Eleonore L. Morris

In a court‑appointed receivership over payroll service companies, the receiver sought a declaration that a customer breached the stay provision of the receivership order by recalling funds previously transferred through a pre‑authorized debit.

The funds had already been deposited into the debtor’s consolidated account prior to the receivership order but were later reversed after the customer learned of the receivership.

The court held that once deposited, the funds constituted “Property” of the debtor within the meaning of the receivership order, even if intended for payroll.

By requesting reimbursement through its bank after receiving notice of the receivership, the customer exercised a remedy affecting the debtor’s property and breached the stay.

The court ordered repayment of the funds to the receiver with interest, while allowing the customer to prove a claim in the receivership distribution.

The appellant, who purchased a portion of the bankrupt company's business, appealed the Trustee's disallowance of various claims totaling over $3 million.

The claims sought reimbursement of expenses and damages allegedly resulting from misrepresentations in unaudited internal financial statements provided prior to the sale.

The court upheld the Trustee's disallowance, finding that the Asset Purchase Agreement contained 'as is, where is' and entire agreement clauses, and that the claims were barred by res judicata due to prior court orders approving the sale and discharging the Chief Restructuring Officer.

The appeal was dismissed.