concurring in part, dissenting in part.
I agree that summary judgment was properly granted to U.S. Bank on the issue of United’s postpetition reimbursement request for prepetition construction expenses (the so-called “Category II” claims). Under the 2001 trust and payment agreements, U.S. Bank’s obligation to pay United’s construction reimbursement claims and United’s obligation to pay principal and interest on the construction bonds are mutual debts subject to setoff under 11 U.S.C. § 553(a). I also agree that summary judgment was properly granted to HSBC Bank under the terms of the 1997 trust and payment agreements, as the same setoff analysis controls.
I cannot agree, however, that United’s prepetition reimbursement request (the so-called “Category III” claims) should be treated differently. Neither the taxation doctrine of “constructive receipt” invoked by the majority here nor the California equitable maxim invoked by the bankruptcy court below is applicable. U.S. Bank’s nonpayment of United’s prepetition reimbursement request gives rise to a legal claim for breach of the trust and payment agreements, not an equitable claim for antecedent possession of money in the construction fund. As such, the claim is subject to setoff under § 553(a) because of the same mutuality in the parties’ indebtedness under the 2001 agreements. See Citizens Bank of Md. v. Strumpf, 516 U.S. 16, 18, 116 S.Ct. 286, 133 L.Ed.2d 258 (1995). Under the terms of those agreements, U.S. Bank owes United nearly $1.2 million on the Category III claims, which should be offset against the $34 million debt United owes on the underlying bonds, reducing it. But there is no justification for treating $1.2 million of the construction fund as the property of United’s bankruptcy estate, subject to turnover and not setoff. I would reverse the summary judgment in favor of United on the Category III claims.
Although the construction fund is held in trust, U.S. Bank’s obligations to United are wholly contractual, not fiduciary. United is not a party to the trust agreement and U.S. Bank is not a party to the *736payment agreement. The California development Authority and U.S. Bank, as trustee, are parties to the trust agreement; the Authority and United are parties to the payment agreement. The majority is correct that under California law the contracts are interrelated and must be read together, but that does not mean that U.S. Bank owes any fiduciary duty to United or that equity controls the parties’ substantive rights or the applicable remedies.
Under the terms of the trust-agreement, U.S. Bank’s fiduciary obligations as trustee are to the bondholders only; the proceeds of the bond issue were deposited in the construction fund, pledged to repayment of principal and interest, and “held in trust for the benefit of the bondholders.” The pledge “constitute^] a first and exclusive lien” held by U.S. Bank as trustee on the amounts in the construction fund “for the payment of the Bonds in accordance with the terms” of the trust and payment agreements.
Under the terms of the payment agreement, United agreed to pay principal and interest on the underlying bonds and the Authority agreed that proceeds in the construction fund would be made available to United “for the purpose of paying for Costs of the LAX Project.” Correspondingly, the trust agreement specifies that proceeds in the construction fund shall be made available to reimburse construction costs “upon the condition that [United] make payment” on the bonds. U.S. Bank as trustee is authorized to “take such actions as the Trustee deems necessary to enforce [United’s] obligation under the Payment Agreement to make timely payment of the principal of and interest on the Bonds.”
The payment agreement provides that payment of reimbursement claims “shall be made upon receipt by the Trustee of a Written Request” from United. The trust agreement provides that “[e]ach Written Request of [United] shall state, and shall be sufficient evidence to the Trustee ... that obligations in the stated amounts have been incurred by [United] and that each item thereof is a proper charge against the Construction Fund in accordance herewith.”
As between U.S. Bank and United, these terms establish only contractual— not fiduciary — rights and duties. State law governs the determination of the nature and scope of the property interests that comprise the “property of the estate” in bankruptcy, see 11 U.S.C. § 541(a)(1), as well as the setoff rights that are preserved under § 553(a) of the Bankruptcy Code. See Butner v. United States, 440 U.S. 48, 54, 99 S.Ct. 914, 59 L.Ed.2d 136 (1979) (“Congress has generally left the determination of property rights in the assets of a bankrupt’s estate to state law”); Strumpf, 516 U.S. at 18, 116 S.Ct. 286 (“[Section] 553(a) provides that, with certain exceptions, whatever right of setoff otherwise exists [under state law] is preserved in bankruptcy.”). In California (as in other states) law — not equity — provides the usual remedy for breach of contract. Wilkison v. Wiederkehr, 101 Cal.App.4th 822, 124 Cal.Rptr.2d 631, 638 (2002). “[Wjhatever equitable powers remain in the bankruptcy courts must and can only be exercised within the confines of the Bankruptcy Code.” Norwest Bank Worthington v. Ahlers, 485 U.S. 197, 206, 108 S.Ct. 963, 99 L.Ed.2d 169 (1988); see also United States v. Noland, 517 U.S. 535, 539, 543, 116 S.Ct. 1524, 134 L.Ed.2d 748 (1996). “There is no general equitable override to the Bankruptcy Code.” In re Payne, 431 F.3d 1055, 1062-63 (7th Cir.2005) (Easterbrook, J., dissenting).
The bankruptcy court held (and the district court agreed) that United’s prepetition (Category III) reimbursement claim *737was due and payable when U.S. Bank received a written request in the form specified by the agreements. U.S. Bank received United’s $1.2 million reimbursement request on December 5, 2002 — four calendar days but only two business days before United’s bankruptcy filing — and it was in proper form. U.S. Bank had a contractual duty to pay United’s claim “upon receipt,” and its nonpayment is actionable as a breach of the trust and payment agreements. That claim is property of the bankruptcy estate. Instead of classifying it as one at law for damages for breach of contract, however, the bankruptcy court invoked an equity maxim codified at section 3529 of the California Civil Code— “[t]hat which ought to have been done is to be regarded as done” — and treated the funds as having been transferred to United prior to the bankruptcy filing. The court further held (on the strength of this equitable maxim) that this “implied” transfer had the effect of terminating U.S. Bank’s security interest because a security interest in money is perfected by possession and under California law continues only while the secured party retains possession. See CAL. COM. CODE § 9313(d). Thus, the court concluded, U.S. Bank was holding property that belonged free and clear to United’s bankruptcy estate, and $1.2 million of the construction fund was subject to turnover and not setoff.
This approach was unwarranted. It ignores the fact that the construction fund is held in trust for the benefit of the bondholders, not United. Equity should not be invoked to enlarge United’s contractual rights at the expense of the bondholders’ fiduciary interests. It also conflicts with California law, under which the nonpayment of the reimbursement claim is actionable as a legal claim for breach of contract, foreclosing application of equitable remedies. “ ‘Equity follows the law and, when the law determines the rights of the respective parties, a court of equity is without power to decree relief which the law denies.’ ” Wilkison, 124 Cal.Rptr.2d at 638 (quoting Skive v. Barrow, 88 Cal.App.2d 838, 843-44, 199 P.2d 693 (1948) (citing Morrison v. Land, 169 Cal. 580, 586, 147 P. 259 (1915))). When the remedy at law is adequate, equity will not step in to rescue a claimant from other circumstances — particularly circumstances of his own making. See, e.g., Wilkison, 124 Cal.Rptr.2d at 640-41 (“[I]f the plaintiffs cause of action is one for which the legal remedy of damages is generally deemed adequate, it does hot become inadequate and justify a decree of specific performance merely because the legal remedy has been lost through neglect.” (quoting 5 B.E. Witiun, Cal. Procedure, Pleading, § 759, at 215 (4th ed.1997))).
That United’s breach of contract damages claim is subject to setoff against its own much larger debt under the 2001 agreements does not mean the legal remedy is inadequate; resort to equity is not justified as a means of avoiding the effects of otherwise applicable law that defines the respective rights and duties of the parties. Id.; see also Buntrock v. S.E.C., 347 F.3d 995, 997, 999 (7th Cir.2003) (“The victim of a breach of contract could not defend his request for injunctive relief by arguing that his suit for damages would be barred by .the statute of limitations.”). Outside bankruptcy United would not.be entitled to an “implied equitable transfer” merely because its breach of contract damages are legally offset by its own larger debt to U.S. Bank. The analysis should be no different inside bankruptcy.
The majority apparently views the bankruptcy court’s use of the California equity maxim with skepticism but strains to find another that will produce the same result. It locates one in the domain of income tax *738law: the doctrine of “constructive receipt,” whereby income is deemed received and reportable to the Internal Revenue Service when it is actually or constructively received, the latter occurring when the taxpayer has the power to receive income but chooses not to, usually for tax avoidance purposes. No one raised this doctrine, either below or on appeal. We should generally refrain from deciding nonjuris-dictional issues on grounds not asserted by the parties, see United States v. Nash, 29 F.3d 1195, 1202, n. 5 (7th Cir.1994), not least because it sabotages the adversarial process. See McNeil v. Wisconsin, 501 U.S. 171, 181 n. 2, 111 S.Ct. 2204, 115 L.Ed.2d 158 (1991) (“What makes a system adversarial rather than inquisitorial is ... the presence of a judge who does not (as an inquisitor does) conduct the factual and legal investigation himself, but instead decides on the basis of facts and arguments pro and con adduced by the parties.”). Parties in court have the right to address the arguments made by their opponents and rely on the doctrine of waiver for arguments not made. Moreover, decisional grounds invoked sua sponte by an appellate court may lack appropriate factual support and have not been subjected to normal adversarial testing, which could expose weaknesses, or worse, outright error.
The majority believes the doctrine of constructive receipt “is appropriately responsive to the issues in this case” because it “addresses issues of timing, specifically to preclude taxpayers from manipulating the timing of income receipt for their own benefit.” As applied here, according to the majority, the doctrine serves to prevent U.S. Bank from “speculating” on United’s bankruptcy by manipulating the timing of its payment on the reimbursement claim. The majority also justifies application of the doctrine as a means of enforcing U.S. Bank’s contractual duty of good faith and fair dealing. But there is no evidence of manipulation or bad faith on the part of U.S. Bank and no authority for the importation of this income tax doctrine into a breach of contract dispute.
It is undisputed that U.S. Bank received United’s reimbursement request sometime on Thursday, December 5, 2002, and that United filed for bankruptcy before business opened on Monday, December 9, 2002. At most, as I have noted, two business days passed. It is also undisputed that U.S. Bank paid numerous prior reimbursement requests, apparently summarily and promptly, although the record does not address the course of dealing between the parties regarding the mode and timing of these payments. It is reasonable to infer that U.S. Bank was aware of United’s looming bankruptcy in December 2002, for the reasons noted by the majority. But it is quite a leap from that permissible inference to a finding — by an appellate court— of manipulation or bad faith shirking of contractual obligations. Reviewing courts are not in the fact-finding business. In any event, this matter is before us on summary judgment.
Application of the taxation doctrine of constructive receipt is no more supportable than application of the California equity doctrine invoked by the lower courts. Accordingly, I would reverse the summary judgment in favor of United on the issue of the Category III claims and to that extent must respectfully dissent.