[p1196] OPINION
D.W. NELSON, Circuit Judge:
Kenneth Schafer, the trustee of Video Depot, Ltd., brings this fraudulent conveyance action to recover the proceeds of a cashier's check purchased by Video Depot and paid to the Las Vegas Hilton in partial satisfaction of gambling debts incurred by Jeffrey Arlynn, Video Depot's principal. Hilton appeals the district court's decision affirming the bankruptcy court's judgment in favor of the trustee. We have jurisdiction pursuant to 28 U.S.C. § 1291, and we affirm.
FACTUAL AND PROCEDURAL BACKGROUND
Most of the relevant facts are not in dispute. Jeffrey Arlynn was the president of Video Depot, a consumer electronics company. Arlynn controlled virtually all of Video Depot's operations.
Arlynn was also an active gambler. Between 1985 and 1990, he made approximately 60 trips to the Las Vegas Hilton. Initially, Arlynn gambled on funds he brought with him, or against credit that Hilton extended to him for the duration of each individual trip. In 1987, however, Arlynn obtained a permanent [p1197] line of credit with Hilton in the amount of $ 50,000, which was increased to $ 75,000 in 1990.
Prior to 1990, Arlynn regularly repaid his losses in full either at the end of each stay or at the beginning of the next trip. While he occasionally retained a balance, the balance was always substantially less than his credit limit. In addition, Arlynn carefully controlled the size of his accumulated credit losses. Until 1990, Arlynn's balance only twice exceeded $ 100,000 and never exceeded $ 125,000.
In early May of 1990, however, Arlynn incurred a debt of $ 225,000, and he did not make a payment towards this debt before he left Las Vegas. On June 15, Video Depot purchased a cashier's check payable to Hilton in the amount of $ 65,000. The check clearly indicated that Video Depot was the purchaser. When Arlynn returned to Las Vegas on June 16, he gave two checks to Hilton: the $ 65,000 cashier's check from Video Depot, and a personal cashier's check in the amount of $ 10,000. Arlynn had never before presented either a cashier's check or a check purchased by Video Depot to cover his gambling losses.
Video Depot commenced bankruptcy proceedings on September 14, 1990, and the trustee was appointed shortly thereafter. The trustee then filed suit against Hilton to recover the proceeds of the $ 65,000 cashier's check. After an initial round of litigation, both parties stipulated that the check was a fraudulent transfer within the meaning of 11 U.S.C. § 548, and the bankruptcy court proceeded to determine whether Hilton was an initial transferee under 11 U.S.C. § 550(a) or a subsequent transferee lacking good faith knowledge of the voidability of the transfer within the meaning of 11 U.S.C. § 550(b).
Before trial, the bankruptcy court partially granted Hilton's motion for summary judgment, determining that Hilton was not the initial transferee. Trial was held on Hilton's asserted section 550(b) defense. The court thereafter determined that cause existed to reconsider its oral grant of summary judgment. In a letter to the parties, the bankruptcy judge requested supplemental briefing on the initial transferee issue "to the extent counsel feel it is necessary." The judge also inquired whether either side felt it necessary to introduce additional evidence if the court reopened the initial transferee issue. Both parties declined to submit additional evidence.
The bankruptcy court determined that Hilton was the debtor's initial transferee and therefore was strictly liable to the bankruptcy estate under 11 U.S.C. § 550(a)(1). The court also determined that, even if it were a subsequent transferee, Hilton had failed to establish a defense under 11 U.S.C. § 550(b). The district court affirmed on the ground that Hilton was an initial transferee and consequently did not consider the section 550(b) issue. Hilton now appeals on both grounds.
STANDARD OF REVIEW
In an appeal of a district court decision reviewing a decision of the bankruptcy court, this court does not defer to the district court. Friedkin v. Sternberg, (In re Sternberg), 85 F.3d 1400, 1404 (9th Cir. 1996). We review the bankruptcy court's conclusions of law de novo and must uphold its findings of fact unless they are clearly erroneous. Feder v. Lazar (In re Lazar) 83 F.3d 306, 308 (9th Cir. 1996).
ANALYSIS
The central issue before us is whether Hilton was the initial transferee of the $ 65,000 cashier's check purchased by Video Depot.