Debtor, who had agreed to act as escrow agent on a loan from plaintiff to a third party, improperly used escrowed funds to pay its own debts to a good faith creditor. After debtor was involuntarily placed in bankruptcy, the chapter 7 trustee recovered the funds from debtor's creditor on the ground that the payments had been avoidable preferences. Plaintiff filed an adversary proceeding, contending that the recovered amount was subject to a trust in its favor, and was thus not available for distribution to other creditors. Both the bankruptcy and district courts had ruled in favor of trustee, finding that the recovered funds were part of the bankruptcy estate. A divided Circuit panel reversed, leading to the Circuit's en banc hearing. The en banc court agreed with the lower courts that, once the recovered funds were transferred to a good faith creditor, plaintiff's interest in them was extinguished. Additionally, pursuant to 11 U.S.C. § 550(a), a trustee's power to recover preferences must be exercised "for the benefit of the estate." Therefore, the Circuit held that, while plaintiff had an unsecured claim against the estate, the recovered funds were estate property available for the benefit of all creditors.