Published on:

Paloian v. LaSalle Bank, N.A. (C.A.7 (Ill.)

Paloian v. LaSalle Bank, N.A. ,(C.A.7 (Ill.))
Bankruptcy – Bank, as trustee for securitized investment pool, was “initial transferee” of funds from debtor.
Issue of apparent first impression for the Federal Appellate Courts. Seventh Circuit held that bank, as trustee for securitized investment pool, was “initial transferee” of lease payments by Chapter 11 debtor-hospital for purposes of Sec. 550(a). Bank had duties to the trust’s beneficiaries/investors concerning application of funds, but was still the legal owner of the trust’s assets and remained the appropriate subject of a preference-avoidance action. Court of Appeals noted that many decisions hold that an entity that receives funds for use in paying down a loan or passing money to investors in a pool constitutes an “initial transferee” though the recipient is obliged by contract to apply the funds according to a formula.

Published on:
Updated: