13 B 43900, 14 A 00719
On the chapter 7 trustee’s motion for authority to turn over certain funds to secured creditor BCL-Capital Funding LLC (“BCL”) as alleged cash collateral proceeds, a creditor (and the Debtor’s former attorney) (“Stern”) objected, arguing that the proceeds were not BCL’s cash collateral and that turnover was, thus, improper.  The trustee contended that he was bound by the terms of a pre-conversion cash collateral order (the “Order”) in which the Debtor and BCL had agreed that certain funds constituted cash collateral.  The Court found that the Order did not, by its terms, foreclose consideration of Stern’s arguments regarding the validity of BCL’s claimed interest in the proceeds because the Order: (1) made no findings regarding whether the funds were cash collateral, and (2) contained broad reservations of rights.  Thus, the Order was found to have no preclusive effect beyond enforcement of the Order itself.  Further, the Court found that, despite an assignment of rents held by BCL, the proceeds were paid to the Debtor before the commencement of the case and while he retained control of the property at issue and that, thus, BCL could assert no interest in the proceeds by virtue of the assignment.  Ultimately, the Court concluded that the proceeds at issue were not BCL’s cash collateral and, accordingly, denied the trustee’s motion.