473 B.R. 70
Bankr. M.D. Penn.2012Background
- Debtor filed a voluntary Chapter 11 petition on November 11, 2011 for Greencastle Property-related proceedings.
- Orrstown held a secured claim totaling approximately $331,520 across first, second, and third liens; FCADC and the DiMarcos held fourth and fifth mortgages.”
- Pre-petition real estate taxes totaling $26,603.46 were unpaid, creating a superior tax lien on the Property.
- Debtor valued the Greencastle Property at $700,000 on Schedule A; Orrstown appraised the Property at about $335,000 for purposes of the stay relief analysis.
- Debtor argued it maintained an equity cushion and continued to make post-petition mortgage payments; Orrstown argued the taxes and senior liens left no adequate protection and no equity.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Orrstown is entitled to relief from the automatic stay for lack of adequate protection. | Orrstown contends Debtor’s failure to pay pre-petition taxes impairs the lien; only mortgage payments do not adequately protect Orrstown. | Debtor argues adequate protection via ongoing payments and equity in the Property as protection against diminution in value. | Relief granted under § 362(d)(1) due to inadequate protection and a lack of equity. |
| Whether the Greencastle Property is necessary for an effective reorganization and whether Debtor has equity. | Orrstown argues Debtor has no equity after senior liens and tax lien; property not necessary for a plan. | Debtor contends potential reorganization and sale/lease options could preserve value; some equity remains. | Relief granted under § 362(d)(2) as Debtor lacks equity and failed to show the property is necessary for a feasible reorganization. |
Key Cases Cited
- In re Curtis, 9 B.R. 110 (Bankr.E.D.Pa.1981) (adequate protection concepts for stay relief)
- In re Murel Holding Corp., 75 F.2d 941 (2d Cir.1935) (indubitable equivalent concept of adequate protection)
- Nazareth Nat’l Bank & Trust Co. v. Trina-Dee, Inc., 26 B.R. 152 (Bankr.E.D.Pa.1984) (equity determination requires total liens against property)
- United Sav. Ass’n v. Timbers of Inwood Forest Assocs., Ltd., 484 U.S. 365 (1988) (test for ‘reasonable possibility of successful reorganization’ under § 362(d)(2))
- John Hancock Mut. Life Ins. Co. v. Route 37 Business Park Assocs., 987 F.2d 154 (3d Cir.1993) (requirement of a realistic chance of plan confirmation in reorganization)
- Nantucket Investors II v. Cal. Fed. Bank (In re Indian Palms Assoc., Ltd.), 61 F.3d 197 (3d Cir.1995) (equity calculation involves deducting senior claims to determine cushion)