Question

Bankruptcy and Secured Transactions Coastal Property Restoration (CPR) periodically purchased used restaurant equipment from Slyce Pizza Company. CPR refurbishes and sells restaurant equipment to small restaurants. In December 2015, CPR purchased five used pizza ovens for $25,000. Because of the good relationship between the companies, Slyce financed the ovens for two years; however, Slyce did not obtain a perfected security interest in the ovens. In July 2016, CPR sold four of the ovens to another refurbishing company for $2,000 two days before filing bankruptcy. CPR still owes approximately $20,000 to Slyce for the ovens. Evaluate the legal and ethical issues associated with CPR's sale of the pizza ovens before filing bankruptcy. What recourse does Slyce have in recovering the monies still owed on the equipment or the remaining oven?

Answer 1

1.Evaluate the legal and ethical issues associated with CPR's sale of the pizza ovens before filing bankruptcy.

CPR sold four of the ovens at very low price of $2,000 which CPR purchased five used pizza ovens for $25,000 from Slyce, After the sale of ovens for $2000 he filed for bankruptcy. Here to evaluate the leagl and ethical issues, it is important to know the property is exempt property or non- exempt property. In the given case situation the used pizza ovens are exempt property, since these are very essential for the purpose and main purposes of the business for CPR.

The sale before two days of bankruptcy is an unethical behavior, since CPR and Slyce had good relationships and so that Slyce hass given finance for the same for two years for the benefit of CPR. Slyce also did not obtain a perfect security interest in the ovens. CPR did unethical decision and sold the ovens for very low price and fills bankruptcy also.

With the view of legal issues associated with CPR's sale of the pizza ovens before filling bankruptcy, the bankruptcy court will look back in time and the purpose of sale exempt property at pre bankruptcy. The reason for the sale of ole pizza ovens is being investigated by the court.

2. What recourse does Slyce have in recovering the monies still owed on the equipment or the remaining oven?

Under bankruptcy law the, Slyce didn't get any interest or value for the oven and Slyce also did not obtain a perfected security interest in the ovens. Even though Slyce has owed on the equipment sold and the remaining oven, he can recover the monies for the remaining oven only. Slyce cannot recover the monies for the sold oven even though he still owned because he finances for the same. Slyce very default act is that he failed to get a strong and perfected security interest in ovens. The bankrupcy court may look back certain factors such as;

• The reecived fair value and control over the old pizza oven
• financial condition of CPR at the time of transfer of ovens
• To whom CPR transfers the ovens, ( to the another refurbising company)
• What CPR had after the transfer and bankruptcy

Based on all these facotors the bankruptcy court will decide to benefit for Slyce for the unethical behavior of CPR.