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Three recent cases deal with the question of what is a Single Asset Real Estate Case. In re
Scotia Pacific Co. LLC, 508 F. 3d 214 (5th Cir. 2007) (tree growing company is not SARE case); In re Heather Apartments L.P., 366 B.R. 45 (Bk. D. Minn. 2007) (apartment complex is SARE, and sought additional time to begin paying mortgage; court held allegations generally applicable in chapter 11 cases for denying stay relief were inadequate given specific statutory interest provision, and debtor had to show sale was subject to binding documents and imminent); In re Kara Homes, 363 B.R. 399 (Bk. D.N.J. 2007) (real estate development and 20+ property owning subs filed; court held property owning subs were SARE cases because they were essentially selling homes and other activities were incidental).Recent cases involving SARE issues include In re Harmony Holdings, LLC, 393 B.R. 409 (Bk. D.S.C. 2008) (filing on eve of foreclosure not bad faith or a basis for stay relief; creditor not entitled to stay relief when proposed plan addressed creditor's claim and court could not say plan was not patently unconfirmable; case involved $40+MM of debt); In re Hope Plantation Group, LLC, 393 B.R. 98 (Bk. D.S.C. 2008) (no relief from stay for secured creditor if debtor could demonstrate progress toward reorganizing at impending hearing, even though the debtor hadn't started payments or proposed a confirmable plan); In re Windwood Heights, Inc., 385 B.R. 832 (Bk. N.D.W. Va. 2008) (SARE case; motion to dismiss is not confirmation hearing and all that is required is that an effective reorganization is in prospect; here, debtor had equity but negative amortization for 8 years too long but debtor might be able to propose plan with more accelerated payment schedule).
Courts have struggled with the effect of prepetition stay waivers. In In re Bryan Road, LLC, 382 B.R. 844 (Bk. S.D. Fla. 2008), the Court granted stay relief to a creditor where the stay waiver was contained in a prepetition forbearance agreement, the debtor was represented by a knowledgeable attorney, and the debtor thought that the 2 month forbearance was adequate to obtain financing.
New Rule 6003 which precludes employment of professional persons within 20 days of filing is n/a to an interim appointment. Here, the Court applied case law from Rule 4001, and said that interim employment was necessary to enable a corporation to obtain representation and to assure compensation of professionals. As part of the interim order, all objections to retention were reserved and Court consideration was to be de novo. In re First NLC Financial Services, LLC, 382 B.R. 547 (Bk. S.D. Fla. 2008).
A few cases have begun to disallow fees when counsel did work in situations where there was no prospect of a successful reorganization or cases where counsel had continued to render services after the situation became hopeless. See In re APW Enclosure Systems, Inc., 48 BCD 1162 (Bk. D. Del 2007) (low probability of success from the beginning and chapter 7 was a foregone conclusion); Kaye v. Hughes & Luce, LLP, 2007 WL 2059724 (N.D. Tex 2007) (court applies hindsight test and denies fees under hindsight test because no benefit to the estate from work on reorganization; prior decision in Pro-Snax requires
©2009 Jonathan M. Landers
