506 B.R. 196
Bankr. E.D.N.Y.2014Background
- Debtor 231 Fourth Avenue Lyceum, LLC filed Chapter 11 on April 11, 2013; principal asset is real property at 227-231 4th Avenue, Brooklyn, subject to P.B. #7 LLC’s mortgage and a state-court foreclosure judgment for ~ $6.6M.
- Debtor was designated a single-asset real estate (SARE) debtor on November 1, 2013 and ordered to file a confirmable plan or begin monthly adequate-interest payments by November 22, 2013. Debtor made no monthly payments.
- Debtor filed amended disclosure statements and a plan proposing 100% payment over 60 months with monthly debt service of $56,300 plus annual lump-sum payments (2015–2019); projected revenue growth was presented but without firm commitments.
- Debtor’s historical operating reports showed zero income since bankruptcy; best prepetition year grossed ~$306,000 (≈ $25,500/month), far below plan payments.
- P.B. moved for relief from the automatic stay under 11 U.S.C. § 362(d)(3); U.S. Trustee and P.B. objected to the disclosure statement and plan on feasibility and improper impairment classification. Debtor also sought to collaterally attack the state foreclosure judgment.
Issues
| Issue | Plaintiff's Argument (Debtor) | Defendant's Argument (P.B.) | Held |
|---|---|---|---|
| Whether the Debtor filed a plan having a reasonable possibility of being confirmed within a reasonable time under § 362(d)(3) | Filed a plan that projects rising revenue, investor/EB-5 possibility, leases and refinancing to fund payments | Plan is infeasible; no evidence of ability to make $56,300/month or annual lump sums; projections speculative | Held: Plan lacks a reasonable possibility of confirmation; stay lifted under § 362(d)(3) |
| Whether monthly adequate-interest payments were timely commenced under § 362(d)(3) | Claimed plan suffices; no payments tendered | No payments were made; therefore § 362(d)(3) relief appropriate | Held: No monthly payments were made; requirement unmet supporting relief from stay |
| Whether Debtor may collaterally attack the state-court foreclosure judgment in this Court | Argues foreclosure judgment invalid under CPLR § 3215(c) and thus subject to attack in bankruptcy | Rooker–Feldman and res judicata bar federal collateral attack; state court had jurisdiction and errors under CPLR § 3215(c) are not jurisdictional | Held: Collateral attack barred by Rooker–Feldman and res judicata; bankruptcy court lacks jurisdiction to review the Foreclosure Judgment |
| Whether EB-5 or other speculative financing suffices to show feasibility | EB-5, investor partners, leases, and refinancing will produce funds | Speculative sources lack commitments; EB-5 requires qualifying investor and enterprise; timing unlikely to meet plan obligations | Held: Speculative financing insufficient; cannot show likely or timely funding to confirm plan |
Key Cases Cited
- Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280 (2005) (Rooker–Feldman doctrine bars federal suits seeking review of state-court judgments)
- Heiser v. Woodruff, 327 U.S. 726 (1946) (bankruptcy court may inquire into state-court judgment on jurisdictional grounds in limited circumstances)
- In re RYYZ, LLC, 490 B.R. 29 (Bankr. E.D.N.Y. 2013) (standards for § 362(d)(3) showing: credible path to reorganization; mini-confirmation burden lighter but must show likely and timely resolution)
- Dish Network Corp. v. DBSD N. Am., Inc. (In re DBSD N. Am., Inc.), 634 F.3d 79 (2d Cir. 2011) (level of specificity required for feasibility projections varies with temporal proximity to confirmation)
- Chase Manhattan Mortg. & Realty Trust v. Bergman (In re Bergman), 585 F.2d 1171 (2d Cir. 1978) (plan feasibility requires practical ability to perform; visionary promises insufficient)