Limited Liability Companies: Do Not Confuse an LLC’s Membership Interests with Its Underlying Assets

In re Gialamas, 606 B.R. 798 (Bankr. W.D. Wisc. 2019) –

A judgment creditor sought relief from the automatic stay and abandonment with respect to a strip mall shopping center. The motions referred to “real estate.” However, the strip mall was not owned by the debtor. Rather the debtor owned the membership interests in a limited liability company (LLC), which in turn owned the strip mall. The debtor and unsecured creditor’s committee objected. Continue reading

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Credit Bids: Buyer Beware

Emerald Capital Advisors v. Victory Park Capital Advisors, LLC (In re KII Liquidating, Inc.) 607 B.R. 398 (D. Del. 2019)

A chapter 11 unsecured creditors’ committee sought to recharacterize or equitably subordinate and to avoid claims for advances made by a stalking horse bidder that it used in a credit bid. The bankruptcy court granted the stalking horse’s motion to dismiss the committee’s complaint, and the committee appealed to the district court. Continue reading

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Delinquent Property Tax Sales: Is a Purchaser at Risk If a Property Owner Files Bankruptcy?

Hackler v. Arianna Holdings Co., LLC (In re Hackler), 938 F.3d 473 (3d Cir. 2019)

Chapter 13 debtors sought to avoid a prepetition delinquent property tax sale. The bankruptcy court agreed with the debtors that the transfer of title to the property could be avoided as a preference. The district court affirmed, and the purchaser appealed to the Third Circuit. Continue reading

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Scrivener’s Error: Can a Residential Deed of Trust Be Avoided Because It States That It Secures a Maximum Principal Amount of $21.1 Trillion?

Rouse v. U.S. Bank, N.A. (In re Lolley), 607 B.R. 673 (Bankr. W.D. Mo. 2019) –

A chapter 7 trustee sought to avoid a deed of trust lien on the grounds that it did not comply with statutory requirements. Specifically, the deed of trust did not identify the correct face amount of the loan. The bank responded that the stated amount was sufficient, and in any event the deed of trust could not be avoided because it was valid and perfected and the trustee has constructive notice of the lien. Continue reading

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UCC Collateral Description: Can You Look Beyond the Four Corners of the Financing Statement?

First Midwest Bank v. Reinbold (In re I80 Equipment, LLC), 938 F.3d 866 (7th Cir. 2019) –

In connection with a lawsuit to recover a loan secured by substantially all of a debtor’s assets, a lender sought a declaration that its security interest was a properly perfected senior lien. The chapter 7 trustee countered that the security interest was avoidable based on an inadequate description of collateral in the financing statement. The bankruptcy court ruled in favor of the trustee, and the lender appealed to the Seventh Circuit. Continue reading

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Delinquent Property Taxes: A Prepetition Tax Sale Purchaser May Find Itself Embroiled in The Bankruptcy

Town of Beacon Falls v. Christiano (In re Christiano), 605 B.R. 1 (Bankr. D. Conn. 2019) –

A prepetition tax sale purchaser sought relief from the automatic stay to exercise its rights with respect to the property it purchased. The debtor objected, proposing a chapter 13 plan that would pay the overdue real property taxes over five years. Continue reading

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