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| vol 14, num 2 | October, 2017 |
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| Free-and-Clear Bankruptcy Sales: There’s This Little Thing Called “Due Process” |
| After a bankruptcy case closed, a third party (CVC) sued the purchaser (ADM) of property acquired from the debtors in a bankruptcy sale. CVC claimed that it had a right of first refusal (ROFR) with respect to the property. In response, ADM contended that the ROFR did not survive the “free and clear” bankruptcy sale. At the request of ADM, the bankruptcy court reopened the bankruptcy case to consider the issue.[1]
The debtors’ chapter 11 plan of reorganization provided for an auction of their grain facility assets, including certain real estate. The court held confirmation and sale hearings, and approved the plan of reorganization and sale of assets to the purchaser (including the real estate in question). Although it appears that the ROFR was not explicitly addressed in the court hearings, it was a recorded document, and the debtors gave a title report to ADM showing the CVC right of first refusal before the sale closed.
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| Losing Your Lease: Ninth Circuit Permits Stripping Leasehold Interests Under § 363(f) |
| What happens when property of the estate that a trustee or debtor-in-possession proposes to sell “free and clear” is subject to unexpired lease interests? The resolution of this question requires the reconciliation of two separate provisions of the Bankruptcy Code that most often operate independently and in isolation. The first provision, 11 U.S.C. § 363(f), permits a trustee or debtor in possession[1] in bankruptcy to sell assets of the estate free and clear of third-party interests. The second provision, § 365(h), permits a debtor in possession or trustee to reject an unexpired lease of property of the estate, with the lessee retaining
the option of treating the entire lease as terminated or remaining in possession of the property. |
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©2017 American Bankruptcy Institute . All rights reserved.
66 Canal Center Plaza, Suite 600, Alexandria, VA 22314 |
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