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6500 Cherrywood Ln - Greenbelt, MD 20770 - Main Tel: 301-344-8018 map
Baltimore
101 W Lombard St Room 8530 - Baltimore, MD 21201 - Main Tel: 410-962-2688
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Defendant was sub-subcontractor to subcontractor debtor, and entered into agreement with debtor and general contractor that required, in addition to checks made payable solely to debtor, that contractor would issue checks payable jointly to debtor and defendant. Chapter 11 plan created two entities, the reorganized debtor and litigation trust. The defendant and debtor entered into a release agreement that was approved by the court but not served on litigation trustee. The litigation trustee sued the defendant seeking recovery of amount of joint checks issued by contractor, as preferential transfers. On defendant’s motion for summary judgment, defendant contended that suit was barred by both the plan and the release agreement and the joint checks were not “property of the estate,” as required by 11 U.S.C. § 547(b). Held, summary judgment granted and complaint dismissed on the second ground. Neither the plan nor the release barred the litigation trustee from bringing the suit to recover a preference because the plan did not divest the litigation trustee of claims against a party to a contract that was assumed by the reorganized debtor after confirmation; but the joint checks were not property of the estate because Texas law provided that subcontractor held joint checks only as “constructive trust” for sub-subcontractor.

Entered: 
2008-03-14
Case: 
01-64463
Judge: 
James F. Schneider