Riley v. Tencara, LLC (In Re Wolverine, Proctor & Schwartz, LLC), 449 B.R. 1

Tencara, LLC holds a secured claim evidenced by a promissory note bearing 10% interest, with default interest at 12%.
The Note provides 30-day default interest, and the case involves postpetition treatment of oversecured claim under 11 U.S.C. § 506(b).
A 2006 sale of substantially all assets raised questions about the enforceability and calculation of costs and interest.
The parties executed a Stipulation regarding allowance and payment of Costs, limiting costs and reserving rights on default interest.
The Court previously entered interim orders and approved a Borrowing Stipulation to support estate preservation, with ongoing disputes about Costs and default interest.
This adversary proceeding seeks judicial determination of entitlement to the default rate and the accrual date for that rate.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Tencara is entitled to the default rate of interest.	Tencara argues default rate applies as contractually provided for on oversecured claim.	Trustee contends default rate may not be recoverable or reasonable under 506(b).	Yes; Tencara is entitled to the default rate.
From when should the default rate accrue?	Default interest should accrue from a defined point after default as per the Note.	Trustee argues date should be limited or delayed under equitable considerations.	accrues from 30 days after the last business day of June 2006.

In re Southland Corp., 160 F.3d 1054 (5th Cir. 1998) (default rate presumptive unless inequitable)
In re Courtland Estates Corp., 144 B.R. 5 (Bankr.D.Mass.1992) (default rate reasonable and not a penalty)
In re 1095 Commonwealth Ave. Corp., 204 B.R. 284 (Bankr.D.Mass.1997) (default rate allowed as reasonable charge )
In re White, 88 B.R. 494 (Bankr.D.Mass.1988) (context for default rate not being unconscionable)
In re AE Hotel Venture, 321 B.R. 209 (Bankr.N.D.Ill.2005) (default interest as compensation for post-default costs; must be reasonable)