In re Miller, 2013 WL 425342 (6th Cir. Feb. 5, 2013)

CASE SNAPSHOT

The Sixth Circuit Court of Appeals held that the secured lender’s credit bid, which equaled the total debt owed on two properties but exceeded the value of the only foreclosed property involved in the sheriff’s sale, extinguished the entire debt. The court affirmed the order to lift the automatic stay only to require the lender to dismiss the second foreclosure action, release the promissory note and mortgage, and turn over the second property to the borrower free and clear.

In re Georges Marciano, No. 11-60070 (9th Cir., Feb. 27, 2013)

CASE SNAPSHOT

Judgment creditors of Georges Marciano filed an involuntary chapter 11 petition against Marciano, who appealed the state judgments before the petition was filed. The Ninth Circuit ruled, in a case of first impression, that unstayed state court judgments on appeal were not "the subject of a bona fide dispute," and thus the Bankruptcy Court did not err when it entered an order for relief under chapter 11 against Marciano, notwithstanding the pending appeals.

Good news for lenders. Judge Carey of the Bankruptcy Court for the District of Delaware enforced a make-whole premium equal to 37 percent of the outstanding principal balance on a loan. He determined that, under New York state law, the calculation was not "plainly disproportionate" to the lender’s possible loss and was negotiated at arm’s length between sophisticated parties. In addition, Judge Carey held that a make-whole claim was not equivalent to "unmatured interest," which is unauthorized under Section 502 of the Bankruptcy Code, but instead was a claim for liquidated damages.

Ad Hoc Group of Vitro Noteholders v. Vitro S.A.B. de C.V., 701 F.3d 1031 (5th Cir. 2012)

CASE SNAPSHOT

Sunbeam Products, Inc. v. Chicago American Manufacturing, LLC, 686 F.3d 372 (7th Cir. 2012)

CASE SNAPSHOT

In a matter of first impression in the Seventh Circuit, the court held that a chapter 7 trustee’s rejection of an executory contract did not terminate the trademark license contained therein.

FACTUAL BACKGROUND

In re Patriot Coal Corporation, et al., 492 B.R. 718 (2012)

CASE SNAPSHOT

544(b) of the Bankruptcy Code empowers a bankruptcy trustee to avoid any transfer of an interest of the debtor in property that is voidable under "applicable law" by an unsecured creditor. Under the plain language of section 544(b), before a trustee can maintain an avoidance action, the trustee must demonstrate the existence of a qualified creditor, i.e., one who: (i) has a right to avoid the transfers; and (ii) holds an "allowable" unsecured claim. Importantly, the scope of "applicable law" is undefined.

In re GAC Storage Lansing, LLC, No. 11-40944 (Bankr. N.D. Ill., Feb. 27, 2013)

CASE SNAPSHOT

The court denied confirmation of the debtor’s plan, finding that: (i) the debtor failed to demonstrate that it would be able to obtain financing to pay off the balloon payment; (ii) the proposed transfer of new equity to an individual with indirect ownership interest violated the absolute priority rule; and (iii) the plan’s injunction barring actions by the secured creditor against the guarantors was overly broad.

FACTUAL BACKGROUND

In re Zota Petroleums, LLC, 482 B.R. 154 (Bankr. E.D. Va. 2012)

CASE SNAPSHOT

In re RAG East, LP– Case no. 12-04545-CMB (Bankr. W.D. Pa. March 4, 2013)

CASE SNAPSHOT

The court granted summary judgment in favor of a defrauded lender in a lien priority dispute with subsequent third-party lenders. The court determined that the lien of a purchase money mortgage that was allegedly released pursuant to a fraudulent satisfaction piece nonetheless had priority over the liens held by innocent third parties who provided loans to the debtor without notice of the fraud.

FACTUAL BACKGROUND