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What Do You Mean My Claim Is Capped? Ninth Circuit Ruling Further Clarifies Types Of Damages Excluded From A Landlord’s Claim In Bankruptcy

March 2, 2017

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The Ninth Circuit Court of Appeals recently provided landlords dealing with a rejected lease with further guidance on the size and basis of their claims against a tenant’s bankruptcy estate.  Kupfer v. Salma (In re Kupfer), No. 14-16697 (9th Cir. Dec. 29, 2016).  The Ninth Circuit held that the statutory cap – 11 U.S.C. § 502(b)(6) – on a landlord’s claims against a tenant arising from lease rejection in bankruptcy applies only to claims that result directly from the lease termination; the cap does not apply to collateral claims.

The Statutory Cap in Bankruptcy Code Section 502(b)(6)

Bankruptcy Code Section 502(b)(6) caps a landlord’s claim for damages for a lease terminated before or during the tenant’s bankruptcy to (a) the greater of (i) one year’s worth of rent or (ii) 15%, not to exceed three years, of the remaining lease term; plus (b) any

11th Circuit Holds Consumer Lenders Can’t Include Estimated Expenses In Pre Closing Reinstatement or Payoff Letters; What You Should Do About This Remarkable Opinion

Editor’s Pre- / Post-Script:  The original post about this case was, frankly, a bit sarcastic toward the consumer borrower, and made light of a serious matter.  (Your author Mark Duedall is to blame for that.)  When the post found its way to the borrower’s counsel, he was kind enough to let us know, as Paul Harvey would say, “the rest of the story.”  And that was this – the borrower was down on his luck, a hard working public servant, but eventually managed to come up with the funds needed to pay his bills (including this loan) in full.  Truly, an individual deserving to be treated fairly in all respects.  But when he paid the loan in full, including the estimated future charges, the lender then refused to refund the estimated future charges that the borrower had paid in full (and that the lender did not incur).  Yikes; the consumer had

Good News for Rent-Stabilized Debtors in New York

Late last year, the New York Court of Appeals issued an interesting opinion: In Mary Veronica Santiago-Monteverde v. John. S. Pereira, 24 N.Y.3d 283 (2014), the Court held that a bankruptcy debtor’s interest in her rent-stabilized apartment is exempted from her bankruptcy estate as a “local public assistance benefit.”

The debtor lived in Manhattan for 40 years in a rent-stabilized apartment. In 2011, after her husband passed away, she became unable to pay her credit-card debts, which totaled about $23,000, and she subsequently filed for Chapter 7 bankruptcy. In her initial filing, the debtor listed her apartment lease as an ordinary unexpired lease.

The debtor’s landlord offered the trustee a deal: The landlord would pay the $23,000 credit-card debt in exchange for the debtor’s interest in the lease and would continue to let the debtor live in the apartment at the rent-controlled rate of $703 a month for the rest

In this world nothing is certain, except taxes—but does that include pre-petition tax sales?

On November 6, 2014, the United States Bankruptcy Court for the Western District of New York in Canandaigua Land Dev., LLC v. Cnty. of Ontario, ruled that an in rem tax foreclosure conducted by a county—in full compliance with Article 11 of the New York Real Property Tax Law—was capable of being set aside in bankruptcy as a constructively fraudulent transfer, pursuant to 11 U.S.C. § 548(a)(1)(B).

The County had foreclosed on a real property tract, 642-732 pdfvalued at approximately $300,000 to $425,000, in order to satisfy a tax debt of $16,595. Further, the sale was conducted only a few hours after the debtor filed its Chapter 11 petition.  The debtor argued that the County’s foreclosure of its tax lien constituted a constructively fraudulent transfer because the debtor was rendered insolvent by the transfer and received less than reasonably equivalent value in exchange for the transfer of the

Arizona Court Finds That A Non-Judicial Foreclosure After Entry of Judgment Limits Valuation Hearing Rights

November 25, 2014

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For lenders in many jurisdictions around the United States, the risk of post-sale litigation expense for valuation determinations can be daunting. However, in a recent unpublished opinion, the Arizona Court of Appeals concluded that once a judgment is entered, the Arizona statute providing a right to a post-sale valuation hearing does not apply if the sale occurs after judgment is entered.

In states like Arizona, there are statutory protections for obligors that require a court to conduct a valuation hearing to determine the lender’s enforceable deficiency. Recently, Bryan Cave represented a lender in attempting to recover on a defaulted loan. In that case, the borrower/guarantors were convinced that the Arizona real property securing the loan was far more valuable than what the lender could recover at a non-judicial foreclosure sale (i.e., in Arizona, a trustee’s sale).

In our case, the lender commenced a trustee’s sale simultaneously with pursuing an action

Bankruptcy Court will not Revisit State Court Foreclosure Decision

A Memorandum of Decision recently entered in In re 56 Walker, LLC, Case No. 13-11571 (ALG), Bankr. S.D.N.Y. (Mar. 25, 2014), provides clear guidance as to the effect of a state court decision granting summary judgment in favor of a secured lender in a foreclosure action prior to the Debtor’s bankruptcy filing.642-737 dumps The collateral estoppel, res judicata and Rooker-Feldman doctrines each separately served as grounds for the Bankruptcy Court’s finding that it was unable to review the prior state court decision.

In 56 Walker, the Debtor’s sole asset was a six-story mixed-use building in New York, New York. The property was pledged as security for a mortgage loan with Broadway Bank. The Debtor defaulted, and Broadway Bank commenced a foreclosure action against the Debtor in the Supreme Court of New York, New York County. After a first chapter 11 case was dismissed, MB Financial Bank, N.A. (having acquired

Case Updates: Glaski v. Bank of America  and Sandri v. Capital One

The California Court of Appeal for the Fifth Appellate District has held that a borrower has standing to state a claim for wrongful foreclosure based on the alleged improper securitization of the borrower’s note and deed of trust. Glaski v. Bank of America, N.A., et al., 218 Cal. App. 4th 1079 (Cal. App. 5th Dist. 2013). This is a minority view. Rejecting both the holding and reasoning of the Glaski court, and adopting the majority view, the U.S. Bankruptcy Court for the Northern District of California reached a contrary conclusion. Sandri v. Capital One, N.A., et al. (In re Sandri), No. 12-3165DM, 2013 WL 5925655 (Bankr. N.D. Cal. Nov. 5, 2013).

I. Glaski v. Bank of America, N.A., et al., 218 Cal. App. 4th 1079 (Cal. App. 5th Dist. 2013)

Factual Background and Procedural History:

In mid-2005, appellant Glaski obtained a purchase money loan from lender Washington Mutual Bank, FA

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