Federal Deposit Insurance v. Wright (In Re Still)

W. EUGENE DAVIS, Circuit Judge:

This case presents the narrow question of whether the FDIC-as-Receiver can use § 550(b)(1) of the Bankruptcy Code to defend against a trustee’s avoidance of a preferential transfer. We hold that the FDIC is not entitled to the defense and therefore affirm the district court.

I

In June 1988 the First State Bank of Abilene (Bank) obtained a judgment against William H. Still to enforce a guaranty. A month later, the Bank obtained writs of garnishment against Still’s obli-gors. In August 1988, Still filed for bankruptcy under Chapter 7. The Bank timely filed a Proof…