Summary:
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. 275, 287 (Bankr. E.D.N.Y. 1992). The “good faith” requirement of 11 U.S.C. § 1129(a)(3), accordingly, precludes the “improper impairment of a class of claims”, with the de minimus amount of claims (here less than 1/4th of 1% of all claims) in the impaired class requiring closer scrutiny. Based on the Debtor’s testimony, he had sufficient resources to pay Class 7 without any delay in payment. Accordingly, this was insufficient to support good faith.
Additionally, the Debtor and Petromax disagreed about the extent to which numerous items located on the gas station properties, including the storage tanks, walk-in coolers and the canopies
sheltering the gas pumps, constitute personal property, which would not be included in the security interest held by Petromax. In addition to a “fixture filing” under N.C.G.S. § 5-9-502(b), the bankruptcy court held that N.C.G.S. § 25-9-502(c) allows that a “record of mortgage” can serve as a fixture filing if it indicates the goods or accounts it covers. The Deed of Trust did include a generic description of “fixtures” and specific types that included the property in question. In determining whether property constituted “fixtures” or retained its nature as personal property, the intention with which the annexation of the property is made is a primary factor. The burden is on the party seeking to preclude the property from being attached. In this case, the fuel tanks had been on the property for decades, are bolted to property and, together with the canopies are custom to the location and use of the property as a gas station.
For a copy of the opinion, please see:
Eng - Impairment of De Minimus Class; Nature as a Fixture
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