A theme running through many apparent-authority cases is the question of who loses: for example, the LLC whose property was used to secure unauthorized, personal borrowings by a member or manager, or the bank that in good faith made the loan to the malefactor? Often the recipient of the funds has used the money for personal matters and is essentially judgment proof.
The United States Court of Appeals for the Seventh Circuit issued its much anticipated decision in In Re River Road Hotel Partners, LLC, __ F.3d __ (7th Cir., June 28, 2011). In the closely watched case, the Seventh Circuit declined to follow the Third Circuit’s decision in Philadelphia Newspapers, 599 F.3d 298 (3d Cir. 2010), holding instead that secured lenders have the right to credit bid in “free and clear” asset sales where their liens are being stripped, whether those sales occur under section 363 of the Bankruptcy Code or under a chapter 11 plan.
Debtors filed a voluntary petition for relief under Chapter 7. The Debtors own and have title to real property ("Property"). Prior to the Petition Date, the husband borrowed $85,000 from Lender. This loan was reflected by a promissory note signed only by the husband, as "Borrower." The term "Note" is defined in the Mortgage as the promissory note signed by Borrower. On the same date, a mortgage granting Lender a mortgage on the Property was executed.
A bank did not engage in “egregious conduct” sufficient to subordinate its lien on equitable grounds, held the U.S. District Court for the Northern District of Illinois on Dec. 10, 2014. In re Sentinel Management Group, Inc., 2014 WL 6990322 (N.D. Ill. Dec. 10, 2014) (“Sentinel IV”). Moreover, because of the bank’s “good faith,” the corrupt borrower’s fraudulent pledging of customer funds to the bank to secure a so-called $312-million rescue loan “cannot be avoided.” Id. at *10.
The U.S. Bankruptcy Court for the Northern District of Illinois recently held in Krol v.
Krol v. Key Bank National Association, et al. (In re MCK Millenium Centre Parking, LLC), Adv. No. 14-00392 (N.D. Ill. Apr. 24, 2015)
The unitranche financing market has expanded significantly in recent years. Generally, a unitranche deal involves two lenders (or groups of lenders) that provide financing on a “first out” and “last out” basis. In conjunction with the financing, the borrower grants one lien and enters into a single credit agreement and the lenders enter into an “Agreement Among Lenders” (“AAL”). An AAL is similar to an intercreditor agreement and provides for certain rights and remedies of the lenders.
© 2015 Hunton & Williams LLP 1 May 2015 Oak Rock Financial District Court Addresses the Applicable Legal Standard for True Participation Agreements The United States District Court for the Eastern District of New York recently applied two tests, the True Participation Test and the Disguised Loan Test, to determine whether agreements were true participation agreements or disguised loans.1 In addition, the District Court noted that the most important question in such a determination is the risk of loss allocation in the transaction, and that if an alleged participant is not subject to the
In an opinion issued today, the Supreme Court held that debtors do not have the right to immediately appeal a bankruptcy court’s decision denying confirmation of a proposed reorganization plan. This decision resolves a circuit split, and confirms the balance of power between debtors and creditors in the plan confirmation process. As the Supreme Court explained, “the knowledge that [a debtor] will have no guaranteed appeal from a denial should encourage the debtor to work with creditors and the trustee to develop a confirmable plan as promptly as possible.”