The U.S. Court of Appeals for the Ninth Circuit recently held that for cram-down valuations, 11 U.S.C. § 506(a)(1) requires the use of “replacement value” based upon the adoption of the replacement value standard in Associates Commercial Corp. v. Rash, 520 U.S. 953, 956 (1997). In so ruling, the Ninth Circuit interpreted Rash to instruct that valuation of collateral in a cram down must be based on the debtor’s desires (i.e., the proposed use of the collateral in the debtor’s plan of reorganization), and without consideration of the value that the secured creditor would realize in an immediate sale. Accordingly,…
Posts published in “Bankruptcy”
The Bankruptcy Appellate Panel of the U.S. Court of Appeals for the Ninth Circuit recently affirmed the dismissal of an adversary proceeding without leave to amend, holding that: (a) the debtors failed to state a claim for wrongful foreclosure under California law; (b) the debtors failed to state a claim for breach of contract or breach of the implied covenant of good faith and fair dealing because they were not third-party beneficiaries of the pooling and servicing agreement; (c) the debtors failed to state a claim for breach of the deed of trust or breach of the implied covenant of…
In a bankruptcy preferential transfer dispute, the U.S. Court of Appeals for the Eighth Circuit recently held that the bankruptcy trustee could recover true overdraft covering deposits, while deposits covering intra-day overdrafts were not recoverable. A copy of the opinion in Joseph Sarachek v. Luana Savings Bank is available at: Link to Opinion. A company filed for bankruptcy and, 90 days before filing, wired funds to its bank to cover overdrafts. The bankruptcy trustee argued that those funds were avoidable transfers that could be recovered from the bank. The bankruptcy court agreed as to some of the deposits but not others. The…
The U.S. Bankruptcy Court for the Southern District of Florida recently held that a bankruptcy debtor’s Chapter 11 proceeding should not be dismissed as filed in bad faith to delay or avoid foreclosure, but could not confirm the debtor’s proposed plan to lease its commercial property asset to a business that generates income from medical marijuana. A copy of the opinion in In re Arm Ventures, LLC is available at: Link to Opinion. A limited liability company (“debtor”) owned 48.8 percent of a commercial property in Miami Beach, Florida (the “commercial property”) that was secured by a mortgage held by…
The U.S. Court of Appeals for the Sixth Circuit recently concluded that Michigan’s assignment of rents statute sufficiently deprived the assignor of the ownership of the rents such that the rents could not be included in the assignor’s bankruptcy estate. The primary issue before the Court was whether Michigan’s assignment of rents statute allowed the assignor to retain sufficient rights in the rents for the rents to be included in the assignor’s bankruptcy estate. The bankruptcy court determined that the debtor’s assignment of the rents gave the assignee a security interest in the rents but did not change the ownership,…
The U.S. Court of Appeals for the Second Circuit recently affirmed the dismissal of LIBOR-manipulation fraud claims brought by a group of hotel-related entities and their investor against a bank and two of its subsidiaries. In so ruling, the Second Circuit held that: (a) the borrower and related entities lacked standing to sue because they failed to list their potential claims in their bankruptcy case and the claims were barred by the doctrine of judicial estoppel; and (b) the claims of the investor and guarantors were untimely and barred by the law of the case. A copy of the opinion…
The U.S. Bankruptcy Court for the Middle District of Alabama recently held that a mortgage servicer did not violate the discharge injunction in 11 U.S.C. § 524 by sending the discharged borrowers monthly mortgage statements, delinquency notices, notices concerning hazard insurance, and a notice of intent to foreclose. Moreover, because the borrowers based their claims for violation of the federal Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq., on the violation of the discharge injunction, the Court also dismissed their FDCPA claims with prejudice. A copy of the opinion in Golden et al v. Carrington Mortgage Services,…
In a 5-3 decision handed down on May 15, the Supreme Court of the United States held that the federal Fair Debt Collection Practices Act (FDCPA) is not violated when a debt collector files a proof of claim for a debt subject to the bar of an expired limitations period. The decision: held that the filing of such a proof of claim is not false, misleading, deceptive or unconscionable in violation of sections 1692e or f of the FDCPA; found that claims under the bankruptcy code need not be capable of being “enforceable” in a civil lawsuit; and, does not…
The U.S. Court of Appeals for the Ninth Circuit recently affirmed the Bankruptcy Appellate Panel’s determination that a creditor’s pre-bankruptcy, non-recourse lien on two debtors’ real property is extinguished following a non-judicial foreclosure sale. A copy of the opinion in In re: Salamon is available at: Link to Opinion. In April 2009, two debtors purchased real property. Rather than fund the purchase price and pay off the two existing liens on the real property, the debtors executed a wrap-around mortgage in favor of the property seller. The debtors then funded the balance of the purchase price with a note secured…
The U.S. Court of Appeals for the Eleventh Circuit recently affirmed the dismissal of a mortgage loan borrower’s federal Fair Debt Collection Practices Act and related state law claims because the defendant mortgagee was not a “debt collector” as defined by the FDCPA. In so ruling, the Court also rejected the borrower’s allegations that the monthly statements the mortgagee sent to the borrower after her bankruptcy discharge were impermissible implied assertions of a right to collect against her personally. A copy of the opinion in Helman v. Bank of America is available at: Link to Opinion. The borrower obtained a…
The U.S. Court of Appeals for the Ninth Circuit recently reversed a ruling that disallowed an unsecured creditor’s claim filed in a California bankruptcy court based on the forum state’s statute of limitations. In so ruling, the Ninth Circuit held that, although courts typically apply the forum state’s statute of limitations if the contract is silent on the issue, exceptional circumstances warranted the application of a longer statute of limitations here, because the creditor had no option but to enforce its claim in the forum based on where the bankruptcy petition was filed. A copy of the opinion in PNC…
11th Cir. Holds Failure to File Proof of Claim in Receivership Does Not Extinguish Security Interest
11th Cir. Holds Failure to File Proof of Claim in Receivership Does Not Extinguish Security Interest
The U.S. Court of Appeals for the Eleventh Circuit recently held that a court cannot extinguish a secured creditor’s state-law security interests for failure to file a proof of claim during the administration of an equity receivership over entities involved in a Ponzi scheme. A copy of the opinion in Securities and Exchange Commission v. Wells Fargo Bank is available at: Link to Opinion. The U.S. Securities and Exchange Commission filed an action seeking the appointment of an equity receiver following the collapse of a Ponzi scheme. The trial court appointed a receiver to “marshal and safeguard” the defendants’ assets…