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airplanes. The indenture trustee then sent a notice of acceleration to the owner trust and eventually commenced foreclosure on the airplanes. After the planes were sold, both the indenture trustee and the owner trust filed proofs of claim, asserting claims for the same thing
-- the damages arising from the lease rejections. At issue in this case was which entity had standing to assert a claim for rejection damages. The bankruptcy court found that the owner trust was the true lease holder at the time leases were terminated, but that the indenture trustee still held a perfected security interest in the leases at the time. Despite the indenture trustee's argument to the contrary, the court found that the lenders' notices of foreclosure and subsequent sale were inadequate to foreclose the leases. Instead, the notices were sufficient only to foreclose upon the airplanes, leaving the owner trust holding the right to assert a claim for rejection damages. The lenders' failure to foreclose upon the leases, however, did not affect the indenture trustee's perfected security interest in the rejection damages as proceeds of the leases, said the court. The court gave the parties an opportunity to work out the numbers on their own before determining the amount of rejection damages and the extent of the lenders' lien on those damages.
* Samoilo v. Citizens Bank of Pa. (In re Samoilo), 375 B.R. 151
(Bankr. W.D. Pa. Sept. 2007) (Bentz, J.) Bankruptcy court used equitable factors to value collateral. Following the sale of estate property (a restaurant), the debtor filed a motion to determine the extent of a bank's lien on the sale proceeds. The parties disputed the property value -- the restaurant sold for substantially more than the value listed in the debtor's schedules. The debtor argued that the bank's interest in the sale proceeds was limited to the value of the property as listed on the debtor's schedules, and further argued that any surplus was attributable to an increase in the going concern of the restaurant over the course of the bankruptcy case. The court, however, failed to agree that the debtor's continued operations of the restaurant at a loss for 19 months while incurring additional, unpaid administrative expenses could increase the going concern of the restaurant. The court reminded the debtor that the court had allowed the continued operations only because of the debtor's assurances that the eventual sale price would satisfy the bank's claim as well as the existing administrative claims. The court further noted that the debtor failed to make the court-ordered adequate assurance payments to the bank, which left the bank at risk for nearly two years. Based on the foregoing circumstances, the court concluded that the bank was entitled to all remaining sale proceeds in satisfaction of its secured claim.
* In re the Roman Catholic Bishop of San Diego, 374 B.R. 756
(Bankr. S.D. Ca. Aug. 2007) (Adler, J.) Court refused to estimate claims before the claims bar date. To stay the trials of several child sexual abuse actions against the debtor, the church filed a voluntary chapter 11 petition. Shortly after filing its petition, the debtor removed 127 of the law suits to the bankruptcy court. The debtor then asked the court to estimate all claims as valued at zero dollars and proposed to pay the claimants from a fund of $95 million. The court noted that this proposed fund would pay the claimants far less than the average amounts other claimants had received in similar litigation. Nevertheless, the court held that claims estimation was impossible because the claims
