494 B.R. 607
Bankr. D.N.H.2013Background
- PM Cross filed a Chapter 11 case seeking to preserve the Property; TD Bank moves for relief from stay and for dismissal for cause, while PM Cross seeks contempt for post-petition foreclosure and damages for pre-petition stays.
- The Court held the automatic stay was in effect at filing but denied retroactive stay relief and declined to award contempt or damages for pre-petition stays.
- The Property is the Debtor's single asset; the case is not a small business case, and the Property remains property of the estate under 11 U.S.C. § 541.
- TD Bank argues the case is a small business case or filed in bad faith to manipulate the Plan; the Debtor argues the stay arose and that the first case’s plan failed due to TD Bank’s noncooperation and other business disruptions.
- The Court conducted a two-day evidentiary hearing, concluded the case was filed in bad faith, and dismissed under § 1112(b) for cause, with no retroactive relief or damages awarded.
- The record shows a pattern of attempts to depress the sale price and influence the foreclosure process for the Debtor’s benefit, supporting the bad faith finding.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the automatic stay arose on filing and retroactive relief is warranted | PM Cross contends stay arose; seeks retroactive relief | TD Bank contends stay may be limited or inapplicable in a small business or two-year context | Yes stay arose; no retroactive relief granted |
| Whether the case was filed in bad faith justifying dismissal for cause | Debtor asserts restructuring intent and unforeseen changes | Bank asserts bad faith due to plan disruption and attempts to retain control of property | Yes, case dismissed for bad faith under §1112(b) |
| Whether the Property remains property of the estate and is subject to stay | Property remains estate asset due to lack of final foreclosure | Foreclosure sale affects debtor’s interest before petition | Property remains estate asset; stay applicable |
| Whether retroactive relief from stay should be granted under Soares v. Brockton Credit Union | Bank seeks retroactive validation of foreclosure | No compelling circumstances to grant retroactive relief | No retroactive relief |
Key Cases Cited
- Butner v. United States, 440 U.S. 48 (Supreme Court 1979) (property interests defined by state law; federal interests require unique result)
- Barrows v. Boles, 141 N.H. 382 (N.H. 1996) (foreclosure auction terminates debtor's interest upon sale memorandum)
- Hazleton, 137 B.R. 560 (Bankr.D.N.H.1992) (pre-petition foreclosure effects on federal property interests)
- In re Gonic Realty Trust, 909 F.2d 624 (1st Cir.1990) (eight-factor bad-faith test for §1112(b) dismissal)
- In re Sirius Sys. Inc., 112 B.R. 50 (Bankr.D.N.H.1990) (bad-faith filing can support dismissal for cause)
- In re Nesenkeag, Inc., 131 B.R. 246 (Bankr.D.N.H.1991) (bad-faith filing analysis guiding dismissal)
- In re C-TC 9th Ave. P’ship, 113 F.3d 1304 (2d Cir.1997) (eight-factor framework for bad-faith analysis; flexible)
- Soares v. Brockton Credit Union, 107 F.3d 969 (1st Cir.1997) (retroactive stay relief discussed; unusual and compelling circumstances required)
- 1633 Broadway Mars Restaurant Corp., 388 B.R. 490 (Bankr.S.D.N.Y.2008) (bad-faith filing considerations in second-bankruptcy context)
- Capitol Food Corp. of Fields Corner, 490 F.3d 21 (1st Cir.2007) (bad-faith filing context in bankruptcy)
- Kerr, 908 F.2d 400 (8th Cir.1990) (special consideration of bad-faith factors in bankruptcy)