458 B.R. 280
Bankr. D.S.C.2011Background
- Ashley Oaks filed a voluntary Chapter 11 petition on July 23, 2010.
- The debtor owns two Blythewood rental properties and 40 lots/132.88 acres, all encumbered by First Palmetto liens.
- Postpetition taxes on at least one parcel remain unpaid.
- Willow Lakes and Abney Hills developments are subject to other liens; relief from stay granted to First Citizens and Security Federal.
- The Disclosure Statement and Proposed Plan were filed February 26, 2011, with plan payments outlined to First Palmetto and others.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether cause exists to dismiss or convert under §1112(b) | First Palmetto shows cause due to tax delinquency and poor estate prospects | Ashley Oaks argues unusual circumstances prevent dismissal/conversion | Cause exists; dismissal granted |
| Effect of the 2010 technical amendments to §1112(b) | Amendments eliminate the unusual-circumstances defense | Same defense still claimed under amended framework | Amendments limit unusual-circumstances defense; burden shifts to debtor under §1112(b)(2) |
| Existence of unusual circumstances to justify continuation | No unusual circumstances identified to override dismissal | Any unusual circumstances would permit conversion/dismissal not in estate's best interests | No unusual circumstances found; not in best interests to continue |
| Reasonable likelihood of plan confirmation | Plan feasible with shareholder funding and continued development | Plan depends on doubtful shareholder funds and market conditions | No reasonable likelihood of confirmation; no feasible path to rehabilitation |
Key Cases Cited
- In re Landmark Atlantic Hess Farm, LLC, 448 B.R. 707 (Bankr.D.Md.2011) (clarifies standards after §1112 amendments; burden-shifting and guidance on cause)
- In re Forest Grove, LLC, 448 B.R. 729 (Bankr.D.S.C.2011) (discusses §1112(b) standards and unusual-circumstances considerations)
- In re Park, 436 B.R. 811 (Bankr.W.D.Va.2010) (addresses rehabilitation and plan feasibility under §1112(b))