485 B.R. 492
Bankr. E.D.N.Y.2012Background
- Debtor filed chapter 11 on April 17, 2012; sole asset is a Rockville Centre commercial property.
- Property is encumbered by NYCB’s first mortgage totaling $1,145,839.39.
- Debtor is a single-asset real estate debtor with a single tenant.
- NYCB moved for relief from stay or dismissal, arguing lack of equity and no effective reorganization.
- Debtor’s amended plan bifurcates NYCB’s claim, classifies deficiency as unsecured, and seeks to cram down via plan; NYCB objects to separate classification.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| May unsecured deficiency be separately classified from other unsecured claims? | Debtor argues personal guarantee allows separate classification. | NYCB argues no credible legitimate reason; must follow Boston Post Road. | No; separate classification is improper gerrymandering; not permitted. |
Key Cases Cited
- Boston Post Road Limited Partnership v. FDIC (In re Boston Post Road Limited Partnership), 21 F.3d 477 (2d Cir.1994) (separate classification requires credible proof of legitimate reason; can't disenfranchise creditors, especially the largest)
- Wells Fargo Bank, N.A. v. Loop 76 LLC (In re Loop 76 LLC), 465 B.R. 525 (9th Cir. BAP 2012) (personal guarantee alone not sufficient to justify separate classification; Loop relied on Ninth Circuit BAP precedent)
- In re AOV Indus., Inc., 792 F.2d 1140 (D.C.Cir.1986) (guarantor does not change nature of a claim for classification purposes)
- In re 500 Fifth Ave. Assocs., 148 B.R. 1010 (Bankr.S.D.N.Y.1993) (rights of creditors outside bankruptcy are irrelevant to classification; equal rights within Chapter 11)
- In re Thornwood Associates, 161 B.R. 367 (Bankr.M.D.Pa.1993) (outside guarantees not relevant to classification)