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On April 29, 2008, the Second Circuit Court of Appeals in In re The Penn Traffic Co., 2008 WL 1885328, held that under Bankruptcy Code §365, a nondebtor party to a contract that is executory at the time a bankruptcy case is commenced cannot, by post-petition tender or performance of its own outstanding obligations under the contract, deprive the debtor party of the ability to exercise its statutory right to reject the contract as disadvantageous to the estate.
Constructive trusts are creations of state law. However, some bankruptcy courts have exercised their equitable powers to impose constructive trusts on estate assets. Other bankruptcy courts have concluded that the notion of constructive trusts is at odds with the goals of the Bankruptcy Code. As set forth below, a party seeking imposition of a constructive trust must commence an adversary proceeding. The plaintiff has the burden of proof, and the standard is clear and convincing evidence.
Creditors finally have a definitive answer. The Delaware Supreme Court has now held in North American Catholic Educational Programming Foundation Inc v.
Creditors finally have a definitive answer. The Delaware Supreme Court has now held in North American Catholic Educational Programming Foundation Inc v.
Long-standing precedent in the First Circuit had held that claims arising out of stock redemptions, including notes payable to the former shareholders as the consideration for the redemption of their stock, were subject to subordination to the claims of creditors when the corporation later became insolvent without any showing of inequitable conduct on the part
While much of the attention on the business side of BAPCPA has been focused on the demise of KERPS, the capping of exclusivity and limitations on extensions of time to assume or reject commercial leases, several other provisions may prove as, if not more, nettlesome to debtors attempting to reorganize, particularly in small- and smaller-cap chapter 11 cases.
