Post-Petition Interest: Default Rate Is Not a Slam Dunk

In re Residential Capital, LLC, 508 B.R. 851 (Bankr. S.D.N.Y. 2014)

An oversecured creditor claimed post-petition interest at the contract default rate. The debtors and the post-confirmation liquidating trust objected, arguing that the lender should be limited to the non-default rate. Continue reading

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Sale “Free and Clear”: Adequate Protection of Nothing is Nothing

In re Elk Grove Village Petroleum, 510 B.R. 594 (Bankr. N.D. Ill. 2014)

After substantially all of the debtors’ assets were sold in a bankruptcy sale, a secured lender and a state tax authority made competing claims for turnover of sale proceeds. The bankruptcy court addressed first the relative priority of their claims and then the right of the state tax authority to collect unpaid seller taxes from the purchaser of the assets. Continue reading

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Strong Arm Powers: For Want of An “S” the Mortgage Was Lost

Hardesty v. Mortgage Electronic Registration Systems, Inc. (In re Boothe), 510 B.R. 154 (Bankr. S.D. Ohio 2013)

A chapter 7 trustee successfully sought to avoid a mortgage using his “strong arm” powers on the basis that the mortgage was not properly acknowledged. Once again a mortgagee paid dearly for sloppy execution of a document. Continue reading

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Lease Abatement: The Act of Eliminating or Nullifying

N. Providence, LLC v. Great Atlantic & Pacific Tea Co., Inc. (In re Great Atlantic & Pacific Tea Co., Inc.), 510 B.R. 42 (S.D.N.Y. 2014)

A lease provided that if the landlord failed to pay a construction allowance when due, the tenant debtor’s obligation to pay rent and charges abated until payment was received. The bankruptcy court interpreted this as a forfeiture provision so that the landlord was not entitled to set off the construction allowance against rents as they became due. The landlord appealed to the district court. Continue reading

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Sale Free and Clear: Permitted “Matters of Record” May Be Broader Than You Expect

In re Joan Fabrics Corp., 508 B.R. 881 (Bankr. D. Del. 2014)

The buyer of assets in a bankruptcy sale sought to enforce its asset purchase agreement against a county that was seeking to collect personal property taxes arising prior to the sale by exercising a statutory lien on the property acquired by the buyer. Continue reading

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Homestead (And Other) Exemptions: Some Fraud Counts More Than Others

Law v Siegel, 134 Sup.Ct. 1188, 188 L.Ed.2d 146 (2014) -

A bankruptcy court ordered that a debtor’s homestead exemption be surcharged to pay the attorney’s fees of a Chapter 7 incurred in overcoming the debtor’s fraud. The order was affirmed on appeal until it reached the Supreme Court. Continue reading

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Title Insurance: May Not Solve As Many Problems As You Might Expect

Amzak Capital Mgmt. v. Stewart Title of Louisiana (In re West Feliciana Acquisition, L.L.C.), 744 F.3d 352 (5th Cir 2014)

In the context of the bankruptcy proceeding to determine the validity of a mortgage, the mortgagee filed a third-party complaint against its title agent, local counsel and underwriter asserting claims for breach of contracts and negligence. The bankruptcy court granted summary judgment for the mortgagee, the district court disagreed, and the mortgagee appealed to the 5th Circuit. The decision on appeal turned on whether title insurance gives a guarantee that a mortgage is enforceable or and indemnity for losses arising from title defects. Continue reading

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