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general partner, Granada did not allow funds to accumulate in the individual partnership accounts. Granada kept track of these transfers as either debt to the partnership or increases in the partnership's debt to Granada. Only when the partnerships needed money would Granada transfer funds back to the partnerships. For purposes of cash management, Granada and the partnerships operated as one entity. When Granada filed for bankruptcy, the trustee sought to avoid several transfers made by Granada to the three partnerships that enabled the partnerships to repay their debts to Key Bank. Although the payments at issue came from the partnerships, the trustee contended that the partnerships were mere conduits of Granada's distribution. The district court disagreed. Even though the partnerships did not maintain their own funds, but held them with their general partner as a result of the cash management system, the court found that the partnerships had control over the funds through their general partner Granada. Thus, when Granada transferred the funds to the partnerships they were not mere conduits because they could determine how to allocate the funds. The Granada case establishes that when analyzing avoidable transfers it is important to look beyond the form of the transfers and the outward appearance of the entities involved to determine who made the transfer and where the funds were derived.
Lien avoidance is not intended to provide a windfall to junior lienholders. Instead, where a senior lien is avoided as fraudulent or preferential, the lien will be preserved in favor of the estate. Interstate Cigar, 278 B.R. at 23. The goal of section 550 is to restore the estate to the position it would have been in had the transfer not been made. Integra, 354 F.3d at 1266; Cybridge, 312 B.R. at 268. Thus, junior lienholders do not receive a windfall when a senior lien is avoided as preferential; the estate will benefit generally.
Additionally, since the goal of section 550 is to protect/restore the estate, and not generate a windfall, the Bankruptcy Code provides some protections to the recipients of avoided transfers. Where a transfer is voided, the transferee/obligor who takes for value and in good faith may be able to retain a lien against the property recovered. See 11 U.S.C. S 548(c) (permitting the creation of a lien to the extent that such good faith transferee gave value to the debtor in exchange for such transfer); 11 U.S.C. S 550(e) (creating a lien in favor of a good faith transferee that made improvements to the property transferred to the extent of the lesser of: (1) the cost of any improvement (less any profits derived therefrom); or (2) the increase in value of the property attributable to such improvements); Henderson v. Andrews (In re Perry County Foods, Inc.), 313 B.R. 875, 913 (Bankr. N.D. Ala. 2004) (recognizing that under section 550 the trustee may only recover the value of the property minus what the debtor received); Gen. Indus., Inc. v. Shea (In re Gen. Indus., Inc.), 79 B.R. 124, 136-37 (Bankr. D. Mass. 1987) (sections 548(c) and 550(e)).
Despite providing for the creation of a lien in favor of these good faith transferees/
