Rollins v. Neilson (In Re Cedar Funding, Inc.)

OPINION & ORDER ON THE CHAPTER 11 TRUSTEE’S MOTION TO DISMISS COMPLAINT PURSUANT TO F.R.C.P. 12(b)(6)

MARILYN MORGAN, Bankruptcy Judge.

Introduction

In this adversary proceeding, one of the primary pillars of bankruptcy law, ratable distribution, must be reconciled with a competing state law principle that authorizes courts of equity to impose an equitable lien against property where substantial justice calls for it. On one hand, ratable distribution places “all property of the bankrupt, wherever it is, under the control of the court for equal distribution among creditors.” In re Visiting Home…