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Vol 13, Num 2 l June 2016

Technology and Intellectual Property

► In This Issue:

HSBC Bank USA N.A. v. Zair: Debtors Cannot Vest Collateral in Secured Creditors Against Their Will

ABI

Megan W. Murray
Trenam Law
Tampa, Fla.

Hurricane Sandy was the deadliest hurricane in the 2012 hurricane season and the second-costliest hurricane in U.S. history. It was Sandy that came ashore on Oct. 29, 2012, with a vengeance and destroyed the Zairs’ home, which was located within the jurisdiction of the U.S. Bankruptcy Court for the Eastern District of New York. The Zairs moved to a new home and abandoned their “Sandy home.” Two years later, they filed a chapter 13 bankruptcy and sought to force their primary lender, HSCB Bank USA, N.A., to assume title to their zombie Sandy home.

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Bankruptcy Court Authorizes Rejection of Certain Executory Contracts

ABI

Gary Philip Nelson
Sherrard, German & Kelly, PC
Pittsburgh, PA

ABI

William T. Fahey III
Sherrard, German & Kelly, PC
Pittsburgh, PA

On May 3, 2016, Hon. Shelley C. Chapman of the U.S. Bankruptcy Court for the Southern District of New York ruled that covenants contained in certain executory contracts do not run with the land and may be rejected pursuant to § 365 of the Bankruptcy Code. In re Sabine Oil & Gas Corp., et al. involved agreements between the Sabine Oil & Gas Corp. (“Sabine”), an independent energy company engaged in the exploration and production of oil and natural gas, Nordheim Eagle Ford Gathering, LLC (“Nordheim”) and HPIP Gonzales Holdings, LLC (“HPIP”).

In applying Texas law, the court stated that “a covenant runs with the land when (1) it touches and concerns the land; (2) it relates to a thing in existence or specifically binds the parties and their assigns; (3) it is intended by the original parties to run with the land; and (4) the successor to the burden has notice.”

Focusing on the “touch and concern” prong of the test, the court addressed the Nordheim and HPIP assertion that oil and gas “produced and saved” is a dedication of minerals and therefore “touches and concerns” real property. The court stated that burdening the oil and gas “produced and saved,” — i.e., as a royalty interest — does not burden the oil and gas that remains in the ground. Under Texas law, minerals extracted from the ground constitute personal property, not real property, and therefore do not “touch and concern” the land.

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In re Sunnyslope Housing L.P.: Ninth Circuit Uses Foreclosure Valuation in Cramdown Where Debtor Retains Affordable Housing Apartment Complex

ABI

Daniel R. Fogarty
Stichter, Riedel, Blain
& Postler, P.A.
Tampa, Fla.

Section 506(a) of the Bankruptcy Code provides that a claim is secured “to the extent of the value of such creditor’s interest in the estate’s interest in such property,” and that for purposes of determining a secured claim, the value of collateral “shall be determined in light of the purpose of the valuation and of the proposed disposition or use of such property.” However, with a few exceptions, § 506 does not specify a valuation methodology.

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In for a Penny, In for a Pound: Condominium Liens and Anti-Modification Clause of Bankruptcy Code

ABI

Timothy P. Duggan
Stark & Stark, PC
Trenton, N.J.

There are legions of cases interpreting the anti-modification clause of the Bankruptcy Code in the context of stripping off, cramming down or bifurcating residential mortgages. However, when it comes to other security interests recorded against residential properties, the law is not so clear.

In In re Rones, the U.S. District Court for the District of New Jersey analyzed the anti-modification clause in a case involving a condominium lien filed in New Jersey. In reversing the bankruptcy court, the district court held that a properly filed condominium lien is subject to the protections of the anti-modification clause under § 1322‌(d)‌(2) and cannot be stripped off the debtors’ home under the “one dollar” rule.

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