Case Updates

Summary: A California appellate court has held that even though a third deed of trust was recorded prior to an assessment lien, the HOA took priority over the lender due to a subordination clause contained in the recorded CC&Rs. [Bear Creek Master Association vs. Southern California Investors, Inc., 2018 Westlaw 5659789 (Cal.App.).] Read more

Summary: A district court in New York has held that a group of junior creditors who supported a Chapter 11 debtor's cramdown plan did not breach their obligations to the senior creditors under the terms of an intercreditor agreement because the juniors held both secured and unsecured claims, and the agreement did not prohibit the juniors from exercising their rights as unsecured creditors. [In re MPM Silicones, LLC, 2018 Westlaw 6324842 (S.D.N.Y.).] Read more

Summary: The Ninth Circuit has held that a trial court correctly ordered equitable restitution of $1.27 billion due to a payday lender's deceptive practices. [Federal Trade Commission vs. AMG Capital Management, LLC, 2018 Westlaw 6273036 (9th Cir.).] Read more

Summary: A bankruptcy court in Georgia has held that after a fraudulent gift deed was nullified by a court order just before a bankruptcy petition was filed, judgment liens held by the bankrupt's creditors reattached to his property interest and were therefore transfers that took place outside of the 90 day preference period. [In re Johnson, 2018 Westlaw 3869602 (Bankr. N.D. Ga.).] Read more

Summary: The First Circuit has held that under Massachusetts law, the post-sale notice given by a lender to a defaulting car buyer must state that the borrower’s deficiency liability is based on the difference between the balance due and the vehicle’s fair market value, rather than the auction price. [Williams vs. American Honda Finance Corp., 907 F.3d 83 (1st Cir. 2018).] Read more

Summary: A federal court in New York has held that despite a deeply discounted conversion price, a convertible note was not usurious because the stock option granted to the noteholder did not constitute "interest." [Blue Citi, LLC vs. 5Barz International, Inc., 2018 Westlaw 4500870 (S.D.N.Y.).] Read more

Summary: A bankruptcy court in Illinois has held that a financing statement that did not describe the collateral but instead simply referred to a security agreement was inadequate because that security agreement was not attached and the creditor failed to use a "supergeneric" collateral description. [In re I80 Equipment, LLC, 2018 Westlaw 4006294 (Bankr. C.D. Ill.).] Read more

The New York Court of Appeals has held that an "accrual clause" contained in a residential mortgage-backed securities agreement was not a condition precedent to the accrual of the purchaser's warranty claim against the originator; therefore, the plaintiff's claim was time-barred. Further, any contractual attempt by the parties to delay the commencement of the statute of limitations was void as against public policy. [Deutsche Bank N.T. Co. vs. Flagstar Capital Markets Corp., 2018 Westlaw 4976777 (N.Y.).] Read more

Summary: In Daff v. Good (In re Swintek), 906 F.3d 1100 (9th Cir. 2018), the United States Court of Appeals for the Ninth Circuit held that Bankruptcy Code section 108(c) applies to afford a prepetition judgment creditor an additional 30 days after termination of the automatic stay of Bankruptcy Code section 362(a) to preserve a lien created prepetition under California law upon the service of an order for appearance and examination (an “ORAP”), which lien otherwise would have lapsed during the bankruptcy proceedings a year after its creation unless renewed by the California court. Read more

In CMBS Lenders v. JD Holdings, LLC, and John Q. Hammons Fall 2006, LLC, et al. (In re John Q. Hammons Fall 2006, LLC, et al.), Nos. KS-18-032 and KS-18-069, (10th Cir. BAP Aug. 1, 2018) (Docket No. 37) (“JD Holdings”), the U.S. Bankruptcy Appellate for the Tenth Circuit (the “BAP”) denied the appeals of multiple trustees of commercial mortgage-backed securities (“Appellants”) on the ground of equitable mootness. Appellants held security interests in a number of hotels that were the subject of confirmed chapter 11 bankruptcy plans. They appealed a number of orders, including the plan confirmation orders, on the grounds, among other things, that the plans: (1) did not require the immediate payment of the disputed portion of Appellants’ claims (including default interest), (2) did not require the escrow of sums required to pay the disputed claims; and (3) effected an impermissible substantive consolidation of the chapter 11 debtors. In dismissing the appeals on the ground of equitable mootness, the BAP ruled that reversal would create “nightmarish situation” for creditors who relied on the finality of the confirmed plans and would inevitably postpone reorganization while plan assets and claims would concurrently diminish. A copy of the opinion is available through PACER. Read more