The opinion of the court was delivered by: AMY J. ST. EVE, District Judge
MEMORANDUM OPINION AND ORDER
Plaintiff Wafra Capital Partners, L.P., ("Wafra") sued Prime Leasing,
Inc. ("Prime") and William Brandt, Jr., as Assignee for Prime, for breach
of contract. On August 26, 2003 the Court entered a judgment in favor of
Wafra in the amount of $732,083. On October 1, 2003, Plaintiff filed a
motion for an order directing Brandt, the Assignee, to turn over
$732,509.88 from the funds held by Brandt in his capacity as Assignee for
the benefit of creditors of Prime. (R.13-1, Ex. D.) For the reasons set
forth below, Plaintiff's motion is denied.
On March 1, 1999, Plaintiff and Prime entered into a contract in which
Prime agreed to pay certain sums to Plaintiff. Prime failed to make such
On July 14, 2000, Prime and Brandt executed a Trust Agreement and
Assignment for the Benefit of Creditors of Prime Leasing, Inc. (the
"Assignment Agreement") in which Brandt was appointed to carry out the
Agreement. (R. 13-1, Ex. D.) Prime noted that it was indebted to various
entities. It transferred to Brandt "for the benefit of its creditors" the
title to all of its
remaining property and assets "so that the property so transferred
may be expeditiously liquidated and the proceeds thereof be fairly
distributed to its creditors without any preference or priority, except
such priority as is established and permitted by applicable law."
On July 8, 2003, Wafra filed this lawsuit against Prime and Brandt, as
Assignee for Prime, alleging breach of the March 1, 1999 contract. On
August 6, 2003, Prime made an offer of judgment in the amount of
$732,083. (R. 3-1.) Plaintiff accepted that offer on August 8, 2003. (R.
5-1.) On August 26, 2003, the Court entered a judgment against Prime in
the amount of $732,083. (R. 8-1.) On October 7, 2003, Plaintiff
voluntarily dismissed its case against Brandt.
On December 11, 2003, the Court granted Brandt's motion to reassign
this case as a related case to Wafra v. Prime Capital Corp., 01
C 4314 ("Wafra I"), pursuant to Local Rule 40.4. Wafra
I is a securities fraud case pending before this Court. For a
description of the allegations in Wafra I, see Wafra Leasing
Corp. 1999-A-1 v. Prime Capital Corp., 247 F. Supp.2d 987 (N.D.III.
In Illinois, an assignment for the benefit of creditors is "a voluntary
transfer by a debtor of his property to an assignee in trust for the
purpose of applying the property or proceeds thereof to the payment of
his debts." Consol Pipe & Supply Co. v. Rovanco Corp.,
897 F. Supp. 364, 370 (N.D. Ill. 1995). A legal "assignment for the benefit
of creditors passes legal and equitable title to the assignor-debtor's
property absolutely from the assignor-debtor to the assignee."
Id., citing Fed. Deposit Ins. Corp. v. Juron,
713 F. Supp. 1116, 1119-20 (N.D. Ill. 1989).
An assignment is invalid and unenforceable against nonparticipating
creditors if it
contains conditions "onerous" to creditors. Consol. Pipe,
897 F. Supp. at 370. "One condition which will render an assignment
invalid is when it puts creditors to a choice of taking a fraction of
their claims in settlement of the whole. . . . Thus assignments
purportedly for the benefit of creditors, which place such creditors upon
the choice of taking nothing at all or a fraction of their claims in
settlement of the whole, are invalid as to non-consenting creditors."
Wafra seeks a turnover of $732,083 in Brandt's possession. Wafra argues
that it is not governed by the Assignment Agreement and therefore a
turnover is appropriate. Wafra specifically argues that the Assignment
Agreement is unenforceable because it gives the Assignee the power to
compromise claims and to prefer specific creditors, and it absolves the
Assignee from all liability of his conduct. Wafra further argues that the
Assignee is improperly attempting to coerce Plaintiff and its affiliate
into releasing their claims against Prime in exchange for payment of a
small fraction of Prime's obligations to them.
I. The Assignment Agreement Does Not Provide For A Full Release
By Wafra Of Its Claims Against Prime As A Condition Precedent To
Wafra first argues that the Assignment Agreement provides for pro
rata distribution to "other creditors," and that the "facts and
circumstances" of this case establish that a full release by each
creditor "was intended to be one of the requirements." In its motion,
Wafra contends that the Assignee's prior settlement agreements, including
its settlement with James Friedman a former officer, director and
shareholder of Prime included a full release, and thus prove that
the Assignee is requiring Prime to release of its claims in exchange for
a pro rata settlement.
First, the plain language of the Assignment Agreement contradicts
Paragraph 3(g)(6) of the Assignment Agreement provides for the
pro rata distribution of assets to other creditors: "all
distributions to other creditors shall be, within each class, pro
rata in accordance with the terms of each creditor's indebtedness,
until all such debts are paid in full." Nothing in the Assignment