478 B.R. 292
Bankr. S.D. Ohio2012Background
- Debtor-in-possession Yisicon Shareholders Trust owns Hope Hotel on Wright-Patterson AFB under a ground lease.
- GCCFC holds a secured position on the hotel assets; case filed under Chapter 11 on June 8, 2010.
- GCCFC moved to dismiss; later motions to prohibit cash collateral use and for debtor to use cash collateral were litigated at a June–July 2012 hearing.
- Debtor's operations were largely conducted by Visicon, Inc. (non-debtor), with insiders Meyers and Witter controlling management and finances.
- Debtor repeatedly used cash collateral for personal and non-operating expenses, failed to file complete monthly operating reports, and did not timely file post-petition tax returns.
- Court dismisses the case for cause, prohibits use of cash collateral, and denies retroactive accounting firm retention.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether cause exists to dismiss Chapter 11 for gross mismanagement | GCCFC shows mismanagement and improper cash use | Debtor argues no extraordinary cause | Yes, dismissal for cause warranted |
| Whether use of cash collateral was authorized or harmful | GCCFC authorized use not provided; use harmed creditors | Debtor argued adequate protection; but not authorized | Use of cash collateral prohibited; dismissal appropriate |
| Whether failure to disclose and maintain records supports dismissal | Non-disclosure harmed estate and creditors | Debtor contends records were incomplete but defensible | Yes, supports dismissal and denial of related relief |
| Whether retroactive employment of Birnbrey should be approved | Retroactive retention would undermine security interests | Debtor sought reasonable post-petition accounting help | Denied; disgorgement of fees; retroactive retention not granted |
Key Cases Cited
- In re Aultman Enterprises, 264 B.R. 485 (E.D.Tenn. 2001) (factors for nunc pro tunc appointment of professionals)
- In re Willowood East Apartments of Indianapolis II, Ltd., 114 B.R. 138 (S.D. Ohio 1990) (adequate protection and cash collateral use limits in single asset real estate cases)
- In re Cardinal Congregate I, 113 B.R. 371 (S.D. Ohio 1990) (discussion of cash collateral and safeguarding creditor interests)
- In re Sanchez, 372 B.R. 289 (Bankr. S.D. Tex. 2007) (candor and disclosure as fundamental debtor duties)