Bankruptcy-RealEstate-Insights

Great Lakes Agri-Services, LLC v State Bank of Newberg (In re Enright), 474 B.R. 854 (Bankr. E.D. Wisc. 2012) –

Steven Enright and his wife borrowed money from a bank to buy dairy cows and other improvements for the family dairy farm.  The bank loan was secured by assets of the Enrights, and also guaranteed by Steven’s parents, with the parents’ guarantee secured by a mortgage on the dairy farm itself (which was owned by the parents).

A second lender, Great Lakes Agri-Services, also extended credit to the Enrights to purchase feed, with the credit secured by real estate owned by the Enrights.  The Enrights proposed a Chapter 12 plan that treated Great Lakes as unsecured since its liens were junior to the bank’s liens.  In response, Great Lakes argued that the parents’ guarantee and mortgage should be treated as collateral of the bank subject to marshaling.  If marshaling was applied in this manner, the bank would remain fully secured, but Great Lakes would have a security interest in the remaining assets. Continue reading →

Huntington Nat’l Bank v. Bruinsma (In re Kentwood Pharmacy, L.L.C.) 478 B.R. 602 (Bankr. W.D. Mich. 2012) –

In Kentwood, the landlord argued that it had a possessory landlord’s lien on the debtor’s assets that was senior to a secured bank claim, arguing that a Michigan Supreme Court case declining to determine whether there was a common law landlord’s lien before adoption of the UCC meant that “the only ‘legitimate conclusion’ is that a common law landlord’s lien exists.”  The landlord’s arguments appear to have exasperated the court, leading to a detailed discussion of the value of the court’s time (which it concluded was $1,400 per hour) in the context of considering sanctions. Continue reading →