memo of law in support of debtors motion for reconsideration of relief from stay
TRANSCRIPT
UNITED STATES BANKRUPTCY COURTFOR THE MIDDLE DISTRICT OF FLORIDA
ORLANDO DIVISIONIN RE:
Case No: 6:11-bk-17271
P.A.C., INC.,
Debtor(s).
______________/
MEMORANDUM IN SUPPORT OF DEBTOR’S MOTION FOR RECONSIDERATION OF
ORDER GRANTING RELIEF FROM AUTOMATIC STAY
COMES NOW the Debtors, P.A.C., INC., and files this Memorandum of Law in Support of
Debtor’s Motion for Reconsideration of Order Granting Relief from Automatic Stay to commercial
landlord creditors KEITH NOTARY and MICHAEL NOTARY.
TABLE OF CONTENTS
TABLE OF AUTHORITIES………………………………………………………………………1
PRELIMINARY STATEMENT……………………………………………………………………2
SUMMARY OF ARGUMENT…………………………………………………………………….3
STATEMENT OF FACTS………………………………………………………………………..4
ARGUMENT…………………………………………………………………………………..5
I. STAY RELIEF SHOULD NOT BE GRANTED TO THE DEBTOR’S LANDLORD BECAUSE THE LANDLORD HAS ACTED IN BAD FAITH AND WITH ULTERIOR MOTIVES TO RE-TAKE POSSESSION OF THE LEASED PREMISES IN BREACH OF WRITTEN AND ORAL AGREEMENTS WITH THE DEBTOR BECAUSE THE LANDLORD RECEIVED A MORE ATTRACTIVE OFFER FROM ANOTHER POTENTIAL TENANT OR PURCHASER……………………………..7
II. THE DEBTOR CONVERTED THIS CASE FROM CHAPTER 7 TO CHAPTER 11 IN GOOD FAITH AND OUT OF ABSOLUTE NECESSITY BECAUSE DEBTOR’S LANDLORD INFLATED ITS CLAIMS IN STATE COURT IN ORDER TO PREVENT THE DEBTOR FROM ASSERTING
AVAILABLE DEFENSES TO THE LANDLORD’S BAD FAITH EVICTION ACTION……….…….9
III. STAY RELIEF IS PREMATURE PURSUANT TO 11 U.S.C. §362(d) AND THE DETRIMENT TO THE DEBTOR AND THE ESTATE IF STAY RELIEF IS GRANTED SEVERELY OUTWEIGHS THE HARDSHIP TO THE LANDLORD BECAUSE DEBTOR’S EFFECTIVE REORGANIZATION IS DEPENDENT UPON ASSUMING THE SUBJECT LEASE AND CASE ADMINISTRATION THROUGH BANKRUPTCY WILL MAXIMIZE THE BENEFIT TO THE LANDLORD………………………………..…………………………………………..10
CONCLUSION……………………………………………………………………………………..15
TABLE OF AUTHORITIES
11 U.S.C. §361—Adequate Protection11 U.S.C. §362(d)—Automatic Stay11 U.S.C. §365(b)—Executory Contracts and Unexpired Leases
Fla. Stat. 725.01—Promise to Pay Another’s Debts, Etc. Fla. Stat. 83.08—Lanldord’s Lien for Rent Fla. Stat. 83.11—Distress for Rent; Complaint Fla. Stat. 83.12—Distress Writ Fla. Stat. 83.201—Notice to Landlord For Failure to Maintain or Repair; Rendering Promises
Wholly Untenable; Right to Withhold Rent Fla. Stat. 83.232—Unpaid Rent into Registry of Court
Xanadu of Cocoa Beach v. Zetley, 822 F.2d 982 (11th Cir. 1987)In re Phoenix Piccadilly, Ltd, 849 F.2d 1393 (11th Cir. 1988)Pegasus Wireless Corp v. Tsao, No. 09-14683 (11th Cir. 2010)In re Davis Heritage GP Holdings, LLC, 443 B.R. 448 (Bankr. N.D. Fla. 2011)In re 1633 Broadway Mars Restaurant Corp, 388 B.R. 490 (Bankr. S.D.N.Y., 2008)In re Mack, 347 B.R. 911 (Bankr. M.D. Fla. 2006)
PRELIMINARY STATEMENT
The Debtor filed for Chapter 7 bankruptcy relief on November 15, 2011, represented by Attorney
Barry Brumer. The sole creditor, Landlords Michael Notary and Keith Notary, filed a motion for relief
from stay on December 23, 2011(D.E. 9). The court held an evidentiary hearing on the landlord’s motion
for relief from stay on February 13, 2012, and granted the landlord’s motion but withholding entry of an
Order for 14 days to allow the debtor to convert to Chapter 11 (D.E. 14). The debtor retained the law
firm of The Advocates Law Office, PLLC, and attorney Catherine J. Jones, and filed a notice of
conversion to Chapter 11 on February 27, 2012 (D.E. 15) along with several emergency motions,
including a motion for reconsideration of the order granting stay relief to the landlord (D.E. 22). An
evidentiary hearing on Debtor’s motion for reconsideration of the order granting stay relief is scheduled
for March 12, 2012 at 3:00pm.
SUMMARY OF ARGUMENT
The totality of the circumstances surrounding the pre and post petition actions and
motives of the debtor and the primary secured creditor preclude an order granting stay relief to
the landlord because the landlord has acted in bad faith to attempt to evict the Debtor in
Possession six years prior to expiration of the lease because the landlord has entered into
negotiations with a potential future lessee or purchaser of the subject property who has offered
the landlord either a higher lease payment or a purchase price lower than the value of the
debtor’s going concern, which necessitates getting rid of the Debtor in Possession.
The landlord filed an eviction action in state court with an inflated claim for rent due.
Florida statues require a tenant to place the full amount of rent claimed due in the court registry
before the tenant is permitted to raise defenses to an eviction action. The landlord claimed an
inflated amount due that made it impossible for the Debtor in Possession to comply with the
registry rules. A hearing was set to determine the amount due and the Debtor in Possession
sought mediation to resolve disputes based on the Debtor in Possession’s claims for damages
associated with the landlord’s lease breaches, lease concessions in association with those
breaches, and the landlord’s waiver of full contractual lease payments.
The landlord has made no “legitimate effort” to enforce its rights under the lease, has
refused to discuss the dispute, and has done everything possible to frustrate the Debtor in
Possession’s efforts to cure the lease arrears, including threatening the debtor and debtor’s
contractor post-petition.1 The landlord’s actions are the primary reason the debtor filed for
1 After the debtor filed a petition for relief under Chapter 7, the Landlord, Keith Notary, appeared at the
lease premises while the auctioneer was on site and threatened the debtor for filing a bankruptcy petition. Keith
Notary threatened to double the claimed amount due if the debtor continued to contest the eviction or the amounts
claimed to be due. Keith Notary is also suspected of cutting the Freon line to the debtor’s coolers after the debtor
file the bankruptcy petition. Keith Notary was seen at the premise location in the area near the lines on the day they
were cut and had no reason to be at the premise that day. The Debtor in Possession, in an effort to preserve the
estate, was forced to pay to fix the intentionally cut line. The Landlord, Keith Notary, also threatened the service
technician who repaired the line. The technician and auctioneer are available to testify to these facts if required.
bankruptcy protection and have made the bankruptcy courts the only venue in which the Debtor
in Possession can effectively reorganize and exercise its right to cure and assume the lease.
Further, the subject leased property is absolutely necessary to the effective reorganization of the
Debtor in Possession.
The Debtor in Possession acted in good faith in converting its Chapter 7 case to Chapter
11. The reason the debtor initially filed for protection under Chapter 7 rather than Chapter 11 are
unclear. However, conversion to Chapter 11 was done in a timely manner and with absolutely
no intent to abuse the judicial process or otherwise frustrate or delay in repaying what the debtor
rightfully owes the landlord.
Stay relief is premature pursuant to 11 U.S.C. §362(d). If stay relief is granted, the
debtor, the estate and the landlord will suffer greater detriment than benefit because 1) the
landlord filed deficient eviction pleadings which are subject to dismissal; 2) the landlord has
failed to perfect any statutory lien on the debtor’s property and has failed to post the required
bond of $132,000 necessary to perfect the lien; 3) the debtor and the estate will incur increased
legal expenses to defend against the landlord’s inflated claims; 4) the debtor and the estate will
have to fund the registry before defending against the eviction; and 5) the debtor and the estate
will incur additional legal expenses associated with defending the eviction action itself.
However, if the stay remains in effect and the Debtor in Possession is permitted to have an
evidentiary hearing on the arrearages due, the debtor can to cure and assume the lease, the
landlord will receive the entire amount deemed to be owed and the debtor will be able to
continue operating the business due to successful reorganization.
STATEMENT OF FACTS
The Debtor signed a lease with landlords Michael Notary and Keith Notary (hereinafter
“Landlords”) in 1997. The debtor leased approximately 4000 square footage, which included 33
parking spaces. The debtor applied for and successfully obtained a 4COP liquor license for the
premises based upon its interest in the leased property. The 4COP license required the tenant to
have at least 2000 square feet indoor space, at least 100 seats, and at least 33 parking spaces.
The debtor met those conditions based upon the original lease. At all times, the Landlords knew
the debtor intended to operate a full liquor bar in the leased premises.
In 1999, the Landlords unilaterally reduced the debtor’s square footage to 3062 and
installed a partition wall to enable the Landlords to lease the subdivided area of the premises to
other businesses. The debtor consented to the reduction in leased square footage when it
executed the renewed lease in 2004, which clearly delineated the portions of the building that
were included in the lease. Pursuant to the 2004 lease, the Landlords agreed not to lease the
subdivided premises to nuisance businesses. The 2004 lease required the debtor to continue
operating as a bar/lounge, to include food business and to comply with all government laws,
ordinances, and regulations necessary for the particular business. Thus, in 2004, the debtor was
still required to have and the Landlord consented to the debtor retaining by renewing the lease,
all 33 parking spaces.
In 2005, the Landlords leased to a day-labor business which proved to be a nuisance
business. The day-labor business, known as Ace Staffing, brought drug addicts, severe
alcoholics and homeless vagrants to the debtor’s parking lot and establishment. Many of the Ace
Staffing laborers were severely lacking in personal hygiene and the debtor’s patrons would not
sit in seats previously occupied by the day laborers due to the smell. The debtors’ business
severely declined due to the presence of the Ace Staffing and its day laborers. Additionally, the
police were frequently at the debtor’s establishment to arrest laborers for various crimes.
The Landlords evicted Ace Staffing in 1999 and agreed to waive four months rent for the
debtor. When the debtor continued to struggle recovering from the negative impact the nuisance
business caused, the Landlords agreed to continue accepting reduced rent and in 2006, agreed to
accept $2000 per month in lieu of the contract rental rate. Pursuant to Paragraph 3 of the
debtor’s lease, the Landlord consented to abatement, diminution or reduction of rents or other
charges payable by the debtor under the lease for “any interruption, cessation or loss of service to
or business of tenant” which was directly or indirectly caused by the Landlord.
The Landlords have now installed another nuisance business that draws drug addicts and
loiterers to populate the parking lot and areas external to the debtor’s establishment. The new
nuisance is a smokeshop or hooka lounge. The DEA and Sheriff’s department have repeatedly
been to the smokeshop in an effort to shut it down or to catch the owners selling illegal drugs.
Part of the 1998 and 2004 lease also gave the debtor exclusive use of the lighted sign in
front of the premises. Despite this lease provision, the landlord required the debtor to split the
sign with the Landlord’s other tenants because of a city ordinance requirement. Despite losing
exclusive rights to the sign, the Debtor has paid all of the electricity for the Landlord’s other
tenants’ use of the sign since 1999.
Pursuant to Section 8 of the 2004 lease, as amended by the 2007 amendment, the
Landlord’s consent is required for all changes to the premises. The Landlord, pursuant to
Section 9 of the lease is responsible for all exterior repairs and all interior structural repairs. The
Landlord agreed at all times at their expense to keep the building roof, exterior walls, grounds
and parking area in good condition and repair. Though not explicitly listed in the lease, the
landlord, by excluding the tenant from making interior structural repairs, is also liable for interior
structural repairs and maintenance.
During the term of the lease, the Debtor has had to pay to replace three A/C condenser
units, despite the condenser units being outside. The Landlord told the debtor to proceed with
each repair and indicated the Landlord would repay the debtor for any repairs. The Landlord has
failed to repay the debtor for said repairs.
In early 2010, the Landlord hired an unlicensed electrician to repair a breaker that
continued to go bad. The unlicensed electrician replaced two breakers with one breaker that was
insufficient to handle the amp load for the debtor’s business. The breaker went bad three times
in the course of one year before the Landlord agreed to hire a licensed contractor to make the
necessary repair. In the meantime, the debtor’s electricity bills skyrocketed from an average of
$420 per month to approximately $800 per month. Due to the increased bills, the electric utility
company demanded an increased deposit.
In the summer of 2011, just before the eviction notice was filed, the Landlord agreed
after the Debtor received a citation from the health department because of the conditions of the
bathrooms, to remodel the bathroom for the debtor. The bathroom was in disrepair due to water
damage caused by roofing leaks that damaged interior walls. The landlord cut a large hole in the
interior wall, leaving exposed wall studs and exposing the debtor’s business to an infestation of
palmetto bugs. The bug infestation further decreased the debtor’s clientele. The debtor treated
the infestation but the Landlord has failed the repair the hole in the wall. The Landlord has also
failed to adequately repair the hole in the roof that caused the damage. In addition to the bug
infestation, the bathroom remodel caused the debtor’s cooler to flood because the unlicensed,
unpermitted contractor did not properly install a urinal drain.
The leased premise has multiple roof leaks, window leaks, and door leaks. The Landlord
has “repaired” the roof leaks by either applying caulk to the leak location or by installing
unpermitted piping to re-route the water through the debtors building to the exterior. The
Landlord has failed to adequately repair any leaking doors or windows, causing the debtor to
maintain overnight security of the building during heavy rains to ensure the interior does not
flood or otherwise cause the debtor to be unable to carry on normal business operations after a
heavy storm. One bathroom still floods after every rain due to the roof and window leak.
Pursuant to Section 4 of the 2004 lease as amended by the 2007 amendment, the
Landlord agreed to pay stormwater fees and dumpster fees. The landlord has failed to pay any of
these required fees and debtor has been forced to pay all assessed fees in order to preserve its
interest in operating its business. The total amount of unpaid stormwater and dumptster fees paid
by the Debtor is approximately $9,730.00.
The Debtor has been communicating with the Landlord and continually attempting to
reasonably resolve any disputes arising under the terms of the 2004 lease agreement as amended
by the 2007 amendment. The debtor has communicated with the Landlord and, until the eviction
suit was filed, has never failed to pay as agreed based on pre-arranged rent reductions or waivers.
The Debtor has been paying $2,000 per month in rent for nearly six years with consent of the
Landlord.
The landlord is aware that the Debtor has been trying to sell the bar to a willing buyer and
agreed to extend the Debtors lease for that purpose. The debtor has been approached by multiple
interested buyers. However, because of the Landlord’s other tenants using the Debtor’s parking
spaces, most potential buyers cite the lack of parking as a basis for not making an offer on the
business. One such potential buyer, who intends to turn the leased premise into a strip club,
approached the Landlords and offered to pay a higher lease premium or purchase the building
directly from the landlord rather than buy out the debtor’s business. It was after this potential
buyer approached the landlord that the eviction suit was filed, citing past due rent in excess of
$66,000, which tallied rent at the contract rate with no offsets or adjustments which should have
been applied pursuant to Section 3 of the lease. The debtor calculates the rent arrearages, not
including any offset and based upon the consensual decreased rental rate, to be approximately
$31,300 from November 2007 through March 12, 2012.
ARGUMENT
Whether cause exists to grant stay relief is determined on a case by case basis and upon the
totality of the circumstances in a particular case. The totality of the circumstances of a case
encompasses not only the debtor’s pre and post petition actions and motives, but also the
creditor’s pre and post petition actions and motives. Cause may exist where there is lack of
adequate protection of an interest in property; where proceedings have already progressed
significantly on the issues in another court; where prejudice against the debtor is outweighed by
a hardship to the creditor; or where the debtor has filed a case in bad faith. In re Mack, 347 B.R.
911 (Bankr. M.D. Fla. 2006)
A debtor is deemed to have filed for Chapter 11 bankruptcy relief in bad faith where there is
evidence of intent to abuse the judicial process and the purposes of the reorganization provisions
or where the petition was filed to delay or frustrate the legitimate efforts of the secured creditors
to enforce their rights. Factors that tend to indicate that a debtor has filed in bad faith include:
1) The debtor has only one asset, the Property, in which it does not hold legal title;2) The debtor has few unsecured creditors whose claims are small in relation to the claims
of the secured creditors;
3) The debtor has few employees;4) The Property is the subject of a foreclosure action as a result of the arrearages on the
debt;5) The debtor’s financial problems involve essentially a dispute between the debtor and the
secured creditor which can be resolved in the pending state court action;6) The timing of the debtor’s filing evidences intent to delay or frustrate;7) The debtor chooses a venue other than that where the property and parties are located;
In re Phoenix Piccadilly, Ltd, 849 F.2d 1393 (11th Cir. 1988);
8) There is no realistic possibility of an effective reorganization9) The debtor has failed to demonstrate any attempt to reorganize post-filing
Pegasus Wireless Corp v. Tsao, No. 09-14683 (11th Cir. 2010)
10) The debtor proposes a plan that really only benefits the debtor or debtor’s insiders while diminishing the benefit to the single creditor
11) The debtor’s has demonstrated or failed to demonstrate honesty and forthrightness with the court and the creditors
12) The debtor has nothing to reorganize (no assets, no income, no taxes, no accounts receivable, no inventory, no bank account, no insurance, no expenses, etc.)
In re Davis Heritage GP Holdings, LLC, 443 B.R. 448 (Bankr. N.D. Fla. 2011)
I. STAY RELIEF SHOULD NOT BE GRANTED TO THE DEBTOR’S LANDLORD BECAUSE THE LANDLORD HAS ACTED IN BAD FAITH AND WITH ULTERIOR MOTIVES TO RE-TAKE POSSESSION OF THE LEASED PREMISES IN BREACH OF WRITTEN AND ORAL AGREEMENTS WITH THE DEBTOR BECAUSE THE LANDLORD RECEIVED A MORE ATTRACTIVE OFFER FROM ANOTHER POTENTIAL TENANT OR PURCHASER.
If a party intentionally frustrates another’s performance, in cannot prevail in an action against
the non-performing party premised on the missed performance. A litigant seeking relief must
have acted fairly and without fraud or deceit as to the controversy in issue. In re 1633 Broadway
Mars Restaurant Corp, 388 B.R. 490 (Bankr. S.D.N.Y., 2008).
In the present case, the landlord has frustrated the Debtor in Possession’s leasehold interest
for nearly the entire duration of the lease. The landlord has made multiple concessions in
recognition of its lease breaches and has accepted decreased rent for nearly six (6) years without
complaint. The landlord further made multiple concessions with the debtor, including repayment
arrangements wherein the debtor provided the landlord with pre-dated checks that the landlord
failed to deposit. Only after the debtor met with one potential buyer, did the landlord start
seeking enforcement of the original lease terms. Landlord, Michael Notary has admitted that the
potential buyer has offered to purchase the subject property. The Debtor In Possession’s
investigation into the matter since the Landlords started pursing eviction has revealed that the
landlords have made multiple trips to the city commission and zoning board to inquire about
installing an adult entertainment establishment in the debtor’s leased premises.
Once the Debtor in Possession filed for bankruptcy protection, the landlord allegedly
attempted to sabotage the debtor by cutting the Freon lines to the debtor’s coolers. The landlord
further threatened the debtor to increase the unpaid rent claim to $80,000. The landlord has done
nothing reasonable or legitimate in its effort to collect past due rents and has frustrated all
attempts by the debtor to cure lease breaches.
II. THE DEBTOR CONVERTED THIS CASE FROM CHAPTER 7 TO CHAPTER 11 IN GOOD FAITH AND OUT OF ABSOLUTE NECESSITY BECAUSE DEBTOR’S LANDLORD INFLATED ITS CLAIMS IN STATE COURT IN ORDER TO PREVENT THE DEBTOR FROM ASSERTING AVAILABLE DEFENSES TO THE LANDLORD’S BAD FAITH EVICTION ACTION.
a) The Landlord is Not Making a “Legitimate Effort” to Enforce Its Rights Under the Lease
Florida Statue, §83.232, requires the tenant in any action which includes a claim for
possession of real property to “pay into the court registry the amount alleged in the complaint as
unpaid.” If the tenant contests the amount to be paid, it is limited to arguing issues related only
to 1) being properly credited for rent payments already made, and 2) what properly constitutes
rent under the provisions of the lease. The tenant cannot raise any other issues in defense of an
eviction action without first depositing the statutory or court-ordered amount in the registry. In
this case, the Debtor in Possession would not be able to defend against the action without first
depositing $66,030 in the court registry because the debtor would not be able to make any
equitable arguments related to amounts due in the initial hearing.
However, pursuant to the protections afforded the Debtor in Possession under Equitable
Defenses under 11 U.S.C. §361, §362(d), and §365(b), the Debtor in Possession is not
immediately required to pay into a registry, and has 90 days from the order of relief, not
including court-ordered extensions, to file a plan of reorganization that will allow the debtor,
upon determination of the amount legitimately due, to pay the landlord in full and resume normal
business operations.
The landlord’s bad faith inflation of the amounts due in an effort to prevent the Debtor in
Possession from raising its available equitable defenses, including waiver, laches, reformation,
part performance, breach of implied contract and equitable estoppels, so the landlord can proceed
with their own, more favorable plans for the property amount to an illegitimate effort to enforce
rights under the lease and should not be rewarded by this court.
b) Bad Faith Factors Must Be Considered in Tandem with Evidence of Intent to Abuse the Judicial Process and Intent is Lacking in This Case
Factor Application to This Case Intent1) The debtor has only
one asset, the Property, in which it does not hold legal title;
2) The debtor has few unsecured creditors whose claims are small in relation to the claims of the secured creditors
The debtor has a leasehold interest that expires December 31, 2018. It has been operating a successful bar business since its inception, with the exception of damages incurred due to landlord’s lease breaches, and is a going concern with substantial goodwill within the community. The debtor expended a great deal of time and effort to convert the subject property into a 4COP premise, which further enhances the value of the debtor’s interest in and emphasizes the importance of the debtor maintaining possession of the subject property.
The debtor has few unsecured creditors because of its shareholder’s experience operating bar establishments. The sole unsecured creditor is the single shareholder, who has loaned substantial amounts of money to the debtor to keep the business afloat when landlords have caused substantial damage to the business due to lease breaches. The debtor’s secured creditor claims are relatively small and will be easily curable in a short term reorganization.
The debtor has no intention of depriving the landlord of the rent that is rightfully due. The debtor sought relief in Chapter 11 only after the landlord refused to comply with previous agreements or discuss the dispute and instead held the debtor hostage in state court to inflated past due rents claims.
The debtor is not trying to avoid or minimize the amount paid to secured creditors. The landlord’s actions and refusal to comply with lease terms and other agreements, forced the debtor to seek bankruptcy protection to force the landlord to allow the debtor to cure what is owed under the lease.
3) The debtor has few employees
4) The Property is the subject of a foreclosure action as a result of the arrearages on the debt
5) The debtor’s financial problems involve essentially a dispute between the debtor and the secured creditor which can be resolved in the pending state court action
6) The timing of the debtor’s filing evidences intent to delay or frustrate
7) The debtor chooses a venue other than that where the property and parties are located
The debtor has few employees because it has made every effort to cut expenses in order to recover the business after landlord’s multiple lease breaches; the debtor does not require a large staff in order to effectively operate.
The landlord suggests in its objection to debtor’s motion for reconsideration that the subject property is now in foreclosure due to the debtor’s rent arrearages.
It is true that the debtor’s financial problem involves solely a dispute between the debtor and landlord, the issue cannot be resolved in state court because the landlord inflated the amount due so that debtor would be unable to pay the claimed amount into the court registry, which is required before the debtor can defend against the eviction action. The landlord refused to attend mediation or otherwise negotiate because the landlord has ulterior motives to take possession of the property.
The debtor did everything prior to filing for Chapter 11 protection to get the landlords to come to the table to discuss the landlord’s claims of amounts due and the debtor’s claim for offsets, concessions, and waivers.
The landlord claims the debtor is forum shopping. Case law referencing forum shopping in the context of bad faith finds that debtors who file bankruptcy actions in a venue other than that where the dispute arises, where the property is
In cases where the number of employees was a factor, the debtor was usually a bankruptcy remote entity holding title to a single asset with no income or expenses.
A review of the official property and court records finds no evidence of any mortgage, lis pendens or foreclosure action against the subject property.
Stay protection and opportunity to reorganize and assume the lease pursuant to the bankruptcy code is the only way the debtor can survive the landlord’s false claims and their attempts to force the debtor out of the property before the lease expires so they can take advantage of a better prospect.
The debtor did not want to file bankruptcy at all but believes it is the only way the landlord will be forced to comply with the lease and other agreements and the only way the debtor will be able to effectively reorganize.
The debtor filed the bankruptcy case in the appropriate venue.
8) There is no realistic possibility of an effective reorganization
9) The debtor has failed to demonstrate any attempt to reorganize post-filing
10) The debtor proposes a plan that really only benefits the debtor or debtor’s insiders while diminishing the benefit to the single creditor
located and where the parties are located, are acting in bad faith.
Because the debtor’s primary creditor is the debtor’s landlord and the amount of arrears the debtor owes after asserting all defenses, claims, and offsets is small, the debtor’s chances of an effective reorganization are extremely likely. The debtor’s shareholder is liquidating a vacant lot and will make the proceeds of that sale available to the debtor upon court approval.
The debtor is saving money so that it can cure the arrears and assume the lease upon determination of the amount due under the lease. The debtor has put forth a feasible plan in a timely manner and slight operational changes in debtor’s business have increased the debtor’s revenue and ability to rapidly cure and assume the lease.
The debtor’s plan benefits the landlord because the landlord receives the entire amount determined to be owed for past due rent. The plan does not benefit the debtor’s insider because the insider is actually liquidating assets to ensure the debtor is capable of curing, assuming the lease, and continuing to operate.
The debtor’s only chance of an effective reorganization is through Chapter 11 because the landlord has ulterior motives to take possession of the property and will only comply with the terms of the lease and subsequent agreements under federal court order.
The debtor converted to Chapter 11 on February 27, 2012. The debtor’s reorganization plan will be filed on or before April 12, 2012. The debtor will filed motions for 2004 examinations, seek an evidentiary hearing and file a motion for mediation in an attempt to rapidly determine the arrearages due and the amount required to cure and assume the lease.
The debtor has incurred great expense to try to get the landlord to comply with the lease and other agreements and is doing everything possible to make the landlord whole. The landlord on the other hand is doing everything possible to derail any reorganization that results in the debtor maintaining
11) The debtor has demonstrated or failed to demonstrate honesty and forthrightness with the court and the creditors
12) The debtor has nothing to reorganize (no assets, no income, no taxes, no accounts receivable, no inventory, no bank account, no insurance, no expenses, etc.)
The debtor has made every effort to disclose all assets, expenses and liabilities to the Court. The debtor has amended schedules when revenue increased and has disclosed to the Court all aspects of this case.
The debtor has a going concern and a lease that does not expire until 2018. The debtor has a pledge of an additional $15-20,000 from the debtor’s sole insider as well as a steadily increasing revenue stream, inventory, expenses, etc. It has a food license that it has not used but that will contribute to the effective reorganization and further increase revenue. It has the ability under the Chapter 11 to resume karaoke, live music and other events that it could not do while dealing with the state court eviction action.
possession of the subject building.
The landlords have mislead the court about the lease expiration date, the waiver of full lease payments, the lease concessions, the pending foreclosure action and the landlord’s true intentions with respect to the subject property.
The debtor has not filed a case with no hope or unrealistic hope of reorganizing. The debtor filed a case with great reorganization prospects and a bad faith creditor who continued to intentionally frustrate the debtor’s efforts to effective operate the business and to cure rent arrears.
III. THE DETRIMENT TO THE DEBTOR AND THE ESTATE IF STAY RELIEF IS GRANTED SEVERELY OUTWEIGHS THE HARDSHIP TO THE LANDLORD BECAUSE DEBTOR’S EFFECTIVE REORGANIZATION IS DEPENDENT UPON ASSUMING THE SUBJECT LEASE AND CASE ADMINISTRATION THROUGH BANKRUPTCY WILL MAXIMIZE THE BENEFIT TO THE LANDLORD.
In re Mack—1) Lack of adequate protection of an interest in property2) Extent to which proceedings have already progressed on the issues in another court3) Prejudice against the debtor vs. hardship to the creditor
Debtor has 90 days from order of relief (or later date as determined by order (i.e. order permitting debtor to convert to CH11) or 30 days after court determines debtor is subject to this paragraph—the debtor has filed a plan of reorganization that has reasonable possibility of being confirmed within a reasonable time (362(d))
CONCLUSION
Therefore
Executed on March 10, 2012./s/ Catherine Jones
Catherine J. JonesFlorida Bar No. 0709271E-mail: [email protected] T. Harper, Jr.Florida Bar No. 0143103E-mail: [email protected] Advocates Law Office, PLLC306 Brevard Avenue, Ste. FCocoa, FL 32922Ph: (321) 392-2400Fax: (321) 400-1121Attorneys for Debtor
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that I have forwarded a true and correct copy of the foregoing Motion by United States Regular Mail, postage prepaid, (or by electronic servicing where appropriate on March 10, 2012 to all interested parties on the attached matrix.
_______________________________Catherine J. JonesAttorneys for Debtor