In re Dewey Commercial Investors, L.P.

503 B.R. 643, 2013 WL 6622910, 2013 Bankr. LEXIS 5261
CourtUnited States Bankruptcy Court, E.D. Pennsylvania
DecidedDecember 16, 2013
DocketNo. 13-17294-MDC
StatusPublished
Cited by1 cases

This text of 503 B.R. 643 (In re Dewey Commercial Investors, L.P.) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, E.D. Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Dewey Commercial Investors, L.P., 503 B.R. 643, 2013 WL 6622910, 2013 Bankr. LEXIS 5261 (Pa. 2013).

Opinion

MEMORANDUM

MAGDELINE D. COLEMAN, Bankruptcy Judge.

INTRODUCTION

Before this Court for consideration is LEI SS Investor LP’s (the “Movant” or “LEI SS”) Motion for (i) Dismissal of Chapter 11 Case Pursuant to 11 U.S.C. § 1112 or, (ii) alternatively, Relief from Automatic Stay Pursuant to 11 U.S.C. § 362 (the “Motion”). LEI SS requests that the Court dismiss the Chapter 11 ease of the Debtor, Dewey Commercial Investors, L.P. (the “Debtor” or “Dewey”) pursuant to 11 U.S.C. § 1112(b) for cause including that the petition was filed in bad faith. In the alternative, the Movant requests relief from the automatic stay pursuant to 11 U.S.C. § 362(d) to permit it to cause the transfer of the Debtor’s 79.52% Class B limited partnership interest in DCI-Station Square, L.P. (the “Partnership”). As set forth in its Objection dated October 7, 2013 (the “Objection”), the Debtor opposes dismissal arguing that it seeks Chapter 11 relief to enable it to “reorganize its affairs” and to avoid “the attendant distraction of legal action over the transfer of the [Partnership Interest].” Objection, ¶¶ 45 & 52. Following a hearing on the issues and consideration of the evidence, this Court will grant the Motion and enter an Order dismissing the Debt- or’s bankruptcy case as a bad faith filing involving a two party dispute and filed without a valid bankruptcy purpose.1

PROCEDURAL HISTORY

On August 21, 2013 (the “Petition Date”), the Debtor filed a voluntary petition for relief under Chapter 11 of Title 11 of the United States Code, as amended (the “Bankruptcy Code”) (the “Chapter 11 Case”). A week later, the Debtor filed its schedules. The Debtor’s schedules reveal that it owns no real estate. It lacks secured creditors and any creditors who may hold unsecured priority claims. The Debt- or only identifies one unsecured creditor, the Movant, on its List of Creditors Holding 20 Largest Unsecured Creditors. The Debtor scheduled the Movant as the holder of a disputed claim in the amount of $8,974,636.00.2

As of the date of the hearing on the Motion, three creditors had filed proofs of claim. On September 24, 2013, PECO Energy Company filed a claim in the amount of $210.82 relating to unpaid utility bills. On October 11, 2013, SGS Concrete, Inc. filed a claim in the amount of $126,758.84 relating to goods sold to the Debtor. Fi[647]*647nally, on October 14, 2013, the Movant filed a claim for an unliquidated amount that is alleged to be not less than $7,792,000.00 relating to the Movant’s damages resulting from the Debtor’s alleged prepetition breach of a partnership agreement. According to the Debtor’s claims register, the Debtor’s total indebtedness is $7,918,969.66 of which 98.4% is owed to the Movant.

The Debtor’s property interests are similarly limited. The Debtor’s schedules identify five assets: (1) a commercial checking account with a balance of $375.00; (2) a 2012 New Jersey state tax refund in the amount of $2,960.00; (3) an executory management contract with Dewey Commercial Management, L.P.; (4) a 99.00% limited partnership interest in Dewey Commercial Management, L.P.; and (5) a 79.52% Class B limited partnership interest in the Partnership (the “Partnership Interest”). The Debtor states that the total value of these assets is worth $7,795,336.00. Of this amount, $7,792,000.00, or 99.96% of the Debtor’s assets, is attributable to the Partnership Interest.

On September 20, 2013, the Movant filed the Motion. The Movant sought dismissal of the Chapter 11 case on the grounds that (1) the Debtor filed its Chapter 11 petition in bad faith and solely for the improper purpose of preventing the transfer of the Partnership Interest, rather than to maximize value for creditors of the Debtor’s estate, (2) the Debtor will not be able to satisfy the plan confirmation requirements of § 1129 of the Bankruptcy Code, and (3) the Chapter 11 case constitutes a two-party dispute between the Movant and Debtor. The Debtor filed its Objection asserting that “[t]he dispute between the Debtor and the Movant involves more than two parties ...” Objection, ¶ 54. With regard to the Debtor’s opposition to the Movant’s request for relief from the automatic stay, the Debtor contends that relief should be denied on the grounds that it holds significant equity in the Partnership Interest and that the Partnership Interest is necessary for an effective reorganization. Objection, ¶ 128.

On October 15, 2013, the Court held a hearing on the Motion. At that time, the Movant presented evidence in support of both its request for dismissal and its request for relief from the stay. The Mov-ant presented the testimony of John Ga-ghan, the Movant’s Vice President. Mr. Gaghan testified regarding, among other things, the Movant’s financial dealings with the Partnership and the Debtor, the parties’ dispute relating to the Partnership Interest, and the status of the Movant’s efforts to transfer the Partnership Interest from the Debtor to Movant.

In support of its Objection, the Debtor presented the testimony of John Dewey. Mr. Dewey is the Managing Member of the Debtor’s General Partner, Dewey Commercial Investors, LLC. Mr. Dewey testified regarding the value of the Partnership Interest, the Debtor’s equity in the Partnership Interest, and the purpose of the Debtor’s bankruptcy filing including the proposal of a plan of reorganization providing for payment of the monies owed to the Movant.

At the close of the Hearing, this Court took the matter under advisement. Consistent with its obligations under Fed. R. Bankr.P. 7052, this Court provides the following explanation of its reasons for granting the Motion and ordering dismissal of this bankruptcy case.

FACTUAL BACKGROUND

Pursuant to an Amended and Restated Agreement of Limited Partnership dated January 23, 2013 (the “Partnership Agree[648]*648ment”),3 the Debtor and the Movant are limited partners of the Partnership.4 The Partnership is the owner of certain real property that consists of a 346-unit apartment complex in Lansdale, Pennsylvania (the “Property”). Prior to the execution of the Partnership Agreement, the Movant was the owner of a mezzanine loan in the original principal amount of $13,599,302 (the “Mezzanine Loan”) issued to the Partnership and secured by, among other things, the Property and the Debtor’s interest in the Partnership. The parties entered into the Partnership Agreement for the purpose of facilitating the refinancing of the Partnership’s senior indebtedness to Fannie Mae. The effect of the refinancing was a lowered interest rate from 6.44% to 3.71% which resulted in a significant increase in the net operating income of the Partnership as well as the overall value of the Partnership itself.

To accomplish this refinancing, Fannie Mae requested the Partnership to pay off the Mezzanine Loan. However, the Partnership was unable to come up with the funds necessary to pay off the Mezzanine Loan.

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Cite This Page — Counsel Stack

Bluebook (online)
503 B.R. 643, 2013 WL 6622910, 2013 Bankr. LEXIS 5261, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-dewey-commercial-investors-lp-paeb-2013.