a property interest in the money. Accordingly, this Court finds that the pleadings of the plaintiff are sufficient to state a claim under 11 U.S.C. § 548. Whether or not Cannon did indeed acquire such money through fraud or make fraudulent conveyances to the defendant are issues which will be decided at trial.
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ORDER
It is therefore ORDERED that the defendants’ partial motion to dismiss is DENIED. IT IS SO ORDERED.