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Summarizing by Amir Shachmurove

Mercado v. Combined Investments, LLC

United States Bankruptcy Appellate Panel for the First Circuit, Case No. MB-13021
The First Circuit Bankruptcy Appellate Panel ("BAP") reversed an order of the U.S. Bankruptcy Court, District of Massachusetts (J. Hillman) granting a secured creditor's motion for relief from stay under 11 U.S.C. section 362(d)(2)(B) on account of the Bankruptcy Court's failure to issue findings of fact and conclusions of law, and remanded to the Bankruptcy Court for further proceedings.
Procedural context:
Appeal from order of the United States Bankruptcy Court granting a motion for relief from stay to the BAP.
The debtor and her husband owned a parcel of rental propoerty ("Property") that was secured by a mortgage and assignment of rents held by Combined Investments, LLC ("CI"). CI filed a secured proof of claim in the amount of $452,629.58; the debtor scheduled the value of the Property as of the petition date at $205,000. During the case, the debtor requested,and received,authority to use the rent generated by the Property, CI's cash collateral, over objection by CI for the duration of the case. The authority to use cash collateral was conditioned primarily on the debtor making periodic cash payments to CI. On October 15, 2012, CI filed a motion for relief from stay under Section 362(d)(1) for lack of adequate protection and under Section 362(d)(2) on the grounds that the debtor had no equity in the Property and that the Property was not necessary for the debtor's reorganization. The debtor then filed a disclosure statement and plan, and proposed to cram down CI's lien to $205,000 at an interest rate of 6%. CI objected to confirmation of the plan on the basis that the value of the Property was higher than $205,000 and that the plan was not feasible. On May 1, 2013, the Bankruptcy Court held a combined hearing regarding the use of cash collateral, CI's motion for relief, and plan confirmation. Prior to the hearing, CI submitted an appraisal report valuing the Property at a range of $290,000 to $315,000 and the debtor submitted a report that valued the Property at $205,000. While the hearing was scheduled as evidentiary, neither party requested to put on evidence beyond the appraisal reports. Despite conceding that the Property had no equity, the debtor argued that the Property was necessary to her reorganization because it produced rental income, and that relief under Section 362(d)(2) was therefore not appropriate. The Bankruptcy Court stated that "I can't agree that it will be worthwhile to allow this debtor to cram down the first mortgage, maintain the property, and hope that it will increase in value" and granted CI's motion for relief. The Bakruptcy Court did not, however, issue a written opinion "elaborating" upon its bench ruling. The debtor appealed the order granting CI"s motion. The BAP noted that for the Bankruptcy Court to grant CI relief from stay, it necessarily found that the debtor "had not met her burden of establishing both the Property is necessary for her reorganization and also that her proposed plan...had a realistic prospect of being confirmed within a reasonable period of time." Yet, the BAP observed that the Bankruptcy Court failed to "state its findings and conclusions on the record or in an opinion or memorandum of decision" as is required by Fed. R. Civ. P. 52(a). Without an adequate record, the BAP held that it could not appropriately review the Bankruptcy Court's ruling. The BAP remanded the case to the Bankruptcy Court to "make specific findings of fact and conclusions of law supporting its decision, or for such further proceedings as it determines are appropriate."
Deasy, Cában, and Finkle

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