In re Skymark Props. Ii, LLC, 597 B.R. 391

Two debtors (Skymark Properties SPE, LLC and Skymark II, LLC) filed jointly-administered Chapter 11 cases while state-court receiverships were pending; the state-court receiver (NAI Farbman) and secured creditor Southfield Metro Center Holdings, LLC (the Lender) moved to dismiss or suspend the bankruptcies.
SPE owns income-producing office properties leased to major tenants Stefanini and Tenneco; Skymark II owns a vacant, uninhabitable building and has no income.
The state-court Receiver retained control of SPE's rental income under a court-approved budget; the Lender, as owner of the rental income, did not consent to the Debtors’ use of that income in bankruptcy.
The Bankruptcy Court denied SPE’s cash-collateral motion, ruling that SPE cannot use its tenants’ rents (the Debtors’ primary revenue source) without the Lender’s consent.
Debtors asserted speculative external funding from an affiliate (Skymark Capital Corp.) but produced no commitment, DIP financing motion, or assurance that such funding would replace lost rental income.
Given lack of revenue and no feasible financing, the Court concluded the debtors cannot operate or confirm a plan in bankruptcy and that state-court receivership is a better forum to preserve creditor and estate interests.

Issue	Receiver/Lender Argument	Debtors' Argument	Held
Whether to dismiss under 11 U.S.C. § 1112(b) for cause	Cases should be dismissed for lack of good faith, diminution of estate, and no reasonable likelihood of rehabilitation	Debtors argued they could reorganize using rents and alleged affiliate funding	Court granted dismissal: lack of revenue and no viable funding establishes cause to dismiss
Whether to excuse turnover of property from receiver under § 543(d)(1)	Receiver should remain in possession; turnover would harm creditors and estate because receiver has controlled rents under state supervision	Debtors sought turnover to operate and use rents in bankruptcy	Court excused turnover: interests of creditors and equity better served by receiver remaining in possession
Whether to abstain or suspend under 11 U.S.C. § 305(a)(1) in favor of state receivership	State receivership is advanced and efficient; continued bankruptcy would duplicate effort and waste resources	Debtors argued bankruptcy provides avoidance powers and reorganization options	Court held dismissal/abstention appropriate: creditors and debtor better served by state receivership proceedings
Whether to bar refiling for a period after dismissal	Receiver/Lender sought dismissal and to prevent evasion of rulings	Debtors opposed a lengthy refiling bar	Court imposed a two-year bar to refiling under its equitable authority to allow state receiverships to conclude

United Sav. Ass'n of Tex. v. Timbers of Inwood Forest Assocs., Ltd., 808 F.2d 363 (5th Cir. 1987) (establishes case-specific inquiry for § 1112(b) cause analysis)
In re Packard Square LLC, 575 B.R. 768 (Bankr. E.D. Mich. 2017) (discusses § 543, § 305, and factors for excusing turnover or abstaining where prepetition receivership exists)
In re Orchards Vill. Invs., LLC, 405 B.R. 341 (Bankr. D. Or. 2009) (lists factors for § 305(a) abstention and notes courts may defer to ongoing state receiverships)