538 B.R. 527
Bankr. S.D. Ill.2015Background
- Debtor Alvion Properties, Inc. filed chapter 11 on May 14, 2015; it listed only two related Virginia parcels: a 1,294-acre fee simple tract (surface + minerals) and a 3,219-acre mineral-rights tract, and no other assets.
- Farmers State Bank holds a mortgage secured by the property and moved to have Debtor declared a single asset real estate (SARE) under 11 U.S.C. § 101(51B) to trigger § 362(d)(3) relief; several creditors joined the motion.
- Loan origination: $1,000,000 note (2007); foreclosure suit was pending prepetition; Bank calculates total secured claim at ~$1.55 million as of petition date.
- Debtor conceded there was effectively no ongoing commercial business on the property at filing; last meaningful activity dated to 2007 (some surface mining in 2010 by a third party) and Debtor reported no income.
- Debtor asserted it owns distinct interests (fee-simple tract including minerals and a separate mineral-only tract) and argued those are not a "single property" or part of a "single project;" discussions about conservation easement, timber or mineral sales were speculative, with no concrete plans or actions taken.
- At the evidentiary hearing the Bank argued the land is undeveloped, passive, and thus constitutes a single project producing (to the extent any) substantially all of Debtor’s income; the Bank bore the burden to prove SARE status.
Issues
| Issue | Bank's Argument | Debtor's Argument | Held |
|---|---|---|---|
| Whether Debtor is a SARE under § 101(51B) (i.e., single property or single project) | Property is undeveloped land that functions as one project; multiple planned uses are part of one land-development project | Two legally and practically distinct assets (fee-simple tract and separate mineral-rights tract) are not a single property or single project; plans are speculative | Denied — Bank failed to prove existence of a single project; two tracts and speculative intentions do not establish a single project |
| Whether facts at filing show a plan or substantial business activity on the property | Property produces little or no income but is held for development and thus qualifies as single-project raw land | No active business since 2007; intentions remain speculative and no concrete plan or implementing actions exist | Court found no plan or implementation; lack of action undermines a finding of a project |
| Burden of proof on SARE designation | Bank must prove SARE status by preponderance of evidence | Debtor emphasizes Bank’s burden and points to speculative evidence | Court reaffirmed movant’s burden and found it unmet |
| Applicability of § 362(d)(3) expedited relief | If SARE shown, § 362(d)(3) would apply to shorten time to file plan or begin payments | Opposes application because SARE prong not met | § 362(d)(3) not applied because SARE status was not established |
Key Cases Cited
- In re Scotia Pacific Co., LLC, 508 F.3d 214 (5th Cir.) (SARE definition narrow; § 362(d)(3) targets debtors without meaningful business operations)
- In re River East Plaza, LLC, 669 F.3d 826 (7th Cir.) (discussing purpose and application of § 362(d)(3))
- In re Hassen Imports P'ship, 466 B.R. 492 (Bankr. C.D. Cal.) (analysis of single-project concept and burden to show project existence)
- In re Oceanside Mission Assocs., 192 B.R. 232 (Bankr. S.D. Cal.) (raw, undeveloped land can fall within SARE definition)
- In re McGreals, 201 B.R. 736 (Bankr. E.D. Pa.) (multiple parcels may constitute a single project only if linked by a common plan/use)