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(3) Lastly, the court overruled a bankruptcy court in In re RBGSC Inv. Corp., 253 B.R. 369 (Bankr.
E.D. Pa. 2000) to the extent that it held that "non-core claims against non-debtors are rendered core because of close business relationships between the debtor and non-debtors or 'intertwinement' with a claim against a debtor..." Instead, courts should engage in claim-by-claim analysis to determine whether a claim is core.
Facts: The debtor, a co-obligor on a note securing certain real property, sought - in a motion - to abandon such property to the mortgagee in full satisfaction of the mortgagee's secured claim. The secured creditor objected to the debtor's motion.
(1) Whether a debtor may abandon property in full satisfaction of a secured claim outside the plan confirmation process.
(1) Under In re Sandy Ridge Dev. Corp., 881 F.2d 1346 (5th Cir. 1989), "a debtor may transfer property directly to a secured creditor in full satisfaction of that creditor's secured claim as long as the transferred property is the 'indubitable equivalent' of the claim... such an approach is permissible because, citing 11 U.S.C. § 1123(a)(5), 'a plan may include a 'give-back'... Section 1125(a)(5) allows the 'distribution of all or any part of property of the estate' to creditors." But, under § 554(c), property may not be abandoned by the Debtor's estate directly to the secured lender because the bankruptcy code states that "property is either (a) 'abandoned to the debtor' when the case is closed... or, if the case is not closed, (b) abandoned to no one in particular, leaving anyone who claims to have any interest in the property to take whatever action under applicable law they deem appropriate to protect their interest."
Holding: Debtor's motion is granted in part: the Debtor may abandon the property to no one in particular.
Reasoning: Because the case is still open, the debtor can only abandon the property at issue to no one in particular. Thereafter, the secured lender (or anyone else) can exercise their rights, including foreclosure proceedings, pursuant to applicable state law. Once the secured lender exercises its rights against the property, the only claim it would have against the debtor's estate is an unsecured claim, which is calculated by determining the value of the property. The court gave the secured lender a limited amount of time to foreclose on the abandoned property and amend its proof of claim to assert an unsecured claim for any amounts it was not paid in the foreclosure.
Facts: During the course of an evidentiary hearing, the debtor's principal indicated on the record his conditional willingness to fund the administration costs of the estate as well as certain ongoing condemnation litigation (the "Litigation") for the benefit of the estate and the estate's secured lenders (the "Lenders"). Thereafter, the debtor and the Lenders entered into a settlement agreement that allowed the Lenders' a secured claim in the amount of $46.5 million and provided that the debtor could use the Lender's cash collateral to pay litigation expenses in the Litigation. The settlement also contained very broad releases. The award in the Litigation was not enough to pay the Lenders and the condemnation counsel; the Lenders moved to enforce the principal's statements that he would fund the Litigation. The debtor and the debtor's principal filed certain cross-motions and the condemnation counsel moved to enforce his charging lien.
