One consequence of the depressed real estate market has been numerous Chapter 11 bankruptcy cases wherein the debtor seeks confirmation of a “dirt-for-debt” plan. In such a plan, instead of paying the secured creditor the value of the real property securing the debt through restructured loan terms, the debtor proposes to convey part or all of the real property securing the debt to the creditor in full satisfaction of its secured claim.

On 9 October 2009, a three-judge panel of the Supreme Court issued a judgment (file no. IV CSK 145/09), in which it ruled that the Polish legal system provides for the possibility to secure claims under a parallel debt (created under foreign law).

Facts of the case

Background

A new wrinkle in the Lehman Brothers bankruptcy cases emerged recently when a U.S. bankruptcy judge issued an opinion directly at odds with the decisions previously rendered by certain English courts regarding priority of payment provisions (the “Priority Provisions”) with respect to collateral under the “Dante Program.”

The Dante Program

The District of Columbia Court of Appeals recently held that a condominium association acting on its six-month super-priority lien for unpaid condominium assessments pursuant to § 42-1903.13(a)(2) of the District of Columbia Condominium Act (the “D.C. Condo Act”) may not conduct its foreclosure sale subject to a first deed of trust lien, even if the terms of sale stated that the condo unit would be sold subject to first deed of trust.

The California Court of Appeals recently held that a mortgage (the “Mortgage”) recorded simultaneously with a home equity line of credit (the “HELOC”) had priority and was not entitled to any surplus proceedings from the foreclosure of the HELOC, despite the fact that the HELOC’s instrument number was prior to that of the Mortgage. SeeMTC Fin., Inc. v. Nationstar Mortg., 19 Cal. App. 5th 811 (Ct. App. 2018).

The U.S. Court of Appeals for the Tenth Circuit recently held that the Rooker-Feldman doctrine did not bar the trial court from considering the plaintiff’s claims because she was not challenging or seeking to set aside an underlying non-judicial mortgage foreclosure proceeding under Colorado law.

Accordingly, the Tenth Circuit remanded to the trial court to determine what effect, if any, the non-judicial proceeding had under the doctrines of issue and claim preclusion.

The U.S. Court of Appeals for the Fifth Circuit recently held that debts arising from a scheme to deprive mortgagees of surplus foreclosure sale proceeds were non-dischargeable, affirming the bankruptcy court’s judgment against the debtor in consolidated adversary proceedings filed by various lenders that held first mortgage liens.

A copy of the opinion is available at:  Link to Opinion.

The U.S. Court of Appeals for the Tenth Circuit recently held that a borrowers’ federal court claim attempting to void a foreclosure sale based on a prior demand to cancel the loan under the federal Truth in Lending Act (TILA) was barred by claim preclusion for failure to raise the issue in a prior state court action.

A copy of the opinion is available at: Link to Opinion.

Good v RMR Investments, Inc, 428 BR 249 (ED Texas, March 31, 2010)

CASE SNAPSHOT

A secured creditor in a chapter 11 case objected to the confirmation of the reorganization plan of the debtor, arguing that the proper “cramdown” interest rate (court-modified rate) was the pre-petition contractual default rate, rather than the significantly lower cramdown rate. After the debtor appealed, the District Court affirmed, holding that utilizing the contract rate of interest was appropriate because the debtor was solvent.