  |
  |
  |
    
  
   |
 | |||
|
|
|
|
| |||
given lack of evidence that creditor would be adequately protected.
(2) Tax liability that Chapter 11 debtor incurred, not as part of process of disposing of substantially all of its assets, but as result of income generated by these sales, was not expense of preserving or disposing of this property, and could not be surcharged to creditor with security interest in property, even assuming that debtor was not barred by res judicata effect of order dismissing prior surcharge claim from again seeking to surcharge creditor's collateral.
(3) "Equities of the case" exception to general rule that security interest in proceeds will continue in proceeds generated postpetition could not be applied to further reduce mortgage lender's security interest in proceeds from sale of Chapter 11 debtor's assets beyond the $950,000 and $450,000 carve-outs to which it agreed for benefit of administrative priority and general unsecured claimants, where there was no evidence that debtor had used unencumbered assets postpetition to increase value of creditor's collateral; rather, it was only through use of creditor's cash collateral that estate was able to continue to operate.
iii. In re Colony Beach and Tennis Club, Inc., 508 B.R. 468 (Bankr. M.D. Fla. 2014
Issue: Whether secured lien is avoidable when creditor's financing statement lapsed post- petition during Chapter 11 case.
Holding: Debtor-in-possession could not use its strong-arm powers in order to avoid the lien of creditor whose security interest was perfected on petition date, based solely on fact that creditor's financing statement lapsed postpetition.
iv. In re Hari Ram, Inc., 507 B.R. 114 (Bankr. M.D. Pa. 2014).
Issue: Chapter 11 debtor, the owner and operator of a hotel, filed motion for use of cash collateral, specifically, for use of hotel room revenues.
Holdings: (1) under Pennsylvania law, the hotel room revenues remained property of the estate when debtor filed its bankruptcy petition;
(2) the hotel room revenues constituted cash collateral; and
(3) debtor failed to sustain its burden to prove that it was able to safeguard secured creditor from the diminution in the value of its interest in the collateral while it attempted to reorganize.
Chapter 11 debtor, which owned and operated hotel and sought court's authorization to use cash collateral, namely, hotel room revenues, failed to sustain its burden to prove that it was able to safeguard secured creditor from diminution in value of its interest in the collateral while it attempted to reorganize. Secured creditor had continuing security interest in the revenues postpetition, so that debtor's offer of replacement lien was meaningless because creditor already had a lien on these assets. Second and third mortgages on hotel property consumed any equity above secured creditor's first mortgage even if debtor were not personally liable on loans secured
©2014 William L. Norton III
