On February 1st, the Tenth Circuit held that Deutsche Bank failed to establish it was a "party of interest" entitled to relief from a bankruptcy petition's automatic stay. After Deutsche Bank's foreclosure of the Millers' home was stayed by the latter's bankruptcy petition, the bank obtained relief from the stay. On appeal, the Tenth Circuit reversed and remanded. The bank failed to provide the original note to the bankruptcy court and did not provide the original or a copy to the bankruptcy appellate panel.
The Issue
The issue is whether a Chapter 11 plan can be crammed down over the secured lender’s objection where the plan provides for the sale or transfer of the secured lender’s collateral with the proceeds going to the secured lender without the secured lender having the right to credit bid for is collateral up to the full amount of its claim.
On December 29, 2011, the FDIC filed suit against seven former directors of the Bank of Asheville in the Western District of North Carolina seeking to recover over $6.8 million in losses suffered by the bank prior to receivership. All of the directors named as defendants were members of the bank’s Loan Committee, the committee responsible “for the amplification, implementation and administration of the loan policy” and “management of the lending function”. The Complaint cites 30 specific commercial real estate and business loans approved by the defendants between June 26, 2007 a
The U.S. Court of Appeals for the Seventh Circuit affirmed a bankruptcy court’s dismissal of a single asset real estate case on Jan. 19, 2012, reasoning that the debtor’s proposed substitute collateral “was not the indubitable equivalent of the [undersecured lender’s] mortgage.”In re River East Plaza, LLC, 2012 WL 169760, *2 (7th Cir. Jan. 19, 2012) (Posner, J.). In the court’s words, the debtor “wanted [the lender] out of there and decided to seek confirmation of a [reorganization] plan . . .
On January 19, 2012, the Seventh Circuit in In re River East Plaza, LLC, (No. 11-3263), held in favor of a secured lender further strengthening the rights of secured creditors in bankruptcy cases.
VIRNICH v. VORWALD (December 20, 2011)
IN RE: IFC CREDIT CORP. (December 5, 2011)
The United States Bankruptcy Court for the District of Delaware (the Court) recently granted a motion to dismiss a mezzanine borrower’s chapter 11 bankruptcy petition at the outset of the debtor’s case.1 In In re JER/Jameson Mezz Borrower II, LLC, The Court found that the debtor’s petition had been filed in bad faith because, among other things, a junior mezzanine lender had directed the debtor to file the petition with the intent of hindering a senior mezzanine lender’s foreclosure efforts and without any valid reorganization purpose.
Last month, the U.S. Supreme Court agreed to hear another bankruptcy case and this one could have a profound effect on a lender’s bidding rights when its collateral is up for sale. RadLAX Gateway Hotel, LLC v. Amalgamated Bank, No. 11-166, cert. granted Dec.
The United States Supreme Court accepted the petition for certiorari on the Seventh Circuit decision in RadLAX Gateway Hotel, LLC v. Amalgamated Bank on December 12, 2011 and arguments will likely be heard by the Court in April 2012. This case presents the Supreme Court with the important issue of whether secured lenders are entitled to submit a credit bid, a bid not requiring actual transfer of payment, at the sale of their collateral in the Bankruptcy Court.