Green v. DeGiacomo (In re Inofin Inc.)

Summarized by Bodie Colwell , Preti Flaherty LLP
13 years 10 months ago

Citation:

In re Inofin Inc., No. 11-11010 (B.A.P. 1st Cir. March 6, 2012)

Tag(s):

Ruling:

The B.A.P found that the motion for relief from stay was not a final order as when relief from stay is denied because a moving party has failed to make the necessary showing of a colorable claim in a non-evidentiary hearing, the order denying relief would not be a final order. Thus, the appeal was DISMISSED for lack of jurisdiction because the order denying relief from stay was not a final order.

Procedural context:

Raymond Green ("RCG"), creditor, appeals from the Bankruptcy Court for the District of Massachusetts order denying its motion for relief from the automatic stay.

Facts:

Inofin Incorporated (“Inofin”), the debtor, in is involuntary chapter 7 case was engaged in financing the sales of used automobiles for retail dealers. RCG was one of Inofin’s lenders. According to a security agreement Inofin gave RCG a security interest in retail installment contracts that were produced with funding from RCG. In actual practice over the years, Inofin assigned random batches of retail installment contracts to RCG, including contracts that did not arise from RCG’s advances. In the end, when Inofin owed RCG in excess of $8,000,000, RCG’s portfolio of retail installment contracts contained contracts that were not traceable to funding from RCG. Months before the order for relief was entered in the involuntary bankruptcy case, RCG purportedly acquired its portfolio of retail installment contracts at its own secured party sale. That sale did not dissuade the chapter 7 trustee from collecting payments on the retail installment contracts held by RCG. This prompted RCG to file a motion for relief from stay under § 362(d). RCG asserted under § 362(d)(1) that the estate had no interest in its portfolio of Inofin’s retail installment contracts because RCG had acquired them at its secured party sale and, should it be determined that RCG had not lawfully acquired its collateral at the secured party sale, the trustee would be unable to provide RCG with adequate protection. RCG also argued that it was entitled to relief under § 362(d)(2) because there could be no effective reorganization in a chapter 7 case. Soon after RCG brought its motion for relief, the trustee commenced a multi-count adversary proceeding against RCG seeking: a determination of the validity of RCG’s lien, the subordination of RCG’s claim, a declaratory judgment, the avoidance of fraudulent transfers, and the avoidance of preferential transfers. After an evidentiary hearing on the motion for relief, the bankruptcy court denied RCG’s motion for relief from stay. The bankruptcy court concluded that “RCG failed to establish a colorable claim to secured status and concomitantly failed to establish entitlement to relief from the automatic stay.” The court reasoned that “[b]ecause the loan proceeds advanced by RCG [could] not be traced to its purported collateral . . . its security interest did not attach and [was] not enforceable as to that collateral . . . .” Ultimately, the bankruptcy court concluded that RCG was not entitled to relief from the automatic stay “for cause” under § 362(d)(1) because it did not hold a security interest in Inofin’s retail installment contracts. There was no conclusion with respect to § 362(d)(2).

Judge(s):

Haines, Lamoutte, and Kornreich

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