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Pembroke Development Corp. v. Carteret Savings Bank, F.A. (In Re Pembroke Development Corp.)
Citations: 121 B.R. 660; 24 Collier Bankr. Cas. 2d 1370; 1990 Bankr. LEXIS 2540Docket: 18-23192
Court: United States Bankruptcy Court, S.D. Florida.; December 4, 1990; Us Bankruptcy; United States Bankruptcy Court
Pembroke Development Corporation (the debtor) filed a complaint against Carteret Savings Bank (the creditor) after defaulting on a $14.5 million construction loan. The debtor sought injunctive and declaratory relief regarding the creditor's ability to draw on letters of credit totaling $1 million, which were pledged as collateral for the loan but issued at the request of non-debtor customers. The Bankruptcy Court initially issued a Temporary Restraining Order preventing the creditor from drawing on the letters, but later dissolved it, concluding that the letters of credit were not property of the debtor’s estate. The court's decision was based on established case law indicating that the letters did not constitute estate property, and allowing the creditor to draw on them would merely convert secured debt into unsecured debt. The creditor subsequently argued that the court lacked subject matter jurisdiction to consider the claim for declaratory relief because the letters of credit involved third parties and did not affect the debtor or the estate. The court agreed with the creditor, stating that the debtor had no interest in the letters of credit, as they were linked to contracts involving non-debtor customers, the issuing bank, and the creditor. Consequently, the court found a lack of subject matter jurisdiction and granted the Motion to Dismiss, dismissing the debtor's complaint.