CK Liquidation Corporation

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Case 03-44906 Doc 784 Filed 05/09/06 Entered 05/09/06 16:04:06 Desc Main
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Huited States Bankruptcy Court
Bistrict of Massachusetts

Chapter 7
Case No. 03-44906-HJB

In re:

CK Liquidation Corporation
(f/k/al CADKEY Corporation),

Debtor

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WHEREAS, on or about April 1, 1998, Baystate Technologies, Inc. (the
predecessor of CK Liquidation Corporation f/k/a Cadkey Corporation [the “Debtor’])
entered into an agreement with FastSURF, Inc., Robert White and David Reyburn
whereby Baystate acquired certain computer software and agreed to pay White and
Reyburn royalties on subsequent sales of software products incorporating the
purchased software (the “Acquisition Agreement”); and

WHEREAS, on August 22, 2003 (the “Petition Date”), the Debtor filed a petition
under Chapter 11 of the United States Bankruptcy Code and, on March 4, 2004, the
case was converted to a case under Chapter 7; and

WHEREAS, by order of November 6, 2003, this Court approved a sale of
substantially all of the Debtor's assets, which sale closed on or about December 3,

2003; and

AUTHENTICATED
U.S. GOVERNMENT
INFORMATION

GPO

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WHEREAS, White claims to be owed monies due under the Acquisition
Agreement for royalties which accrued both before and after the Petition Date through
the closing of the sale; and

WHEREAS, White has filed an “Application for Payment of Priority
Administrative Claim” (the “Application”) and maintains that:

1. the Acquisition Contract is not an executory contract withing the meaning

of 11 U.S.C. § 365;' and

2. the estate derived a post-petition benefit from its post-petition sales

employing the software obtained under the Acquisition Agreement, and
therefore White is entitled to an administrative claim under 11 U.S.C. §§

503(b)* and 507(a)(1);°

' The parties agree that the Acquisition Agreement was not executory and, in the light of
the fact that the transfer of the software was completed pre-petition and only the payment
obligation remained, the Court agrees with their conclusion.

?11U.S.C. § 503(b), as applicable to the instant case (filed prior to the effective date of

the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. 109-8, 119
Stat. 23 (2005)), provides:

(b) After notice and a hearing, there shall be allowed, administrative expenses,
other than claims allowed under section 502(f) of this title, including —

(1) (A) the actual, necessary costs and expenses of preserving the
estate, including wages, salaries, or commissions for services rendered
after the commencement of the case;

° 11 U.S.C. § 507(a)(1), as applicable to the instant case, provides:

(a) The following expenses and claims have priority in the following order:

(1) First, administrative expenses allowed under section 503(b) of this
title, and any fees and charges assessed against the estate under
chapter 123 of title 28.

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and

WHEREAS, the Chapter 7 trustee opposes the Application and maintains that
royalty payments due, if any, are general unsecured claims against the estate and are
not entitled to administrative priority; and

WHEREAS, it is well-settled that “for a claim to qualify as an administrative
expense under subsection 503(b)(1), (1) it must have arisen from a transaction with the
trustee or debtor in possession, rather than from a prepetition transaction with the
debtor, and (2) the consideration supporting the claim must have benefitted the estate

in some demonstrable way.” Mason v. Official Comm. of Unsecured Creditors (In re FBI

Distrib. Corp., 330 F.3d 36, 42 (1st Cir. 2003) (emphasis added); see also Cramer v.

Mammoth Mart. Inc. (In re Mammoth Mart, Inc.), 536 F.2d 950, 954 (1st Cir.1976): and
WHEREAS, White was not engaged in any post-petition transaction with the
Debtor; rather, he claims only that his pre-petition transaction with the Debtor benefitted
the post-petition estate;
Now, therefore, the Court FINDS AND RULES that White has failed to establish
that his claim, if any, for royalties satisfies the conditions necessary to establish priority
under §§ 503(b) and 507(a)(1). Accordingly, the “Application for Payment of Priority

Administrative Claim’ is DENIED.

Dated: May 9, 2006 : y Do

Henry J. Boroff
United States Bankruptcy Judge