Monthly Archives: January 2012

Court denies lender’s motion to dismiss Section 547 preference action seeking to avoid valid foreclosure sale

  • Reed Smith LLP
  • Ann E. Pille
  • USA
  • ·         December 19 2011
  • Whittle Development, Inc. v. Branch Banking & Trust Co. et al. (In re Whittle Development Inc.) 2011 WL 3268398 (Bankr. N.D. Tex., July 27, 2011)      

CASE SNAPSHOT

The lender foreclosed on the borrower’s property after the borrower defaulted on its loan obligations. At the foreclosure sale, the property was sold to a subsidiary of the lender for less than the outstanding loan balance. Within one month following the foreclosure sale, the borrower filed for chapter 11 bankruptcy, and the lender filed a deficiency claim for the difference between the loan balance due and the amount of the credit bid at the foreclosure sale. Despite the fact that the foreclosure sale was operated in accordance with state law, the borrower argued that the value of the property exceeded the pre-foreclosure loan balance, and that the foreclosure sale was avoidable as a preferential transfer. The lender filed a motion to dismiss the preference claim, and the Bankruptcy Court denied the motion.

FACTUAL BACKGROUND

Whittle Development, Inc. was a real estate developer in Dallas, Texas. Whittle and the lender entered into a loan agreement secured by real property. After Whittle defaulted on its obligations, the lender notified Whittle of its intent to foreclose upon the property securing the note. A sale was held in conformity with all relevant state requirements, and the property was sold to a subsidiary of the lender for $1.2 million. Within a month, Whittle filed for bankruptcy, and the lender filed a deficiency claim for the roughly $1 million that remained due and owing following the foreclosure sale.

The debtor argued that there was no deficiency claim, contending that the property was worth $3.3 million. As such, the debtor contended that the lender received more than it would have under a chapter 7 liquidation, rendering the foreclosure avoidable as a preferential transfer under section 547 of the Bankruptcy Code. The debtor filed an adversary action, and the lender filed a motion to dismiss.  

COURT ANALYSIS

Under section 547 of the Bankruptcy Code, a transfer can only be avoided if the creditor received more than it would receive in a chapter 7 case. The lender argued that this requirement could not be met as a matter of law, because the Supreme Court’s decision in BFP v. Resolution Trust Corp. 511 U.S. 531 (1994), held that a non-collusive foreclosure sale conducted in accordance with state law was not avoidable because, as a matter of law, it provided “reasonably equivalent value” for the property transferred. The debtor countered that, if it could prove the property’s fair market value was $3.3 million, the lender did indeed receive more through foreclosure than it would have in a chapter 7 liquidation (i.e., both the property and a $1 million deficiency claim on a $2.2 million debt). Further, the debtor argued that BFP did not control the outcome of this case, because BFP dealt with a constructively fraudulent transfer under section 548, and that section’s requirement of “reasonably equivalent value” is distinguishable from section 547, which requires only that the creditor receive more than it would have under chapter 7 without regard to equivalent value. The debtor’s position was that the amounts bid at a foreclosure are not per se equal to the fair market value of the property. As such, it is possible that a creditor might receive more through a pre-petition foreclosure sale than it might have obtained in hypothetical chapter 7 liquidation. If true, the prong of section 547 at issue would be satisfied, and the transfer would be avoidable.

In declining to dismiss the preference claim, the court held that applying the BFP reasoning to a case involving section 547 was “misplaced.” In BFP, the Supreme Court analyzed what, as a matter of law, was meant by “reasonably equivalent value” under section 548. Section 547, however, does not require that value be reasonably equivalent; it requires only that a creditor receive an amount in excess of a hypothetical recovery. The court concluded that BFP was not controlling, and that the debtor’s complaint was sufficient to state a claim against the lender.  

PRACTICAL CONSIDERATIONS

Mere compliance with state law is insufficient to shield a foreclosure sale, and the benefits received therefrom, from a preference action. Secured lenders that wish to credit bid at a foreclosure sale need to be cognizant that a low-ball offer may subject them to liability if their borrower files for bankruptcy protection within 90 days after the foreclosure sale.

 


Charles
Charles Wayne Cox – Oregon State Director for the National Homeowners Cooperative
Email: mailto:Charles@BayLiving.com
Websites: http://www.NHCwest.com; www.BayLiving.com; and www.ForensicLoanAnalyst.com
1969 Camellia Ave.
Medford, OR 97504-5403
(541) 727-2240 direct
(541) 610-1931 eFax


Oakland OWS Update -from the ground in Oakland

From: charles@bayliving.com
To: charles@bayliving.com
Subject: Oakland OWS Update -from the ground in Oakland
Date: Thu, 5 Jan 2012 13:40:12 -0800

Charles,

 

The police department and DA’s office are really stepping it up.  People are planning to do a sit in at the mayor’s office this afternoon at 2 pm. Here is the comment/release I received, please forward widely to your network.

 

 

“Tonight, the OPD, assumedly backed by the city, acted with such complete disregard for the law that our immediate action is required in protest. At about 11pm, Sri Louise and I were at the Interfaith Umbrella on Frank Ogawa Plaza, making political signs and keeping an eye on a sweet puppy named Jasmine. Others around us were gathered in small clusters talking, using computers at a new power station someone had rigged up, and eating food some of us brought to share. There were maybe 50 or 60 people total. .It was all so peaceful and beautiful, and then the cry went out: “Riot Police! Watch out!” Sure enough, more than a dozen cruisers had pulled up at high speed and were now disgorging scores of police in riot gear, who immediately began advancing on us with no order to disperse, no warning, and no explanation of what they were doing. One protester, Sven La Rose, stepped forward and began to speak to the police about what they were doing. They had him on the ground in seconds and immediately handcuffed him. Meanwhile, I was nearly taken as I stopped to grab the blankets we had at the umbrella. Several police were advancing on me, forcing me forward and telling me to move or be arrested. Meanwhile, Sri was shouting for help moving a man who was drunk and asleep and who had a dog with him. We did get him up and out of harm’s way, but fourteen of our people were taken in all, including two who actually had left the scene and crossed the street to avoid arrest, and who were arrested by cops who deliberately broke away and went after them as targets. (Both are African American men who have demonstrated leadership in two different areas of the movement.) An attorney then appeared on the scene and offered to go with us to the jail to try to get people out, since they had clearly been arrested without the police following legal procedure. We marched there but were prevented from getting there by a line of police advancing on us and yelling for us to “Get back.” The attorney, Sri, several other witnesses and I then went around the corner to the public entrance to the jail lobby, which we entered. Immediately someone started saying over a PA that we were trespassing and needed to leave or be arrested. Meanwhile, someone opened the opposite door, and a group of protesters entered, and then several dozen sherriff’s deputies came out and told us we had ten seconds to choose one representative and get out. They then advanced on us while counting backward from ten, and we chose the attorney (who was lovely–I will get her name) and stood outside videotaping her through the glass. The deputies told her very aggressively to leave and go to the police station across the street where our people were being held. We did that, but the police station told us they had no holding facilities and that we should go back to the jail. It was a classic run-around consisting of blatant lies to an attorney who was trying to represent clients.

This action tonight is the most serious violation of first amendment rights I have ever seen. It is mind-boggling. We were doing nothing wrong. We were simply present in a public square as part of a movement that is being targeted for repression. We have to respond and respond with clarity of purpose and intent.

Please invite your clergy colleagues, right now, to join you at 2pm at the plaza. We propose to erect the canopy and then go into city hall to occupy the mayor’s and city administrator’s offices. I know this is short notice and that many of you haven’t been spending time at the plaza, nor do you know the people impacted by this. I don’t know how to say to you how upsetting and urgent this is. These people have done nothing wrong. They are political prisoners currently being held without charge. We must demand their release and the release of all Occupy Oakland political prisoners and an end to the police harassment of peaceful protesters.

Sri and I will lead an action with whoever will come with us. If you come, wonderful. If not, that’s fine, too. There will be a risk of arrest, of course, although an order to disperse should be given before arrests are made. I plan to use the nonviolence pledge to develop a set of requests we will ask protesters to agree to, including nonviolence and a spirit of love rather than revenge.

I am very sorry about the short notice, but next week is too late, and if we wait until Friday, we are likely to spend all weekend in jail.

It would be a great asset to have many members of the faith community present, but we will go with whoever is willing to go with us. Please wear clergy collars or other religious garb if you have it.

Thanks.”


Charles
Charles Wayne Cox – Oregon State Director for the National Homeowners Cooperative
Email: mailto:Charles@BayLiving.com
Websites: http://www.NHCwest.com; www.BayLiving.com; and www.ForensicLoanAnalyst.com
1969 Camellia Ave.
Medford, OR 97504-5403
(541) 727-2240 direct
(541) 610-1931 eFax

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DISCLOSURE: I AM NOT AN ATTORNEY AND NOTHING IN THIS EMAIL SHALL BE CONSIDERED OR CONSTRUED AS LEGAL ADVICE.  I am a California Business and Professions Code § 6450 qualified paralegal and only work as a paralegal when employed by an attorney or law firm. I am also a licensed California Real Estate Broker #01217620.  My license expires 10/09/2013. As a real estate broker, I am qualified to advise on real estate but I do not offer legal advice. If you have any questions concerning the legal sufficiency, legal effect, insurance, or tax consequences regarding any real estate or other matter, consult with your attorney, accountant, insurance agent, tax or other appropriate professional.

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Charles


IMPORTANT – California court holds the business judgment rule does not protect corporate officers in California‏

IMPORTANT – California court holds the business judgment rule does not protect corporate officers in California‏.


IMPORTANT – California court holds the business judgment rule does not protect corporate officers in California‏

California court holds the business judgment rule does not protect corporate officers in California
The business judgment rule is a longstanding corporate law principle that shields corporate directors from personal liability for their business decisions, even if the decisions lead to bad results, so long as the decisions are made in good faith, and with reasonable care and diligence. The business judgment rule recognizes the realities of business by not requiring directors to be liable for every business risk they take, or substituting a court’s judgment for that of a director.

Lawyers have generally believed that the protection of the business judgment rule extends to corporate officers as well as directors. However, a recent federal district court decision held that under California law, the business judgment rule does not insulate officers from liability for their mistaken decisions.

In Federal Deposit Insurance Corporation v. Perry , C.D. Cal., No. CV 11-5561 ODW (MRWx), December 13, 2011, IndyMac CEO Michael Perry was denied the protection of the business judgment rule in an action brought against him in his capacity as CEO. Mr. Perry moved to dismiss the FDIC’s claims that he negligently permitted the sale of US$10 billion in “risky” residential loans to the secondary market, arguing that the business judgment rule applied. The court disagreed, basing its decision on (1) the fact that California’s codified business judgment rule refers only to directors and not officers, (2) the existence of California legislative history that indicates omission of officers from the statute was intentional and (3) the absence of any direct California precedent holding that the business judgment rule protects officers as well as directors. One concept underlying this decision is the rationale that directors may rely on information received from corporate officers in making business decisions, while officers are closer to the business data and information on which decisions are based and therefore may be held to a higher standard of care.

This decision is significant to all corporate officers doing business in California (including corporate officers of out-of- state corporations doing business in the state), and may expose such individuals to lawsuits and liability for claims that they failed in their duties.

——————————————————————————–

Charles
Charles Wayne Cox – Oregon State Director for the National Homeowners Cooperative
Email: mailto:Charles@BayLiving.com
Websites: http://www.NHCwest.com; http://www.BayLiving.com; and http://www.ForensicLoanAnalyst.com
1969 Camellia Ave.
Medford, OR 97504-5403
(541) 727-2240 direct
(541) 610-1931 eFax


Bank of America working hard to screw Americans!‏

http://mattweidnerlaw.com/blog/2012/01/outrage-watch-bank-of-americayour-government-hard-at-work-screwing-americans/

http://www2.tbo.com/news/2012/jan/02/largo-man-nearly-loses-his-home-85236-vi-25544/?referer=http://www.facebook.com/l.php?u=http%3A%2F%2Ftbo.com%2Fvi%2F25544%2F&h=OAQEz9GT7AQEN3PLx_bkEKgjHdsC7EiImJsDv53lZ-3DJ9g&shorturl=http://tbo.ly/u3zmJI

Video.

(by the way, if you believe what they told him in the first place…I’ve got a bridge to sell you)

Charles
Charles Wayne Cox – Oregon State Director for the National Homeowners Cooperative
Email: mailto:Charles@BayLiving.com
Websites: http://www.NHCwest.com; http://www.BayLiving.com; and http://www.ForensicLoanAnalyst.com
1969 Camellia Ave.
Medford, OR 97504-5403
(541) 727-2240 direct
(541) 610-1931 eFax

NR 2012-1

FOR IMMEDIATE RELEASE
January 4, 2012
Contact: Bryan Hubbard
(202) 874-5770

OCC Releases Public Service Ads About the Independent Foreclosure Review
WASHINGTON — The Office of the Comptroller of the Currency today released print and radio public service advertisements to increase awareness of the Independent Foreclosure Review, announced in November 2011.

The public service items include a feature story, distributed to 7,000 small newspapers throughout the country, and two 30-second radio spots distributed to 6,500 small radio stations. The material will be distributed in English and Spanish. Below is the text of the feature story for use:

Your Independent Foreclosure Review
Did you face foreclosure in 2009 or 2010? If so, the Office of the Comptroller of the Currency says you may be eligible for a free independent review of your case.

Independent foreclosure reviews let borrowers who faced foreclosure on their primary residences between January 1, 2009 and December 31, 2010 request reviews of their cases if they believe they suffered financial injury as a result of errors in the foreclosure processes of these servicers: America’s Servicing Company, Aurora Loan Services, Bank of America, Beneficial, Chase,Citibank, CitiFinancial, Citi Mortgage, Country-Wide, EMC, EverBank/Everhome, Freedom Financial, GMAC Mortgage, HFC, HSBC, IndyMac Mortgage Services, MetLife Bank, National City, PNC Mortgage, Sovereign Bank, Sun-Trust Mortgage, U.S. Bank, Wachovia, Washington Mutual, and Wells Fargo.

The reviews will determine whether individuals suffered financial injury and should receive compensation or other remedies due to errors or other problems during their home foreclosure process. The reviews were ordered by the Office of the Comptroller of the Currency and the Board of Governors of the Federal Reserve in April 2011 after the federal regulators found unsafe and unsound mortgage servicing and foreclosure practices among these large, federally regulated mortgage servicers.

Situations that may have led to financial injury include, but are not limited to:

· The mortgage balance at the time of the foreclosure action was more than you actually owed.

· Fees charged or mortgage payments were inaccurately calculated, processed or applied.

· You were doing everything a modification agreement required but the foreclosure sale still happened.

· The foreclosure action occurred while you were protected by bankruptcy.

· A foreclosure proceeded on a military member in violation of Servicemembers Civil Relief Act protections.

More than 4 million letters were mailed to potentially eligible borrowers with request-for-review forms and instructions on how to complete and return them. The form lets you describe what you think went wrong. Simply answer the questions to tell your story, include any additional documents you think relevant and return the form by April 30, 2012.

If you believe you are eligible and have not received a form, you can request one from (888) 952-9105, Monday through Friday from 8 a.m. to 10 p.m. (ET) and Saturday from 8 a.m. to 5 p.m. (ET).

For additional information and answers to basic questions about the review process, visit http://www.IndependentForeclosureReview.com. Reviews are conducted by independent consultants working under the direction of the federal regulators and may take several months to complete.

You can learn more at www.occ.gov/independentforeclosurereview.

Related Links
Print Feature—Your Independent Foreclosure Review
Radio Script 1—Money Matters: Independent Foreclosure Review
Radio Script 2—Consumer Corner: Foreclosure Review
# # #

The Office of the Comptroller of the Currency (OCC) charters and oversees a nationwide system of national banks and federal savings associations and assures that these banking institutions are safe and sound, competitive, and capable of serving the banking needs of their customers in the best possible manner. OCC press releases and other information are available at http://www.occ.gov. To receive OCC press releases and issuances by e-mail, subscribe at http://www.occ.gov/tools-forms/subscribe/occ-email-list-service.html.

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