  |
  |
  |
    
  
   |
 | |||
|
|
|
|
| |||
Holding: The court held that the state agency's claim was not for a tax that entitled it to a priority status under 11 U.S.C. § 507(a)(8). Relying on many facts and factors from other cases, the court explained that a primary purpose of giving priority status to taxes is that "governments do not generally choose their tax debtors" and are involuntary creditors. In this case, the court found that the state agency had the option of requiring a surety bond. The court reasoned that due to the option of surety bond and the fact that a hypothetical surety holder could not seek priority status if there was insufficient collateral securing the surety obligations, the state agency's "unemployment benefits and claims . . . in this case cannot be considered a tax under Section 507(a)(8)."
Issue: Whether an undersecured second mortgage, nonrecourse loan, secured by a lien on a shopping center is an allowed claim under §1111(a).
Holding: By the plain language of §1111(a), a nonrecourse lien that is secured by a valid lien against Chapter 11 debtor's property, should be treated as if the creditor had recourse against the debtor and should not be disallowed eventhough there was no equity in the debtor's property after the first lien.
ii. Continental Ins. Co. v. Thorpe Insulation Co. (In re Thorpe Insulation Co.), 671 F.3d 1011 (9th Cir. 2012)
Issue: Whether, as an issue of first impression, the bankruptcy court had the discretion, even in a core proceeding, to decline to enforce an otherwise applicable arbitration provision if arbitration would conflict with the underlying purpose of the Bankruptcy Code.
Holding: The court affirmed the decision of the bankruptcy court denying the creditor's motion to compel arbitration and disallowing its claim. The Ninth Circuit first noted that in deciding whether to enforce an arbitration provision within the context of a bankruptcy proceeding, the court had to determine whether there was an inherent conflict between arbitration and the underlying purposes of the Code. The court then noted that "[s]everal of our sister circuits that have addressed the issue have considered, as a threshold matter, a distinction between core and non-core proceedings." The court then concluded that Continental's breach of contract claim against the Debtor was a "core proceeding." Said the court: "Continental argues that its 'state law breach of contract claim' is non-core because 'it is based on state law and arose outside of and independent of Thorpe's bankruptcy.' Yet regardless of how Continental characterizes its claim, Continental filed a proof of claim, and Thorpe objected to the claim, so under 28 U.S.C. § 157(b) (2)(B), the allowance or disallowance of that claim was a core proceeding." Because it was a core proceeding, the court concluded that the bankruptcy court had the discretion to deny
©2014 William L. Norton III
