In a ruling on February 28, 2013, the U.S. District Court for the Central District of Illinois reversed the February 29, 2012 order of the U.S. Bankruptcy Court for the Central District of Illinois allowing a bankruptcy trustee to avoid an Illinois mortgage as to unsecured creditors for lack of “constructive notice” because the mortgage did not expressly state the maturity date of and interest rate on the underlying debt (In Re Crane, Case 12-2146, U.S. Dist. Ct., C.D. IL, February 28, 2013).
A recent decision in the protracted litigation by lenders of Extended Stay to recover under guaranties executed by owners of Extended Stay highlights the need for clear and unambiguous drafting in intercreditor agreements.
A new troubling case from California allows borrowers to present evidence of prior oral statements of a lender which contradict the terms of the written agreement between the parties with a standard integration clause. Marsha Houston of our Los Angeles office writes more about the case below.
Inre Brooke Capital Corp., 2012 WL 4793010 (Bankr. D. Kan., Oct. 5, 2012)
Custom and practice in Illinois with respect to mortgages has been to incorporate the note or other debt instrument by reference, rather than to disclose all of the financial terms of a loan transaction in the mortgage.
On December 31, 2012, Strategic Growth Bancorp Inc. (“Strategic Growth”), an El Paso, Texas-based bank holding company, acquired Mile High Banks (the “Bank”), a Colorado community bank, from the Bank’s parent, Big Sandy Holding Company (“Big Sandy”), through an auction process conducted pursuant to section 363 of the Bankruptcy Code. Davis Polk represented Strategic Growth and advised on the complex and overlapping bankruptcy, mergers and acquisitions, credit, tax and bank regulatory issues presented by the transaction.
The Sixth Circuit Court of Appeals recently affirmed the decisions of the courts below and held in an unpublished opinion that a secured lender’s credit bid at a Michigan foreclosure sale extinguished all of the Chapter 13 debtor’s indebtedness to the lender, thereby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).
On February 4th, the United States Court of Appeals for the Seventh Circuit affirmed the dismissal of claims brought by plaintiffs, who controlled a mutual bank before it collapsed, against the FDIC as both regulator and as receiver. The Administrative Procedures Act (the "APA") claim against the FDIC as regulator, which seeks money damages and an order directing the FDIC to treat $23.6 million in subordinated debt as bank deposits, is a claim for substitute relief barred by the APA.
A lender’s entitlement to a make-whole premium, that is, a prepayment penalty designed to compensate the lender for the loss of interest payments it would have received had the borrower continued to service the debt through the maturity date of the loan, depends principally on the plain language of the bond indenture or credit agreement. See, e.g.,HSBC Bank USA, N.A. v. Calpine Corp. (In re Calpine Corp.),No. 07 Civ 3088 (GBD), 2010 WL 3835200, at *4 (S.D.N.Y. Sept.
In Heritage Pacific Financial LLC v. Machuca, 2012 DJDAR 16803 (2012), the US Bankruptcy Appellate Panel for the Ninth Circuit decided an interesting attorney fee case arising in the commercial litigation context. The fee award was given to the debtor arising from adversary proceedings initiated by a creditor, a commercial bank.