Helms v. Certified Packaging Corporation

Facts

Sarah Michaels, Inc., a manufacturer of bath products and a customer of a packaging manufacturer named Certified Packaging Corporation (D), declared bankruptcy. P brought an adversary proceeding against Certified seeking to avoid transfers made to that company to pay for packaging. P obtained a default judgment for some $2 million, but in an effort to collect the judgment D came forward and made its claims. P as the assignee of a loan to Certified claimed a security interest in Certified's assets. D, in turn, assigned its claim to CPC Acquisition (D), which is the successor to Certified and which has intervened in the bankruptcy proceeding to assert the priority of its lien over P's judgment lien. In December 2000, after D made the loan, a fire broke out at one of Certified's plants and damaged equipment in it. Certified brought two lawsuits. One was against its insurance broker, Rothschild, for negligence in having failed to list the plant on a business-losses insurance policy that Rothschild had procured for Certified. That suit was settled for $88,000 after deduction of attorneys' fees. P contends that the settlement money should belong to the bankrupt estate, D that the money should belong to it as proceeds of the collateral damaged in the fire. The bankruptcy judge agreed with P but was reversed by the district judge, and P appealed. Certified's other suit was against Commonwealth Edison and claimed that the fire had been due to Com Ed's negligence in maintaining one of its power lines. Certified seeks damages of $2,000,000 for property damage and business losses, the latter accounting for about 90 percent of the claimed damages. The bankruptcy judge, seconded by the district judge, ruled that the business-losses part of Certified's claim against Com Ed belongs to P in bankruptcy, not D. D cross-appealed that ruling.

Issues

Rule of Law

Holding and Decision

Legal Analysis

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