United States Court of Appeals For the Seventh Circuit
Bankruptcy — estate assets — priority
Where assets did not belong to the bankruptcy estate, it did not violate the Bankruptcy Code’s priority rules to distribute them to the debtor’s attorneys.
“Scouler relies heavily on two cases for most of its argument: In re Resource Tech. Corp., 356 B.R. 435, 443 (Bankr. N.D. Ill. 2006), and an unpublished ‘tentative ruling,’ In re Golden Bear Oil Specialties, No. 01-BK-22467 (Bankr. C.D. Cal. Nov. 7, 2001). Reliance on these cases is misplaced because both involved assets of the estate. Scouler never clearly articulates how the funds at issue here can be considered assets of the bankruptcy estate. In Golden Bear, for example, a committee of creditors agreed to relinquish legal claims against certain lenders on behalf of the bankruptcy estate in exchange for funds; the court found that it was really the estate in this situation that was providing consideration, and so the estate should receive the benefit of the bargain. Thus, in that case, the funds involved in the settlement were estate funds. In this case, the estate agreed to settle claims against Dawson, and it certainly provided consideration (relinquishing a claim to the Ewing property) in exchange for the certainty of the settlement value. The money paid to Bauch is an entirely different matter; that payout was negotiated after the bankruptcy court had already allocated the value of the Ewing property among the estate, Dawson, and Headland. Scouler cannot show clear error in the lower court’s determination that the $65,000 actually belonged to Dawson and Headland rather than to the estate.”
Appeal from the United States District Court for the Northern District of Illinois, Kendall, J., Bauer, J.