472 B.R. 481
Bankr. N.D. Ill.2012Background
- Efoora, Inc. filed a Chapter 7 bankruptcy, with Trustee Catherine Steege managing the estate.
- Jaeger objected to selling the estate’s earn-out rights under the 2008 APA with Applied Biomedical, LLC.
- Jaeger moved to dismiss the case for lack of jurisdiction, contending Efoora lacked capacity because it had forfeited its Delaware charter.
- The court held an evidentiary hearing on April 23, 2012, and then fully briefed both the dismissal and sale motions.
- The court concluded Efoora retained capacity to be a debtor despite charter forfeiture and granted Steege’s sale amendment request to sell the earn-out rights for $50,000.
- Steege’s sale was supported by a documented business justification and a sufficient investigation, while Jaeger offered no compelling alternative financing.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the case should be dismissed for lack of jurisdiction | Jaeger | Jaeger | Denied; Efoora retained capacity to be a debtor under Delaware law |
| Whether the trustee may amend the APA to sell the earnout rights under 363(b) | Jaeger | Steege | Granted; trustee authorized to amend APA and sell earnout rights |
Key Cases Cited
- Chicago Title & Trust Co. v. Forty-One Thirty-Six Wilcox Bldg. Corp., 302 U.S. 120 (1937) (corporate capacity and dissolution concepts in bankruptcy jurisdiction)
- Watts v. Liberty Royalties Corp., 106 F.2d 941 (10th Cir.1939) (reinstatement and continued existence of Delaware corporations)
- Wax v. Riverview Cemetery Co., 24 A.2d 431 (Del. Super. Ct. 1942) (forfeiture does not extinguish corporate existence; reinstatement possible)
- Gorson, 243 A.2d 713 (Del. 1968) (Delaware view on reinstatement after charter forfeiture)
- In re International Zinc Coatings & Chem. Corp., 355 B.R. 76 (Bankr.N.D.Ill.2006) (Delaware capacity vs. corporate dissolution issues in bankruptcy)