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Copyright © International Chamber of Commerce (ICC). All rights reserved. ( Source of the document: ICC Digital Library )
1996 LC CASE SUMMARIES 197 B.R. 31 (Bankr. M.D. Pa. Apr. 18, 1996).
Topics:
Bankruptcy, Turnover of L/C Proceeds, 11 U.S.C. -541(a)(1) Debtor's Estate.
Type of Lawsuit:
By applicant's Chapter 7 trustee against beneficiary for recovery of L/C proceeds for the debtor's estate.
Principals:
Plaintiff/Trustee: John J. Martin;
Applicant/Debtor: Milford Group, Inc.;
Intervenors/Mortgagees: Samall Assoc., Inc., and ILM, Inc.;
Defendant/Beneficiary: Westfall Township;
Issuer: Northeastern Bank.
Underlying Transaction:
Completion of infrastructure for a real estate development.
LC:
Standby L/C for US$193,409. Silent whether L/C is subject to UCP.
Procedural History:
Judge Thomas of the U.S. Bankruptcy Court for the Middle District of Pennsylvania held that the L/C proceeds were not property of the debtor's estate and thereby denied Trustee request for turnover of L/C proceeds under 11 U.S.C. -542.
Rule:
Proceeds of L/C are not property of the debtor's estate under Chapter 7 of the Bankruptcy Code.
Article
Factual Summary: To assure applicant/debtor's completion of a real estate infrastructure contract, applicant/debtor obtained a standby letter of credit for US$193,409. Upon applicant/debtor's failure to timely perform the contract, beneficiary demanded payment which was honored by the issuer. After filing for bankruptcy, the Chapter 7 trustee brought this action claiming the letter of credit proceeds as property of the debtor's estate on the ground that the estate may be liable to the issuer for payment of the letter of credit. Concluding that this possibility does not give rise to an interest in the proceeds, the court denied the trustee's request for relief.
©1997 INSTITUTE OF INTERNATIONAL BANKING LAW & PRACTICE
COPYRIGHT OF THE INSTITUTE OF INTERNATIONAL BANKING LAW & PRACTICE
The views expressed in this Case Summary are those of the Institute of International Banking Law and Practice and not necessarily those of ICC or the other partners in DC-PRO.