Opinion ID: 487154
Heading Depth: 2
Heading Rank: 4

Heading: The Ryan-Walsh Account

Text: 22 Among the accounts due Lift was $80,000 for the lease of equipment to Ryan-Walsh Stevedoring. Lift borrowed the purchase money for that equipment from Seafirst Commercial Corporation and secured its obligation with an assignment of lease payments. 4 Notwithstanding the assignment, Ryan-Walsh made its payments to Lift and Lift retained them. After the bankruptcy filing, Lift sought to enforce its rights to lease proceeds and the trustee resisted. The parties squared-off but just before trial reached an accord. Their settlement proposal was submitted to the bankruptcy court for approval. Under the agreement, title to the equipment bought with Seafirst funds was transferred to Seafirst and Seafirst was to receive $20,000 of the Ryan-Walsh payments. In return, Seafirst was to release its security position with respect to the remaining $60,000 of Ryan-Walsh payments. 23 Notice of the proposed settlement, including its terms and the nature of the claims involved, was given to all creditors. ITT made no objection. The settlement was approved. ITT now contends that the settlement was violative of its security rights and, in any event, it has a security interest in the remaining $60,000 of Ryan-Walsh payments. 24 The district court rejected that contention. We do likewise. ITT's acquiescence in the settlement agreement permitted the surrender of valuable equipment, equipment which otherwise would have remained in the bankruptcy estate for the benefit of all creditors. Were we to recognize ITT's claimed security interest in the remaining Ryan-Walsh funds, the estate would be depleted of both those funds and the equipment, to the prejudice of unsecured creditors. In reality, the residual funds more closely represent the sale price of the equipment transferred to Seafirst than proceeds of accounts assigned to ITT.