510 B.R. 712
Bankr. S.D.N.Y.2013Background
- RAMZ Real Estate Co. owns two properties: a two-story commercial building in Highland, NY and a Kingston, NY mixed-use building encumbered by a CPC mortgage of $474,000? wait confirmed: Kingston Property first mortgage to CPC for $744,000 (as stated) and other liens.
- Kingston Property tax claim held by Ulster County is Class 4; Ulster is impaired and votes yes; CPC votes to reject both its secured Class 3 and unsecured Class 6 claims.
- Class 7 (O’Neill’s equity) remains 100% owner of Debtor with no plan payments to equity; Class 6 unsecured and CPC’s unsecured portion valued around $270,000 receives $27,000 if Plan is confirmed.
- Plan 2nd amended proposes payment to Class 6 over 60 months at 9% interest; Ulster’s tax claim treated with 12% interest under NY tax law, creating impairment.
- Court values Kingston Property at $485,000 prepetition; plan feasibility is disputed; Debtor concedes confirmation only under §1129(b) cramdown; plan denial is final without prejudice to a new plan.
- CPC objects to confirmation on several grounds including artificial impairment and violation of absolute priority; court denies confirmation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is Ulster’s claim impaired under §1129(a)(10)? | CPC argues 9% interest under Plan constitutes impairment | Debtor contends impairment exists but justified by law | Yes; Ulster impairment found due to lower interest rate. |
| Does the Plan violate the absolute priority rule? | CPC argues junior equity (O’Neill) retains 100% and is not paid in full | Debtor argues new value supports impairment and priority shift | No; absolute priority violated, plan cannot be crammed down. |
| Does the new value exception apply? | CPC asserts no competing plan or market value for new equity opportunity | Debtor argues there is some new value from O’Neill | No; lacks competing plan and market valuation; exception not met. |
| Is the plan feasible under §1129(a)(11)? | CPC contends projected income/expenses do not assure feasibility | Debtor offers new revenue and management arrangements | Court does not reach feasibility; plan not confirmed. |
Key Cases Cited
- Boston Post Rd. Ltd. P’ship v. FDIC (In re Boston Post Rd. Ltd. P’ship), 21 F.3d 477 (2d Cir. 1994) (requires plan acceptance by at least one impaired class for cramdown)
- In re Bryson Properties, XVIII, 961 F.2d 496 (4th Cir. 1992) (tax priority claimants not treated as impaired for cramdown)
- In re Coltex Loop Cent. Three Partners, L.P., 203 B.R. 527 (S.D.N.Y. 1996) (new value corollary; five-factor test for new value)
- LaSalle Bank N.A. v. Bar, 526 U.S. 434 (1999) (new value/absolute priority analysis; market value considerations)
- In re American Solar King Corp., 90 B.R. 808 (W.D. Tex. 1988) (impairment depends on plan effects, not statutory impairments)
- In re Gramercy Twins Assocs., 187 B.R. 112 (S.D.N.Y. 1995) (impairment standards for tax and other claims)