United States Court of Appeals
For the First Circuit
03-2586
IN RE NTA, LLC, AND NTA II, LLC, Debtors
NTA, LLC, AND NTA II, LLC,
Appellants,
v.
CONCOURSE HOLDING COMPANY, LLC,
Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Michael A. Ponsor, U.S. District Judge]
Before
Torruella, Lynch, and Lipez, Circuit Judges.
Charles R. Bennett, Jr., with whom Harold B. Murphy and Jesse
I. Redlener were on brief, for appellants.
Sabin Willett, with whom Julia Frost-Davies, Melissa G.
Liazos, and Gregory N. Kazarian were on brief, for appellee.
August 17, 2004
LIPEZ, Circuit Judge. Appellants NTA and NTA II placed
their primary assets, the Membership Interests in a company, into
an escrow account as part of an agreement to avoid foreclosure by
a lender, appellee Concourse Holding Company. Appellants
subsequently filed for bankruptcy under Chapter 11. They now claim
that the Membership Interests placed in escrow are part of the
bankruptcy estate and not the property of the appellee. Both the
bankruptcy court and the district court ruled that the escrowed
assets were not part of the bankruptcy estate and were properly
distributed from escrow to the appellee. Interpreting the written
agreements that govern the relationship between the parties, and
applying both 11 U.S.C. § 541 and Illinois state law, we affirm.
I.
We glean the facts from the record before the bankruptcy
and district courts. While there is a long and complicated history
between the parties, we relate only those facts relevant to the
issues on appeal.
NTA and NTA II (collectively, NTA) are holding companies.
NTA owned one hundred percent of the Membership Interests1 in
Concourse Communications (Concourse), a company that develops,
implements, and maintains wireless communication systems in
airports and other public venues. The Membership Interests were
1
The Membership Interests represent the rights to equity
ownership in Concourse. They are the only ownership interests in
Concourse.
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NTA's primary assets and entitled NTA to exercise total control
over Concourse. Based on its business contracts at the time of the
bankruptcy filing, Concourse had a value in excess of $20 million.
In August of 1999, Concourse borrowed approximately $14
million to finance its business. On August 15, 2002, Concourse
Holding Company (Holding Company) bought the rights to that loan
from Concourse's original lender.2 Concurrently with that
purchase, Holding Company entered into an agreement with Concourse
and NTA, providing that (1) Holding Company would provide up to
$4.1 million in additional financing to Concourse, and (2) Holding
Company would have the option to purchase NTA's Membership
Interests in Concourse. In a separate agreement, executed
simultaneously, NTA guaranteed Holding Company's loans to
Concourse, offering its Membership Interests in Concourse as
security. Under the terms of that agreement, if Concourse
defaulted on its obligations to Holding Company, NTA would transfer
its Membership Interests in Concourse to Holding Company.
In December 2002, Holding Company sent a notice of
default to Concourse, stating that Concourse had failed to make its
most recent scheduled interest payment. Concourse commenced a
civil action in Illinois state court seeking a determination that
2
Holding Company was created by Cardinal Growth, a venture
capital fund, for the purpose of acquiring the loans to Concourse.
Prior to acquiring those loans, Holding Company had no affiliation
with Concourse.
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it was not in default under the terms of its loan agreement with
Holding Company. In March of 2003, the parties suspended
litigation and entered into two agreements, the Standstill
Agreement and the Escrow Agreement.3
The Standstill Agreement was "intended by the parties to
provide the terms under which the indebtedness of Concourse owed
to, or held by Holding Company will either be paid off, or
alternatively, the business of Concourse and its related entities
transferred to Holding Company in satisfaction of the outstanding
indebtedness." Under the Standstill Agreement, Concourse had two
options: it could either (1) pay off its loan obligations to
Holding Company by April 30, 2003, or (2) obtain financing from
another lender and provide Holding Company with a Letter of Intent
from that lender by April 30, 2003, agreeing to pay off Concourse's
loan obligations to Holding Company. In the latter case, the new
financing would have to have been completed by June 30, 2003.4
The Standstill Agreement also required NTA and Holding
Company to place several documents in escrow. First, it required
both parties to submit a mutual release of liabilities. These
3
Although these agreements suspended litigation, they did not
resolve the question of whether Concourse was in default.
Concourse still maintains that it was not in default under the loan
agreement.
4
The Standstill Agreement provided that Concourse could extend
the period for completing the new financing until July 31, 2003, if
it requested an extension by June 15, 2003, and paid $100,000 to
Holding Company. Concourse never exercised this provision.
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mutual releases were to be distributed to the parties if Concourse
satisfied its obligations to Holding Company in accordance with the
Standstill Agreement. Second, the Standstill Agreement required
NTA and Concourse to submit a "Confession of Judgment," conceding
that NTA and Concourse were liable to Holding Company for $13
million, to be released if Concourse failed to meet its obligations
under the Standstill Agreement.
Finally, and most importantly for the issues on appeal,
the Standstill Agreement required NTA to submit an "Assignment of
Interests" that was "intended to transfer all right, title and
interest in Concourse to Holding Company." This provision
effectively required NTA to place its Membership Interests into
escrow.5 Paragraph 7 of the Standstill Agreement governed the
release of the Membership Interests. Under its terms, the Escrow
Agent would release the Interests to Holding Company if one of
several "triggering events" occurred. The "triggering events"
relevant in this case were (1) the failure of NTA to supply a
Letter of Intent to Holding Company by April 30, 2003, and (2) the
failure to close on new financing by June 30, 2003.
The Escrow Agreement specified the procedure for
releasing the Membership Interests to Holding Company: the
Interests should be released "upon the earlier of (i) two (2)
5
Because the "Assignment of Interests" operated to transfer
title in the Membership Interests, we characterize the property
held in escrow as the "Membership Interests."
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business days after the Escrow Agent receives a copy of the written
notice from Holding Company to [Concourse] that a triggering event
has occurred within the meaning of paragraph 7 of the Standstill
Agreement, (ii) or July 31, 2003."6 Despite the provision
requiring the Escrow Agent to wait two business days before
disbursing the Membership Interests, neither the Standstill
Agreement nor the Escrow Agreement included any provision allowing
NTA to prevent the distribution of the Membership Interests to
Holding Company on any basis.7
On Friday, May 16, 2003, Holding Company sent a letter to
the Escrow Agent giving notice of a "triggering event," namely that
Concourse had not provided Holding Company with a Letter of Intent
6
The Standstill Agreement contained a similar provision,
requiring the Escrow Agent to release the escrowed documents after
receiving written notice from Holding Company that a triggering
event had occurred, "provided, however, that the Escrow Agent may
not disburse without waiting 48 hours after written notice to
Concourse that it has been notified by Holding Company that one of
the triggering events has occurred."
7
Appellees argue that the sole purpose of the two business day
waiting period was to allow NTA to seek an injunction in Illinois
state court if it thought that Holding Company had improperly
notified the Escrow Agent of a triggering event. As discussed
infra, appellants sought such an injunction in Illinois state
court. Their pleadings to that court stated that "[t]he purpose of
the [two business day waiting period] was to permit Concourse to
appear before [the state court] to obtain injunctive relief against
disbursement." Nevertheless, appellants argue on appeal that,
because there was no express purpose stated in the Standstill
Agreement for the two business day waiting period, we should not
assume that it was only intended to give appellants time to seek an
injunction. As our decision does not rely on the purpose of the
two business day waiting period, we do not decide whether that
provision was available only to seek an injunction.
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from another lender by April 30, 2003, in compliance with the
Standstill Agreement.8 On Monday, May 19, 2003, NTA sought a
temporary restraining order in Illinois state court to prevent
release of the escrowed documents. The Illinois court denied NTA's
motion, stating that NTA had "failed to present a fair question
regarding [its] likelihood of success on the merits."
Several hours later, but before the expiration of the two
business days that the Escrow Agent was required to wait before
releasing the Membership Interests, NTA filed for Chapter 11
protection in U.S. Bankruptcy Court and claimed that the Membership
Interests were part of the bankruptcy estate. Holding Company
moved for relief from the automatic stay in order to receive the
Membership Interests from the Escrow Agent. After hearing
arguments, the bankruptcy court ruled that Holding Company's motion
was moot because the Membership Interests were not part of the
bankruptcy estate. In its bench ruling, the bankruptcy court
reasoned that "[t]he escrow arrangement says that the membership
interests would be transferred to Holding Company upon the delivery
of the notice of default, or within two days thereafter. In light
of the escrow agreement, the membership interests are no longer
8
Concourse had provided a Letter of Intent on April 29, 2003.
Holding Company contended that the letter did not meet the
requirements of the Standstill Agreement. On May 7, 2003, Holding
Company challenged the sufficiency of the letter in Illinois state
court. On May 14, 2003, however, the letter was withdrawn by its
issuer, making the court proceedings moot.
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property of the bankruptcy debtors." The bankruptcy court issued
an order to this effect on June 4, 2003, and the Escrow Agent
released the Membership Interests to Holding Company on the
following day.9
NTA appealed the June 4 order to the district court. On
July 8, 2003, before the district court could hear the appeal, NTA
filed a motion in bankruptcy court seeking to confirm that it held
"redemption rights" in the Membership Interests. The bankruptcy
court ruled that it had no jurisdiction to consider the motion
because the June 4 order was on appeal to the district court. NTA
appealed this second order to the district court.
The district court consolidated the two appeals. On
November 12, 2003, the district court held that NTA's bankruptcy
estate had no rights to the Membership Interests, and that it did
not retain any right of redemption in those interests. The court's
order stated that "the membership interests in question left the
possession of [NTA] at the time they were transferred to the Escrow
Agent," and that "[a]t the latest, [NTA's] claim to [the]
membership interests (including any right of redemption) was
extinguished at the time of the triggering event."
NTA now appeals the ruling of the district court, arguing
that (1) the Membership Interests were part of the bankruptcy
9
Since release of the Membership Interests, Holding Company
has exercised control of Concourse and its business operations.
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estate at the time of the bankruptcy filing, and (2) in the
alternative, the bankruptcy estate retained a right of redemption
in the Membership Interests. It asks us to remand the case for
bankruptcy proceedings with the Membership Interests, or
alternatively the right of redemption, included in the bankruptcy
estate. "Like the district court, we review the bankruptcy court's
factual findings for clear error, and its conclusions of law de
novo." Haseotes v. Cumberland Farms, Inc. (In re Cumberland Farms,
Inc.), 284 F.3d 216, 224 (1st Cir. 2002).
II.
A. The Effect of the Standstill and Escrow Agreements on the
Interests of the Parties in the Membership Interests at the time of
the Bankruptcy Filing
The commencement of a bankruptcy case creates a debtor's
estate, which is comprised of "all legal or equitable interests of
the debtor in property as of the commencement of the case." 11
U.S.C. § 541(a)(1). Generally, state law determines what interests
the debtor holds in property. See, e.g., Butner v. United States,
440 U.S. 48, 54 & n.9 (1979) ("Congress has generally left the
determination of property rights in the assets of a bankrupt's
estate to state law."); Musso v. New York State Higher Educ.
Servs. Corp. (In re Royal Business School, Inc.), 157 B.R. 932,
940-42 (Bankr. E.D.N.Y. 1993) (looking to state law to determine
what rights the debtor had under an escrow agreement). A
bankruptcy estate cannot succeed to a greater interest in property
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than the debtor held prior to bankruptcy. 11 U.S.C. § 541(d); see
also Ga. Pac. Corp. v. Sigma Serv. Corp., 712 F.2d 962, 968 (5th
Cir. 1983) ("[T]he rule is elementary that the estate succeeds only
to the title and right in the property that the debtor possessed .
. . .")(quotations omitted); TTS, Inc. v. Citibank, N.A. (In re
TTS, Inc.), 158 B.R. 583, 585 (D. Del. 1993) ("Section 541 does not
give the debtor any greater rights to property than the debtor had
before filing for Chapter 11."). Thus, in this case, the
bankruptcy estate's interest in the Membership Interests is the
same as--no more than and no less than--the interest that NTA held
in the Membership Interests at the time of the bankruptcy filing.
Prior to the state court litigation that led to the
signing of the Standstill and Escrow Agreements, NTA owned the
Membership Interests subject to Holding Company's interest in those
Membership Interests as security for Holding Company's loans to
NTA. When the parties signed the Standstill and Escrow Agreements,
however, those agreements superseded previous agreements between
the parties with respect to each party's rights to the Membership
Interests. At the time of NTA's bankruptcy filing, the bankruptcy
estate's rights to the Membership Interests were defined by those
agreements. See In re TTS, Inc., 158 B.R. at 586 (stating that the
court must "consider the escrow agreement to determine the extent
of each party's interest in the escrow account").
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The Standstill and Escrow Agreements significantly
altered the rights of the parties to the Membership Interests and,
concomitantly, to control over the business of Concourse itself.
NTA could no longer assign, sell, or use the Membership Interests
as collateral without the permission of Holding Company. Paragraph
7 of the Standstill Agreement allowed NTA to exercise operating
control over Concourse only so long as it avoided any of the
triggering events. The Standstill Agreement required Concourse to
provide detailed monthly cash flow statements to Holding Company
and prevented Concourse from making capital expenditures or taking
on new debt without Holding Company's approval. Whereas under the
loan agreement Holding Company merely had a security interest in
the Membership Interests, with no right to control the conduct of
Concourse's business, the Standstill Agreement permitted Holding
Company to exercise substantial control over Concourse's business
and the Membership Interests.
In essence, the Standstill Agreement left NTA with only
a limited right to the Membership Interests, best described as a
contingent right to reclaim the Interests by meeting certain
financing requirements. If NTA obtained new financing for
Concourse during the time frame set out in the Standstill
Agreement, it could pay off the balance of the loan and effectively
"buy back" the Membership Interests from Holding Company. If,
however, it did not obtain new financing in the time and in the
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manner specified by the Standstill Agreement, the Membership
Interests would be distributed from escrow to Holding Company.
Thus, after it signed the Standstill and Escrow Agreements, and
deposited its Membership Interests into escrow, NTA's right to the
Membership Interests was simply a contractual right to prevent
their distribution to Holding Company and to buy them back by
meeting the requirements for new financing outlined in the
Standstill Agreement.
The bankruptcy estate can no longer exercise the
contingent interest that NTA held in the Membership Interests
pursuant to the Standstill and Escrow Agreements.10 NTA did not
provide a letter of intent by April 30, 2003, and therefore did not
fulfill the requirements necessary to prevent distribution of the
Membership Interests to Holding Company under the terms of the
Standstill Agreement. If NTA had not filed for bankruptcy, there
would be no dispute that the Membership Interests should be
10
Appellees argue that this conclusion requires us to find that
appellants' claim is moot. Appellants argue that appellees have
taken a contradictory position in prior proceedings and are thus
estopped from raising a mootness argument. We do not decide
whether appellants' claim is moot. However, in addressing the
merits of that claim, we must determine the specific rights to the
Membership Interests that appellants held under the Standstill
Agreement. These rights were, by the terms of that agreement, time
sensitive, i.e., the Agreement allowed NTA to reclaim the
Membership Interests only by securing new financing within a
limited time period. Thus, the question of whether the bankruptcy
estate has any interest in the Membership Interests necessarily
requires us to consider the time periods outlined in the Standstill
Agreement.
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distributed to Holding Company. With this litigation, NTA
effectively seeks to expand its rights to the Membership Interests
by claiming that, through its bankruptcy filing, it could avoid the
distribution of the Membership Interests that would have occurred
under the terms of the Standstill and Escrow Agreements. However,
as we have stated, the bankruptcy estate cannot hold a greater
interest in property than the debtor held prior to bankruptcy. In
this case, NTA's contingent right, and therefore the bankruptcy
estate's contingent right, to "buy back" the Membership Interests
under the terms of the Standstill Agreement has expired.
Therefore, the bankruptcy estate has no remaining property interest
in the Membership Interests.
B. The Parties' Rights to the Membership Interests under Illinois
Law
We reach our conclusions regarding the Standstill and
Escrow Agreements under Illinois law, which we now describe in
greater detail.11 "The law in Illinois regarding conditional
delivery into escrow is well-established. Delivery of a deed into
escrow does not convey title when the conveyance is contingent upon
the occurrence of an event that entitles the grantee to the
possession of the deed." Miguel v. Belzeski, 797 F. Supp. 636, 641
11
The parties agree that Illinois law governs both the
Standstill and Escrow Agreements. "Where the parties have agreed
to the choice of law, this court is free to forgo an independent
analysis and accept the parties' agreement." Hershey v. Donaldson,
Lufkin & Jenrette Sec. Corp., 317 F.3d 16, 20 (1st Cir.
2003)(quotation omitted).
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(N.D. Ill. 1992).12 Although legal title does not transfer upon
placing property in escrow, the grantor does not necessarily hold
the same rights to the property as he did prior to the deposit.
Rather, "[w]hen property is delivered in escrow, a trust is
created." FDIC v. Knostman, 966 F.2d 1133, 1140 (7th Cir. 1992);
see Stark v. Chicago Title & Trust Co., 45 N.E.2d 81, 84 (Ill. App.
Ct. 1942) ("From the time the deposit is made the [Escrow Agent]
becomes the trustee of both the party making the deposit and the
one for whose benefit it is made."); Restatement (Second) of Trusts
§ 32 cmt. d (1959) ("At the time of the delivery in escrow there is
a presently created trust . . . ."). The beneficiary of the trust
holds an "equitable interest" in the property, consisting of the
right to obtain legal title to the property pursuant to the terms
of the contractual agreements between the parties. Merchant's
Nat'l Bank of Aurora v. Frazier, 67 N.E.2d 611, 617 (Ill. App. Ct.
1946) ("[A] trust may be said to exist where the legal estate is in
one person and the equitable estate is in another, or where there
are rights, titles and interest in property distinct from the legal
ownership thereof."); see also Berger, Shapiro & Davis, P.A., v.
Haeling (In re Foos), 183 B.R. 149, 158 (Bankr. N.D. Ill. 1995)
(stating that the beneficiaries "hold the equitable title to the
12
Illinois law in this area is similar to the law in other
states. See, e.g., In re Royal Business School, Inc., 157 B.R. at
940 ("In New York, as in most other states, legal title to property
placed in escrow remains with the grantor pending the fulfillment
of the conditions agreed upon in the escrow agreement.").
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trust property pursuant to the trust agreement") (applying Illinois
law). Thus, under Illinois law, when a grantor places property
into escrow, the grantee holds an equitable interest in the
escrowed property, defined by the agreements between the parties,
even before the property is released and the grantee takes legal
title.13
In this case, once the parties signed the Standstill and
Escrow Agreements and placed the Membership Interests in escrow,
Holding Company had an equitable interest in the Membership
Interests that consisted of the right to obtain legal title to the
Membership Interests pursuant to the terms of the Standstill and
Escrow Agreements. Similarly, NTA could only reclaim the
Membership Interests by fulfilling the terms for new financing
pursuant to the Standstill and Escrow Agreements. As stated above,
under the bankruptcy code, NTA's estate can only hold the interest
13
Other states have a similar framework for the transfer of
property in escrow. See, e.g., Wilson v. United Sav. of Texas (In
re Missionary Baptist Found., Inc.), 792 F.2d 502, 504 (5th Cir.
1986) ("Texas courts hold that when a grantor executes an escrow
agreement and deposits the subject matter into escrow, he retains
legal title to the subject matter, with equitable title passing to
the ultimate grantee."); In re TTS, Inc., 158 B.R. at 586 ("Thus,
under New York law, [grantor] clearly holds legal title to the
escrow account subject to the equitable interest held by
[grantee]."); Zeigler v. Hathaway Ranch P'ship (In re Hathaway
Ranch P'ship), 127 B.R. 859, 863 (Bankr. C.D. Ca. 1990) ("Under
California law, once there is a binding and enforceable escrow
agreement between the parties, . . . the grantee acquires immediate
equitable title to the subject property, and upon satisfaction or
performance of the escrow conditions, legal title to the property
passes to the grantee.").
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that NTA held at the time of the bankruptcy filing. See, e.g.,
N.S. Garrott & Sons v. Union Planters Nat'l Bank of Memphis (In re
N.S. Garrott & Sons), 772 F.2d 462, 466 (8th Cir. 1985) ("[W]here
the debtor holds bare legal title without any equitable interest,
the estate acquires bare legal title without any equitable
interest."). Thus, the bankruptcy estate held only the right to
reclaim the Membership Interests pursuant to the parties'
agreements, while Holding Company held the right to obtain legal
title to the Membership Interests if NTA failed to obtain new
financing under the terms and within the time frame provided in the
Standstill and Escrow Agreements.
When NTA filed for bankruptcy, the Illinois court had
already denied its request for an injunction, and the Standstill
Agreement required that the Membership Interests be released to
Holding Company in a matter of hours. Thus, at the time of the
bankruptcy filing, NTA's contingent right to reclaim the Membership
Interests had expired, with only the two business day waiting
period to lapse before the Membership Interests would be
distributed to Holding Company. Pursuant to both Illinois escrow
law and federal bankruptcy law, NTA's bankruptcy estate succeeded
only to this minimal interest. NTA's bankruptcy filing could not
prevent operation of the Standstill and Escrow Agreements by making
the Membership Interests the property of the bankruptcy estate.
See In re Prairie Crossing, 44 Collier Bankr. Cas.2d 1865 (N.D.
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Ill. 2000) ("Debtor gave up its legal rights to equity in the
property when it agreed to execute and deliver a deed pursuant to
the escrow provisions.") (interpreting Illinois law).
Our holding that the Membership Interests are not part of
NTA's bankruptcy estate is consistent with the treatment given by
other courts to property placed in escrow prior to a party filing
for bankruptcy protection. See 5-541 Collier on Bankruptcy §
541.09A (15th ed. rev. 2004) ("In general, most courts have held
that assets in escrow are not property of the estate, even though
the debtor may have certain rights under an escrow agreement and,
therefore, in the assets escrowed."); Gulf Petroleum, S.A. v.
Collazo, 316 F.2d 257, 261 (1st Cir. 1963) ("Courts of bankruptcy
recognize that money held in escrow is not property which vests in
the trustee in bankruptcy . . . ."). In general, an estate holds
only the same contingent rights to the escrowed property that the
debtor held prior to filing for bankruptcy. See In re Royal
Business School, Inc., 157 B.R. at 940 ("[T]he predominant rule is
that a subsequent judgment or release of escrow monies does not
deprive the estate of anything of value since the debtor reserves
only a contingent right to the escrowed funds."). In this case,
the Membership Interests are not part of the bankruptcy estate
because the bankruptcy filing could not prevent the distribution of
the Interests pursuant to the Standstill and Escrow Agreements.
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III.
Appellants argue that, even if the Membership Interests
are not part of the bankruptcy estate, the estate at least owns a
right to redeem those interests. As noted, prior to the execution
of the Standstill and Escrow Agreements, Holding Company held only
a security interest in the Membership Interests. Arguing that the
execution of the Standstill and Escrow Agreements did not alter
this arrangement, appellants contend that, as a security agreement,
the Standstill and Escrow Agreements are governed by Illinois's
version of the Uniform Commercial Code, which provides a statutory
right of redemption pursuant to 810 Ill. Comp. Stat. 5/9-623.14
The Standstill and Escrow Agreements did not preserve or
create a security interest in the Membership Interests. Under the
earlier loan agreements, Holding Company had a perfected security
interest in the Membership Interests, and it could have pursued
state court proceedings to foreclose on the collateral after
Concourse's alleged default. Instead, Holding Company and NTA
entered into new agreements--the Standstill and Escrow Agreements--
whereby NTA gave up control of its Membership Interests and
retained only a contingent right to "buy back" those interests by
14
As stated supra Part I, the bankruptcy court did not address
the right to redeem issue. The district court ruled that NTA had
not waived this argument, but nevertheless decided that any right
to redemption had been extinguished prior to NTA's bankruptcy
filing. We assume, without deciding, that NTA has not waived this
argument and address it on the merits.
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obtaining new financing in the manner and within the time frame
described in the Standstill Agreement. From that point forward,
Holding Company's rights in the Membership Interests were defined
by the terms of the Standstill Agreement and consisted of a right
to take immediate title to the Membership Interests, subject to the
two business days condition, if Concourse failed to obtain new
financing. This substantial right to the Membership Interests
cannot be described as a mere security interest for Holding
Company's loans to Concourse.
Moreover, "in the absence of a separate written security
agreement, there must be some language reflecting the parties'
desire to grant a security interest." Eagle Bank v. Cmty. Bank of
Trenton (In re Zurliene), 97 B.R. 460, 464 (Bankr. S.D. Ill. 1989)
(interpreting Illinois law). There is no such language in the
Standstill and Escrow Agreements. The parties in this case were
sophisticated actors in a complex business transaction who had
previously executed a loan agreement granting Holding Company a
security interest in the Membership Interests. If they had
intended the Standstill and Escrow Agreements merely to grant a
security interest once again, they could have made that intent
clear in the text of the new agreements. They did not do so;
instead, they entered into new agreements that substantially
altered each party's rights to the Membership Interests. These
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alterations preclude NTA's argument that the bankruptcy estate has
the right to redeem the Membership Interests.
IV.
Our holding does nothing more than effectuate the
agreement between the parties. If NTA had not filed for
bankruptcy, the Membership Interests would have been released to
Holding Company pursuant to the Standstill and Escrow Agreements.
As the bankruptcy estate cannot hold a greater interest in property
than the debtor held prior to filing for bankruptcy, NTA's
bankruptcy filing could not prevent the operation of the parties'
valid agreements.
For the foregoing reasons, the judgment of the district
court is AFFIRMED.
So ordered.
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