Palmdale Hills Property, LLC v. Lehman Commerical Paper, Inc. (In Re Palmdale Hills Property, LLC)
457 B.R. 29
9th Cir. BAP2011Background
- SunCal debtors and Lehman entities engaged in a large SunCal loan program totaling about $2 billion.
- The Master Repurchase Agreement (MRA) dated August 22, 2008 purportedly transferred SunCal Loans to Fenway and stated all transactions were sales and purchases, not loans, with a Hold-in-Custody Annex naming LCPI as custodian.
- The MRA and related loan documents contained extensive agency provisions whereby certain Lehman entities acted as agents for lenders under the SunCal Loans.
- Lehman later moved to file about $1.6 billion in Disputed Claims as Fenway’s authorized agent, prompting SunCal to seek to strike them as improper under Rule 3001(b).
- Bankruptcy court found the MRA to be a true sale and held that Lehman could file as Fenway’s agent only if express authority existed prior to March 27, 2009; an evidentiary hearing was ordered on agency, and a Sale Order (Oct. 2, 2009) and Agency Order (Dec. 21, 2009) followed.
- This Ninth Circuit Bankruptcy Appellate Panel affirmed, concluding the MRA was unambiguous and that Fenway’s express authorization to Lehman to act on its behalf encompassed authority to file the Disputed Claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the MRA constitutes a sale or a secured loan | SunCal argues the MRA is a loan secured by collateral | Lehman argues the MRA is a sale or, if loan-like, still supports agency | MRA unambiguously a sale; not a secured loan |
| Whether Fenway’s express authorization to Lehman included authority to file the Disputed Claims | SunCal contends express authority to file claims was required | Lehman contends agency under Loan Agreements sufficed and November 18, 2008 letter evidences authority | Agency existed; express authorization not required to file the claims; SunCal’s challenge failed |
Key Cases Cited
- In re Comark, 145 B.R. 47 (9th Cir. BAP 1992) (repo sales vs loans; intent governs)
- Bevill, Bresler & Schulman Asset Mgmt. Corp. v. Army Moral Support Fund (In re Bevill, Bresler & Schulman Asset Mgmt. Corp.), 878 F.2d 742 (3d Cir. 1989) (sale vs loan analysis in repo context)
- Granite Partners v. Bear, Stearns & Co., Inc., 17 F. Supp. 2d 275 (S.D.N.Y. 1998) (examines sale vs loan in MRAs and factors supporting sale)
- American Home Mortg. Inv. Corp. v. Lehman Bros. Inc. (In re Am. Mortg. Holdings, Inc.), 388 B.R. 69 (Bankr. D. Del. 2008) (explicit intent language; sale characterization)
- CRIIMI MAE, Inc. v. Citicorp S., Inc., 251 B.R. 796 (Bankr. D. Md. 2000) (discussion of whether explicit sale language dictates actual transfer)