Court Opinion

ID: 2998766
Source: CourtListenerOpinion
Date Created: 2015-09-24 19:47:01.814745+00
Date Added: 2024-06-11T11:25:05.743221
License: Public Domain

In the
 United States Court of Appeals
               For the Seventh Circuit
                         ____________

Nos. 05-1752 & 05-1814
I N RE
  UNITED AIR LINES, INC.,
                                                          Debtor.

U.S. BANK NATIONAL ASSOCIATION,
                                                     Appellant,
                                                 Cross-Appellee,
                               v.

UNITED AIR LINES, INC.,
                                               Debtor-Appellee,
                                               Cross-Appellant.
                         ____________
            Appeals from the United States District Court
        for the Northern District of Illinois, Eastern Division.
  Nos. 04 C 6643, 04 C 6644, 04 C 6885—John W. Darrah, Judge.
                         ____________
 ARGUED SEPTEMBER 7, 2005—DECIDED FEBRUARY 13, 2006
                    ____________

  Before CUDAHY, MANION, and SYKES, Circuit Judges.
  CUDAHY, Circuit Judge. The fundamental question in
this consolidated appeal is when title to funds held in trust
passes to a beneficiary. That question is broad, and an
imprecise resolution might have far-reaching implications
for, among other things, the law of secured transactions.
The facts of this appeal, however, limit its scope. While this
2                                  Nos. 05-1752 & 05-1814

appeal involves a basic question about secured-lending
relationships, it more importantly involves a beneficiary on
the brink of bankruptcy. How to resolve this fundamental
question in this particular situation is not easy.
  The cases underlying this consolidated appeal involve
disputes relating to two construction bonds that the
California Statewide Communities Development Authority
(the Authority) established to finance a new cargo terminal
at Los Angeles International Airport (LAX). That terminal
was to belong to United Air Lines, Inc. (United), and as
almost every air traveler knows, United entered bankruptcy
in late 2002. These cases come to this Court as the consoli-
dated appeal of two separate proceedings in the bankruptcy
court. In one proceeding, HSBC Bank USA (HSBC) filed a
motion seeking relief from an automatic stay so that it
could distribute to bondholders approximately $4.9 million
that it held as indenture trustee. In the other proceeding,
United sued U.S. Bank National Association (U.S. Bank)
seeking a turnover of construction funds.
  The issues on appeal are whether the district court
correctly affirmed (1) the bankruptcy court’s grant of
summary judgment to United with respect to its prepetition
reimbursement for work completed prepetition; (2) the
bankruptcy court’s grant of summary judgment to U.S.
Bank with respect to United’s postpetition reimbursement
request for prepetition work; and (3) the bankruptcy court’s
grant of HSBC’s motion for relief from the automatic stay.
The district court properly affirmed the bankruptcy court’s
dispositions and we affirm.

                      I. Background
  In 1997, the Authority issued $190,240,000 in bonds on
behalf of United to fund construction of an LAX cargo
terminal. Chase Manhattan Bank and Trust Company, N.A.
(Chase) served as indenture trustee pursuant to the
Nos. 05-1752 & 05-1814                                     3

agreements underlying the bonds. In 2001, the Authority
issued $34,590,000 in bonds on behalf of United to provide
additional funding. U.S. Bank served as indenture trustee
for the agreements underlying those bonds. On December
9, 2002, United entered Chapter 11 bankruptcy.

                 A. The Bond Agreements
   The 1997 and 2001 bond agreements share the same basic
structure and are governed by California law. A trust
agreement and a payment agreement underlie both bonds.
The Authority first sold the bonds and deposited their
proceeds into construction funds. The money in these funds
is pledged for the repayment of principal and interest on the
bonds and is held in trust for the bondholders. United is
obligated to make these payments. The construction funds
themselves, however, were designed to reimburse United
for construction costs it incurred on the LAX project.
Although the structure of the funds is similar, we discuss
each in turn for clarity.
  On November 1, 1997, the Authority entered into a trust
agreement (the 1997 Trust Agreement) with Chase, which
HSBC succeeded in 2003. Under the 1997 Trust Agreement,
the Authority issued bonds in the aggregate sum of
$190,240,000. On the same day, United and the Authority
entered into the 1997 Payment Agreement governing the
bonds. This Agreement requires that United make periodic
payments to HSBC to cover principal and interest due on
the bonds. Unless United is in default in its payment
obligations, HSBC is to pay the costs of projects upon
United’s written request. Any money remaining in the
funds is to be used to pay bondholders after United com-
pleted the LAX cargo terminal. The bonds are secured by a
pledge and assignment of the Authority’s interests to
HSBC, the details of which were not presented to this
Court. A pledge and assignment also secure payment of the
4                                   Nos. 05-1752 & 05-1814

principal and interest on the bonds. HSBC holds a lien on
the funds it holds, perfected by possession, to secure
payment of the bonds under the 1997 Trust Agreement.
  Likewise, on April 1, 2001, the Authority issued
$34,590,000 in revenue bonds. The 2001 Payment Agree-
ment requires that United make payments of principal and
interest on these bonds, and the 2001 Trust Agreement
requires U.S. Bank as trustee to reimburse United for
construction costs upon its written request. The 2001 Trust
Agreement expressly provides that U.S. Bank may rely on
a written request as sufficient evidence that United in-
curred the costs stated, that they are properly payable out
of the 2001 construction fund and that there are no liens on
the money to be paid. U.S. Bank is to make payments to
United “upon receipt” of a written request.

               B. The U.S. Bank Requests
   The reimbursement arrangement fell apart in early
December of 2002—when United’s bankruptcy filing
appeared imminent. Prior to December 5, 2002, U.S. Bank
had summarily granted each request for construction funds
without making any attempt to substantiate it. On Decem-
ber 5, as newspapers across the country reported that
United teetered on the brink of bankruptcy, United made a
draw request directing U.S. Bank to disburse $1,191,547.29
from the 2001 construction fund as reimbursement for costs
incurred on the LAX project. The bankruptcy and district
courts referred to these requests as Category III Claims.
U.S. Bank took no action on this request, and United filed
a voluntary Chapter 11 bankruptcy petition on December 9,
2002. On December 13, 2002, United submitted a request
for $233,824.88 to U.S. Bank for costs it had incurred before
filing its bankruptcy petition. The lower courts referred to
these requests as Category II Claims. U.S. Bank again took
no action. United finally incurred $30,093.51 in LAX
Nos. 05-1752 & 05-1814                                       5

construction costs after filing for bankruptcy. The lower
courts called claims based on these costs Category I Claims.
United however, never submitted a written reimbursement
request with respect to these costs. Accordingly, the
bankruptcy court granted U.S. Bank’s motion for summary
judgment on the Category I Claims, and United does not
contest that ruling here.
   When United entered bankruptcy, it defaulted on its
obligations under the 1997 and 2001 Trust and Payment
Agreements, which expressly provide that a bankruptcy
filing is a default. United, as part of its bankruptcy proceed-
ing, also ceased paying the principal and interest on the
bonds, which constitutes further default. United has not
made a required payment since October 2002.
  The bankruptcy court concluded that, under the terms
of the 1997 and 2001 Trust and Payment Agreements,
United is obliged to submit a written reimbursement
request before the trustee has any payment obligation
whatsoever. That court reasoned that, because submitting
a proper written request is a condition precedent to obtain-
ing reimbursement, United’s claim to the Category I funds
must fail. Likewise, the court concluded that the Category
II Claims were subject to setoff. Since United was in
bankruptcy when it filed the request, the airline was in
bankruptcy when it became entitled to the funds. As such,
the funds were subject to setoff under 11 U.S.C. § 553(a),
which permits setoff if a creditor’s claim against the estate
and the estate’s claim against the creditor both arose before
the filing of the debtor’s bankruptcy case. The bankruptcy
court also concluded that § 553(a)’s mutuality requirement
was satisfied because United was obliged to pay the trustee
and the trustee was obliged to pay United. Because the
Category II Claims fit § 553(a), the bankruptcy court
reduced United’s obligation to U.S. Bank by the amount
United claimed.
6                                  Nos. 05-1752 & 05-1814

  The Category III Claims presented the most difficult
question for the bankruptcy court. United argued that
U.S. Bank had a nondiscretionary duty to disburse the
funds for the Category III Claims upon its submission of the
written request. U.S. Bank responded that it was not
obliged to pay or, in the alternative, that the funds were
subject to setoff since U.S. Bank was provided a reasonable
time to verify the request. In the circumstance before us, a
“reasonable” time carried the transaction into the
United bankruptcy, occasioning a default. The bankruptcy
court, however, concluded that since no agreement im-
poses any duty on the trustee to confirm the validity of
the submission nor extends to the trustee the discretion
to do so, United’s right to reimbursement arose upon its
submission of the written request.
  After concluding that United was entitled to the funds
covered by the Category III Claims when it made the
request on December 5, 2002, the bankruptcy court moved
on to the very difficult issue of assessing damages. The
essential problem here, the bankruptcy court explained, is
that if it simply awarded damages at law to United, that
money would now be subject to setoff. To avoid this prob-
lem, the bankruptcy court turned to equity. More specifi-
cally, the bankruptcy court applied the equitable maxim
codified at California Civil Code § 3529, holding “[t]hat
which ought to have been done is to be regarded as done, in
favor of him to whom, and against him from whom, perfor-
mance is due.” The bankruptcy court reasoned that since
U.S. Bank ought to have paid United on December 5,
2002—before United’s bankruptcy filing— U.S. Bank must
now pay United and that payment was to be regarded as
paid on December 5. Since the court deemed the payment
made before United filed for bankruptcy, it likewise con-
cluded that the money was free from setoff.
  On appeal, the district court affirmed the bankruptcy
court and essentially adopted its reasoning.
Nos. 05-1752 & 05-1814                                     7

                   C. The HSBC Matter
  The situation with HSBC is slightly different, although
United is in default on the HSBC bonds as well. As of
December 9, 2002, Chase (HSBC’s predecessor) had no
outstanding requisitions due from United. On August 13,
2003, HSBC filed a precautionary motion for relief from the
automatic stay so that it could apply setoff to United’s
outstanding obligations and disburse the remaining
money in the construction funds—about $37 million—to the
bondholders. United consented to the release of all
but approximately $5 million. The retained $5 million
represents the amount that United contends it incurred
in construction costs both before and after it filed for
bankruptcy. United submitted a written reimbursement
request for these costs to HSBC on September 30, 2004. The
bankruptcy court entered an order allowing HSBC to offset
and disburse the uncontested $32 million. HSBC volun-
tarily withdrew without prejudice its precautionary motion
as it applied to the retained $5 million.
  On February 5, 2004, HSBC filed its second motion for
relief from the automatic stay. In this motion, HSBC sought
the release of the retained $5 million so that it could apply
setoff and disburse these funds to the bondholders. After
the bankruptcy court issued its opinion in the U.S. Bank
proceedings, United and HSBC agreed that the reasoning
of that opinion required this motion to be granted. On
October 15, 2004, United and HSBC agreed to the entry of
an order granting HSBC’s motion. United appealed. Since
HSBC and United agreed that the bankrupcty’s court’s
setoff reasoning in the U.S. Bank matter required that the
remaining $5 million be offset as well, the district court
affirmed the bankruptcy court’s order granting HSBC’s
motion to lift the automatic stay.
8                                    Nos. 05-1752 & 05-1814

                       II. Discussion
                   A. U.S. Bank Matter
  We review a bankruptcy court’s disposition of cross-
motions for summary judgment de novo, with all facts
and inferences viewed in a light most favorable to the
respective nonmoving parties. Hoseman v. Weinschneider,
322 F.3d 468, 473 (7th Cir. 2003). An award of summary
judgment is proper when “there is no genuine issue as to
any material fact and [ ] the moving party is entitled to a
judgment as a matter of law.” FED. R. CIV P. 56 (c); Celotex
Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). U.S. Bank
asserts that the bankruptcy and district courts erred in
concluding that it had a nondiscretionary duty to make
disbursements to United from the construction fund upon
United’s request. U.S. Bank further contends that even if
such an obligation did exist, any obligation to perform
such a duty would be contingent upon United’s repay-
ments of interest and principal. U.S. Bank also contends
that regardless, the bankruptcy court erred in applying
an equitable maxim codified in California law to a contrac-
tual breach, and, finally, that its perfected security interest
in the construction funds survived because it maintained
possession.
  A critical question in this case is how the underlying
agreements bind the parties to one another. While it is true,
as U.S. Bank points out, that separate agreements govern,
the reality is that the agreements form the basis of a single
relationship: the reimbursement arrangement underlying
the financing of the LAX terminal. The structure of the
relationship is such that one agreement cannot be under-
stood in isolation from its counterpart. California law
instructs that, in circumstances such as these, interrelated
documents should be read together for purposes of interpre-
tation. CAL. CIVIL CODE § 1642 (2005) (“Several contracts
relating to the same matter, between the same parties, and
Nos. 05-1752 & 05-1814                                         9

made as parts of substantially the same transaction, are to
be taken together.”); Versaci v. Superior Court, 26 Cal Rptr.
3d 92, 97-98 (Ct. App. 2005); Heston v. Farmers Ins. Group,
206 Cal. Rptr. 585, 594 (Ct. App. 1984).
   This discussion leads directly into the important question
of duty—what duty, if any, does U.S. Bank owe to United?
U.S. Bank contends that it owes United no duty because
their two signatures never appeared on the same document.
By the terms of the 2001 Trust Agreement, U.S. Bank
reasons, the only duty it owes anyone is the fiduciary duty
it owes the bondholders. Again, however, these arguments
are flawed in that they misapprehend the essentially
unified nature of the Trust and Bond Agreements. The
parties understood from the beginning that United would
receive the bond money upon its request. These contracts,
then, were made for United’s benefit, as well as that of the
bondholders. It is well settled under California law that
when a contract is made expressly for the benefit of an-
other, that other party is a third-party beneficiary. E.g.,
Johnson v. Superior Court, 95 Cal Rptr. 2d 864, 873 (Ct.
App. 2000); Principal Mut. Life Ins. Co. v. Vars, Pave,
McCord & Freedman, 77 Cal. Rptr. 2d 479, 488-89 (Ct. App.
1998); Harper v. Wausau Ins. Co., 66 Cal. Rptr. 2d 64, 68
(Ct. App. 1997); COAC, Inc. v. Kennedy Eng’rs, 136 Cal.
Rptr. 890, 892 (Ct. App. 1977). Because United is a third-
party beneficiary, U.S. Bank owes United the duty of good
faith and fair dealing. E.g., Walker v. Truck Ins. Exch., Inc.,
900 P.2d 619, 639 (Cal. 1995); CalFarm Ins. Co. v.
Krusiewicz, 31 Cal. Rptr. 3d 619, 628 (Ct. App. 2005).1

1
  U.S. Bank’s argument is curious on the point of duty. The
fulcrum of its overall argument is that equity is inappropriate
because this case is contractual. But on the issue of duty, U.S.
Bank turns to the Restatement (Third) of Trusts to conclude that
                                                   (continued...)
10                                      Nos. 05-1752 & 05-1814

  What we have, then, are competing obligations of duty on
the part of U.S. Bank; U.S. Bank owes the bondholders a
fiduciary duty and United the duty of good faith and fair
dealing. It is inevitable, especially in a situation such as
this one, that these duties will sometimes conflict. The
question then becomes how to resolve the conflicts in a
manner fairest to the parties and to the terms of the
agreements.
  It is possible, of course, to conclude that one duty trumps
the other.2 U.S. Bank makes essentially this point, arguing
that its fiduciary duty to the bondholders prevented it from
paying out to a financially strapped United. But this
resolution is rather arbitrary, and it is strange to con-
tend that one’s fiduciary duty to a party requires it to
violate the terms of the agreement creating that fiduciary
relationship. We suppose it is possible to create such an
arrangement, but that certainly is not the case here.
Moreover, this argument places the burden following
resolution squarely on one of the parties to whom a duty
is owed, which seems inappropriate. The better resolu-
tion, we think, is to balance the duties. Balancing is both
more sensible and more just, and it remains truer to the
agreement among all interested parties. Thus, we conclude
that while U.S. Bank’s fiduciary duty to the bondholders is
important and must be considered, it does not erase
United’s claim to duty as a third-party beneficiary.

1
  (...continued)
“a person who merely benefits from the performance of a
trust is not a beneficiary.” While that may be true, United
remains a third-party beneficiary under California contract law.
2
   The dissent appears to assert that the fiduciary duty must
prevail under the particular circumstances here, but without
citing any authority for this conclusion. The fiduciary relationship
to the bondholders is the product of the same contract that creates
the duty to United.
Nos. 05-1752 & 05-1814                                            11

  Since U.S. Bank owes United the duty of good faith and
fair dealing, it must face the elephant in the room: United’s
bankruptcy, which was imminent in December 2002 and of
which U.S. Bank rather implausibly denied anticipation at
oral argument. There, U.S. Bank asserted that it had no
idea United was nearing bankruptcy in December 2002. A
cursory glance at the major newspapers of the day makes it
hard to believe that even laypersons were unaware of the
airline’s impending bankruptcy.3 Surely a major bank in a

3
   E.g., Edmund L. Andrews, No Help for United, N.Y. TIMES, Dec.
8, 2002, §, at 1 (“The Bush administration refused to give United
Airlines . . . a $1.8 billion loan guarantee, almost certainly
pushing it to bankruptcy court.”); Greg Griffin, United Board
Weighs Filing; Bankruptcy Move Could Come Today, DENVER
POST, Dec. 8, 2002, at A-1 (“United Airlines’ board of directors met
by teleconference Saturday afternoon to consider how to proceed
with a bankruptcy filing in the next two days.”); Matthew Brelis,
US Rebuffs United Airlines on $1.8B Loan Guarantees; Bank-
ruptcy Filing Looks Likely, BOSTON GLOBE, Dec. 5, 2002, at A1
(“United Airlines . . . will almost certainly be forced to file for
bankruptcy protection after the federal Air Transportation
Stabilization Board yesterday evening rejected its application for
$1.8 billion in federal loan guarantees.”); Greg Burns, Bitter
Bankruptcy Feared, Workers, Travelers Would Lose, Rivals Stand
to Gain, CHI. TRIB., Dec. 5, 2002, at 1 (“United is running out of
options besides bankruptcy”); Editorial, United: An End, and a
Beginning, CHI. TRIB., Dec. 5, 2002, at 28 (“Given the overwhelm-
ing liabilities United faces and the fact that it is burning through
cash at a startling rate, the [$1.8 billion loan guarantee] decision
almost certainly means the financially struggling airline will be
forced to reorganize under bankruptcy protection.”); Simon
English, United Airlines on Brink of Collapse, DAILY TELEGRAPH
(London), Dec. 5, 2002, at 34 (“United warned earlier this week
that it was down to its last $1 billion and repeated its threat that
bankruptcy looked hard to avoid, even with a loan.”); What
United’s Up Against, CHI. TRIB., Dec. 4, 2002, at 6 (“But many
                                                        (continued...)
12                                        Nos. 05-1752 & 05-1814

lending relationship with United understood the airline’s
dire financial situation, especially a bank that has in this

3
   (...continued)
airline analysts say bankruptcy is inevitable.”); Keith L. Alexan-
der, Frequent Fliers Look Ahead to United Filing, WASH. POST, at
E01; James Flanigan, United is a Poor Model for Employee
Ownership, L.A. TIMES, Dec. 4, 2002, at 3:1 (“It would be easy to
look at what’s happening at United Airlines, now on the brink of
bankruptcy, and conclude that the concept of employee ownership
in America has fallen into a tailspin.”); Russell Grantham, Delta’s
Status Better than United, Observers Say, ATLANTA J.-CONST.,
Dec. 4, 2002, at 1D (“United will almost certainly seek Chapter 11
protection from creditors, said [an analyst], if Machinists union
members don’t approve an amended $700 million concession
package this week.”); Greg Griffin, United, Union Set New Vote;
Airline Defers Bond Payment, Though Another Comes Due in
Solvency Fight, DENVER POST, Dec. 3, 2002, at A-01 (“Without
ratification of the 7 percent pay cut by the mechanics, cash-
strapped United could file for bankruptcy immediately because it
will have no chance of receiving a loan guarantee from the
government. . . . United also is preparing for the possibility of
Chapter 11, trying to line up $1.5 billion in emergency financing
to fund its operations while in court, according to published
reports.”); John Schmeltzer, CHI. TRIB., Dec. 3, 2002, at N1
(“Hedging its bets, United also is working with private lenders to
finance the company’s operations should it file for court protec-
tion. ‘You don’t arrange bankruptcy financing unless you think
you’re going to file for bankruptcy,’ [an analyst] said. ‘If they don’t
file, I would be surprised.’ ”); Air NZ Unfazed As United Teeters on
the Edge of Bankruptcy, N.Z. HERALD, Dec. 2, 2002 (“United is
likely to file for bankruptcy within the next two weeks unless it
can soon get a new wage-cut deal from reluctant mechanics and
a crucial federal guarantee of a US$1.8 billion . . . loan, sources
familiar with the matter said.”); John Schmeltzer, United,
Mechanics Return to the Table; Flight Attendants OK Wage Cuts,
CHI. TRIB., Dec. 1, 2002, at C1 (“United doesn’t have much more
time before a bankruptcy filing will be its only alternative.”).
Nos. 05-1752 & 05-1814                                        13

case repeatedly asserted the need for due diligence.4 This
understanding implicates critically important policy
questions: is it appropriate to imbue trustees with virtually
unfettered discretion to disburse funds so that they can
punish debtors on the verge of bankruptcy? Should we
extend such a power even in the face of agreements that
plainly create a nondiscretionary duty to disburse funds?
We think not.
  Our answer may have been different in a factual setting
with different underlying agreements. But the reality
here is that the parties negotiated agreements that afford
U.S. Bank no discretion in disbursing the funds. Under
California law, a trustee’s duties and obligations are strictly
defined by and limited to the terms of the underlying
agreement, particularly in relationships involving indenture
trustees. Bryson v. Bryson, 216 P. 391, 393 (Cal. Dist. Ct.
App. 1923). The agreements here provide that once United
completes the work and once United submits a reimburse-
ment request, U.S. Bank must pay. (2001 Payment Agree-
ment § 3.3(a) (“Each of the payments referred to . . . shall be
made upon receipt by the Trustee of a Written Request of
the Corporation.”).) Moreover, the Agreements exclude the
need for due diligence by stating that written requests
conforming to certain procedures “shall be sufficient evi-
dence” that the items are properly reimbursable. Reading
a “reasonable time to perform due diligence” clause into the
agreements ignores their plain text and the course of

4
  U.S. Bank’s denial is rendered all the more implausible by its
assertion in its opening brief to this Court that “[w]ithholding
reimbursements to United when it is expected that United will not
honor its contractual obligations under the [2001] Payment
Agreement was simply an action U.S. Bank deemed necessary
with respect to enforcing United’s obligations under the Pay-
ment Agreement.” (Pet’r Br. at 15-16) (footnote omitted.) The
agreements do not afford U.S. Bank this discretion.
14                                   Nos. 05-1752 & 05-1814

dealing between the parties. Thus, we conclude, as did the
bankruptcy and district courts, that U.S. Bank had a
nondiscretionary duty to disburse funds upon an appropri-
ate request from United.
   These conclusions permit us to resolve the first step
in adjudicating these claims: who is entitled to the money
in absence of setoff (an issue to which we will return)? Since
the terms of the agreements clearly state that
once a request is properly filed, U.S. Bank must reimburse,
it follows that United was entitled to the funds covered by
the Category III Claims on December 5, 2002, and the funds
subject to the Category II Claims on December 13, 2002.
   Under California law as preserved in the Bankruptcy
Code, mutual debts arising before the commencement of
a bankruptcy proceeding may be offset, subject to certain
exceptions not relevant here. “The right of setoff (also called
‘offset’) allows entities that owe each other money to apply
their mutual debts against each other, thereby avoiding the
‘absurdity of making A pay B when B owes A.’ ” Citizens
Bank of Md. v. Strumpf, 516 U.S. 16, 18 (1995) (quoting
Studley v. Boylston Nat’l Bank of Boston, 229 U.S. 523, 528
(1913)). Section 553(a) “generally permit[s] a creditor to
offset, on a dollar-for-dollar basis, a debt it owes to the
bankrupt party on a pre-commencement debt that the
bankrupt owed to the creditor.” United States v. Maxwell,
157 F.3d 1099, 1100 (7th Cir. 1998); see also CAL CIV. PRO.
CODE § 431.70 (2005); Harrison v. Adams, 128 P.2d 9, 11
(Cal. 1942); Plut v. Fireman’s Fund Ins. Co., 102 Cal. Rptr.
2d 36, 42 (Ct. App. 2000).
  Setoff is appropriate against the Category II Claims
because, under the 2001 Agreements, United owed U.S.
Bank and the bondholders repayments of principal and
interest. Once United entered bankruptcy, all debts were
therefore subject to setoff. United’s primary defense against
setoff is that the debts are not mutual. California law and
Nos. 05-1752 & 05-1814                                     15

§ 553(a) require that, for setoff to apply, debts be between
the same parties and that both arise before the filing of the
bankruptcy petition. Meyer Med. Physicians Group, Ltd. v.
Health Care Serv. Corp., 385 F.3d 1039, 1041 (7th Cir.
2004); In re Doctors Hosp. of Hyde Park, Inc., 337 F.3d 951,
955 (7th Cir. 2003); Harrison, 128 P.2d at 11-12. United
argues that since, as we have concluded, U.S. Bank’s
obligation to pay does not arise until United submits a
request, U.S. Bank’s debt to United is not prepetition and
therefore enjoys no mutuality with United’s debt to repay
principal and interest.
  In order for this argument by United to succeed, we would
need to read each reimbursement request as a separate act
that obligates U.S. Bank. That is, we would need to con-
clude that U.S. Bank is bound to pay only after United
submits a reimbursement request, and once that request
has been paid out, U.S. Bank’s obligation ceases. But that
is not the arrangement here. Although United was not
entitled to this money until it filed its request, U.S. Bank
bound itself to pay, subject to request, when it entered the
agreements in 2001. We have already explained that we are
not willing to view the arrangement as a series of piecemeal
agreements; it is improper to view the 2001 Trust Agree-
ment and the 2001 Payment Agreement as two separate
agreements because together they form a single framework
of provisions governing the financing arrangement, and it
not possible to understand one without reference to the
other. Likewise, it is improper to treat each interaction in
this arrangement as a separate transaction. Accordingly,
this debt arose prepetition.
  Moreover, these funds are not, as United contends, special
purpose funds exempt from setoff. See In re Ben Franklin
Retail Store, Inc., 202 B.R. 955, 957 (Bankr. N.D. Ill. 1996).
This exemption applies when a debtor deposits funds for
some special purpose, which are thereby held in trust for
the debtor. Id. A typical example of a special purpose fund
16                                   Nos. 05-1752 & 05-1814

is collateral pledged to satisfy obligations to third parties in
the event of a draw on a letter of credit. Id. Here, however,
the bondholders deposited the funds—not United. These
funds are not earmarked in any way that imposes a special
purpose on them, nor are they pledged for any third-party
purpose (that is, some purpose outside the LAX project).
Thus, these debts are mutual, ordinary purpose funds
subject to setoff.
  We next confront the issue of default. Section 6.1(c) of the
2001 Payment Agreement identifies filing a bankruptcy
petition as an event of default.5 United argues that this
provision is an ipso facto default term, which 11 U.S.C. §§
363(1), 365(e)(1), and 541(c)(1)(B) prohibit. United reasons
that the default provision of the 2001 Payment Agreement
provide U.S. Bank with its only avenue to setoff, which
means that the default provision modifies United’s interest
in property. Authority supporting this proposition is slim
and not quite on point. Indeed, the only case directly on
point brought to our attention—an unpublished disposition
at that—limits its holding to situations where debtors are
not otherwise in default. Reloeb Co. v. LTV Corp. (In re
Chateaugay Corp.), 1993 WL 159969, at *5 (S.D.N.Y. May
10, 1993).
  United, on the other hand, is in default for reasons
extending beyond the bankruptcy filing; the airline has
not made a required payment of principal and interest since
October 2002. Even if we were to determine that the ipso
facto default provisions are unenforceable, United’s nonpay-
ment remains a default under Section 6.1 of the 2001
Payment Agreement (which is parallel to Section 7.01 of the
2001 Trust Agreement). United contends that these
nonpayments ought not count as defaults, because the

5
   Nothing, however, indicates that anticipation of bankruptcy
is cause to withhold payment.
Nos. 05-1752 & 05-1814                                    17

Bankruptcy Code prohibits these types of payments while it
remains in bankruptcy. The Code may well prohibit such
payments, but the agreements—the sole authority govern-
ing this relationship—provide no basis to avoid setoff on
this ground. United must be held to the deal it made, just
as U.S. Bank must be held to the payment obligations it
made.
   In addition, United’s ipso facto argument is not particu-
larly relevant here. Section 553(a) expressly preserves
creditors’ setoff rights that are protected under state law.
California law expressly extends setoff rights to bankruptcy
filings in situations where the creditor and the debtor share
a mutual debt. Thus, because the Category II Claims satisfy
the requirements for setoff as outlined in California law and
preserved in § 553(a), the claims are subject to setoff.
   Now, having resolved the Category II Claims and ex-
plored some aspects of setoff, we can move on to the Cate-
gory III Claims. As we have demonstrated, United was
entitled to the claimed funds upon making its reimburse-
ment request—that is, on December 5, 2002. Because U.S.
Bank had a nondiscretionary duty to reimburse, it wrong-
fully withheld these funds. In the absence of bankruptcy,
we could simply order U.S. Bank to pay United now and the
issue of damages would be resolved. But the bankruptcy
filing, which United is only just now overcoming, compli-
cates the matter. For if we were simply to award United its
damages effective today, the money would be subject to the
bankruptcy filing and would be disbursable to creditors.
The purpose of damages would not be served; United would
not be compensated for the damages it suffered, nor would
the construction funds be available for their intended
purpose. See, e.g., Avery v. Fredericksen & Westbrook, 154
P.2d 41, 42 (Cal. Dist. Ct. App. 1944); Mente & Co. v. Fresno
Compress & Warehouse Co., 298 P. 126, 128 (Cal. Dist. Ct.
App. 1931). In addition, U.S. Bank would be rewarded for
speculating on United’s bankruptcy, which surely would
18                                      Nos. 05-1752 & 05-1814

increase the incidence of such behavior in the future. The
question, then, is whether California law contains a remedy
that will make United whole.
  The bankruptcy court, as we have discussed, believed that
equity provided the necessary remedy. While the
maxim—that which ought to be done is deemed as having
been done—is codified under California law and certainly
makes sense, it may seem to be a tight fit here. First, equity
is generally unavailable in breach of contract
cases, although the courts are willing to turn to equity
where damages at law are inadequate. Wilkison v.
Wiederkehr, 124 Cal. Rptr. 2d 631, 638 (Ct. App. 2002).
Second, and perhaps more fundamentally, applying the
maxim in this context may appear to be reaching bey-
ond the bounds of this case to force a result.
  That appearance, however, is deceptive. The California
courts, like courts of other jurisdictions, rely on a number of
equitable doctrines in different situations to provide the
relief required to redress a plaintiff’s injuries when the law
is unable to do so. See, e.g., Cortez v. Purolator Air Filtra-
tion Prods. Co., 999 P.2d 706, 716-17 (Cal. 2000); Poultry
Producers of Cent. Cal., Inc. v. Nilsson, 197 Cal. 245, 253-55
(Cal. 1925); Portuguese Am. Bank v. Schultz, 193 P. 806,
807 (Cal. Dist. Ct. App. 1920). One doctrine rooted in equity
with particular analogic value here is the doctrine of
constructive receipt.
  The doctrine of constructive receipt—an income tax
doctrine—has the same basic thrust as the equitable maxim
that the bankruptcy court relied upon.6 The constructive

6
  Despite the dissent’s suggestions to the contrary, we do not
directly rely on the doctrine of constructive receipt to decide this
case. The doctrine only represents an apt analogy; it, like this
case, directs that context and timing are relevant even in
                                                      (continued...)
Nos. 05-1752 & 05-1814                                        19

receipt doctrine provides that cash and receipts in kind are
reportable as income either when they are actually received
or when they are constructively received. Income is con-
structively received when, although a taxpayer has the
power to receive income, she chooses not to do so—generally
to obtain favorable tax treatment. E.g., Corliss v. Bowers,
281 U.S. 376, 376-77 (1930); Hornung v. Comm’r, 47 T.C.
428, 433-34 (1967). The constructive receipt doctrine, then,
addresses issues of timing, specifically to preclude taxpay-
ers from manipulating the timing of income receipt for their
own benefit. In the case before us, the problem is to pre-
clude the lender from manipulating the timing of payment
to the detriment of the borrower.
  Quite clearly, then, the policy underlying the constructive
receipt doctrine is appropriately responsive to the issues in
this case. A key policy issue here is that a trustee should
not be rewarded for speculating on the bankruptcy of a
debtor. But the legal redress for such an injury is insuffi-
cient. The common thread between this case and ordinary
applications of the constructive receipt doctrine is the idea
that parties in a position to control disbursements may not
manipulate the system to avoid the consequences of control-
ling requirements (e.g., the Internal Revenue Code or the
Trust Agreements). U.S. Bank withheld reimbursement,
predicting—accurately, it turned out—that United would
enter bankruptcy. It is as improper for U.S. Bank to
withhold the Category III Claims to obtain a financial
advantage as it is for a taxpayer to defer the receipt of

6
  (...continued)
cases involving comprehensive codes. See also In re Payne, 431
F.3d 1055, 1057-58 (7th Cir. 2005) (Posner, J.) (holding that
the definition of an income tax “return” in both the Bankruptcy
Code and the Internal Revenue Code depends, in part, on context).
Contrary to the dissent, nothing precludes appellate courts from
seeking apt analogies, whether or not suggested by the parties.
20                                    Nos. 05-1752 & 05-1814

income to avoid a realization event to reduce taxes.7 The
California courts are willing to apply extralegal remedies in
situations where the equities demand it. E.g., Cortez, 999
P.2d at 716-17 (applying equitable considerations to a
disposition under unfair competition law); Poultry Produc-
ers of Cent. Cal., Inc., 197 Cal. at 255-56 (awarding specific
performance and damages for breach of contract); see also
Hirshfield v. Schwartz, 110 Cal. Rptr. 2d 861, 876 (Ct. App.
2001) (“ ‘Equity or chancery law has its origin in the
necessity for exceptions to the application of rules of law in
those cases where the law, by reason of its universality,
would create injustice in the affairs of men.’ ” (quoting
Estate of Lankershim, 58 P.2d 1282, 1284 (Cal. 1936)). In
this case, application of an equitable remedy is appropriate
to ensure that the parties are made whole for the breach.
And, under the particular circumstances present here, U.S.
Bank’s fiduciary duty to the bondholders does not, as we
have earlier noted, extinguish its contractual obligation
of good faith and fair dealing with respect to United. U.S.
Bank may not breach its agreements in a purported effort
to observe its fiduciary duty.
  Finally, U.S. Bank’s point about holding a perfected
security interest fails because as of December 5, 2002, the
effective date of this transfer, no debt existed that such an
interest might secure. United was current in its payments,
and nothing had occurred to trigger application of the
security interest. Accordingly, United is entitled to the
full amount of the Category III Claims free from setoff.

7
   U.S. Bank argues that its delay was not to procure advantage
but instead to conduct due diligence. The terms of the agreements
and the course of dealing expose this argument as merely a post
hoc rationalization. In any event, whether or not U.S. Bank
improperly withheld payment in anticipation of bankruptcy here,
the dissent would provide an incentive for lenders in these
circumstances to do so in the future.
Nos. 05-1752 & 05-1814                                     21

   U.S. Bank argues that the decisions below will wreak
havoc with commercial law. It believes that the bankruptcy
and district courts have so blurred the lines drawn in the
Bankruptcy Code as to render the Code unworkable. It
argues that our affirmance would undermine well-estab-
lished principles of both bankruptcy and general commer-
cial law.
  Those doomsday fears, however, are overstated. We have
done nothing to blur the operation of the Bankruptcy Code.
Our decision today stands for the simple propositions that
parties will be held to their deals and that one party
may not manipulate the timing of its payments to ex-
ploit the vulnerabilities of the other. U.S. Bank’s character-
ization of recourse to equity as some rogue remedy is
baseless. Courts consistently rely on equitable remedies
where damages at law are insufficient. More fundamen-
tally, this type of remedy is appropriate and applicable in
cases where one party shirks its obligations in order to
obtain benefits at the expense of the other.
  Moreover, if any position is likely to upend well-settled
law, it is U.S. Bank’s position. Despite its assertions to
the contrary at oral argument, U.S. Bank conceded in
briefing that it deemed it necessary to withhold payment to
United because U.S. Bank believed United was nearing
bankruptcy. This type of speculation is not permitted by the
agreement the parties made, which once again directs that
when United incurs expenses and properly requests
reimbursement, U.S. Bank must pay and promptly. Sanc-
tioning that speculation here would create incentives for
future lenders to withhold funds when it appears that their
borrowers are in financial trouble, regardless of
their bargain.

                     B. HSBC Matter
  The final matter before the Court is HSBC’s motion for
relief from the automatic stay. The relief requested would
22                                  Nos. 05-1752 & 05-1814

allow HSBC to distribute approximately $5 million in
retained funds to bondholders. We review a bankruptcy
court’s decision to grant relief from an automatic stay for an
abuse of discretion. Meyer Med. Physicians Group, Ltd., 385
F.3d at 1041. HSBC argues that because United submitted
its written reimbursement request after it filed for bank-
ruptcy (on September 30, 2004), those funds are subject to
setoff. Accordingly, HSBC argues that the bankruptcy court
properly granted its motion to lift the automatic stay and
the district court properly affirmed.
  HSBC and United have stipulated that their respective
claims succeed or fail with the setoff issue. United submit-
ted the reimbursement request at issue here postpetition
for work it completed prepetition. United has no colorable
claim that it was entitled to this money before enter-
ing bankruptcy. As we have determined that reimburse-
ment requests submitted after bankruptcy are subject
to setoff, we conclude that the HSBC motion was properly
granted. Moreover, since we conclude that HSBC has setoff
rights, we find it unnecessary to address HSBC’s recoup-
ment argument. Thus, we affirm the Bankruptcy Court and
District Court orders granting relief from the automatic
stay.

                      III. Conclusion
  In sum, we AFFIRM the bankruptcy court and the dis-
trict court in full. We direct that U.S. Bank turn over
the Category III funds, which United requested on Decem-
ber 5, 2002. The Category II funds, which United requested
on December 13, 2002, are subject to setoff. Finally, we
AFFIRM the order granting HSBC’s motion for relief from
the automatic stay.
Nos. 05-1752 & 05-1814                                   23

  SYKES, Circuit Judge, concurring in part, dissenting in
part. I agree that summary judgment was properly granted
to U.S. Bank on the issue of United’s postpeti-
tion 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 (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
24                                  Nos. 05-1752 & 05-1814

fiduciary. United is not a party to the trust agreement and
U.S. Bank is not a party to the payment 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 bondhold-
ers.” The pledge “constitute[s] a first and exclusive lien”
held by U.S. Bank as trustee on the amounts in the con-
struction 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.” Corre-
spondingly, 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
Nos. 05-1752 & 05-1814                                    25

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 (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 (“[Section] 553(a) provides
that, with certain exceptions, whatever right of setoff
otherwise exists [under state law] is preserved in bank-
ruptcy.”). In California (as in other states) law—not
equity—provides the usual remedy for breach of contract.
Wilkison v. Wiederkehr, 124 Cal. Rptr. 2d 631, 638 (Cal. Ct.
App. 2002). “[W]hatever 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 (1988); see also
United States v. Noland, 517 U.S. 535, 539, 543 (1996).
“There is no general equitable override to the Bankruptcy
Code.” In re Payne, 431 F.3d 1055, 1062-63 (7th Cir. 2006)
(Easterbrook, J., dissenting).
  The bankruptcy court held (and the district court agreed)
that United’s prepetition (Category III) reimbursement
claim was 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
26                                  Nos. 05-1752 & 05-1814

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 agree-
ments. 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 reim-
bursement 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 Shive 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 circum-
stances of his own making. See, e.g., Wilkison, 124 Cal.
Nos. 05-1752 & 05-1814                                      27

Rptr. 2d at 640-41 (“[I]f the plaintiff’s cause of action is one
for which the legal remedy of damages is generally deemed
adequate, it does not become inadequate and justify a
decree of specific performance merely because the legal
remedy has been lost through neglect.” (quoting 5 B.E.
WITKIN, 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 respec-
tive 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 law: 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. See
supra p. 19. No one raised this doctrine, either below or on
appeal. We should generally refrain from deciding
nonjurisdictional 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 ad-
28                                  Nos. 05-1752 & 05-1814

versarial process. See McNeil v. Wisconsin, 501 U.S. 171,
181 n.2 (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 appro-
priate 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.” Supra pp. 19-20. As applied
here, according to the majority, the doctrine serves to
prevent U.S. Bank from “speculating” on United’s bank-
ruptcy by manipulating the timing of its payment on the
reimbursement claim. The majority also justifies applica-
tion 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 reim-
bursement 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
Nos. 05-1752 & 05-1814                                     29

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.

A true Copy:
       Teste:

                        ________________________________
                        Clerk of the United States Court of
                          Appeals for the Seventh Circuit

                   USCA-02-C-0072—2-13-06