- Case No. 14-41463 (5th Cir. Dec. 29, 2015)
- AFFIRMED by 5th Circuit. In reviewing the origins of the "primarily for the benefit of" language from In re Delta Towers, Ltd., 924 F.2d 74, 76 (5th Cir. 1991) requirement of Section 506 (c), the Court held that while an expense which was not incurred primarily to preserve or dispose of an encumbered property cannot meet the requirement of being incurred primarily for the benefit of the the secured creditor, an expense incurred primarily to preserve or dispose of encumbered property meets that requirement. Further, a bankruptcy court's finding of fact in the Section 506 (c) analysis is reviewed for clear error and legal conclusions de novo. Notably, the 5th Circuit rejected secured creditor's argument that "primarily" means solely for the benefit of creditor.
- Procedural context:
- The Trustee filed a motion to surcharge expenses to maintain property under Section 506(c). Secured creditor objected because secured creditor did not benefit from the expenses. Trustee responded that secured creditor received benefit by receiving property with its value preserved and avoiding preservation costs during the 14 months that property was part of the liquidating trust.
- Debtor owned property everyone thought was worth more than the outstanding mortgages. Trustee spent nearly a year trying to sell and when it could not and realized that there was no equity to estate, trustee abandoned property to secured creditor. Trustee then applied to surcharge the expenses paid in maintaining the property from start of bankruptcy case (as opposed to time of abandonment). Secured creditor objected to surcharge that occurred prior to abandonment. Secured creditor objected because secured creditor did not benefit from the expenses. Trustee responded that secured creditor received benefit by receiving property with its value preserved and avoiding preservation costs during the 14 months that property was part of the liquidating trust. Court granted trustee's motion and granted a priming lien. Secured creditor filed and direct appeal to 5th Circuit was held.
- Benavides, Dennis and Costa, Circuit Judges.
In re Zachary Allen ; Tiara Donegan
Summarizing by Lars Fuller
3267 in the system
3 Being Processed