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third-party defendants (children of the former principal of the debtor) to allege facts with the requisite particularity for its unjust enrichment claim.
* Borrego Springs Bank, N.A. v. Skuna River Lumber, LLC, 381 B.R. 211 (D. Miss. Jan. 2008) (Mills, J.)
Can a secured creditor who offers the highest bid at a section 363(f) sale through a "credit bid" be surcharged for the costs of the sale under section 506(c)? This court seems to think so. Despite two prior motions for relief from stay (which were both withdrawn) and at least one objection to the employment of an auctioneer for the sale, the bankruptcy court ordered the secured creditor to pay the costs of the sale out of the proceeds from the sale of the estate property. On appeal, the secured creditor argued that it was exempt from section 506(c) because no money changed hands -- the successful bid was merely a credit bid. The district court disagreed, noting instead that the secured creditor had benefitted from the auctioneer's reasonable and necessary services because the auction allowed the title to pass to the creditor and further established a market value for the property. "Secured creditors are aware that those performing compensable services receive priority payment from funds generated from a third party at auction," said the Court. "This court discerns no difference in funds generated from a creditor as opposed to funds generated by a third party." Accordingly, the district court affirmed the bankruptcy court's order and authorized the bankruptcy court to enter "any such orders as it deems necessary to effect payment" of the auctioneer's costs (including commissions) from the secured creditor. Who ever said credit bidding was free?
* In re Asia Global Crossing, Ltd., 379 B.R. 490 (Bankr. S.D.N.Y. Dec. 2007) (Bernstein, J.)
Creditor was not entitled to damages for anticipatory breach without proving that it was ready and willing to perform. Under a pre-petition agreement between the creditor and some of the debtors, the creditor pre-paid for bandwidth to be provided by the debtors upon request of the creditor. When the debtors sold their assets to a third party purchaser through a section 363 sale, the creditor argued that the sale constituted anticipatory repudiation of the pre-petition agreement. The court, in a previous opinion, rejected that argument but allowed the creditor to prove up damages for anticipatory breach if it could prove that it was ready, willing, and able to perform under the pre-petition agreement but for the purchaser's inability to perform the debtors' obligations. As proof of willingness and readiness, the court considered whether the creditor, in the past, actually followed the agreed upon procedures for requesting the debtors to allocate bandwidth to the creditor. The court concluded that the creditor never actually ordered the bandwidth but merely expressed its intent to use bandwidth. Furthermore, the creditor never disclosed the pre-paid bandwidth as an asset in its own Canadian insolvency proceedings, which demonstrated to the court that the creditor had formulated no plan to use the bandwidth and considered it to be of no value. Thus, said the court, the creditor suffered no damages by the anticipatory breach because it was never "ready" or "willing" to use the bandwidth.
