In re SPM Manufacturing Corp.

163 B.R. 411 (1994)

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In re SPM Manufacturing Corp.

United States Bankruptcy Court for the District of Massachusetts
163 B.R. 411 (1994)

  • Written by Heather Whittemore, JD

Facts

In 1978 the Shaine Foundation (the foundation) (creditor) was given shares of SPM Manufacturing Corporation (SPM) (debtor) stock. SPM was a Massachusetts corporation. In 1982 SPM redeemed its stock from the foundation with a promissory note for over $660,000. At the time of the redemption, SPM was in good financial health. SPM eventually filed for Chapter 7 bankruptcy. The foundation filed an unsecured claim for $542,000, the outstanding amount of the note. A committee of unsecured creditors (the committee) sought to subordinate the foundation’s claim below the claims of the other unsecured creditors, arguing that equitable subordination was proper under 11 U.S.C. § 510(c). This provision of the United States Bankruptcy Code allowed a court to equitably subordinate a claim if the court believed such subordination was proper. The foundation asserted that equitable subordination of its claim was improper because it had not engaged in any inequitable conduct.

Rule of Law

Issue

Holding and Reasoning (Queenan, C.J.)

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