Bankr. L. Rep. P 71,102 in Re Center Wholesale, Inc. Owens-Corning Fiberglas Corp. v. Center Wholesale, Inc.

For the second time, we concern ourselves with the bankruptcy of Center Wholesale, Inc. (Center). Our prior opinion recites the facts and procedural history of this case. See In re Center Wholesale, Inc., 759 F.2d 1440 (9th Cir.1985) (before Judges Wright, Pregerson and Poole). The instant appeal raises the question of whether a trustee in bankruptcy or a debtor in possession may force the “reverse marshaling” of assets. We hold that he may not and therefore reverse the district court’s affirmance of Judge Rainville’s summary judgment dismissing Owens-Coming Fiberglas Corporation’s (Owens-Coming’s) adversary complaint.

In this appeal, Center and Owens-Coming agree on several points. Center accepts Judge Rainville’s conclusion that Owens-Corning has a valid perfected security interest in Center’s Owens-Corning inventory and proceeds. Center also concedes the invalidity of that portion of Judge Rainville’s opinion which holds that the value of Owens-Corning’s interest must be reduced by post-petition payments to Union Bank. Owens-Corning accepts as binding our prior decision that Owens-Corning could not require Union to marshal non-Owens-Corning assets. Owens-Corning now presents…