SPCP Group, LLC v. Biggins
465 B.R. 316
M.D. Fla.2011Background
- Residence owns an assisted living facility; Debtors own 25% each and Management company runs it.
- In 2007, Residence borrowed ~$5,000,000 from American Bank secured by mortgage; Debtors and Management guarantied the debt.
- Bank assigned rights to SPCP; note matured in 2008; Residence defaulted prompting SPF to sue and leading to Chapter 11 filings.
- Residence and Management filed Chapter 11 plans to repay SPCP at 118% through monthly payments; individual Debtors later filed Chapter 11/13 petitions with guarantees intact.
- Bankruptcy court confirmed plans over SPCP objections, finding plans feasible, non-gerrymandered, and that absolute priority rule does not bar individual debtors from retaining property.
- SPCP appealed; district court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the absolute priority rule apply to individual Chapter 11 debtors post-BAPCPA? | SPCP argues the rule still applies to prevent retention of pre-petition property. | Debtors contend BAPCPA broadens retention rights of individuals and allows cramdown. | Yes; broad application of 1115 allows retention |
| Was segregating SPCP into its own unsecured class improper gerrymandering? | SPCP claims no distinct rights justify separate class; classification is improper. | Debtors showed SPCP’s secured, collateral-backed, post-petition payments justify separate class. | Not improper; justification supported |
| Are Debtors’ plans feasible under 11 U.S.C. §1129(a)(11)? | Feasibility questioned because reliance on third-party corporate payments. | Third-party funding is permissible and plans feasible given corporate debtors’ payments and existing feasibility findings. | Plans feasible; corroborated by corporate debtors’ feasibility |
Key Cases Cited
- In re Shat, 424 B.R. 854 (Bankr. Nev. 2010) (broad vs narrow absolute priority interpretations after BAPCPA)
- In re Gelin, 437 B.R. 435 (Bankr. M.D. Fla. 2010) (ambiguous 1115/1129 language; raised broader interpretive questions)
- Reeves v. Astrue, 526 F.3d 732 (11th Cir. 2008) (statutory interpretation begins with text when clear)
- United States v. DBB, Inc., 180 F.3d 1277 (11th Cir. 1999) (statutory interpretation approach)
- In re D&G Inv. of W. Fla., Inc., 342 B.R. 882 (Bankr. M.D. Fla. 2006) (feasibility factors for reorganization)