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by second and third mortgages. Under terms of second and third mortgages it appeared that debtor was in fact personally obligated to make payments on the debt, and forecasted profitability of debtor's operations nine months from petition date, alone, was insufficient to provide secured creditor with adequate protection.
v. In re Diamond Beach VP, LP, 506 B.R. 701 (Bankr. S.D.Tex. (2014).
Issue: Proof that a court can consider in valuing property that collateralizes a creditor's claim, for purpose of determining the claim's secured status.
Holding: When it is presented with competing appraisals, in proceeding to value property that collateralizes a creditor's claim, bankruptcy court must consider portions of each report in order to arrive at a realistic market value.
In valuing the undeveloped tract that was to be phase two of proposed luxury condominium development project, for purposes of determining secured status of claim of lender with deed of trust lien on the property, bankruptcy court would accept $30.00 per square foot, a value which was at low end of range of values on which there was general consensus among appraisers who had valued this land for future use as luxury condominiums, for a total raw land value, without access to amenities on phase one of condominium project, of $3,745,027, but had to adjust this value upward based on significant value that access to amenities on phase one would provide to anyone purchasing a condominium in phase two of project.
vi. In re Shree Mahalaxmi, Inc., 505 B.R. 794 (Bankr. W.D. Tx. 2014).
Issue: Whether secured creditor is entitled to prepetition default interest.
Holding: Under Texas law, borrower's loan documents, construed together, required acceleration and non-payment before default interest could be imposed by lender; both promissory note and deed of trust conditioned the imposition of default interest on non-payment of an amount due on a certain date, loan documents provided lender with the option to accelerate the debt as a remedy for an Event of Default, imposition of default rate of interest thus was not automatic upon the occurrence of an Event of Default but, rather, lender had to exercise its option to accelerate the debt, and only if borrower did not pay the amount due at the accelerated maturity date promptly could lender begin imposing the default rate of interest.
vii. In re Cahill, 503 B.R. 535 (Bankr. D.N.H. 2013)
Issue: Individual Chapter 11 debtors moved for determination of secured status of claim filed by junior residential mortgage lender, for purposes of deciding whether mortgage lien could be "stripped off" under their plan. Lender, while conceding that there may have been no equity in mortgaged property to support its lien when bankruptcy petition was filed, asserted that property values had improved, and that valuation had to be conducted close of time of confirmation.
©2014 William L. Norton III
