In Re Hamilton Taft & Co., Debtor. Frederick S. Wyle, Trustee in Bankruptcy of Hamilton Taft & Co. v. S & S Credit Co.

The bankruptcy trustee of debtor Hamilton Taft & Company (Taft) appeals the bankruptcy court’s dismissal of his suit to recover from S & S Company (S & S) payments Taft made to the Internal Revenue Service (IRS) on behalf of S & S. The trustee also appeals the court’s denial of his motion for partial summary judgment. The question presented in both aspects of the appeal is whether the money Taft paid the IRS on behalf of S & S was ever the property of the debtor within the meaning of Bankruptcy Code § 547(b), 11 U.S.C. § 547 (b).

I

The relevant facts are not in dispute. Taft contracted with S & S and 286 other clients to pay the clients’ federal, state and local payroll taxes and prepare all the relevant reports. As consideration, S & S paid Taft the amount of the taxes in advance of the due date of the taxes which enabled Taft to get the benefit of the use of the funds during the interval between the date it received the funds from its clients and the date it paid the taxes. Thus, Taft was paid for its services from the “float” on S & S’s money.

The funds Taft received from S & S and its other clients were not placed in separate accounts with the exception of funds from two…