Laws 2325

Kim Huggins

Module 10

                                                                                                                                      2-23-22

 Topic Questions:

1. At the time, the original petition for In re Riddle was filed, the debtor (Green Hobson Riddle, Jr.) owed Northside Bank $907,000. The two consensual liens include a priority deed to secure debt on approximately 36 acres of real property, referred to as the “Highway 411/Dodd Blvd Property”; and a priority deed to secure debt on a condominium unit, referred to as the “Heritage Square Property.” There is also a judgement lien involved in this bankruptcy case claim.

The Chapter 11 Bankruptcy Plan in this case proposed to surrender the Highway 411/Dodd Blvd Property (estimated to be worth $1.2 million) to the Bank by execution of a quitclaim deed to the Bank. By doing so, this would be “upon confirmation in full satisfaction of the Bank’s claim, thereby requiring cancellation of both the second priority security deed on the Heritage Square Property and the judgment lien.”

2.      The case I found in the United States Bankruptcy Court District of Nebraska, involved the following case matter F & P Covalt Co., Inc., Case No. Bkbs-2611. This was a case filed in 1985, involving a rancher who filed a Chapter 11 Bankruptcy case. He had to liquidate his herd of cattle in the case, and then received a check for $102,767 for the liquidation sale.

As the case matter notes: “As adequate protection for the interest of the creditor, the debtor has offered the following: A. A deed of trust on certain land owned by the debtor or by one of the shareholder/officers of the debtor, such land being identified as ‘Esther’s Place.’ It has a fair market value of $56,000 with approximately $1,000 of taxes encumbering it.; B. A lien on all of the cattle purchased and/or born in the future.; C. A payback in three lump - sum annual payments including interest at the rate of 13%; and D. The right of the creditor to request the Bankruptcy Court to terminate the permissive use of the cash collateral upon any deviation from the income and expense projections submitted into evidence at the hearing, upon failure to maintain the herd, or upon failure of the crop.” The creditor's position is that none of the above is the indubitable equivalent of cash in the amount of $102,767.”

Despite the creditor’s objections in the case, when it comes to indubitable equivalent the case matter analysis noted “cash was the indubitable equivalent of cash” despite when the claim is resolved. The standard of proof in this case matter, as well as several other cases I reviewed in Nebraska bankruptcy court, referred to the following In Re Martin: The Indubitable Equivalence. collier_indubitable.pdf (nationalaglawcenter.org).

“In In re Martin, the Eighth Circuit Court ofAppeals held that indubitable equivalence, under Bankruptcy Code section 361, should be determined under a compensatory standard. The Court's reasoning, however, seems to utilize both a compensatory and protective standard. This note examines the Eighth Circuit's opinion to determine what, if anything, it adds to the understanding of indubitable equivalence and how that standard should be applied by bankruptcy courts.” - collier_indubitable.pdf (nationalaglawcenter.org).

I also reviewed the following two articles on indubitable equivalence, which provided further information on this matter of law: Eat my dirt! Dirt-for-debt swaps under 11 U.S.C. §1129(b)(2)(A)(iii) (northeastern.edu)

The Indubitable Equivalent and Giving Debt for Dirt Can a Debtor Force a Secured Creditor to Take Less than All of Its Collateral in Satisfaction of its Debt | ABI

3. Once surrendered, the Court determined that the property being surrendered to the bank had a “fire sale” value of $990,000, which is $200,000 less than the fair market value it would typically be sold at. Upon payment of selling expenses ($50,000) and unpaid ad valorem taxes of approximately $9,000, the remaining proceeds would be $931,000. This amount would be more than enough to pay the Bank’s secured claim, which is now $907,000, plus 6 months interest (approximately $21,500 for 180 days at the per diem rate of $119 for a total of $928,500.

No, as I read this case matter, once the property was surrendered and as discussed in the January 27, 2011 court hearing, I did not see that both a nondistress and distress sale was considered. I only saw that it referred to the distress or “file sale” value of the property.

Yes, as I noted above the sale deducted expenses such as the selling expenses of $50,000 and unpaid ad valorem taxes of $9,000). Additionally, interest was calculated into the sale as I referred to earlier (6 months interest which calculates to approximately $21,500 for 180 days at the per diem rate of $119).

4. If I were the judge in this case, I think the qualifications and experience of the appraiser for the creditor would probably have a more significant impact on my decision in a bankruptcy case. While you never know what is going to happen in a real estate market as quickly as that can change, as a judge I think the phrase “be on the market six to 18 months” would have a significant impact on my opinion regarding the sale of the property. Thus, I would be more likely to side in favor of the creditor regarding this property as collateral.

While the question did not specifically discuss the qualifications or the experience of the two appraisers, I think the creditor’s appraiser would mostly like have more experience when it comes to working with property that has been through a bankruptcy case, so again, that appraiser’s opinion would probably have a stronger impact on my decision. Most people want property to sell as quickly as possible, and as a Judge, I would feel the same way in a bankruptcy situation.

Regarding the standard of proof for indubitable value in my area, this mostly likely would be a case similar to what I noted above, “cash was the indubitable equivalent of cash” despite when it was paid. Except in this situation, it involves real estate, and it sounds like the sooner this property is sold, the least likely it would have to be sold in a “fire sale.”

Reflection Questions:

1. With this module, the opportunity to review my classmates’ PowerPoint projects was highly informative and educational. As a fellow paralegal student, it was very helpful for me to see how my peers formulated their court case opinions and put together their IRAC presentations. I was able to glean a wealth of information, which I hope to use in the further pursuit of my paralegal degree. I also found the case matters each one of my peers chose to focus on to be highly informative and interesting to see how the various case matters were settled and/or discussed.
2. There were various cases I read in my peers’ PowerPoint presentations which involved various ethical issues. One of which I would differ to includes a case matter involving a trustee who was borrowing money against a trust. I think this makes it all that much more important that a trust have two trustees involved to make sure each one is accountable for the other.

Additionally, I found it interesting to read the case matter discussed above with the equivalent value situation. I read several Nebraska cases which focused on this topic. It was interesting to see how the creditors and debtors argued over equivalent value and how in the end, each Court ruled on the topic. While this may have not been a clear matter of ethics, but some of the tactics the parties used to argue their cases bordered on ethical concerns.

3. The discussion questions above were challenging. I do hope that I read the material clearly and came to the proper conclusions when I answered each question. Bankruptcy is a challenging topic. However, this course has taught me so much about the topic. It would be enticing to take another course on the topic to continue to enhance my education on bankruptcy material and the laws involved in these case matters.