In re ELEGANT MERCHANDISING, INC., Debtor.
ELEGANT MERCHANDISING, INC., Plaintiff,
v.
REPUBLIC NATIONAL BANK and Bank Leumi Trust Company of New York, Defendants.
Bankruptcy No. 84 B 10903 (HCB), Adv. No. 84 6014A.
United States Bankruptcy Court, S.D. New York.
August 30, 1984.*399 Lester A. Lazarus, P.C., New York City, for debtor-plaintiff.
Kreindler & Relkin, P.C., New York City, for defendant Republic National Bank.
Hahn & Hessen, New York City, for Bank of Leumi Trust Company of New York.
EDWARD J. RYAN, Bankruptcy Judge.
On June 8, 1984, Elegant Merchandising, Inc. filed a voluntary petition under Chapter 11 of the Bankruptcy Code (Code). 11 U.S.C. 1101 et seq.
On July 24, 1984, by order to show cause and application, the debtor sought to enjoin Republic National Bank of New York (Republic) from demanding payment or performance from Bank Leumi Trust Company of New York (Bank Leumi) under Bank Leumi's Letter of Credit # 8795 and to enjoin Bank Leumi from honoring demands for payments or performance under the letter of credit.
The debtor's application was heard on July 26, 1984.
The debtor's application is denied. The court finds that there is no proper legal authority under which Republic or Bank of Leumi can be enjoined from exercising their respective rights and obligations under the letter of credit.
A letter of credit and its proceeds are not "property of the estate" within the meaning of 11 U.S.C. 541, and therefore the payment of a letter of credit is not a transfer of assets in violation of the automatic stay provisions of 11 U.S.C. 362. The letter of credit and its proceeds constitute property of the bank. In re Page, 18 B.R. 713, 714-16 (D.D.C.1982).
Republic National Bank made an oral application at the hearing for attorneys fees under Federal Rule 11 on the ground that the debtor's application was patently frivolous. The court finds that the debtor's application was filed in good faith and therefore the application for expenses should be denied.
It is so ordered.