Partap Investments, LLC v. Kittusamy, LLP (In re Kittusamy, LLP)

Case Type:
Business
Case Status:
Affirmed
Citation:
BAP No. NV-16-1242-LJuKu (9th Circuit, Mar 10,2017) Not Published
Tag(s):
Ruling:
A purchaser of leased personal property at a foreclosure sale was not entitled to assert an administrative rent claim against the debtor where the lease was a disguised security interest, the bill of sale was unclear whether the purchaser was assigned the right to assert an administrative claim, and there was no evidence of diminution of value during the bankruptcy case.
Procedural context:
Appeal from orders (1) sustaining objections to administrative and unsecured claims, and (2) denying a motion to allow an administrative claim.
Facts:
The debtor defaulted on a personal property lease. The lessor filed a secured claim, was granted relief from the stay, and foreclosed. The purchaser at the foreclosure sale received a bill of sale that transferred the lessor's rights in the proof of claim. The purchaser then filed an administrative expense request for unpaid postpetition rent. The bankruptcy court denied the request, holding that the lease was a disguised security interest, so no entitlement to postpetition rent, the purchaser did not have standing to assert an administrative claim, and the purchaser failed to evidence any diminution in the value of the property as a result of the use. The BAP affirmed. While the bill of sale transferred the lessor's right under the proof of claim, the lessor had only filed a prepetition secured claim and not an administrative claim. The BAP agreed that no administrative rent is due where the lease is a disguised security interest. Any payments due under the disguised security interest would be a prepetition claim. The BAP also agreed there was insufficient evidence of diminution of value. The purchaser relied upon the difference between the debtor's representations concerning value and the foreclosure sale price, but the BAP held that a foreclosure sale price does not necessarily reflect fair market value.
Judge(s):
LAFFERTY, JURY, and KURTZ

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