In Re Greenwood Point, LP
2011 Bankr. LEXIS 392
Bankr. S.D. Ind.2011Background
- Debtor is Greenwood Point, LP, a single-asset real estate Chapter 11 debtor in SD Indiana; CWCapital, as Special Servicer for the Trust, objected to the Debtor’s Revised Plan filed Oct 15, 2010.
- A confirmation hearing occurred Nov 15–19, 2010 after evidentiary submissions and testimony from multiple witnesses regarding plan feasibility and treatment of claims.
- Property consists of a 136,000 sq ft retail center at 8010–8040 U.S. 31 S., Indianapolis, secured by a $7,650,000 promissory note, mortgage, and rents assignment held by the Trust; note matured Oct 1, 2009 prompting CWCapital receivership litigation.
- Management is by The Broadbent Company (TBC), controlled by George Broadbent; George’s wife Mary Clare Broadbent agreed to a $100,000 cash infusion in exchange for new equity in the Reorganized Debtor, with TBC continuing to manage the property.
- Plan classes include: Class 1 CWCapital secured claim; Class 2 administrative; Class 3 administrative operating; Class 4 secured tax claim (Marion County); Class 5A CWCapital unsecured deficiency; Class 5B other unsecured claims; Class 6 equity canceled and new equity issued to Mary Clare; Gracey, Roberts, and others’ votes and insider issues discussed; CWCapital raised objections including separate classification and absolute priority concerns.
- CWCapital’s objections and the court’s analysis address separate classification under 11 U.S.C. §1111(b), the treatment and voting of Class 5B, the Marion County tax lien impairment questions, the absolute priority rule as applied to Mary Clare’s equity infusion, and the plan’s overall good faith and feasibility.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether CWCapital’s unsecured deficiency may be separately classified from other unsecured claims. | CWCapital argues Woodbrook requires separate classification. | Woodbrook does require separate classification for 1111(b) deficiencies. | Proper separate classification is approved. |
| Whether Gracey’s and Roberts’ votes count toward Class 5B acceptance. | Gracey and Roberts voted to accept; CWCapital contests insiders and privity. | Gracey is not a statutory or non-statutory insider; Roberts lacks a claim against Debtor. | Gracey and Gracey Purchased Claims count; Roberts’ claim is disallowed; overall Class 5B votes sufficient for cramdown eligibility. |
| Whether the Marion County Secured Tax Claim is impaired and countable for Section 1129(a)(10). | Tax claim treated in a way that differs from statutory minimum, but impairment occurs. | Treatment via escrow and three-month interest timing is permissible; lien may vest in Reorganized Debtor. | Secured Tax Claim is impaired and Class 4 vote counts. |
| Whether the plan satisfies the absolute priority rule with Mary Clare’s new equity and LaSalle line of authority. | Mary Clare’s $100,000 infusion impermissibly advances insiders; LaSalle requires market testing. | Mary Clare is not a straw person; LaSalle not violated; market testing not required here. | Absolute priority rule not implicated; Mary Clare’s infusion satisfies plan requirements. |
| Whether the plan is proposed in good faith and satisfies 11 U.S.C. §1129(a)(3). | Debtor engaged in legitimate negotiations and aimed to maximize value. | No bad faith; votes and defections appropriately managed; plan is feasible and in creditors’ best interests. | Plan proposed in good faith; §1129(a)(3) satisfied. |
Key Cases Cited
- Woodbrook Assocs. v. Cal. 7th Cir., 19 F.3d 312 (7th Cir.1994) (separate classification of 1111(b) deficiency claims required by difference in rights)
- In re Krehl, 86 F.3d 737 (7th Cir.1996) (insiders and related testing for cramdown considerations)
- In re Figter Ltd., 118 F.3d 635 (9th Cir.1997) (designation of votes due to bad faith; standard for designation under 1126(e))
- Bank of America Nat. Trust & Sav. Ass’n v. 203 North LaSalle St. P'ship, 526 U.S. 434 (U.S. 1999) (absent market testing, insiders’ presence affects absolute priority considerations)
- Till v. SCS Credit Corp., 541 U.S. 465 (U.S. 2004) (cramdown interest rate for lack of an efficient market; use prime rate plus risk)
- In re S. Beach Sec., Inc., 606 F.3d 366 (7th Cir.2010) (definition of creditor includes anyone with a right to payment; broad view of 'claim')