Memorandum of Decision Re: Single Asset Case

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Decisions
IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA
In re CHRIS H. BECK,                                                                           No. 96-14459      Debtor. ___________________________/
Memorandum of Decision
     Secured creditors Bariteau, Brown, Schreck and Doyle, seeking relief from the automatic stay to foreclose on the debtor's real property, argue that this case is the epitome of a single asset real estate case. It is hardly that. The epitome of a single asset real estate case is a corporation or partnership filing a bankruptcy petition to avoid foreclosure, with no other purpose to the proceeding. The legislative history cited by creditor Westamerica Bank makes this clear.      Debtor Chris Beck is an individual. In addition to his commercial property, he is interested in his home, his exemption rights, and his discharge from considerable debt. This is certainly not what Congress had in mind when it amended the Bankruptcy Code in 1994.      Nonetheless, while the legislative history speaks in terms of "single asset real estate entities," the language of the Code refers to "single asset real estate." It is the language of the Code which binds this court, not the legislative history.      Beck's primary business asset is a commercial building in St. Helena, California. Since he has no other income, and since the secured debt on the property is less than $4 million, the provisions of section 362(d)(3) apply, even though this may not be the type of case Congress had in mind when it enacted the section.      Beck concedes that he did not file a plan within 90 days of his petition, nor has he commenced monthly payment to the secured creditors. They are accordingly entitled to relief from the automatic stay. However, the creditors go further and argue that they are entitled to full, immediate, and unconditional termination of the stay. This is not what the Code provides.      Section 362(d) provides that in certain circumstances relief from the stay is mandatory. However, it specifically provides that such relief may take the form of modifying or conditioning the stay as well as termination. If the statute were interpreted as urged by the creditors, then they would be entitled to foreclose even if this were a Chapter 7 case, the property was worth far more than their debt, and foreclosure would mean that numerous unsecured creditors were left unpaid. It is exactly to avoid such inequitable results that Congress gave the courts considerable leeway in fashioning appropriate relief from the automatic stay.      Section 362(d)(3) does not mandate immediate termination of the automatic stay any time that section is applicable. In re Archway Apartments, Ltd., 206 B.R. 463, 465 (Bkrtcy.M.D.Tenn.1997). The effect of the section is to simplify the secured creditors' ability to get relief, and to put the case on a "fast track." It does not mandate a forfeiture. The primary case relied upon by the creditors, In re CBJ Development, Inc., 202 B.R. 467, 470 (9th Cir.BAP 1996), does not hold differently.1 The creditors are entitled to relief from the automatic stay. However, that relief _______      1. In fact, the holding of the case is that the creditor was not entitled to relief from the stay. The portion cited by the creditors is dicta. Even this dicta does not mandate the harsh result urged by the creditors in this case. may take the form of modification or condition as well as termination.      Beck argues that he has just concluded negotiation of a long-term lease which will return his property to profitability and allow him to obtain confirmation of a plan. It appears that there may be considerable equity in the property, especially if this new lease is considered. Accordingly, the court will grant the creditors' motions and modify the automatic stay as follows:      1. The stay will be modified, effective July 11, 1997, to permit the secured creditors to enforce their security interests in the St. Helena property unless by that date Beck has served them with a copy of the fully executed lease as represented at the hearing.      2. In the event that a fully executed lease is produced, the stay will be modified, effective at 5:00 P.M. on September 12, 1997, to permit the secured creditors to enforce their security interests in said property unless by that date Beck has obtained confirmation of a plan of reorganization.      3. Beck may seek orders shortening time as appropriate. The deadline in paragraph 2 may be extended by a few days to conclude a confirmation hearing commenced by the deadline.      Counsel for the creditors shall submit appropriate forms of order.
Dated: June 13, 1997                                                                           _______________________                                                                                                            Alan Jaroslovsky                                                                                                            U.S. Bankruptcy