“You cannot properly appraise the real seriousness of that situation unless you are right there in the city. Everything that frugal men and women put aside for years to save for old age, to get security for themselves –– every¬thing that they put aside to make the lot of their children a better one than their own, is now likely to be swept away. There is only one way that you can lighten the load of the municipality and that is to take its debt service off for the time being. Specifically, so that you will understand it, what is it in the city of Detroit?

A. Background to Chapter 9 Filing

In these days of continued integration of the world economy, it is not unusual for a foreign-based business enterprise to own assets of substantial value in the United States either directly or through an affiliate. If the foreign enterprise commences an insolvency proceeding in its home country, there is substantial risk that local American creditors of the insolvent company may seek to attach these assets to satisfy their own claims to the prejudice of non-U.S. creditors.

The Sixth Circuit Court of Appeals recently affirmed the decisions of the courts below and held in an unpublished opinion that a secured lender’s credit bid at a Michigan foreclosure sale extinguished all of the Chapter 13 debtor’s indebtedness to the lender, thereby precluding the lender from executing on a prepetition foreclosure judgment obtained against the debtor in Wisconsin. State Bank of Florence v. Miller (In re Miller), 2013 WL 425342 (6th Cir. Feb. 5, 2013).

In a previous Alert that we published in July 2012 entitled “Michigan Court Authorizes Receiver Sale of Real Property Free and Clear of Redemption Rights,” we reported on a decision of a Michigan trial court in Ottawa County, Michigan permitting a state-court receiver to sell real property free and clear of a mortgagor’s redemption rights.

In a fairly controversial decision from January 2012, the United States Bankruptcy Court for the Central District of Illinois held that a financing statement must contain the “legal” name of an individual as it appears on the individual’s birth certificate. Miller v. State Bank of Arthur (In re Miller), Adv. P. No. 11-9055 (Bankr. C.D. Ill. Jan. 6, 2012). On appeal, the United States District Court for the Central District of Illinois reversed and held that the Uniform Commercial Code requires only that a “correct” name appear on the financing statement.

The Indiana Court of Appeals recently held in a published opinion that the appointment of a receiver for the benefit of a mortgagee who agreed to subordinate its mortgages was mandatory under Indiana law. PNC Bank, Nat’l Assoc. v. LA Dev., Inc., __ N.W.2d __, 2012 WL 3156539 (Ind. Ct. App. Aug. 6, 2012).

Like the common law of most other states, Michigan law generally grants to a court-appointed receiver a first priority claim in the receivership proceeding for payment of the receiver’s fees and expenses incurred in that proceeding. See, e.g., In re Dissolution of Henry Smith Floral Co., 260 Mich. 299, 244 N.W. 480 (1932); Cohen v. Cohen, 125 Mich. App. 206, 335 N.W.2d 661 (1983).

The United States Bankruptcy Court for the Western District of Michigan recently held in a published opinion that no statutory or common law landlord’s lien exists under Michigan law. Rather, in order for a landlord to assert a valid lien on the personal property of its tenant, the tenant must have consensually agreed to grant a security interest in the property and the landlord must have perfected such interest in accordance with Article 9 of the Uniform Commercial Code. In re Kentwood Pharmacy, LLC, ___ B.R. ___, 2012 WL 2899383 (Bankr. W.D. Mich. July 17, 2012).

On May 29, 2012, the United States Supreme Court upheld a secured creditor’s absolute right to credit bid when a debtor files a Chapter 11 plan proposing to sell the secured creditor’s collateral free and clear of the secured creditor’s liens. RadLAX Gateway Hotel, LLC v. Amalgamated Bank, 566 U.S. ___ (2012). In just a little over one month since oral argument, the Supreme Court resolved a conflict between two circuit courts of appeal as to whether a plan could prohibit a secured creditor from credit bidding on its collateral at a sale.