447 B.R. 726
Bankr. D.N.J.2011Background
- Debtor Ocean Place Development, LLC sought final approval to use cash collateral; AFP 104 Corp. objected and sought dismissal or stay relief.
- Hotel revenues (rooms, F&B, catering, spa, etc.) were allegedly assigned absolutely to AFP pre-bankruptcy, raising questions about estate property.
- Debtor asserts hotel revenues are estate property available under 11 U.S.C. § 541(a) and Article 9 of the UCC for cash collateral purposes.
- Loan documents define rents broadly but the court must determine if those revenues are real or personal property for Article 9 purposes.
- Court analyzes whether hotel room revenues are assets of the estate or prevented by 9-109(d)(11) real-property exclusion.
- Ultimately, the court holds hotel revenues are personal property (accounts/payment intangibles) and thus estate property available as cash collateral, subject to adequate protection.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether hotel revenues are estate property | AFP argues revenues are not estate property due to assignment. | Ocean Place contends revenues are estate property under §541(a). | Hotel revenues are property of the estate (personal property), not excluded real property. |
| Whether Article 9 applies to hotel revenues | Article 9 may not apply if revenues are rents on real property. | Article 9 governs security interests in personal property; loan documents show a security interest in revenues. | Article 9 applies; revenues are security interests in personal property. |
| Whether Jason Realty controls classification of hotel revenues | Jason Realty precludes use of assigned rents if not estate property. | Jason Realty applies to real-property rents, not to personal-property hotel revenues. | Jason Realty is inapplicable to personal-property revenues. |
| Whether the hotel revenues fall within the § 9-109(d)(11) exception for real property rents | Rents exception excludes real-property interests; revenues may be excluded. | Revenues are not real property rents; they are accounts/payment intangibles. | Revenues do not fall within the real-property rents exception; they are not excluded from Article 9. |
| Whether AFP's collateral is adequately protected and the case should be dismissed | Court should deny dismissal and confirm cash collateral use. | Court should dismiss or stay relief if not adequately protected. | Cash collateral approved; AFP adequately protected; case not dismissed. |
Key Cases Cited
- In re Jason Realty, L.P., 59 F.3d 423 (3d Cir. 1995) (pre-petition assignment of rents; rents may be property of the estate)
- In re Kearney Hotel Partners v. Richardson, 92 B.R. 95 (S.D.N.Y. 1988) (hotel income treated as non-excluded property under Article 9)
- In re Jersey Tractor Trailer Training Inc., 580 F.3d 147 (3d Cir. 2009) (Article 9 scope; secured transactions in personal property)
- Wachovia Bank Nat. Ass'n v. EnCap Golf Holdings, LLC, 690 F. Supp. 2d 311 (S.D.N.Y. 2010) (discussion of Article 9 applicability to secured transactions)
- In re Northview Corp., 130 B.R. 543 (9th Cir. BAP 1991) (characterization of hotel revenues as accounts under Article 9)
- In re Village Green I, GP, 435 B.R. 525 (Bankr. W.D. Tenn. 2010) (estate scope and interpretation principles in Chapter 11)