4 ABR 447 UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF ALASKA

In re: Case No. A93-00889-DMD	)
	)
MARTECH USA, INC., a Delaware	)
corporation,	)
	)
Debtor.	)
______________________________________	)
	)	Bancap No. 96-3108
KENNETH W. BATTLEY, Trustee,	)
	)
Plaintiff,	)	Adv. No. A93-00889-195-DMD
	)	Chapter 7
v.	)
	)
NATIONAL BANK OF ALASKA, a	)
national banking association,	)
	)
Defendant.	)
_____________________________________	)

MEMORANDUM REGARDING PENDING MOTIONS
INDEX⁽¹⁾
I.	Procedural Background	448
II.	Case Background	448
III.	Trustee's Motion for Partial Summary Judgment	456
A.	Center Wholesale	457
B.	Noticing Requirements Under the Bankruptcy Code and Rules	459
C.	Due Process Requirements	461
D.	The Trustee's Other Contentions	462
IV.	NBA's Motion for Summary Judgment	463
A.	First Claim for Relief	463
B.	Second and Third Claims for Relief	464
C.	Fourth Claim for Relief	465
D.	Fifth Claim for Relief	466
E.	Seventh and Eighth Claims for Relief	466
F.	Ninth Claim for Relief	467
G.	Tenth and Eleventh Claims for Relief	469
H.	Twelfth Claim for Relief	470
4 ABR 448
V.	NBA's Motion to Strike Jury Demand	470
VI.	NBA's Combined Discovery Motions	472
VII.	Conclusion	472

   I.   Procedural Background
     This proceeding was commenced in the United States District Court for the District of Alaska, Battley v. National Bank of Alaska, Case No. A95-470-CIV-HRH. By order entered August 5, 1996, the United States District Court denied the plaintiff's motion to withdraw the reference and the proceeding was transferred to this court.

     At the time this case was transferred, the following motions were pending:

- the plaintiff's motion for partial summary judgment, filed February 29, 1996;

- the defendant's motion for summary judgment, filed March 15, 1996;

- the defendant's motion to strike plaintiff's jury demand, filed June 3, 1996; and

- the defendant's combined discovery motions, filed July 10, 1996.

A hearing on the above motions was held on September 18, 1996. I have thoroughly reviewed the motions and oppositions, as well as the entire adversary proceeding file, and considered the arguments of counsel. The plaintiff's motion for partial summary judgment will be denied. The defendant's motion for summary judgment will be granted, in part, and denied, in part, for the reasons discussed below. The motion to strike jury demand will be granted. The defendant's combined discovery motions will be granted, in part, and denied, in part, as discussed further below.

   II.  Case Background
     The factual summary provided below is based upon the undisputed facts as determined from the parties' cross-motions for summary judgment, and from the Main Case File No. A93-00889-DMD, of which this court takes judicial notice.

     The debtor, Martech USA, Inc. ("Martech"), was a Delaware corporation with its principal place of business in Anchorage. Initially,      4 ABR 449 Martech's primary business was environmental clean-up and remediation work, although it also provided diving and marine construction services. Its stock was publicly traded on the New York Stock Exchange. Martech was very profitable. In the November 9, 1992, edition of Forbes Magazine, Martech was listed as one of the top 200 best small publicly traded companies. During its 1992 fiscal year, Martech expanded its business operations by bidding upon and performing U.S. government construction projects. Martech had no prior experience in performing these types of contracts.

     Defendant National Bank of Alaska ("NBA") was the primary commercial lender for Martech in the years immediately preceding its bankruptcy filing. On December 15, 1992, just more than one year before Martech filed bankruptcy, NBA and Martech entered a loan agreement for a $10 million revolving loan, a $5 million revolving loan and letters of credit, and a $2 million revolving loan for equipment purchases. The loan agreement modified the terms of certain loan agreements and promissory notes Martech had previously entered with NBA in July, 1990 and April, 1992. Under the terms of the December, 1992, loan agreement, Martech granted NBA a security interest in its assets, as follows:

3.2.1 All accounts, accounts receivable, equipment, inventory, furniture, fixtures, chattel paper, documents, instruments, deposit accounts, contracts, choses in action, licenses, and general intangibles now existing or hereafter arising, and all proceeds thereof;

3.2.2 Upon request of the Bank, all vessels and personal property attached thereto owned by Borrower.

Martech experienced serious financial difficulties in the fall of 1993. In November, 1993, at the request of NBA and pursuant to the terms of the December, 1992, loan agreement, Martech granted NBA security interests in its vessels. NBA also acquired a lien against an aircraft. Martech filed a chapter 11 petition in bankruptcy one month later, on December 19, 1993. At the time Martech's bankruptcy was filed, NBA was owed in excess of $20 million on various prepetition loans, and held extensive security interests in Martech's assets. Also, at the time of filing, Martech was involved in many U.S. government construction projects throughout the nation.

The day after its petition was filed, on December 20, 1993, Martech

4 ABR 450 filed an ex parte application for an order shortening time to hear various motions, including a motion to approve a stipulation for use of NBA's cash collateral (Docket Entry No. 10).⁽²⁾ This court held a hearing on the ex parte application the same afternoon, and granted the motion (DE 38). A hearing on approval of the stipulated cash collateral agreement with NBA was scheduled for December 23, 1993. Martech served notice of the hearing on its motion for use of cash collateral via first class mail and DHL Worldwide Express on December 20th and 21st (DE 22). Notice was served on counsel for NBA, Martech's 20 largest unsecured creditors, and counsel for sureties who had issued Miller Act payment or performance bonds for government projects on which Martech was working at the time the petition was filed.⁽³⁾ The notice of hearing (DE 16) described the cash collateral motion as follows:

a) Motion to approve cash collateral stipulation. Without the ability to utilize the cash collateral of the National Bank of Alaska ("NBA"), Martech would face immediate liquidation. Thus, Martech requested and was granted a hearing on shortened notice for a motion to obtain Court approval of its stipulation with NBA to use the bank's cash collateral. The stipulation is still being negotiated with NBA; once it is finalized it will be filed with the court.

     Martech filed its emergency motion for approval of the cash collateral agreement one day before the scheduled hearing, on December 22, 1993 (DE 27). The motion did not include a copy of the cash collateral agreement. Martech indicated in the motion that a copy would be provided at the hearing. The main case file does not contain a certificate of service for this motion.

     4 ABR 451      The cash collateral hearing on December 23, 1993, was attended by counsel for the debtor, the sureties, and NBA. Also attending were the United States Trustee and counsel for 5 of the 20 largest unsecured creditors who had been noticed with the hearing. Counsel for the debtor represented that a copy of the emergency motion, without exhibits, had been served via facsimile the previous afternoon on the twenty largest unsecured creditors, the United States Trustee, and on parties who had filed an appearance in the case. Debtor's counsel also represented that Martech had immediate need for use of the cash collateral, in order to meet its payroll obligations and to satisfy requirements on pending U.S. government jobs. Copies of the proposed cash collateral agreement were circulated at the hearing and a recess was provided so the parties could review the document.

     The cash collateral agreement (DE 60) authorized Martech's use of NBA's cash collateral. It provided adequate protection to NBA in the form of a replacement lien on Martech's assets up to the amount of cash collateral expended by Martech post-petition, subject only to existing liens of third parties on the assets and to a $1 million carve-out for post-petition professional fees and costs. To the extent that NBA was not adequately protected by the replacement lien, the agreement granted NBA a priority administrative expense claim under 11 U.S.C. § 507(b) for any deficiency. Finally, under the terms of the agreement, Martech agreed that NBA had valid, perfected and enforceable pre-petition security interests, and waived its right to challenge any potential defects in these interests. At the December 23 hearing, both Martech's and NBA's counsel represented that this provision in the agreement would not preclude other parties in interest, such as the Unsecured Creditors' Committee, from contesting NBA's security interests.

     After the hearing, this court entered an order approving the cash collateral agreement (DE 33). The order authorized Martech to use up to $8.6 million in cash collateral on an interim basis, from the date the petition was filed through January 28, 1994. A final hearing on Martech's motion for use of cash collateral was scheduled for January 26, 1994. On January 7, 1994, Martech filed a notice of hearing and motion for order approving the cash collateral agreement (DE 119). The motion consisted of more than 100 pages, with exhibits, and contained a full

   4 ABR 452 copy of the cash collateral agreement with NBA. Copies of the notice, motion and cash collateral agreement were served on the official service list on January 6, 1994 (DE 120).⁽⁴⁾

     The final cash collateral hearing scheduled for January 26th was continued to February 1, 1994, at the request of the Unsecured Creditors' Committee ("UCC"). A stipulation to continue the hearing, signed by counsel for the debtor, NBA, the sureties, and the UCC, was filed with this court on January 26, 1994 (DE 206).⁽⁵⁾ The stipulation stated that the UCC had concerns regarding certain terms of the cash collateral agreement, and wanted additional time to discuss these concerns with the debtor and NBA prior to the hearing. The stipulation provided that the cash collateral agreement would remain in effect on an interim basis until February 3, 1994, unless otherwise ordered by the court. The stipulation also provided that the rights of any party to oppose approval of the cash collateral agreement, or to request modification of the agreement, were not prejudiced by the stipulated continuance. Finally, the stipulation provided that any opposition to the motion for use of cash collateral would be due by January 31, 1994. An order continuing the cash collateral agreement, as stipulated by the parties, was entered by this court (DE 224). The hearing scheduled for January 26, 1994, was taken off calendar.

     On February 1, 1994, a second stipulation between the debtor, NBA, the sureties and the UCC was filed (DE 235). The second stipulation advised that the parties were still negotiating various terms of the agreement, and requested that the final cash collateral hearing be

   4 ABR 453 continued to February 8, 1994. The parties agreed that the cash collateral agreement would remain in effect on an interim basis until February 10, 1994, unless otherwise ordered by the court. The stipulation again provided that the continuance would not prejudice the rights of any party to contest approval of the cash collateral agreement or request modification of the agreement, and set a new deadline of February 7, 1994, for filing objections. At the hearing on February 1, the parties discussed the requested continuance on the record. After the hearing, this court entered an order on the various motions which were scheduled for the February 1 hearing (DE 239). The order stated that the final cash collateral hearing was continued without date, but that the debtor or any other party in interest could submit a calendar request to the court if they wanted the matter again scheduled for hearing. Neither the UCC nor any other party ever requested a final hearing on the cash collateral agreement. Further, no party in interest ever filed an objection to the interim cash collateral agreement, or to the entry of the interim cash collateral order.⁽⁶⁾

     At a hearing on other motions held on February 3, 1994, Martech's counsel advised this court and parties in attendance that Martech's projections for reorganization had been incorrect and that Martech would most likely be proposing a down-sized reorganization. Martech ceased work on its government contracts shortly thereafter, and the sureties were forced to complete the projects.

     On December 21, 1994, this court denied confirmation of Martech's third amended plan and converted the case to one under chapter 7 (DE 1686). One reason for denying confirmation was that insufficient evidence was provided to the court to allow it to evaluate Martech's settlement of its claims against NBA. I noted that the only one of the debtor's potential claims against NBA which had received any attention was the preference claim, and then stated:

Under the terms of a cash collateral order, however, NBA was given a replacement lien on all of the debtor's assets, including the vessels. NBA has lost at least $4.5 million in 4 ABR 454 cash collateral post-petition. These losses effectively render any preference argument moot. Any preference for the estate has been lost to the debtor's post-petition operations and NBA's replacement lien. The preference claim has no value.⁽⁷⁾

On December 30, 1994, the UCC filed a motion for clarification or reconsideration (DE 1703), asking this court to clarify that the above language was simply dicta and not a determination, on the merits, of any potential preference claim against NBA. I entered an order granting the motion for clarification on January 13, 1995 (DE 1723), which stated that the above language was "not an adjudication on the merits of any potential preference action nor was it an adjudication on the merits of NBA's replacement lien rights."

After the case was converted, Kenneth Battley was appointed trustee. On May 5, 1995, Battley filed a notice of election to be substituted as plaintiff in Gulf Insurance Company, et al. v. NBA, Adv. No. A93-00889-009 DMD. In that adversary proceeding, the sureties sought equitable subordination of NBA's claim to the claims of general unsecured creditors. During the pendency of this proceeding, NBA agreed to permit the trustee to conduct a "due diligence" investigation of NBA. The trustee was allowed to review NBA's records and depose NBA personnel to evaluate the viability of the estate's potential claims against it. NBA also agreed to allow the trustee to apply a portion of the funds remaining from the cash collateral agreement's carve out for professional fees to expenses the trustee incurred for this investigation (DE 2131). The trustee's professional fees and expenses for the due diligence investigation exceeded $100,000 (DE 2158).

Battley filed this civil action against NBA on December 18, 1995.⁽⁸⁾ In the complaint, Battley alleges that when Martech expanded its business to bid on government projects, it had inadequate financial controls and accounting systems to support the expansion. He alleges NBA, as primary lender for both Martech and its principal shareholder, knew of Martech's

   4 ABR 455 financial condition at all times. NBA allegedly assisted Martech in a variety of ways which were contrary to standard banking practices, including permitting overdrafts, extending lines of credit and failing to enforce terms of loan agreements. Battley alleges NBA aided Martech in misrepresenting its financial condition in connection with a $20 million offering of convertible subordinated notes to various purchasers (the "subordinated debenture holders") in February, 1993. The proceeds from the sale of the notes were applied against NBA's outstanding loans to Martech.

     The complaint also alleges NBA dominated and controlled Martech's management and business affairs by overreaching, making bad faith demands for additional collateral (including the vessels in which NBA was granted a security interest just one month prior to Martech's bankruptcy), threatening to terminate lending, and extending favors to Martech shareholders who also had loans with NBA. In particular, the complaint alleges NBA failed to fund a $14 million loan for an "801" project and failed to extend an agreed loan of $500,000 for working capital.

     Finally, the complaint attacks NBA's post-petition replacement lien and contends the interim cash collateral agreement is void ab initio. Battley alleges inadequate notice of the interim agreement was given and that NBA misrepresented that it would seek final approval of the agreement, so that creditors were not provided an opportunity to object to the replacement lien.

     The trustee's complaint contains 12 claims for relief, which are summarized as follows:

1. breach of implied covenant of good faith;

2. tortious interference with corporate governance and dominance and control of borrower;

3. violation of standard banking practices;

4. common law fraud;

5. breach of contract to loan money (with regard to the "801" project);

6. preferences - 11 U.S.C. § 547(b) (with regard to the security interests in the vessels and a jet, all funds paid by Martech to NBA which exceed new advances made within one year of filing, and all funds paid to or applied by NBA against
4 ABR 456 overdrafts on Martech's accounts within one year of filing);

7. fraudulent transfers - 11 U.S.C. § 548;

8. unauthorized post-petition transfer of security interest - 11 U.S.C. § 549 (to avoid the post-petition replacement lien);

9. equitable subordination to subordinated debenture holders - 11 U.S.C. § 510(c)(1);

10. equitable subordination as to general creditors;

11. equitable subordination as to all post-petition creditors; and

12. for recovery of the plaintiff's costs and expenses in connection with the disposition of NBA's collateral, pursuant to 11 U.S.C. § 506(c).

The trustee's complaint demands a jury as to all issues so triable.

   III.   Trustee's Motion for Partial Summary Judgment

     In his motion for partial summary judgment, the trustee seeks judgment on his sixth claim for relief: avoidance of preferential transfers under 11 U.S.C. § 547(b). Specifically, the trustee seeks to avoid the transfer of the security interests in vessels given to NBA just one month prior to Martech's bankruptcy filing. It is undisputed that Martech executed two preferred marine mortgages on November 19, 1993, which granted NBA security interests in the following vessels: Martech Bettye, Martech Roxy, Slick Chick, Arctic Bay, Arctic Carolyn, Arctic Dawn, Barge 204, Bettye K, Glacier, Golden Bear, Krystal Sea, Lori Ann, MLC 261 and the Shamrock. Martech filed its chapter 11 petition one month later, on December 19, 1993. Battley contends there are no genuine issues of fact as to any of the elements required to avoid a transfer as a preference under § 547(b). He contends he is entitled to recover in excess of $5 million from NBA, based on insurance appraisals done on the vessels in 1993.

     NBA opposes the motion for partial summary judgment on several grounds. First, NBA argues that the preference count should be dismissed because the cash collateral agreement is binding on Battley and precludes

   4 ABR 457 his attack against NBA's security interests.⁽⁹⁾ Second, NBA argues that the preference claim is moot because it is entitled to the net proceeds from the vessels sales towards payment of its post-petition replacement lien, which has not been satisfied. NBA also contends it gave new value for the security interests in the vessels. Finally, NBA argues that, if the security interests are avoided as preferences, the trustee can only recover $1.7 million, which sum represents the net sales proceeds received for the vessels post-petition.

     Because I agree with NBA's first argument, it will be unnecessary to reach the remaining issues. At the outset, the trustee's contention that the cash collateral agreement is void, ab initio, due to defective notice must be addressed. Whether the notice provided in this case satisfied due process is a question of law. In re Center Wholesale, Inc., 759 F.2d 1440, 1445 (9th Cir. 1985); see also In re Southland Supply, Inc., 657 F.2d 1076, 1082 (9th Cir. 1981).

A. Center Wholesale

The trustee relies on Center Wholesale in support of his position. However, that case is distinguishable on its facts. There, a cash collateral order ("CCO") was entered on an emergency basis 4 days after the debtor's chapter 11 petition was filed. Notice of the emergency motion was given via mailgram to the debtor's 10 largest creditors. One of these creditors, Owens-Corning, received the notice just 24 hours prior to the emergency hearing. The CCO was approved by the court, but a further hearing to determine the "continued effectiveness" of the CCO was noticed to all creditors. At this second hearing, Owens-Corning's request for a continuance so it could have sufficient time to review the order was denied by the bankruptcy court. The Ninth Circuit determined that the notice which Owens-Corning received was inadequate and did not satisfy due process. This determination was based not only on the shortness of the initial notice to Owens-Corning, but the fact that Owens-Corning was precluded by the bankruptcy judge from presenting its

4 ABR 458 objections at a continued hearing. The court noted:

     [T]he necessity of an immediate hearing to authorize the debtor's use of cash collateral or borrowing does not excuse a careful consideration of the continued propriety of such actions at a later date. In the legislative history accompanying section 102(1), which defines notice and hearing as that which "is appropriate in the particular circumstances," Congress acknowledged that "[i]n very limited emergency circumstances, there will be insufficient time for a hearing to be commenced before an action must be taken. The action sought to be taken may be taken if authorized by the court at an ex parte hearing of which a record is made in open court. A full hearing after the fact will be available in such an instance." 124 Cong. Rec. 33,993 (1978). See 2 Collier on Bankruptcy ¶ 102.02 at 102-6 (15th Ed. 1984).
. . . .

     The debtor in the instant case appears to have proceeded under the assumption that Judge King's approval of the CCO on December 22 was merely temporary because its notice described the January 14 hearing as one to consider the "continued effectiveness" of the CCO. Judge King subsequently determined that the CCO was final because it did not contain a provision conditioning its effectiveness on the court's approval at the January 14 hearing.

     Had the CCO contained such a provision and had Judge King seriously reconsidered the CCO's propriety at the January 14 hearing or granted Owens-Corning's request for a continuance and reconsidered the CCO at a later hearing where Owens-Corning, the creditors' committee, and the other creditors had a chance to challenge fully the CCO, then the notice of the December 22 hearing probably would have been sufficient to satisfy due process. . . .

Center Wholesale, 759 F.2d at 1449, n.21 (emphasis in original). Unlike Center Wholesale, in the instant case "a full hearing after the fact" was made available to creditors. Notice of the final hearing on the cash collateral agreement was served on the official service list 21 days prior to the hearing. The final hearing on the cash collateral agreement was continued twice at the request of the UCC. The deadline for filing objections to the cash collateral agreement was extended by stipulation to January 31, 1994, and then to February 7, 1994. In spite of the continuance of the final hearing and the extension of the deadline for objections, no objections to the cash collateral agreement were ever filed and no hearing was ultimately requested. The noticing deficiencies the Ninth Circuit found in Center Wholesale do not exist in this case.

4 ABR 459

B. Noticing Requirements Under the Bankruptcy Code and Rules

"Notice analysis takes place on two levels, statutory requirements and constitutional due process concerns." Citicorp Mfg., Inc. v. Brooks (In re Ex-Cel Concrete Co., Inc.), 178 B.R. 198, 202 (9th Cir. BAP 1995). The statutory requirements for noticing a cash collateral agreement are contained in 11 U.S.C. § 363(c)(2), which provides:

      (c)(2) The trustee may not use, sell, or lease cash collateral under paragraph (1) of this subsection unless --

      (A) each entity that has an interest in such cash collateral consents, or

      (B) the court, after notice and a hearing, authorizes such use, sale, or lease in accordance with the provisions of this section.

In this case, the entities which claimed an interest in the cash collateral Martech was to be using, the sureties and NBA, both consented to its use. Accordingly, under § 363(c)(2)(A), notice of the cash collateral agreement was not required. Further, even assuming notice was required in this instance under § 363(c)(2)(B), the phrase, "notice and a hearing," does not require that an actual hearing occur, provided notice is properly given and a hearing is not timely requested by a party in interest or there is insufficient time for a hearing before the court authorizes an act. 11 U.S.C. § 102(1)(B).

The trustee argues, however, that "[t]he parties not only failed miserably to comply with Bankruptcy Rule 4001 but provided such short and inadequate notice that meaningful participation by unsecured creditors in the emergency hearing was impossible."⁽¹⁰⁾ Under Fed. R. Bankr. P. 4001(d)(1)(D), a motion for approval of an agreement to use cash collateral, with a copy of the cash collateral agreement, must be served upon the 20 largest unsecured creditors or the unsecured creditors committee, if one has been appointed. Under Fed. R. Bankr. P. 4001(d)(3), the court may enter an order approving a cash collateral agreement without hearing, if no objections are filed. The provisions of Rule 4001(d) are inconsistent with the statutory requirements of §

   4 ABR 460 363(c)(2)(A), which permit a debtor to use cash collateral without notice and a hearing when a consensual cash collateral agreement has been reached.

     Rule 4001(b)(2), Fed. R. Bankr. P., provides that a final hearing on a motion for use of cash collateral may be held "no earlier than 15 days after service of the motion." A preliminary hearing may be held sooner under Rule 4001(b)(2), "but the court may authorize the use of only that amount of cash collateral as is necessary to avoid immediate and irreparable harm to the estate pending a final hearing." Notice of a motion to use cash collateral (as opposed to a motion for approval of an agreement to use cash collateral) must be given to entities with an interest in the cash collateral and upon the 20 largest unsecured creditors or the unsecured creditors committee, if one has been appointed. Fed. R. Bankr. P. 4001(b)(1).

     In this case, the parties did not "fail miserably" to satisfy the noticing requirements of Rule 4001. Notice of the emergency motion for use of cash collateral was served, via facsimile, mail and express delivery upon the parties specified in Rule 4001(b)(1), i.e., NBA, the sureties, and the 20 largest unsecured creditors. The emergency motion did not contain a copy of the cash collateral agreement. However, under Rule 4001(b), which deals with preliminary cash collateral hearings, this is not specifically required. The subsequent motion for approval of the cash collateral agreement, which was noticed to the official service list, did contain a copy of the agreement and thus complied with the requirements of Rule 4001(d)(1). The notice of final hearing on the agreement was given 21 days prior to the January 28 hearing. The only response to the motion was a conditional non-opposition filed by creditor USKH. The UCC requested a continuance of the hearing, because of concerns it had with certain terms of the agreement. However, in spite of two continuances of the final hearing, and two extensions of the deadline for filing objections, the UCC never filed an objection to the agreement. A cash collateral agreement may be approved, without a hearing, under Rule 4001(d)(3), if no objections are filed. In short, the record in this case doesn't support the trustee's assertions of glaring deficiencies under Rule 4001.

4 ABR 461

C. Due Process Requirements

Even assuming that violations of the statutory or rule requirements regarding noticing were present in this case, such violations are not necessarily a denial of due process. In re Manchester Center, 123 B.R. 378, 381 (Bankr. C.D. Ca. 1991). The due process clause of the Fifth Amendment requires that notice be

reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and to afford them an opportunity to present their objections.

Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950). "If the notice requirement of the due process clause is not satisfied, the order is void." Ex-Cel Concrete, 178 B.R. at 203, citing In re Center Wholesale, 759 F.2d 1440, 1448 (9th Cir. 1985); In re Moberg, 112 B.R. 362, 363 (9th Cir. BAP 1990); In re Blumer, 66 B.R. 109, 113 (9th Cir. BAP 1986), affirmed 826 F.2d 1069 (9th Cir. 1987).

Looking at all the circumstances in this case, the due process requirements for notice have been satisfied. Although the initial notice of the emergency cash collateral hearing was short, notice was provided to the 20 largest unsecured creditors. The subsequent notice of the motion to approve the cash collateral agreement, which contained a copy of the entire agreement, was sufficient to apprise all interested parties of the relief sought. More than 15 days notice of the final cash collateral hearing was provided. There was sufficient opportunity for interested parties to present objections. Unlike the Center Wholesale case, the court in this case did not deny a requested continuance or otherwise foreclose a final hearing on the agreement. Two requested continuances were granted. The deadline for filing objections was extended twice. The fact that none of the parties so noticed filed an objection or requested a final hearing does not defeat the adequacy of the notice.⁽¹¹⁾ The notice of the cash collateral agreement provided by

4 ABR 462 the debtor in this case satisfied due process requirements. The trustee cannot now attack the cash collateral agreement and order on the grounds of defective notice.

D. The Trustee's Other Contentions
The trustee argues that he can assert the preference claim against NBA, even if the cash collateral order is valid, because for the purpose of this claim he stands in the shoes of the unsecured creditors, rather than the debtor-in-possession. I disagree. The trustee is bound by the acts of the debtor-in-possession. Southland Supply, 657 F.2d at 1080; Armstrong v. Norwest Bank, Minneapolis, N.A., 964 F.2d 797, 801 (8th Cir. 1992); Paul v. Monts, 906 F.2d 1468, 1473 (10th Cir. 1990); Pollack v. FDIC (In re Monument Record Corp.), 71 B.R. 853, 862 (Bankr. M.D. Tenn. 1987); In re Tandem Group, Inc., 61 B.R. 738, 741 (Bankr. C.D. Ca. 1986); Seidle v. GATX Leasing Corp., 45 B.R. 327, 330 n.6, (S.D. Fla. 1984), affm'd, 778 F.2d 659 (11th Cir. 1985). As the Eighth Circuit explained:

First, it is axiomatic that the Trustee is bound by the acts of the debtor-in-possession, Trout, in entering into the three [cash collateral] stipulations. It is equally self-evident that the Trustee is bound by the decisions of the courts regarding the stipulations, even absent his presence at those proceedings. We cannot entertain any suggestion to the contrary, as the result would be chaos among debtors-in-possession and their creditors. Creditors must be able to deal freely with debtors-in-possession, within the confines of the bankruptcy laws, without fear of retribution or reversal at the hands of a later appointed trustee.

Armstrong, 964 F.2d at 801. The cash collateral agreement is binding on the trustee.

Finally, the trustee's contention that NBA made misrepresentations to creditors and the court in acquiring approval of the cash collateral agreement must be briefly discussed. Nothing in the record supports this claim. Martech, rather than NBA, noticed both the initial emergency hearing on use of cash collateral and the final hearing scheduled for January 28. The final hearing was continued by stipulation, at the request of the UCC, which noticed the continuance to creditors. Further, nothing in the record reflects that Martech's cash collateral agreement was a sweetheart deal for NBA, approved by the court based on misrepresentations or omissions regarding its true terms. On the contrary, NBA agreed to permit Martech, already indebted for over $20 million, to use

   4 ABR 463 up to $8.6 million of its cash collateral. In consideration for the use of cash collateral Martech agreed to give NBA adequate protection as provided under 11 U.S.C. § 361, and to waive its right to attack NBA's pre-petition security interests. All parties agreed that this waiver is not binding on Martech's creditors.

     The trustee's arguments in favor of voiding the cash collateral order are defeated by the record. The facts simply do not support the trustee's claims. The trustee is bound by the cash collateral agreement, approved by this court. The waiver of the right to attack the validity of NBA's pre-petition security interests is binding on the trustee. The effect of this waiver is to preclude the trustee from seeking to avoid the security interests in vessels which Martech granted NBA pre-petition (¶ 9.2.1 of the complaint). The waiver also precludes the trustee from seeking to avoid a security interest granted NBA in a jet aircraft (¶ 9.2.4 of the complaint). The trustee's motion for partial summary judgment will therefore be denied. For the same reasons, NBA's cross motion for summary judgment will be granted, as to paragraphs 9.2.1 and 9.2.4 of the complaint, which will be dismissed, with prejudice. NBA's motion will be denied with respect to the transfers alleged in paragraphs 9.2.2 and 9.2.3 of the complaint.

   IV.  NBA's Motion for Summary Judgment
     In its motion for summary judgment, NBA seeks dismissal of the trustee's first through eleventh claims for relief, with prejudice, and dismissal of the twelfth claim for relief, without prejudice.

A. First Claim for Relief
The trustee's first claim for relief seeks damages from NBA for breach of the implied covenant of good faith and fair dealing. In support of this claim, the trustee contends NBA required Martech to give it additional collateral (the vessels) before it would extend additional loans, that NBA wrongfully terminated a loan agreement, and that NBA engaged in fraudulent conduct in connection with the approval of the cash collateral agreement.

As a matter of law, all contracts in Alaska contain an implied covenant of good faith and fair dealing. This covenant primarily sounds in contract; in limited situations, however, it may sound in tort. In Alaska, breach of the 4 ABR 464 covenant is a tort only if it is in the surety or insurance context. We have specifically declined to extend a tort remedy to commercial and employment contracts.

Municipality of Anchorage v. Gentile, 922 P.2d 248, 260 (Alaska 1996) (citations omitted). As no tort action will lie for breach of the implied covenant of good faith and fair dealing in commercial transactions, NBA's motion for summary judgment on the trustee's first claim for relief will be granted and this count will be dismissed, with prejudice.

        B.  Second and Third Claims for Relief
      NBA seeks dismissal of the trustee's second and third claims for relief because these counts do not state claims for which relief can be granted. I agree with NBA as to both counts. The trustee's second claim for relief seeks damages for NBA's tortious interference with corporate governance and dominance and control of Martech. As noted by NBA, there is no authority in Alaska or the Ninth Circuit which recognizes such a cause of action. The only case of which this court is aware that discusses whether such a claim exists as an independent tort was cited by NBA, Government Street Lumber Co., Inc. v. AmSouth Bank, N.A., 553 So.2d 68 (Alabama 1989). In that case the court stated, "We can find no cause of action in contract or tort for wrongful control and domination," and declined to create such a claim for relief. Id., at 74.
     I am not persuaded to recognize such a cause of action based upon the cases cited by the trustee. For example, State National Bank of El Paso v. Farah Mfg. Co., Inc., 678 S.W.2d 661 (Tex. Ct. App. 1984), dealt with a borrower's claims against a bank for interference with contract and business relations, fraud and duress. The Farah court did not recognize claims for tortious interference with corporate governance and dominance and control of borrower as independent torts, nor did the other cases cited by the trustee, which involved claims for bad faith or equitable subordination. The fact that the Alaska Supreme Court has recognized the tort of interference with prospective economic advantage, Ellis v. City of Valdez, 686 P.2d 700 (Alaska 1984), can hardly be viewed as an inclination by that court to recognize the tort of interference with corporate governance. This is particularly evident in light of its recent refusal to apply the tort of breach of the implied covenant of good faith and fair dealing in commercial transactions. Municipality of

   4 ABR 465 Anchorage v. Gentile, 922 P.2d at 260. NBA's motion for summary judgment as to the trustee's second claim for relief will be granted, and this count will be dismissed with prejudice.

     The trustee's third claim for relief is for violation of standard banking practices. NBA argues that failure to follow standard banking practices is not, by itself, an independent, actionable tort. Both NBA and the trustee rely on the same case, Alaska State Bank v. Fairco, 674 P.2d 288 (Alaska 1983), to support their positions. I agree with NBA's interpretation. The Fairco case was based upon claims for conversion and defamation, not a tort for violation of standard banking practices. Summary judgment will be granted NBA as to the trustee's third claim for relief, which will be dismissed with prejudice.

C. Fourth Claim for Relief
The trustee's fourth claim for relief seeks damages for common law fraud. The trustee contends NBA committed fraud by failing to obtain a final hearing on the cash collateral agreement, which granted it a replacement lien as adequate protection. The trustee also claims NBA committed fraud by requiring Martech to grant security interests in its vessels. Finally, the trustee contends NBA committed fraud in connection with Martech's offering and issuance of $20 million in convertible debentures, by assisting Martech in misrepresenting its financial condition to purchasers of the notes.⁽¹²⁾ NBA contends the fourth count should be dismissed because the trustee lacks standing to assert the fraud allegedly committed on the purchasers of the notes, NBA's acquisition of security interests in vessels was permitted under the terms of the December, 1992, loan agreement, and the circumstances constituting fraud have not been pled with particularity, as required by Fed. R. Civ. P. 9(b). The trustee's opposition did not address NBA's contentions regarding the common law fraud count. I agree with NBA's analysis. The trustee lacks standing to sue NBA for a fraud it purportedly committed against certain creditors of the estate. Williams v. California 1st Bank, 859 F.2d 664, 667 (9th Cir. 1988). This claim belongs to the

4 ABR 466 affected creditors, rather than to the estate. Id. Further, the allegations in support of the common law fraud count do not satisfy the requirements of Fed. R. Civ. P. 9(b), made applicable to adversary proceedings by Fed. R. Bankr. P. 7009. Finally, NBA was simply enforcing its rights under a contract when it acquired security interests in Martech's vessels, and its acquisition of a replacement lien pursuant to the terms of the cash collateral agreement was not fraudulent, as more thoroughly discussed above. The fourth claim for relief will be dismissed, with prejudice.

        D.  Fifth Claim for Relief
      NBA also seeks dismissal of the trustee's fifth claim for relief, breach of contract to loan money with regard to the "801" project. NBA bases its argument on allegations in the complaint regarding Martech's dire financial condition prior to filing bankruptcy and the trustee's allegation that Martech was insolvent, under § 547(b). NBA contends these allegations are binding judicial admissions by the trustee and, since insolvency is a condition of default under the "801" loan agreement, NBA wasn't required to fund the loan. I find that a grant of summary judgment to NBA on this basis is inappropriate. NBA seeks to bind the trustee to allegations which it has denied in its answer and, thus, placed in issue. Fed. R. Civ. P. 8(d); Fed. R. Bankr. P. 7008. Summary judgment is only appropriate where the pleadings and other documents on file "show that there is no genuine issue as to any material fact." Fed. R. Civ. P. 56(c); Fed. R. Bankr. P. 7056. Here, there are genuine issues of material fact regarding Martech's financial demise and the extent of NBA's knowledge as to Martech's true financial condition. Further, NBA's own exhibits show that, as late as November 23, 1993, it was willing to extend the "801" loan to Martech provided certain conditions were met [NBA Ex. 6]. NBA's motion will be denied as to the fifth count of the trustee's complaint.

E. Seventh and Eighth Claims for Relief
The trustee's seventh claim for relief, for avoidance of fraudulent transfers under 11 U.S.C. § 548, seeks to set aside the same transfers which the trustee alleged were preferences in his sixth count. NBA's motion for summary judgment as to the seventh claim for relief will be granted to the same extent and for the same reasons stated in Part B

4 ABR 467 above with reference to the sixth claim for relief. Similarly, the trustee's eighth claim for relief, which seeks to avoid unauthorized post-petition transfers of security interests to NBA under 11 U.S.C. § 549 will be dismissed, but only as to that portion of the complaint which seeks to set aside all post-petition transfers based on the trustee's claim that the cash collateral agreement was void, ab initio. The trustee cannot invalidate the replacement lien granted to NBA pursuant to the terms of the cash collateral agreement. However, NBA's motion will be denied with respect to the trustee's alternative claim for relief, contained in paragraph 11.4 of the complaint. This alternative claim deals only with post-petition transfers which occurred after the expiration of the interim cash collateral order.

        F.  Ninth Claim for Relief
     The trustee's ninth claim for relief seeks equitable subordination of NBA's claim to the claims of the subordinated debenture holders pursuant to 11 U.S.C. § 510(c)(1). As with the fourth count, for common law fraud, NBA contends this claim belongs to the subordinated debenture holders and the trustee lacks standing to bring it. NBA also argues that the trustee has failed to satisfy the pleading requirements of Fed. R. Civ. P. 9(b) in this count. I agree with NBA's second argument.

     In support of his ninth claim for relief, the trustee's complaint alleges NBA knew, by May of 1992, that Martech's continued viability was doubtful. He alleges NBA, knowing that Martech planned to make the $20 million offering, "continued to loan funds to Martech, increased lending to Martech, ignored violations of loan agreements by Martech and otherwise propped Martech up" so that the offering could occur and the proceeds could be used to pay off NBA debt. [Complaint, ¶ 12.3]. The complaint also alleges NBA "represented, by affirmative statement or omission, to the Note Holders or their agents and/or the underwriters, that Martech was a healthy viable company with favorable prospects," and that these representations or omissions were "material inducements for the Note Holders to purchase the Notes." [Complaint, ¶ 12.4]. Similar allegations can be found in paragraphs 3.8 and 3.9 of the trustee's complaint.

     The trustee contends his allegations of fraud, with reference to the ninth claim for relief, are simply underlying factual allegations

4 ABR 468 to his equitable subordination claim and therefore not subject to the pleading requirements of Rule 9(b). I disagree. The requirements still apply. See Moore v. Kayport Package Exp., Inc., 885 F.2d 531, 540 (9th Cir. 1989) [Rule 9(b) applied to securities actions under section 10(b) and rule 10b-5]. "While statements of the time, place and nature of the alleged fraudulent activities are sufficient, mere conclusory allegations of fraud are insufficient." Id. The trustee's complaint lacks allegations regarding the time, place, and nature of the alleged fraudulent representations or omissions made by NBA, and fails to satisfy the requirements of Rule 9(b).

The deficiencies in pleading fraud in the complaint could be overlooked for the purposes of this motion if the trustee had provided additional information in support of this claim in connection with the cross motions for summary judgment. However, the trustee has not done this. For example, the trustee's responses to NBA's interrogatories simply reiterate the allegations of the complaint, without providing the name of a single person to whom such misrepresentations or omissions were made.⁽¹³⁾ The trustee's response to NBA's motion for summary judgment, as to this count, is to essentially reiterate the allegations of his complaint, unsupported by affidavits or any of the other types of evidentiary material listed in Fed. R. Civ. P. 56(c). This is insufficient to rebut NBA's motion. Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986). The trustee conducted extended discovery during his due diligence investigation, performed prior to the time this action was filed. He has not moved for a Rule 56(f) continuance. Yet, the trustee cannot name a single witness to buttress his allegations of misrepresen-

4 ABR 469 tation. At this stage of the proceedings, the trustee should be able to provide NBA and the court with more to support his claim than that "it appears" NBA made misrepresentations.

[T]he plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party to fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. In such a situation, there can be "no genuine issue as to any material fact," since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial. The moving party is "entitled to a judgment as a matter of law" because the nonmoving party has failed to make a sufficient showing on an essential element of her case with respect to which she has the burden of proof. "[T]h[e] standard [for granting summary judgment] mirrors the standard for a directed verdict under Federal Rule of Civil Procedure 50(a) . . . . "Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986).

Celotex Corp. v. Catrett, 477 U.S. at 322-323 (alteration in original). NBA's motion will be granted as to the ninth count of the complaint, which will be dismissed. However, so that the subordinated debenture holders themselves are not precluded from bringing such a claim, should they have more definitive evidence to support it, the count will be dismissed without prejudice.⁽¹⁴⁾

G. Tenth and Eleventh Claims for Relief
The trustee's tenth and eleventh claims also seek equitable subordination, as to all "general creditors" (10th count) and as to all post-petition creditors (11th count). NBA contends the cash collateral agreement bars the trustee from bringing these two counts. I agree, but only as to the 11th count, and only for post-petition transfers occurring during the period the cash collateral agreement was in effect. To the extent the trustee is seeking to subordinate NBA's replacement lien, the terms of the cash collateral agreement bar his claim. However, any post-petition transfers which may have been made after the cash collateral

4 ABR 470 agreement terminated are not within its scope. Further, the cash collateral agreement's waiver of the debtor's right to attack the validity of NBA's pre-petition security interests, which is binding on the trustee, does not preclude the trustee from seeking equitable subordination of NBA's claim, as to all general unsecured creditors, pursuant to 11 U.S.C. § 510(c). An equitable subordination claim is not encompassed within this waiver. Equitable subordination under § 510(c) is based upon inequitable conduct of a creditor and, in the case of a non-insider of the debtor, requires a showing of "egregious conduct" or "gross misconduct tantamount to 'fraud, overreaching or spoliation to the detriment of others.'" Unsecured Creditors' Committee v. Pioneer Commercial Funding Corp. (In re Pacific Exp., Inc.), 69 B.R. 112, 116 (9th Cir. BAP 1986), citing Matter of Teltronics Svcs., Inc., 29 B.R. 139, 169 (Bankr. E.D.N.Y. 1983). The trustee's 10th claim is based upon NBA's alleged domination, control and manipulation of Martech management, which the trustee claims shifted the risk of loss from NBA to Martech's general unsecured creditors. It is clearly distinguishable from a claim attacking the validity of NBA's security interests. NBA's motion, as to the tenth claim, will be denied.

        H.  Twelfth Claim for Relief
     Summary judgment on the twelfth claim for relief, which seeks recovery of expenses under § 506(c), will be denied. This action was initially filed in the United States District Court for the District of Alaska. NBA requested dismissal of the twelfth claim on the grounds that this claim was more appropriately brought in the bankruptcy court. Since this proceeding has now been transferred to the bankruptcy court, the twelfth claim is now in the proper forum and NBA's reason for seeking dismissal is moot.

V. NBA's Motion to Strike Jury Demand
NBA's motion to strike jury demand will be granted. The counts of the trustee's complaint which remain in this proceeding are the fifth claim for relief (breach of contract re the "801" project), portions of the sixth and seventh claims for relief (preferences and fraudulent transfers, respectively), the eighth claim for relief (regarding unauthorized post-petition transfers occurring after the expiration of the

4 ABR 471 cash collateral agreement), the tenth claim for relief (equitable subordination of NBA's claim to those of general creditors), the eleventh claim for relief (equitable subordination of that portion of NBA's claim relating to unauthorized post-petition transfers), and the twelfth claim for relief (recovery of expenses under § 506(c)).

I conclude the trustee is bound by the waiver of the right to jury trial contained in the loan agreement for the "801" project (NBA Ex. 4, p. 60), which precludes a jury trial on the fifth claim. Hays and Co. v. Merrill Lynch, 885 F.2d 1149, 1153 (3d Cir. 1989); Reggie Packing Co. v. Lazere Financial Corp. (In re Reggie Packing Co, Inc.), 671 F.Supp. 571 (N.D. Ill. 1987). With reference to the trustee's preference and fraudulent transfer claims, as NBA has filed a proof of claim in the main bankruptcy case, these counts have become part of the claims allowance process subject to this court's equitable jurisdiction. Langenkamp v. Culp, 498 U.S. 42, 44 (1990); Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 58 (1989); Germain v. Connecticut Nat'l Bank, 988 F.2d 1323, 1327 (2nd Cir. 1993); Citicorp N.A., Inc. v. Finley (In re Washintgon Mfg. Co., 133 B.R. 113, 117 (M.D. Tenn. 1991); Dery v. Nat'l Bank of Detroit, N.A. (In re B & E Sales Co., Inc.), 129 B.R. 133, 137 (Bankr. E.D. Mich. 1990). The trustee has no right to a jury trial on the sixth and seventh counts. There is also no right to a jury trial on the trustee's eighth claim, seeking avoidance of unauthorized post-petition transfers under § 549. In re M & L Business Mach. Co., Inc., 59 F.3d 1078, 1082 (10th Cir. 1995); Keller v. Blinder (In re Blinder, Robinson & Co., Inc.), 146 B.R. 28, 30 (D. Colo. 1992). Similarly, there is no right to a jury trial on the trustee's equitable subordination counts. Tennessee Valley Steel Corp. v. B.T. Commercial Corp. (In re Tennessee Valley Steel Corp.), 186 B.R. 919, 922-923 (Bankr. E.D. Tenn. 1995); Torcise v. Community Bank of Homestead, 131 B.R. 503, 508 (S.D. Fla. 1991); Otasco, Inc. v. American Mfr. Mutual Ins. Co. (In re Otasco, Inc.), 110 B.R. 964, 967 (Bankr. N.D. Okl. 1990); In re Atlas Fire Apparatus, 56 B.R. 927, 935 (Bankr. E.D.N.C. 1986). Finally, there is no right to a jury trial on the § 506(c) count. As with the preference and fraudulent transfer counts, the § 506 count is part of the claims allowance process, subject to this court's equitable jurisdiction. See, e.g., Langenkamp, 498 U.S. at 44; Granfinanciera, 492 U.S. at 58.

4 ABR 472

   VI.  NBA's Combined Discovery Motions
     In its combined discovery motions, NBA seeks an order: 1) deeming certain matters admitted pursuant to Fed. R. Civ. P. 36; 2) requiring the trustee's compliance with Fed. R. Civ. P. 30(d)(1) regarding the form and nature of objections made during depositions; and 3) compelling the trustee to answer questions propounded at his deposition.

     NBA's motion to have certain matters deemed admitted will be denied. NBA served the trustee with one request for admission, asking the trustee to admit all the allegations contained in the first amended complaint the trustee has filed against KPMG Peat Marwick, Case No. A95-471 CIV, pending in the United States District Court for the District of Alaska. The 76-page complaint which NBA seeks to have deemed admitted under Rule 36 contains 11 counts, including alleged violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO") and Section 10(b) of the Securities Exchange Act of 1934. Use of Rule 36 in this fashion is inappropriate. Rule 36(a) specifies that "each matter of which an admission is requested shall be separately set forth." NBA cannot apply this rule in such a sweeping fashion. Its motion to have matters deemed admitted will be denied.

     NBA's remaining two discovery motions will be denied, without prejudice, as this court's ruling on the cross-motions for summary judgment makes many of the issues on which NBA was seeking discovery moot (e.g, the fraud counts of the complaint). However, should NBA feel further deposition testimony from Mr. Battley is necessary, the court will agree to the scheduling of a continued deposition before it at the convenience of the parties, so that any issues regarding objections or failures to answer can be immediately resolved.

VII. Conclusion
The trustee's motion for partial summary judgment will be denied. NBA's motion for summary judgment will be granted as follows: the trustee's first, second, third, and fourth claims for relief will be dismissed, with prejudice; that portion of the trustee's sixth and seventh claims which seek to avoid NBA's security interests in vessels and a jet aircraft will be dismissed, with prejudice; and the trustee's ninth count will be dismissed, without prejudice. The trustee's fifth,

   4 ABR 473 tenth and twelfth counts remain at issue in this proceeding. Also remaining at issue are the sixth and seventh counts, but only as to the transfers alleged in paragraphs 9.2.2 and 9.2.3 of the complaint. Finally, the eighth and eleventh counts remain at issue, but only as to post-petition transfers occurring after the expiration of the cash collateral agreement. NBA's motion to strike the trustee's jury demand will be granted. NBA's combined discovery motion is denied, with prejudice, as to its request to have matters admitted, and without prejudice as to the balance.

     An order will be entered consistent with this memorandum decision.

     DATED: November 25, 1996.

BY THE COURT

DONALD MacDONALD IV

United States Bankruptcy Judge

4 ABR 447 My thanks to Amy McFarlane, Esq., for her invaluable assistance in the research and preparation of this decision.

2.

4 ABR 450 The Docket Entry numbers for documents in the Main Case file will hereinafter be referred to as "DE ___."

3.

4 ABR 450 Contractors working on government construction projects are required to post payment and performance bonds, pursuant to provisions of the Miller Act, 40 U.S.C. § 270(a). The sureties who issued these bonds for Martech on its government projects have an interest in the debtor's cash collateral. Pearlman v. Reliance Insurance Company, 371 U.S. 132, 136-137 (1962); Prairie State National Bank of Chicago v. U.S., 164 U.S. 227, 231 (1896). The sureties negotiated an agreement for Martech's use of bonded contract receivables during the pendency of the bankruptcy at the same time the cash collateral agreement with NBA was negotiated. At the time the bankruptcy was filed, Martech intended to retain this portion of its business and complete its outstanding government projects.

4.

4 ABR 452 The official service list consisted of the following: "(i) the committee of unsecured creditors, if one is appointed, or to the twenty (20) largest unsecured creditors if no committee is appointed, (ii) the secured creditors and their counsel of record, if any, (iii) the indenture trustee for the subordinated debt, (iv) Midwest Indemnity and its know [sic] counsel of record, (v) all parties requesting special notice, (vi) the Office of the United States Trustee, and (vii) any party not listed in (i) through (vi) who has a direct interest in the subject matter of the motion in question." DE 39, Order Establishing Notice Procedure, filed Dec. 23, 1996 (emphasis in original). At the time Martech's motion was served, the Unsecured Creditors' Committee had been appointed and counsel had appeared on its behalf.

5.

4 ABR 452 Counsel for the UCC also noticed the continued hearing to the official service list (DE 197, 198).

6.

4 ABR 453 A conditional non-opposition to the agreement was filed by creditor USKH on January 28, 1996 (DE 214) and a response to the cash collateral motion was filed by creditor Soils Processing on February 11, 1994 (DE 304). However, neither of these parties requested a hearing.

7.

4 ABR 454 DE 1686, p. 8, Order Denying Confirmation of Plan and Approval of Settlement and Converting Case to Chapter 7, filed 12/21/94.

8.

4 ABR 454 Adversary No. A93-00889-009-DMD, Battley v. NBA, was dismissed, without prejudice, on February 2, 1996.

9.

4 ABR 457 This argument is also contained in NBA's cross motion for summary judgment, which seeks dismissal, with prejudice, as to all but the 12th count of the trustee's complaint. The remainder of NBA's cross motion is discussed below.

10.

4 ABR 459 Trustee's Memorandum in Opposition to Defendant's Motion for Summary Judgment Dismissing Trustee's Claims, filed April 1, 1996, p. 10.

11.

4 ABR 461 The Eighth Circuit has held that a chapter 7 trustee lacks standing to object to a cash collateral order on the grounds of insufficient notice to creditors, "especially when nothing in the bankruptcy court docket sheets indicates any motion by a creditor to set aside either the stipulation or the bankruptcy court's order approving it." Armstrong v. Dakota Bank and Trust Co. (In re Knudson), 929 F.2d 1280, 1287 (8th Cir. 1991).

12.

4 ABR 465 This final contention is also the basis of the trustee's ninth claim for relief, which seeks equitable subordination of NBA's claim to the claims of the subordinated debenture holders. The ninth claim for relief is discussed below.

13.

4 ABR 468 In response to NBA's interrogatory No. 1, which requested the trustee to state with particularity who misrepresented what to whom and when, with regard to the misrepresentations alleged in the complaint, the trustee answered: "It appears that in connection with the $20,000,000 subordinated debenture offering that NBA failed to disclose Martech's projected cash flow shortages, loan agreement violations and other warning signs that should have been made known to the underwriter, Smith Barney, Inc., and to potential purchasers of the debentures. It appears that Smith Barney, Inc. asked NBA about Martech's loan and financial status and was not fully and fairly informed." With regard to NBA's interrogatory No. 2, which requested the same information regarding non-disclosures alleged in the complaint, the trustee referred to his response to interrogatory No. 1. NBA Ex. 20, p. 1-2.

14.

4 ABR 469 Although the trustee has standing to bring this count, the subordinated debenture holders themselves also have standing to bring such a claim. American Cigar Co. v. MNC Commercial Corp. (In re M. Paolella & Sons, Inc.), 85 B.R. 965, 973 (Bankr. E.D.Pa. 1988), aff'd, 37 F.3d 1487 (3rd Cir. 1994).