Six Palms Music Corp. v. Quality Records, Inc.

MEMORANDUM OPINION RE: MOTION FOR RECONSIDERATION OF DECISION AFFIRMING IN PART JUDGMENT OF BANKRUPTCY COURT

I. INTRODUCTION & BACKGROUND

Appellants Quality Records, Inc. (“Quality”), R-Tek Music International, Inc. (“RTek”), et al. move for reconsideration of the memorandum opinion filed May 20, 1997. That opinion affirmed in part and reversed in part the judgment of the Bankruptcy Court.

Appellants furnished funds to a songwriter named Timothy Torres so he could produce a record. They also furnished him with funds to assist him with legal difficulties. They did not execute a loan agreement with Torres before lending him money for his legal difficulties.

Torres subsequently declared bankruptcy, but Appellants did not file a claim with the estate because they did not think of themselves as unsecured creditors. They deemed themselves secured creditors because, under the recording contract they had with Torres, they had reserved a right to recoup from Torres’ share of royalties any funds they had advanced to Torres for “recording costs.”

It was previously determined that the monies furnished to Torres fell into two categories. Some represented an investment in the production of…