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Keywords

equitymotionbankruptcychapter 11 bankruptcylegal counselliens

motionbankruptcypartnership

Related Cases

In re Darrell Creek Associates, L.P., 187 B.R. 908, 8 Fourth Cir. & D.C. Bankr. 269

Facts

Darrell Creek Associates, L.P. filed for Chapter 11 bankruptcy on March 10, 1995, with Wachovia Bank holding significant claims against the debtor secured by mortgage liens on real property in South Carolina. The debtor had entered into a workout agreement with Wachovia in 1993, which restructured its debts and included a waiver of the automatic stay. Despite various challenges, including damage to infrastructure and legal issues, the debtor failed to meet the terms of the agreement, leading Wachovia to seek relief from the stay.

Debtor filed a petition under Chapter 11 of the Bankruptcy Code on March 10, 1995. Debtor is a South Carolina general partnership in which the general partner is Island Land Company, a South Carolina General Partnership.

Issue

Whether the waiver of the automatic stay in the workout agreement was enforceable and whether cause existed for lifting the stay.

One of the primary issues raised in this case is that of the enforceability of the waiver of stay contained in the Workout Agreement.

Rule

Prepetition agreements containing waivers of stay are enforceable in bankruptcy, and the burden is on opposing parties to demonstrate that such waivers should not be enforced.

Pre-petition agreements, such as the waiver of stay agreement in this case, are enforceable in bankruptcy.

Analysis

The court found that the debtor understood the terms of the waiver of stay, as the agreement was negotiated with legal counsel and the debtor's principal was an experienced real estate developer. The court also noted that the waiver was clearly stated in the agreement and that the debtor had voluntarily entered into it to obtain time for project development. The court considered the lack of equity in the property and the debtor's inability to demonstrate a realistic chance of successful reorganization.

The principal of the Debtor testified that this Agreement was negotiated over a very long period of time and that it was an active negotiation. Further, he testified that he made comments on certain provisions through the course of this negotiation. Clearly, the evidence is undisputed that during at least a portion of these negotiations, the Debtor was represented by counsel.

Conclusion

The court granted Wachovia's motion for relief from the automatic stay, concluding that the debtor had not shown a reasonable likelihood of effective reorganization and that the balance of hardship favored the secured creditors.

Based upon the foregoing, it is ORDERED, that the Motion for Relief from the Automatic Stay is granted for cause pursuant to § 362(d)(1).

Who won?

Wachovia Bank prevailed in the case because the court found that the debtor had knowingly waived the protections of the automatic stay and failed to demonstrate a likelihood of successful reorganization.

Wachovia has filed two (2) claims against the Debtor in the amount of approximately $2,595,793.65 and $217,080.69.

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