Advanced Biomedical, Inc. v. Specialty Laboratories, Inc. (In re Advanced Biomedical, Inc.)

Case Type:
Business
Case Status:
Affirmed
Citation:
BAP No. CC-16-1100-DKiF (9th Cir. B.A.P. Dec. 2, 2016) (9th Circuit, Dec 02,2016) Not Published
Tag(s):
Ruling:

A prepetition assignment of accounts receivable ordered by a California Superior Court under Cal. Civ. Code section 708.510 was effective to remove the accounts from the debtor’s bankruptcy estate,

Procedural context:

Before the petition date, creditor obtained a judgment against debtor. Creditor then sought and obtained a court order under Cal. Civ. Code section 708.510 assigning debtor’s accounts receivable to creditor.

Debtor later filed its bankruptcy petition. Creditor filed an adversary proceeding requesting a determination that the receivables were not property of the estate because the assignment order had effected an absolute transfer to creditor of debtor’s interest in the receivables. The bankruptcy court agreed with creditor. On appeal, the BAP affirmed.

Facts:

An assignment under Cal. Civ. Code section 708.510 transfers title to receivables to a judgment creditor. The assignment may be by the Superior Court itself in its order, even though the statute appears to authorize the court only to order the judgment debtor to assign to the creditor. Under Cal. Civ. Code section 708.530, an assignee is deemed to be a bona fide assignee for value of the receivables. Although debtor had referred in a post-trial brief to a possible preference claim against creditor, debtor had not asserted a preference claim, and neither the bankruptcy court nor the BAP considered whether the assignment could be avoided as a preference. In a footnote, the BAP described a separate adversary proceeding pending before the bankruptcy court in which debtor sought to avoid the receivables assignment as a preference, and creditor moved to dismiss that action, arguing that the preference claim was a compulsory counterclaim in creditor’s declaratory-judgment action.

Judge(s):
Randall B. Dunn, Bankruptcy Judge for the District of Oregon sitting by designation, and Ralph B. Kirscher and Robert J. Faris, Bankruptcy Appellate Panel Judges

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