Canovali-Relief from Chapter 11 Confirmation Order under Rule 60(b)Summary:
The Debtors had a two mortgage against their home, initially valued in the amount of $1,068,000.00, with Bank of America, a first with a balance of $988,000.00 and second with a balance of $368,000.00.
The Debtors proposed a Chapter 11 plan that recognized that there were two notes and Deeds of Trust, but that both such claims would be paid as a single claim secured in the amount of $1,000,000.00, payable with 5% interest over 30 years. The balance on the claims would be treated as unsecured.
Bank of America voted against the proposed Plan. (The Bankruptcy Administrator also opposed the plan as being inconsistent with 11 U.S.C. § 1123(b)(5), unless Bank of America accepted the treatment.)
Subsequently, however, Bank of America, through its attorney, filed a Proof of Claim, asserting that it was secured in the amount of $977,918.35. It also shortly thereafter, objected to confirmation, stating that "sums due to [Bank of America] under the Promissory Notes, which are secured by Deeds of trust, aggregate approximately $977,918.36."
A Consent Order was entered between the Debtors and Bank of America, providing the objection to confirmation would be withdrawn and Bank of America would be allowed a fully secured claim in the amount of $977,918.35, to be paid with 6.5% interest over 30 years.
Later realizing that it had made a mistake, Bank of America sought relief from the confirmation order pursuant to Rule 60(b).
In order to obtain relief under Rule 60(b), the Movant must show the following:
1. That the motion for relief pursuant to Rule 60 is timely;
2. That a meritorious defense to the matter exists; and
3. That the opposing party would not be unfairly prejudiced by granting the proposed relief.
Deferring on determining whether the 60(b) Motion was timely, simply because it was filed within one year of the order confirming the plan, the Court held that Bank of America did not have a meritorious defense. Although its claims would normally have been protected from modification by 11 U.S.C. § 1123(b)(5), Bank of America had constructive knowledge, as shown by its own filings, that its two claims were being modified in this plan. Furthermore, its negotiations, consent order and withdrawal of objection showed clear acceptance. The Court also found that the relief requested would not only obviously prejudice the Debtors, but, reinstating the second mortgage would eliminate the equity that was being paid to unsecured creditors.
Canovali-Relief from Chapter 11 Confirmation Order under Rule 60(b).PDF
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