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The Sixth Circuit, Relying upon Michigan’s Nonrecourse Mortgage Loan Act, Rejects the Enforceability of an Insolvency Covenant

Notwithstanding Michigan’s 2012 Nonrecourse Mortgage Loan Act (NMLA), which provides that solvency covenants in nonrecourse loans unenforceable, in Borman, LLC v. 18718 Borman, LLC, a third-party purchaser of a foreclosed...more

Women’s Clothing Retailer, Cache Inc., Seeks Protection Inside Chapter 11

On February 4, 2015, women’s clothing retailer, Cache Inc., filed a chapter 11 bankruptcy case in Delaware. The petition lists the top 30 unsecured creditors. Two of the largest creditors are landlords Simon Property Group...more

Blog: The Ninth Circuit Rejects the “Dominion and Control Test” for Determining the Initial Transferee in Fraudulent Conveyance...

Under section 550(a) of the Bankruptcy Code, a trustee or debtor in possession may recover property (or its value) that has been fraudulently transferred “from the initial transferee or the entity for whose benefit the...more

Lease Damage Claim: Federal or State Law – Flip A Coin?

Broadfoot v. Jamestown Mgmt. Corp. (In re Int’l BioChemical Indus., Inc.), 521 B.R. 395 (Bankr. N.D. Ga. 2014) – A chapter 7 trustee objected to the claim of a creditor/lessor on the basis that it should be disallowed...more

Client Alert: Oil & Gas Bankruptcies on the Horizon: Beware of Statutory Liens

The recent drop in crude oil prices has been a boon to consumers and businesses alike. However, sustained lower crude prices will invariably have a negative impact on drilling activity in those states where oil and gas...more

Leases and Bankruptcy

WHEN THE TENANT FILES BANKRUPTCY I. Before the Bankruptcy is Filed. The Bankruptcy Code, found at 11 U.S.C. §§ 101, et seq., creates a category of rights known as “executory contracts.” An executory contract, in...more

Real Estate Cases: You May Want to Think Twice Before You File

Branch Bank & Trust Co. v. Michael’s Enterprises of Virginia, Inc. (In re Michael’s Enterprises of Virginia, Inc.), 519 B.R. 916 (Bankr. E.D. Va. 2014)  – A mortgage lender sought sanctions against the debtor, its sole...more

Proof of Claim: Foreign Qualification Requirements May Be More Important Than You Thought

In re Flex Fin. Holding Co., 518 B.R. 891 (Bankr. D. Kan. 2014) – A landlord filed a proof of claim for ~$1.34 million for a debtor’s prepetition breach of its lease. The debtor objected based on the landlord’s...more

Washington Supreme Court Affirms Washington Federal v. Gentry and Confirms Lenders’ Right to Obtain Deficiency Judgments Against...

The Washington Supreme Court issued an opinion today affirming the right of a lender to obtain a deficiency judgment against a commercial guarantor following a nonjudicial foreclosure. Divisions One and Two of the Washington...more

The Second District Court of Appeals Holds That Due To Inconsistencies Between The Provisions Of A Promissory Note And A Deed Of...

Facts - U.S. Bank's predecessor bank extended a $62,000,000 loan (Loan) to three legal entities (Borrowers). The Loan was secured by a deed of trust on real property. Mr. and Mrs. Yashouafar (Yashouafars) guaranteed...more

December 2014 - Real Estate FOUNDATION

In this issue - The CERCLA Divisibilty Defense: Back from the Dead? - Springing Recourse for Breach of Solvency and Debt Payment Covenants? Does New York Need Cherryland Legislation? - Mid-Construction...more

Bankruptcy Beat: Connecticut Bankruptcy Court Approves Settlement In Two Related Cases with a Torturous Twelve Year History

The Chapter 7 case of First Connecticut Consulting Group, Inc. and James J. Licata (the “Cases”) began as Chapter 11 cases over twelve years ago. The cases were consolidated and remained in Chapter 11 for four years as...more

Sale Proceeds: Better Get the Carve-Out Right the First Time

In re Stacy’s, Inc., 508 B.R. 370 (Bankr. D. S.C. 2014) – A debtor sold substantially all of its assets after negotiating with its primary secured creditor for carve-outs from the sale proceeds for administrative...more

Loan to Own Variation: Bankruptcy May Not Provide The Answers

In re SR Real Estate Holdings, LLC, 506 B.R. 121 (Bankr. S.D. Cal. 2014) – A group of lenders moved to dismiss the debtor’s bankruptcy case on the basis that it was filed in bad faith, or in the alternative asked the...more

Neither the non-charitable corporation, itself, nor its directors hold the corporate assets in trust, absent special facts.

A charitable corporation is more a trust than a corporation, a topic that is taken up in an earlier posting on this site. See http://www.jdsupra.com/legalnews/the-charitable-corporation-a-trust-in-d-90654/. In the case of a...more

Determining “Value” Given By Good Faith Transferee In Fraudulent Transfer Action

The Bankruptcy Code allows a trustee to recover fraudulent transfers made by the debtor prior to bankruptcy. 11 U.S.C. § 548(a). An innocent recipient of a fraudulent transfer is not without a defense, however. The Code...more

Williams v. FDIC (In re Positive Health Management) - Lender Forced to Return Payments Made by Non-Borrower

On October 16, 2014, the United States Court of Appeals for the Fifth Circuit entered an order requiring a real estate lender, First National Bank (the “Lender”), to refund certain mortgage payments it received from...more

Bankruptcy by the Developer/Owner: Mechanics Lien Rights May Still Prevail!

The rate of bankruptcies among construction industry participants is higher than some think. The bankruptcy of a developer creates an “automatic stay” under federal law preventing almost all collection activities, including...more

Stay Relief: What Happens to “Unreasonable” Fees?

Wells Fargo Bank, N.A. v. 804 Congress, L.L.C. (In re 804 Congress, L.L.C.), 756 F.3d 358 (5th Cir. 2014) – After an oversecured creditor obtained relief from the automatic stay and foreclosed on some property, the...more

Just When You Thought You Were Out, They Pull You Back In

It is a rare occasion for a secured lender to foreclose on collateral with a value in excess of the entire debt owed, particularly following a bankruptcy filing by the borrower, but on that rare occasion the lender should...more

Bankruptcy Court Finds Tenant Cannot Assume Commercial Lease After Waiving Rights to Seek Relief From Forfeiture Under California...

The US Bankruptcy Court for the Central District of California (the "Court") recently upheld the validity of a commercial lease provision by which a debtor/tenant waived its rights to seek relief from forfeiture (i.e.,...more

Credit Bid (Round 2): What Does It Take to Show “Cause”?

In re Charles Street African Methodist Episcopal Church of Boston, 510 B.R. 453 (Bankr. D. Mass. 2014) – In connection with a proposed sale of real property, a chapter 11 debtor sought to prohibit the mortgagee from...more

It Wasn’t Wirth It: Nonresident Limited Partners Liable for Personal Income Tax on Discharge of Nonrecourse Debt

In June 17, 2014, in Wirth v. Commonwealth, 82-85 MAP 2012, the Pennsylvania Supreme Court (the “Court”) affirmed the Commonwealth Court’s holding that nonresident limited partners were liable for Pennsylvania Personal Income...more

Business Finance & Restructuring Q&A Series

The following discussion examines a number of factors that have complicated the bankruptcy process. It also offers a look at how out-of-court restructurings might be a more viable course for distressed business owners to...more

Lease Termination: Do You Really Mean It?

A commercial landlord sought relief from the automatic stay so that it could complete prepetition eviction proceedings against the debtor. The debtor objected, arguing that it had a right to assume the lease. The case turned...more

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