Opinion ID: 393753
Heading Depth: 3
Heading Rank: 1

Heading: Adequacy of Consideration

Text: 19 There is no factual dispute regarding the consideration for the collateral arrangement. The record indicates that Southland agreed to assign the net proceeds of any recovery in its pending lawsuit; in return Santiago Bank partially released its lien on the Craig's property, thus securing a reduction in principal, and releasing approximately $25,000 8 in working capital to Southland. Although the adequacy of consideration is generally a question of fact, the actual amounts involved are not in question and the bankruptcy court was justified in finding the consideration adequate as a matter of law. Cf. Klein v. Tabatchnick, 610 F.2d 1043, 1047 (2d Cir. 1979). 20 With the advantage of hindsight, Jonas now argues that the consideration for the collateral compromise was inadequate. The adequacy of consideration is tested as of the time of the making of the contract, and the courts do not weigh the quantum of the consideration as long as it has some value. A. J. Industries, Inc. v. Ver Halen, 75 Cal.App.3d 751, 761, 142 Cal.Rptr. 383, 389 (1977) (citation omitted); Crail v. Blakely, 8 Cal.3d 744, 753, 505 P.2d 1027, 1034, 106 Cal.Rptr. 187, 194 (1973). As the bankruptcy court noted, (t)he state court lawsuit was hotly contested. There were no assurances that there would be a recovery of any kind.... The debtor had proposed a plan which would return something to the creditors as against the unknowns of litigation. In light of the highly speculative value of the lawsuit at the time Southland and Santiago entered into their agreement, it cannot now be argued that the $25,000 in capital Southland received was inadequate consideration for assigning the potential proceeds of the litigation.