Reassignment of contracts
Where it would require $3 million to perform a contract, and the proposed assignee only had $1,000 in assets, the bankruptcy court properly refused to permit assignment of the contract to that party.
“The bankruptcy judge also doubted that Chiplease or Scattered had the financial wherewithal to lend the Investment Trust the $3 million everyone agreed was required to fulfill the obligations of the assigned contracts. The Trust did not submit any financial statements at trial, and according to the witnesses’ testimony, most of the assets of the two companies were illiquid. There is very little in the record explaining exactly how Chiplease and Scattered expected to come up with a $3 million capital infusion for the Investment Trust; indeed, the testimony established that Scattered did not have the funds necessary to contribute to this sum.2 Finally, the bankruptcy court properly considered the fact that the Trust was controlled by the same managers who were at the helm of RTC when it was forced into bankruptcy. Given RTC’s difficulties in performing its contracts before the involuntary Chapter 7 petition was filed, the bankruptcy court was within its discretion to require more convincing evidence of the Investment Trust’s ability to perform. See U.C.C. § 2-609 cmt. 4 (noting that a promise of performance alone might be ‘adequate’ when it is made by ‘a seller of good repute’ but not when it is made by ‘a known corner-cutter’).”
08-4118 & 08-4310 In re: Resource Technology Corp.
Appeals from the United States District Court for the Northern District of Illinois, Kennelly, J., Sykes, J.