FYI: Ill App Ct Holds Account Debtor Had No Right of Set Off in Action By Assignee

The Illinois Appellate Court, First District, recently held that the Uniform Commercial Code did not permit an account debtor to use separate and unrelated debt owed to the account debtor by the assignor as a set off against an assignee of the accounts receivable, ruling that setoffs against assigned debt are limited to actual causes of action or viable legal claims that "accrued" prior to notice of an assignment. 

 

A copy of the opinion is available at:

http://www.state.il.us/court/Opinions/AppellateCourt/2012/1stDistrict/1112261.pdf.
  
A trucking company ("Assignor") filed for bankruptcy protection.  During the bankruptcy proceedings, the Assignor assigned its accounts receivable to a factoring company ("Plaintiff-assignee"), which held a secured lien on the Assignor's accounts receivable.  Among the assigned accounts receivable were invoices that Account Debtor, a construction firm, owed Assignor for trucking services provided to Account Debtor by Assignor.   The mutual exchange of services between the Assignor and the Account Debtor historically allowed the Assignor and Account Debtor to set off their respective invoices against each other.  

 

Plaintiff-assignee brought an action against Account Debtor to collect on the accounts receivable that it acquired in the bankruptcy proceedings.   In response, Account Debtor sought to set off unpaid amounts the Assignor owed Account Debtor for services Account Debtor had previously provided to Assignor.   

 

The parties filed cross-motions for summary judgment.  Denying both motions, the circuit court held a trial, after which the court entered judgment in Plaintiff's favor.  Account Debtor appealed.  The Appellate Court affirmed.

 

As you may recall, with respect to setoffs against assigned accounts receivable, the Uniform Commercial Code ("UCC") provides:

 

"Unless an account debtor has made an enforceable agreement not to assert defenses or claims, . . . the rights of an assignee are subject to:  (1) all terms of the agreement between the account debtor and assignor and any defense or claim in recoupment arising from the transaction that gave rise to the contract; and (2) any other defense or claim of the account debtor against the assignor which accrues before the account debtor receives a notification of the assignment . . ."  810 ILCS 5/9-404(a).
 
In analyzing whether the UCC allowed a setoff of the debt assigned to Plaintiff-assignee against the unrelated debt owed to Account Debtor by the Assignor, the Court examined whether the unrelated debt constituted "any other defense or claim . . . against the assignor which accrue[d]" before the Account Debtor had notice of the assignment of the accounts-receivable debt.

 

In so doing, the Court noted a dearth of Illinois case law interpreting whether Subsection 9-404(a)(2) permits setoffs for unrelated debt, or whether a cause of action must accrue prior to notice of an assignment.  Relying therefore on non-Illinois authority, the Court examined the question of when a defense or claim "accrues" for purposes of section 9-404-(a)(2), and concluded that a claim "accrues" when the claim gives rise to a viable cause of action. 

 

Looking to the UCC policy goals of simplicity and elimination of commercial uncertainty, the Court noted that this interpretation allows the value of accounts to be determined with reasonable certainty at the time of assignment.  The Court distinguished this interpretation of "accrue" from a "fiscal" interpretation, according to which a claim is considered accrued when an obligation to pay is simply incurred.  The Court pointed out that a fiscal approach in a case such as this would not allow an accurate determination of assigned accounts due to the risk of a post-assignment claim against an assignor.

 

Rejecting the Account Debtor's assertions that the Court's interpretation rendered subsection 9-404(a)(2) meaningless, the Court noted the distinct purposes of subsections 9-404(a)(1) and 9-404-(a)(2).  The Court pointed out that subsection (a)(1) allows setoffs arising out of the same transaction that gave rise to the assigned asset, and that subsection (a)(2) allows setoffs based on matters not connected to the assigned asset, but limits such setoffs to claims that matured into a cause of action prior to notice of the assignment.

 

The Court also ruled that the Illinois Code of Civil Procedure did not allow a setoff based on a contract or indebtedness separate from and unrelated to the debt assigned, such as the debt Account Debtor sought to set off in this case.  See 735 ILCS 5/2-403(a); R.A.N. Consultants, Inc. v. Peacock, 201 Ill. App. 3d, 67, 559 N.E.2d 283(1990).

 

Accordingly, the Appellate Court held that Account Debtor could not set off the debt it owed Plaintiff-assignee against amounts Assignor owed to Account Debtor, as the amounts Assignor owed to Account Debtor has not yet developed into a cause of action prior to notification of the assignment of the accounts receivable.

Ralph T. Wutscher
McGinnis Tessitore Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874
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FYI: 8th Cir Rules in Favor of Servicer as to Alleged Oral Promise to Postpone Foreclosure Sale

The U.S. Court of Appeals for the Eighth Circuit recently held that: (1) Minnesota's Credit Agreement Statute prohibited enforcement of a loan servicer's alleged oral promise to postpone a foreclosure sale, because such a "credit agreement" must be in writing;  (2) Minnesota's "foreclosure by advertisement" statute was inapplicable where a foreclosure sale was never actually postponed.  A copy of the opinion is attached.

 

The plaintiff ("Borrower") obtained a home mortgage loan and eventually fell behind on her loan payments.  The loan servicer ("Servicer") allegedly agreed to place Borrower on a forbearance plan, but nevertheless initiated foreclosure proceedings and scheduled a foreclosure sale date.

 

Shortly thereafter, Borrower contacted Servicer to request a loan modification under the Home Affordable Modification Program ("HAMP"), at which time the Servicer allegedly promised to postpone the foreclosure sale pending review of Borrower's loan modification application.  The sale was never postponed, but instead took place as scheduled. 

 

Shortly after the sale, Servicer denied the borrower's loan modification request, because the foreclosure sale had already taken place.  After allegedly instructing the borrower to submit a second loan modification application, the Servicer allegedly informed the borrower that her second request for a loan modification was also denied for the same reason.  Servicer supposedly then offered to rescind the foreclosure sale if Borrower paid off her loan prior to the expiration of the redemption period.  Borrower failed to make the redemption payment and the foreclosure sale was never rescinded.

 

Borrower filed suit in state court against Servicer and others (collectively, "Defendants").  Seeking to invalidate the foreclosure sale, Borrower claimed that she had detrimentally relied on the alleged oral promise to postpone the sale, and that Defendants supposedly failed to comply with the notice requirements under Minnesota's "foreclosure-by-advertisement" statute and, further, that the Servicer had supposedly breached its HAMP participation agreement under which Borrower claimed to be a third-party beneficiary.   Borrower also sought damages for alleged negligent and intentional misrepresentation.

 

After removing the case to federal court, Defendants moved for summary judgment on all counts, arguing that Servicer had provided proper notice of the foreclosure sale, that Minnesota's Credit Agreement Statute ("MCAS") precluded enforcement of Servicer's alleged oral promise to postpone the foreclosure sale, and that the borrower had not shown detrimental reliance on that promise. 

 

The district court granted summary judgment.  Borrower appealed.  The Eighth Circuit affirmed.

 

As you may recall, Minnesota's "foreclosure-by-advertisement" statute allows a mortgagee to postpone a previously scheduled foreclosure sale, but requires the "party requesting the postponement" to publish notice of the postponement."  Minn. Stat. § 580.07, subdiv. 1.
 
In addition, the MCAS defines 'credit agreement" as "an agreement to lend or forbear repayment of money . . . or to make any other financial accommodation" and prohibits a debtor from "maintain[ing] an action on a credit agreement unless the agreement is in writing, expresses consideration, sets forth the relevant terms and conditions, and is signed by the creditor and debtor."  Minn. Stat. § 513.33, subdiv. 1(1), subdiv. 2.  

 

Further, the MCAS precludes claims based on an "agreement by a creditor to take certain actions, such as . . . forbearing from exercising remedies under prior credit agreements" unless the agreement meets the preceding four requirements.  Minn. Stat. § 513.33 subdiv. 3.

 

In rejecting the borrower's various arguments, the Eighth Circuit ruled that the notice requirements of the foreclosure-by-advertisement statute were never triggered in this case.  In so ruling, the Court pointed out that notice of postponement is only required in situations where the foreclosure sale is actually postponed by the mortgagee and that Borrower's complaint was that the sale had not been postponed.   The Court also held that Borrower had failed to provide any support for invalidating a properly noticed foreclosure sale.

 

Turning to Borrower's promissory estoppel argument, the Eighth Circuit ruled that the oral promise was a "financial accommodation" under the MCAS and as such was a "credit agreement" required to be in writing in order to be enforceable.  The Court explained "[b]ecause foreclosure is a means of enforcing a debt, a promise to postpone the foreclosure sale falls squarely within the plain meaning of a forbearance agreement and is thus a 'credit agreement' within the meaning of the MCAS."

 

The Eighth Circuit also rejected Borrower's assertions that she detrimentally relied on the oral promise not to foreclose.  In so doing, the Court noted that the evidence failed to show that Borrower would have taken steps to cure the loan default before the foreclosure sale.

 

 

Ralph T. Wutscher
McGinnis Tessitore Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874
Email: RWutscher@mtwllp.com
 

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FYI: Cal App Ct Rules Lenders Not Entitled to File "Lambert Motions" as to Mechanics Liens and Stop Notices

The California Court of Appeal, Third District, recently held that lenders were not entitled to file a so-called "Lambert motion" to release a mechanics lien and stop notice, ruling that the lenders were sufficiently protected by a trust deed and had no protectable interest in funds committed to a construction project for work already performed.
 
A copy of the opinion is available at: 

http://www.courts.ca.gov/opinions/documents/C060707.PDF.

 

Plaintiff construction firm performed construction services for developers engaged in a commercial development project for which a number of banks (collectively, the "Defendant Banks") provided a loan secured by a deed of trust on the property.  Later, the property developers defaulted on the construction loan and allegedly ordered the Plaintiff to stop all work on the project.  Plaintiff immediately recorded a mechanics lien against the developers' real and personal property for over $2 million in construction services already provided.  The Plaintiff also served the Defendant Banks with a "stop notice" for the same amount. 

 

In Plaintiff's subsequent suit to enforce its mechanics lien and stop notice, the Defendant Banks filed a cross-complaint against the Plaintiff, seeking a declaration that their deed of trust was superior to the Plaintiff's mechanics lien.  The Defendant Banks also filed a so-called "Lambert motion" (an expedited procedure whereby a landowner may obtain relief from having its construction project suspended indefinitely by an unjustified lien) to set aside the mechanics lien and stop notice.  

 

In support of their motion, the Defendant Banks filed declarations explaining that the Plaintiff had already been reimbursed through insurance proceeds for most of what it claimed to be owed.  In opposition, the Plaintiff asserted in part that because it had assigned its rights under the mechanics lien and stop notice to the insurer, the full amount claimed was still subject to the stop notice.

 

The trial court granted the Defendant Banks' "Lambert motion" for release of the mechanics lien and stop notice, concluding that the Plaintiff had failed to present evidence as to the validity of its claims. 

 

The Defendant Banks then moved for attorneys' fees, and Plaintiff moved for a new trial.  Plaintiff argued that the trial court had overlooked evidence supporting its claim and further that the court improperly granted the "Lambert motion," as such a motion was intended to protect property owners, not lenders.

 

Explaining that it had not overlooked any evidence, the trial court denied the Plaintiff's motion for a new trial, but did not address whether a Lambert motion was a proper method for resolving the mechanics lien and stop notice claims.  The trial court also denied the Defendant Banks' motion for attorneys' fees.

 

The Plaintiff appealed the order granting the Defendant Banks' Lambert motion, and the Defendant Banks appealed the order denying their motion for attorneys' fees.  The Court of Appeal reversed the order granting the Lambert motion.

 

As you may recall, California law provides in part that a recorded mechanics lien constitutes a direct lien on the real property improved to the extent of the interests of the owner or the person who caused the improvement to be constructed.  See Cal. Civ. Code §§ 3128, 3129.  In addition, a "stop notice" establishes a lien on the unexpended balance of construction loan funds, but does not attach to the land itself, thereby surviving foreclosure of a trust deed.  See Cal. Civ. Code §§ 3156.  

 

The appellate court began its analysis by noting various remedies available to contractors stemming from California's constitutional mandate to enact lien statutes protecting contractors for work performed.  In so doing, the Court pointed out that, although the recording of a mechanics lien or a stop notice constitutes a Fourteenth Amendment taking of an owner's property, the procedures available to the owner afford sufficient due process protections against any unjustified mechanics liens.   See Connolly Development, Inc. v. Superior Court, 17 Cal. 3d 803, 809, 827-28 (1976). 

 

The Court observed, however, that where a lien claimant has already filed suit to foreclose its lien, a property owner may file a Lambert motion, an expedited procedure whereby a landowner may obtain relief from having its construction project suspended indefinitely by an unjustified lien.   See Lambert v. Superior Court, 228 Cal. App. 3d 383, 387 (1991). 

 

Turning to the circumstances presented in this case, the Appellate Court noted the California Supreme Court's emphasis that "[n]either the recording of a mechanics' lien nor the filing of a stop notice constitutes a taking of the lender's property.  The mechanics' liens attaches to the landowner's realty; the stop notice garnishes the landowner's credit; neither encumber property of the lender."  Connolly, supra, 17 Cal.3d at 814. 

 

Accordingly, the Appellate Court rejected the Defendant Banks' assertion that their interests were at stake because the property owner defaulted on the construction loan and the loan funds had thus reverted to them.  The Court ruled that, although "any remaining loan funds after payment for work completed before default" may revert to a lender, the Defendant Banks had no protectable interest in the funds in this case.  The Court explained that "since the banks had already committed the funds to the construction project, and their interests were protected by their security interest in the property, the same concerns do not apply to them."  

 

Consequently, the Appellate Court ruled that the trial court had deprived the Plaintiff of its due process right to trial in granting the Lambert motion where the Defendant Banks' property interests were not at stake.  The Court thus reversed the lower court's order granting the motion to set aside the lien and stop notice, and remanded with directions to deny the motion.

 

In light of its ruling, there was no need for the Court to address the Plaintiff's arguments for a new trial, the Defendant Banks' appeal of the denial of their motion for attorneys' fees, or any issues relating to the insurance payments.   

 

Ralph T. Wutscher
McGinnis Tessitore Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874
Email: RWutscher@mtwllp.com
 

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FYI: Feds and CFPB Issue MOU on Coordination of Supervisory Activities

The CFPB today released the attached a Memorandum of Understanding (MOU) with four other federal regulators (FRB, FDIC, NCUA, and OCC), clarifying how the agencies will coordinate their supervisory activities.  The MOU is dated May 16, 2012.

As you may recall, section 1025 of the Dodd-Frank Act provides that the Consumer Financial Protection Bureau (CFPB) has exclusive authority to require reports and conduct periodic examinations relating to various consumer financial laws and issues, as to insured depository institutions and their affiliates with more than $10 billion in assets.  Similarly, section 1024 provides the CFPB comparable supervisory authority with respect to certain entities that are not insured depository institutions with total assets of $10 billion or more.

 

However, both sections also require that the CFPB work with the prudential regulators to: (1) coordinate the scheduling of examinations; (2) conduct simultaneous examinations of insured depository institutions with more than $10 billion in assets and their insured depository institution affiliates, unless the institution requests separate examinations; (3) share draft reports of examinations with the other supervising agency, and provide the receiving agency with opportunity to comment on the draft report before it is made final; and (4) take into consideration any concerns raised by the other agency before issuing the CFPB's final report of examination.

 

Toward these ends, the regulators announced that, under the attached MOU, the agencies will work with each other and share materials concerning:

* Compliance with federal consumer financial laws and certain other federal laws that regulate consumer financial products and services;
* Consumer compliance risk management programs;
* Activities such as underwriting, sales, marketing, servicing, collections, if they are related to consumer financial products or services; and
* Other related matters that the agencies may mutually agree upon.

According to the regulators, "[t]hese coordination undertakings should lead to greater uniformity and efficiencies in supervision and help to minimize regulatory burden on covered depository institutions."

 

 

Ralph T. Wutscher
McGinnis Tessitore Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874
Email: RWutscher@mtwllp.com
 

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FYI: 4th Cir Holds 1-Yr Statute of Limitations Under West Virginia's CCPA Begins to Run At Acceleration

The U.S. Court of Appeals for the Fourth Circuit recently held that the one-year statute of limitations period in West Virginia's Consumer Credit and Protection Act began to run as of the date of loan acceleration when all outstanding loan amounts became due and payable, and not from the loan maturity date over two decades in the future.

 

A copy of the opinion is available at: 

http://pacer.ca4.uscourts.gov/opinion.pdf/111139.P.pdf.

 

Plaintiffs ("Borrowers") obtained a mortgage refinancing loan that was secured by a deed of trust.  The trust deed provided for optional loan acceleration in the event of default.  After the Borrowers had made a number of late payments, the loan servicer ("Servicer") assessed late payment fees. 

 

The parties subsequently entered into a loan modification agreement, which extended the loan maturity date to the year 2030.   Nevertheless, the Borrowers were unable to make their payments on time, and the Servicer eventually exercised its right to accelerate the loan, demanding immediate payment of the loan in full.  

 

Shortly thereafter, the Servicer initiated foreclosure proceedings, but on the date scheduled for the foreclosure sale of the Borrowers' property, the Borrowers filed a petition for bankruptcy protection.  The Servicer ceased the foreclosure action and filed a proof of claim in the bankruptcy proceedings for the balance due.  

 

Almost two years after the Servicer accelerated the loan, and while the bankruptcy proceedings were still pending, the Borrowers filed a putative class action, claiming that the Servicer had improperly assessed late fees in violation of the West Virginia Consumer Credit and Protection Act, W. VA. Code §§ 46A-1-101-46A-8-102 ("WV Consumer Credit Act").
 
The Servicer filed a motion for summary judgment, arguing that the Borrowers' claims were time-barred under the WV Consumer Credit Act's one-year statute of limitations. The district court granted summary judgment, ruling that the one-year limitations period began to run as of the date of loan acceleration.  The Fourth Circuit affirmed.

 

As you may recall, the statute of limitations in the WV Consumer Credit Act provides in pertinent part: "[w]ith respect to violations arising from . . . consumer loans, no action pursuant to this subsection may be brought more than one year from the due date of the last scheduled payment of the agreement."  W. Va. Code § 46A-5-101(1).

 

In analyzing whether "due date of the last scheduled payment of the agreement" referred to the loan maturity date, or to the loan acceleration date, the Court concluded that the statute unambiguously referred "to the last date under the parties' agreement providing for payment of a specified loan amount."  In so ruling, the Court reasoned that the parties' "agreement" included not only the original payment schedule set forth in the promissory note, but also the acceleration clause contained in the deed of trust.
 
Rejecting the Borrowers' assertions that the acceleration date was not a "last scheduled payment date" for purposes of the statute of limitations, the Court pointed out that the deed of trust expressly provided that, upon acceleration, "all sums secured by this Security Instrument . . . shall at once become due and payable."  Thus, according to the parties' "agreement, the event of acceleration materially altered the parties' original schedule of payments, allowing the lender to demand full payment of the loan amount upon the borrower's default." 

 

Thus, the Fourth Circuit held that, once the Servicer exercised its right to demand full payment, the entire loan amount became due, thereby triggering the one-year statute of limitations under the WV Consumer Credit Act. 

 

 

Ralph T. Wutscher
McGinnis Tessitore Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874
Email: RWutscher@mtwllp.com
 

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FYI: US Sup Ct Holds Secured Creditor Entitled to "Credit Bid" as to BK Sale of Collateral Free of Creditor's Lien

The U.S. Supreme Court recently held that, under the cramdown provisions of the Bankruptcy Code, a secured creditor must be permitted to "credit bid" at a sale of collateral as part of a proposed bankruptcy reorganization plan, where the plan provided for the sale of the collateral free of the creditor's lien.

 

A copy of the opinion is available at: 

http://www.supremecourt.gov/opinions/11pdf/11-166.pdf.

 

Debtors obtained a construction loan for purposes of renovating commercial property and constructing an adjacent parking structure.  The lender ("Bank") secured the loan with a lien on all of the Debtors' assets.  Eventually, the Debtors ran out of money and were forced to cease the construction project.  The Debtors filed for reorganization under Chapter 11 of the Bankruptcy Code and submitted their proposed plan to the Bankruptcy Court for the Northern District of Illinois. 

 

The plan proposed in part to sell substantially all of the Debtors' assets pursuant to procedures set forth in their "Sale and Bid Procedures Motion" ("Procedures").  The Procedures proposed that the Debtors' assets would be sold at auction to the highest bidder, but prohibited the Bank from "credit-bidding," that is, offsetting the amount paid for the collateral against the debt owed.  Instead, the Procedures required the Bank to bid cash.  The Debtors sought confirmation of the reorganization plan pursuant to the cramdown provisions of Section 1129(b)2(A) of the Bankruptcy Code.

 

The Bankruptcy Court denied the Debtors' proposed Procedures, ruling that the proposed Procedures failed to comply with Section 1129(b)(2)(A)'s requirements for cramdown plans.  The Seventh Circuit affirmed, ruling that Section 1129(b)(2)(A) does not permit debtors to sell an encumbered asset free and clear of a lien without permitting the lienholder to credit-bid.  

 

The U.S. Supreme Court affirmed in a unanimous decision.

 

As you may recall, Section 1129(b)(2)(A) provides that a Chapter 11 cramdown plan must meet one of three requirements in order to be deemed "fair and equitable" with respect to non-consenting creditors' claims.  Specifically, the cramdown plan must provide:

 

"(i)(I) that the holders of [secured] claims retain the liens securing such claims . . . to the extent of the allowed amount of such claims; and (II) that each holder of a claim . . . receive on account of such claim deferred cash payments totaling at least the allowed amount of such claim . . . ;

 

(ii) for the sale, subject to section 363(k) . . . of any property that is subject to the liens securing such claims, free and clear of such liens, with such liens to attach to the proceeds of such sale, and the treatment of such liens on proceeds under clause (i) or (iii) of this subparagraph; or

 

(iii) for the realization by such holders of the indubitable equivalent of such claims."  11 U.S.C. § 1129(b)(2)(A).

 

Section 363(k), in turn, provides in part that "the holder of such claim may bid at such sale, and if the holder of such claim purchases such property, such holder may offset such claim against the purchase price of such property." 

Summarizing Section 1129(b)(2)(A), the Supreme Court explained that:  under clause (i) the secured creditor retains its lien on the property and receives deferred cash payments; under clause (ii), the property is sold free and clear of the lien, "subject to section 3639(k)" and the creditor receives a lien on the sale proceeds; and, under clause (iii) the cramdown plan provides the secured creditor with the "indubitable equivalent" of its claim.   The Court also noted that section 363(k) in clause (ii) expressly allows the creditor to credit-bid at the sale, up to the amount of its claim.

 

Relying on the so-called "general/specific canon" of statutory interpretation, the Court noted that where "a general authorization and a more limited, specific authorization exist side-by-side," the terms of the specific authorization must be complied with.  See D. Ginsberg & Sons, Inc. v. Popkin, 285 U.S. 204, 206, 208 (1932) ("[g]eneral language of a statutory provision, although broad enough to include it, will not be held to apply to a matter specifically dealt with in another part of the same enactment").

 

The Court thus ruled that, because clause (ii) is a detailed provision that spells out the requirements for selling collateral free and clear of liens, while clause (iii) is a broadly worded provision that says nothing about such a sale, the "general language" of clause (iii) did not apply to a proposed sale of property under clause (ii).

 

Recognizing that the general/specific canon is not an absolute rule, the Court noted that the Debtors failed to point to any provision in the Bankruptcy Code that would refute the court's reading of the statute.    The Court also found no validity in the Debtors' argument that the Court's reading of Section 1129(b)(2)(A) required compliance with more than one clause. 

 

The Court also rejected the Debtors' contention that clauses (i) and (ii) were merely two "safe harbor" methods of achieving the "indubitable equivalent" in clause (iii).  The Court stated, "the [existing] structure of [Section 1129(b)(2)(A)] would be a surprisingly strange manner of accomplishing that result – which would normally be achieved by setting forth the "indubitable equivalent" rule first (rather than last), and establishing the two safe harbors as provisos to that rule." 

 

Accordingly, concluding that all of the requirements of clause (ii) must be satisfied where debtors seek to sell the property free of liens, the Court ruled that the Debtors were not permitted to sell the collateral free of any liens without allowing the Bank to credit-bid. 

 

Ralph T. Wutscher
McGinnis Tessitore Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874
Email: RWutscher@mtwllp.com
 

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