- Case Type:
- Case Status:
- 17-2410-cv (2nd Circuit, Jun 13,2018) Not Published
- Summary Order, WITH NO PRECEDENTIAL EFFECT. Stock subscription agreement not enforceable by Chapter 7 trustee in bankruptcy under 11 U.S.C. section 365(c)(2), which precludes assumption of " a contract...to issue a security of the debtor."
- Procedural context:
- Court of appeals affirmed judgment of United States District Court for the Western District of New York affirming order of bankruptcy court dismissing claim by trustee for balance of money agreed to be invested by investor pursuant to stock subscription agreement.
- David and Jennifer Smith executed a stock subscription agreement with NanoDynamics, Inc., to purchase over time a total of 2.5 million shares of stock at $1 per share. The purchases were required to be completed by March 31, 2009, but the Smiths continued to make purchases after that deadline, and NanoDynamics continued to issue shares of stock within five business days of each payment. When NanoDynamics filed its Chapter 7 petition, $700,000 remained untendered. The Chapter 7 trustee sued the Smiths for that amount. The bankruptcy court dismissed the action and the district court affirmed on the basis that the subscription agreement was an executory contract that could not be assumed or enforced by the trustee under Bankruptcy Code section 365(c)(2) because it was "a contract ... to issue a security of the debtor," namely its stock.
- Dennis Jacobs, Denny Chin, and Raymond J. Lohier, Jr., Circuit Judges
Bennett v Garner
Summarizing by Shane Ramsey
2831 in the system
12 Being Processed