Ms. Redding’s Chapter 11 plan was confirmed providing that she was to have six months in which to market and sell her principal residence and was required to make adequate protection payments on the mortgage claim of $1,000.00 per month during that time. After failing to do either, Ms. Redding filed a motion to modify, asserting that the a possible increase in the value of the real property, due to potential grants to ameliorate flooding problems.
The bankruptcy court found that the standard for modification of a Chapter 11 plan was same the “substantial and unanticipated circumstances” standard in Chapter 13.… Read More
As part of its Chapter 11 reorganization Bally Total Fitness of the Mid-Atlantic assumed a lease with Friday Investment, which had originally included a guaranty by Bally Holding. When Bally Mid-Atlantic later defaulted, Friday Investments sought to enforce the guaranty against Bally Holding. Bally asserted that while the lease had been assumed, the guaranty was discharged.
In a divided opinion, the majority of held that under North Carolina law a guaranty is a separate contract from the underlying obligation, Tripps Rests. of N.C., Inc. v. Showtime Enters., Inc., 164 N.C. App. 389, 391, 595 S.E.2d 765, 767 (2004), with “[t]he strict independence of the two separate contracts is “not affected by the fact that both contracts are written on the same paper or instrument or are contemporaneously executed.” There remained, however, a genuine issue of material fact whether the guaranty was “required to be maintained” by the assumption or discharged.… Read More
Mr. Faison filed a voluntary Chapter 11 bankruptcy seeking, among other things, to continue to develop real property against which Summit Bridge held several claims. Summit Bridge objected to confirmation of Mr. Faison’s (third) plan of reorganization based on infeasibility at it was a “visionary scheme” that was “based on speculation, hope and desire, and has no demonstrable objective fact or facts as its foundation.”
While stating that it believed Mr. Faison could ultimately propose a feasible plan, the bankruptcy court found the current plan infeasible. This was in part due to a failure to treat each parcel of property in the proposed development as unique and of differing values, high degree of speculation as to both the values of the lots and the costs of expenses, etc.… Read More
Mr. Smith filed Chapter 11 bankruptcy after Wells Fargo commenced foreclosure on real property. The amended proposed plan provided for the cram-down of the secured claim held by Wells Fargo to $60,000.00. The Confirmation Order provided “that confirmation is expressly conditioned upon [Mr. Smith] providing for the payment of all claims assertable against [Mr. Smith’s] estate as specified in the Plan and in this Order.” The Chapter 11 case was, however, dismissed at Mr. Smith’s request two years later, after which Wells Fargo recommenced foreclosure. The Superior Court, hearing the foreclosure on appeal, held that the pursuant to 11 U.S.C.… Read More
Following the confirmation of its Chapter 11 plan and closure of the bankruptcy, the Debtor was sued in state court for a pre-petition debt by a creditor that was unknown at the time of filing of the bankruptcy and unlisted in the schedules. The state court directed the Debtor to re-open the bankruptcy case for a determination of whether the debt was discharged. Facing dismissal for failure to pay quarterly fees, the Debtor argued that it should not be required to pay such fees as they were forced to reopen the case.
The court quickly rejected the argument that the Debtor, which had filed a voluntary Chapter 11, was forced to appear again.… Read More
A provision of the Chapter 11 plan for National Heritage Foundation (“NHF”) provided that its officers, directors, and employees, the Unsecured Creditor Committee, and their successors and assigns (the “Released Parties”) were released from liability for any acts or omissions relating to NHF.
Relying on Class Five Nevada Claimants v. Dow Corning Corp. (In re Dow Corning Corp.), 280 F.3d 648 (6th Cir. 2002), the Fourth Circuit considered (and found the plan of NHF lacking) the following factors in determining the valid of a third-party release:
1. whether there is an identity of interests between the debtor and the third party…such that a suit against the non-debtor, in essence, is a suit against the debtor or will deplete the assets of the bankruptcy estate;
2.… Read More
The Debtor purchased two gas stations, against which Petromax held Deeds of Trust, including against fixtures, in the amount of more than $2.4 million. Upon filing Chapter 11, the Debtor valued the gas stations at $1.3 million. The Debtor’s second proposed plan had eight classes of claims, but Class 7, which consisted of only $5,760.52 in unsecured claims, was the sole impaired class in favor of the plan, with the City of Greenville, holding a claim for $915.42, being the lone claimant to vote. The impairment to Class 7 was a 20 month delay in payment.
While a debtor may proceed to confirmation even in the absence of accepting ballots from all impaired classes pursuant to § 1129(b)(1) if, among other things, at least one impaired class of claims accepts the plan, and the remaining requirements of § 1129(a) are met, “there must be some other properly classified group that is also hurt and nonetheless favors the plan.” In re 266 Washington Associates, 141 B.R.… Read More
The Debtor was the manager and majority member of IYB Properties (“IYB”), where he executed and personally guaranteed a promissory note in favor of Prestige Wealth Management (“Prestige”) for $1.5 million. The Debtor owned an 85% interest in IYB, with Prestige holding 15%, with the purpose of acquiring and developing specific real property to expand the recycling operation owned by the Debtor. The operating agreement provided that IYB could not engage in other business ventures, without the unanimous consent of all owners and all funds were to be held in bank accounts to which IYB, the Debtor and Prestige had access.… Read More
Petromax sought to prohibit the use by the Debtor of cash collateral of all of the profits produced by convenience stores, or at least a portion of the funds attributable to rent payments, due to an assignment of “rents and emoluments from the premises” provision in a Deed of Trust.
In the present case, the bankruptcy court drew a distinction between income generated by the real property itself, which would constitute “rents”, and sales and services, which are merely sold or performed at the location, even if those services and sales relied on improvements on the real property.
That notwithstanding, because the convenience stores are owned by the debtor but actually operated by another entity, the facts show that, pursuant to N.C.G.S.… Read More
Following a objections to a Chapter 11 plan by the bankruptcy administrator, First Citizens Bank and other creditors, the Debtor negotiated confirmation, which provided, in part pertinent to this decision, that it would be allowed 11 months to actively market and sell to parcels of real property, against which First Citizens held liens. Failure to sell the collateral during that time would allow First Citizens to foreclose. As this period drew towards an end and no sale was imminent, the Debtor, after failing to renegotiate terms with First Citizens, brought a motion to modify the plan, seeking to release some of the property in a “partial dirt for debt”, to which First Citizens objected.… Read More