467 B.R. 275
Bankr. E.D.N.Y.2012Background
- Debtor JJMM International Corp. filed Chapter 11 on Sept. 14, 2011; Property comprises three contiguous parcels in Huntington Station, NY, owned by Debtor and subject to a first mortgage in favor of Asia Bank.
- Debtor’s Schedules show the Property as its sole asset, with two leases to non-debtor tenants Yummy Foods and Dream Tree Academy.
- Lessees are allegedly controlled by Debtor’s principal, Ms. Moae Chae, though Debtor itself does not own or control the Lessees.
- Debtor derives substantially all gross income from leasing the Property and is not engaged in substantial business beyond ownership and leasing activities.
- Asia Bank filed a motion on Nov. 28, 2011 seeking relief from stay or designation of SARE; Debtor opposed on Jan. 7, 2012.
- A hearing occurred on Jan. 11, 2012; the Court took the issue under submission and requested additional briefing, which did not occur.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Property qualifies as single asset real estate under §101(51B). | Debtor argues ownership/complex tenancy prevents SARE. | Court should apply SARE definition focusing on property, not tenant activities; Debtor’s lack of substantial business supports SARE. | Yes, Property qualifies as SARE. |
| Whether the Property constitutes a single property or project. | Three parcels do not form a single project due to divergent uses. | Three parcels operated as one project with a common plan. | Yes, the Property constitutes a single project. |
| Whether Debtor has substantial business other than operating the Property. | Lessees’ activities imply substantial business beyond property. | Debtor itself has no substantial business; activities are by tenants. | No substantial business beyond owning/leasing Property; supports SARE. |
| Whether common ownership by Ms. Chae undermines SARE designation. | Ms. Chae’s control of Debtor and Lessees complicates independent operations. | Common ownership does not defeat SARE if there is a single project and no substantial business by Debtor. | Does not defeat SARE; designation proper. |
Key Cases Cited
- The McGreals, 202 B.R. 736 (Bankr.E.D.Pa.1996) (relevant for single project analysis in multi-parcel real estate)
- In re 68 W. 127 St., LLC, 285 B.R. 838 (Bankr.S.D.N.Y.2002) (multiple parcels; single project where there is a common plan)
- In re Kaplan Breslaw Ash, LLC, 264 B.R. 309 (Bankr.S.D.N.Y.2001) (principles governing SARE eligibility and business activity limits)