Triumph Investment Group, Inc.

UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
In re 	: 	Chapter 11
TRIUMPH INVESTMENT GROUP, INC. 	:
Debtor 	: 	Bankruptcy No. 09-10488bf
.................................................
STATEMENT OF REASONS IN SUPPORT OF ORDER
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AND NOW, Pinecrest National Funding, LLC, having filed a motion to
terminate the automatic stay,
And upon consideration of the debtor’s opposition thereto,
And the debtor filed a voluntary petition in bankruptcy under chapter 11 on
January 26, 2009,
And the debtor is a subchapter S Delaware corporation located in
Middletown, Delaware. It owns real property located at 747-49 North 63rd Street,
Philadelphia, Pennsylvania. It owns no other assets. Its sole shareholder is Mr. Richard
Ross. The debtor’s sole employee is Mr. Charles Myers, the son-in-law of Mr. Ross,
And Pinecrest received a promissory note from the debtor dated May 3,
2007 in the principal amount of $1,300,000. Ex. P-1. Interest payments only were due on
this note, with a balloon payment due on maturity: June 1, 2008. Id.,
And this note was secured by a mortgage on the 63rd Street realty. Ex. P-2,
And the debtor borrowed these funds from Pinecrest to refinance a prior
loan, and to complete renovations of the realty so that it could lease the realty to
commercial tenants,
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And when the debtor was unable to tender the balloon payment required on
June 1st, the parties agreed to modify the loan documents to extend the maturity date of
the loan until September 1, 2008. Motion and Answer, ¶ 6,
And on September 1, 2008, the debtor was unable to tender the balloon
payment and the loan was in default,
And Pinecrest sued the debtor in foreclosure and later in ejectment, and
obtained an order scheduling the debtor’s ejectment from the 63rd Street realty on
January 27, 2009. That ejectment, however, was stayed by the instant chapter 11
bankruptcy filing one day earlier,
And the debtor was unable to complete the renovations to the building and
has no cash on hand with which to do so,
And the debtor believes that the remaining renovations are located in the
non-public area portions of the building. It is attempting to rent the 4 story, 16,000 square
foot building on terms requiring triple net leases, with the tenants completing the
renovations needed for occupancy of their leaseholds,
And one potential tenant is an entity owned by Mr. Ross’s daughter who
would operate a day-care center,
And the debtor asserts that its only creditor is Pinecrest, with Pinecrest
contending that it is owed more than $1.5 million in principal and accrued interest. The
City of Philadelphia, though, has filed two secured proofs of claim, one for about $830
and the other for approximately $5,400, claiming unpaid water and sewer rents and
property taxes,
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And Pinecrest offered evidence that the 63rd Street property is worth only
$680,000 in its present condition as of December 9, 2008 and $950,000 if the building
were completed and fully rented. Ex. P-4. The appraiser, however, did not have access to
the interior of the building and thus made assumptions as to its condition, assumptions the
debtor contends are unfounded,
And the debtor maintains that the realty is worth more than Pinecrest’s
outstanding secured claim, but offered no admissible evidence as to current value,
And 11 U.S.C. § 101(51B) provides:
The term “single asset real estate” means real property
constituting a single property or project, other than residential
real property with fewer than 4 residential units, which
generates substantially all of the gross income of a debtor who
is not a family farmer and on which no substantial business is
being conducted by a debtor other than the business of
operating the real property and activities incidental.
And 11 U.S.C. § 362(d) states:
On request of a party in interest and after notice and a
hearing, the court shall grant relief from the stay provided
under subsection (a) of this section, such as by terminating,
annulling, modifying, or conditioning such stay–
***
(3) with respect to a stay of an act against single asset real
estate under subsection (a), by a creditor whose claim is
secured by an interest in such real estate, unless, not later than
the date that is 90 days after the entry of the order for relief
(or such later date as the court may determine for cause by
order entered within that 90-day period) or 30 days after the
court determines that the debtor is subject to this paragraph,
whichever is later–
(A) the debtor has filed a plan of reorganization that has a
reasonable possibility of being confirmed within a reasonable
time; or
(B) the debtor has commenced monthly payments that–
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(i) may, in the debtor’s sole discretion,
notwithstanding section 363(c)(2), be made
from rents or other income generated before, on,
or after the date of the commencement of the
case by or from the property to each creditor
whose claim is secured by such real estate
(other than a claim secured by a judgment lien
or by an unmatured statutory lien); and
(ii) are in an amount equal to interest at the then
applicable nondefault contract rate of interest on
the value of the creditor’s interest in the real
estate[.]
And, as one commentator has concluded:
Section 362(d)(3), added by the Bankruptcy Reform Act of
1994, and amended by the Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005, provides that relief from
the stay of acts against ‘’single asset real estate,’‘ as defined
in section 101, must be granted unless, within the latest of (1)
90 days after the order for relief, (2) such longer period as the
court determines during the initial 90-day period or (3) 30
days after the court determines that the debtor is subject to the
single asset real estate provisions, the debtor files a
reorganization plan that has a reasonable possibility of being
confirmed within a reasonable time, or the debtor has
commenced monthly payments equal to interest at the then
applicable nondefault contract rate of interest on the value of
a consensual lien creditor’s interest in the property.
***
The purpose of section 362(d)(3) is to address perceived
abuses in single asset real estate cases, in which debtors have
attempted to delay mortgage foreclosures even when there is
little chance that they can reorganize successfully. Section
362(d)(3) attempts to shorten such cases by requiring that the
court grant relief from the stay if a reasonable plan is not filed
promptly or payments are not commenced. The court may, of
course, grant relief under subsection 362(d)(1) or (2) when it
is appropriate to do so even if the the applicable time period
in subsection (d)(3) has not run. This might occur, for
example, if the court determines that the case was commenced
in bad faith and that the debtor is not entitled to bankruptcy
relief.
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Prior to the amendment, in a single asset real estate case the debtor was obligated1
to either commence interest payments or file a viable plan within 90 days from the
commencement of the case. See In re Pensignorkay, Inc., 204 B.R. 676, 683 (Bankr. E.D. Pa.
1997) (“Since, the Debtor did not file a Chapter 11 plan within 90 days after the filing of its
petition, LC is entitled to relief from the automatic stay pursuant to Code § 362(d)(3).”). The
2005 amendment to section 362(d)(3) modified the filing deadline, probably because it was
unclear in some instances whether a case was indeed a single asset real estate case. Thus, the
2005 amendment added a 30-day deadline from the court’s finding on that issue.
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Although technically the court may condition or modify the
stay rather than terminate it, it appears that the legislative
intention was to terminate the stay when the debtor neither
proposes a viable plan nor makes payments to the secured
party. A court should refuse to terminate the stay only when
there is a strong reason for offering lesser relief.
3 Collier on Bankruptcy, ¶ 362.07[5], [b] (footnotes omitted),
And the Bankruptcy Abuse and Consumer Protection Act of 2005, Pub. L.
No. 109-8, § 444, amended section 362(d)(3) by adding, inter alia, the phrase “or 30 days
after the court determines that the debtor is subject to this paragraph, whichever is later.”
The legislative history states that this amendment “requires a court to grant relief from the
automatic stay within 30 days after it determines that a single asset real estate debtor is
subject to this provision.” H.R. Rep. No. 109-31, Pt. 1, at 95, 109th Cong., 1st Sess.
(2005), 1
And I hereby conclude that Pinecrest holds a secured claim on real estate
that is single asset real estate within the meaning of section 101(51B) and that the
provisions of section 362(d)(3) are applicable,
And as the 90 period from the date of the commencement of this case has
expired, the debtor shall have 30 days from the date of this order to file a plan of
reorganization “that has a reasonable possibility of being confirmed within a reasonable
time.” In re ACA Real Estate LLC, 2008 WL 4899024, at *1 (Bankr. M.D.N.C. Nov. 12,
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As the debtor has no tenants nor other income generated from the realty, it2
apparently could not comply with the pay provisions of section 362(d)(3)(B)(i).
I appreciate that Pinecrest’s motion is broadly written and would include relief3
under subsections 362(d)(1) and (2). A viable reorganization plan, however, may provide
adequate protection under section 362(d)(1) and meet a debtor’s burden under section
362(d)(2)(B).
Given my discretion in applying section 362(d), see, e.g., In re Sonnax Industries,
Inc., 907 F.2d 1280, 1286 (2d Cir. 1990); In re Wilson, 116 F.3d 87, 89 (3d Cir. 1997), and given
that this motion was filed four days after this case commenced and the original hearing date was
postponed with the consent of the movant, affording the debtor 30 days to demonstrate a viable
reorganization plan consistent with amended section 362(d)(3) seems appropriate in these
circumstances.
Section 363(e) permits a final hearing to be held more than 30 days from the4
conclusion of the preliminary hearing when required by compelling circumstances.
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2008); In re Kara Homes, Inc., 363 B.R. 399, 407 (Bankr. D.N.J. 2007). 	Absent such a2
filing, the bankruptcy stay shall be terminated. 3
An appropriate order shall be entered, with a final hearing scheduled shortly
after the 30-day plan submission period has expired. 4
____________________
BRUCE FOX
United States Bankruptcy Judge
Dated: April 23, 2009
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