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Singh v, Singh (In re Singh)

Summarizing by Bradley Pearce

THERMO CREDIT, LLC v DCA SERVICES, INC.,

Case Type:
Business
Case Status:
Reversed and Remanded
Citation:
Case No. 17-4207; File No. 18a0542n.06 (6th Circuit, Oct 29,2018) Not Published
Tag(s):
Ruling:
Sixth Circuit held that, under the Ohio UFTA, payments subject to a valid lien cannot be subject to being recovered from a transferee. The Court also held that a lender that is aware of the financial condition of its borrower and is aware of the payments by its borrower to a third party waives its rights to later seek to recover them under the Ohio UFTA..
Procedural context:
Lender filed suit in District Court against a third party who had received payments from the lender's borrower both before and after the Chapter 11 of the borrower. The third party had entered into an agreement with the borrower to manage the borrower business. The agreement was amended and revised several times. When the borrower filed its Chapter 11 the lender was granted a first priority lien in the borrower's assets as a condition of the borrower's use of cash collateral. The borrower, as the debtor, made payments to the third party during the Chapter 11 just as it had prior to the bankruptcy filing. After the bankruptcy case was dismissed the lender sued the third party under the UFTA to recover the payments made pre-petition and post petition to the third party. The District Court granted summary judgment to the third party on the lender's attempt to recover both sets of payments. The Sixth Circuit affirmed the District Court as to both sets of payments.
Facts:
The evidence showed that the lender monitored its borrower's affairs closely and was aware of the payments made pre-petition to the third party. The lender took no action to stop the payments. The lender was concerned about the size of the payments but did nothing. The lender claimed that to interfere with the payments would result in lender liability. The Sixth Circuit discounted this argument. In bankruptcy the lien granted to the lender in all assets of the borrower extended to the cash of the borrower as debtor. The payments to the third party then were subject to the lien. The lender claimed the payments were free of the lien, which the Sixth Circuit agreed with, but the Sixth Circuit stated that the proper time frame for review was when the payments were first made- they were subject to a lien when made.
Judge(s):
Gibbons, Stranch and Bush, Circuit Judges

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