Case Analysis of In re Atlantic Gulf Comtys. Corp.

(Excerpt)In In re Atlantic Gulf Comtys. Corp., a Delaware Bankruptcy Court applied New York law to both equitable and legal arguments made by the debtor, holding that funds in an escrow account created by the debtor were not property of the debtor’s estate. 369 B.R. 156, 164–65 (Bankr. D. Del. 2007). First, this memo will examine the two opposing legal and equitable arguments made by the parties, with each relying on different theories of characterizing the debtor’s interest in escrow accounts as they have evolved throughout New York caselaw. Second, it will analyze the contingency argument made by the department, which primarily relied upon law from a similar case in another jurisdiction. Third, it will discuss decision made by the Delaware Bankruptcy Court, including the reasoning adopted by the Court. Finally, it will conclude by alluding to the broader implications of this case, as it could provide guidance for the future of New York law in this area as well as providing practical advice on how to protect the interests of those developers who rely on the use of escrow in real estate transactions on a regular basis.