Bankr. No.:
86-30049
Adv. No.:
88-3003
Chapter:
11
Date of Decision:
February 2, 1990
Issue:
(1) Whether surety or contract assigneee is entitled to balance of defaulting debtors' segregated DIP account. (2) Whether surety or secured party was entitled to personal property of debtor, purchased prior to issuance of order establishing debtor's segregated DIP account. (3) Whether surety or secured party is entitled to personal property purchased with funds from debtors' segregated DIP account.
Ruling:
(1) By virtue of order establishing a segregated DIP account, debtors' surety, by right of subrogation, would be entitled to those funds remaining in that account after debtor defaulted on a construction project that surety was obligated to complete. (2) Secured party is entitled to personalty of debtor that was not purchased with funds of debtors's egregated DIP account. Surety may not claim such property through subrogation. (3) Surety is entitled to personalty bought with segregated DIP account funds as such personalty would be analogous to non-cash proceeds of the DIP account.
Full Bankruptcy Court Decision:
