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In re Cafeteria Operators, L.P.

United States Bankruptcy Court for the Northern District of Texas
299 B.R. 400 (2003)


Restaurant operator Cafeteria Operators, L.P. (Cafeteria) (plaintiff) obtained a loan from a group of secured lenders (Bank Group) (defendants). As part of the loan transaction, Bank Group received a security interest in Cafeteria’s property, including fixtures, equipment, and food and beverage inventory. Cafeteria eventually filed a Chapter 11 bankruptcy petition, seeking to reorganize. Cafeteria moved for an order permitting the use of cash collateral during the reorganization process. At a hearing on the motion, Cafeteria’s chief restructuring officer testified that the cash generated after filing the bankruptcy petition was the result of labor services provided by Cafeteria’s employees, and therefore did not constitute proceeds in which Bank Group retained a security interest.

Rule of Law


Holding and Reasoning (Hale, J.)

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