Response to Bankruptcy Motion to Dismiss - PDF

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					       Case 09-32824-rcj      Doc 1521     Entered 05/26/11 16:47:07      Page 1 of 7



 1   FRANCIS B. MAJORIE                               MELANIE A. HILL
     Pro Hac Vice                                     Nevada Bar. No. 8796
 2   THE MAJORIE FIRM LTD.                            LAW OFFICE OF MELANIE HILL
     3514 Cedar Springs Road                          9345 W. Sunset Road, Suite 100
 3   Dallas, Texas 75219                              Las Vegas, Nevada 89148
     Phone: 214-522-7400                              Phone: 702-362-8500
 4   Fax: 214-522-7911                                Fax: 702-362-8505

 5   Counsel for Silar Advisors, LP                   Counsel for Sitar Advisors, LP
     and Silar Special Opportunities Fund, LP         and Silar Special Opportunities Fund, LP
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 7                               UNITED STATES DISTRICT COURT
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                                        DISTRICT OF NEVADA
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     IN RE:
                                                     Case No. BK-S-09-32824-RCJ
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     ASSET RESOLUTION LLC,                           Chapter 7
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     X Affects this Debtor                           Jointly Administered
14   El Affects all Debtors                          09-32831; 09-32839; 09-32843; 09-32844;
     Affects Bundy 2.5 Million SPE, LLC              09-32846; 09-32849; 09-32851; 09-32853;
15   Affects Bundy Five Million SPE, LLC
     El Affects CFP Anchor B SPE, LLC                09-32868; 09-32873; 09-32875; 09-32878;
16   El Affects CFP Cornman Toltec SPE, LLC          09-32880; 09-32882
     Affects CFP Gess SPE LLC
17   Affects CFP GRAMERCY SPE, LLC                   ASSET RESOLUTION, LLC (As Debtor),
     Affects Fiesta Stoneridge, LLC                  SILAR ADVISORS LP, AND SILAR
18   Affects Fox Hills SPE, LLC
     Affects HFAH Monaco SPE, LLC                    SPECIAL OPPORTUNITIES FUND LLC’S
19   Affects Huntsville SPE LLC                      RESPONSE TO LA COUNTY TAX
     Affects Lake Helen Partners SPE LLC             COLLECTOR’S MOTION TO DISMISS
20   o Affects Ocean Atlantic SPE LLC                (Doc. 1508, 1510, 1511, & 15171
      Affects Shamrock SPE LLC
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     Eli Affects 10-90 SPE, LLC
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                                    Debtors.
23

24          Asset Resolution, LLC (as debtor), Silar Advisors, LP, and Silar Special Opportunities
25   Fund, LP (jointly and severally, "Respondents") file this response to the Motion To Dismiss
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     Debtor’s Bankruptcy Case Pursuant to 11 U.S.C. § 707(a) Etc. [Doc. 1508] (the "Motion To
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     Dismiss"), as follows:
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           Case 09-32824-rcj    Doc 1521     Entered 05/26/11 16:47:07       Page 2 of 7



 1             1.     The Motion To Dismiss asks this Court to dismiss the Asset Resolution
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         bankruptcy under ii U.S. C. § 707(a) and other authority.
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               2.     Respondents ask the Court to grant the Motion To Dismiss.
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               3.     The Asset Resolution bankruptcies were filed under chapter 11 to accomplish
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 6       numerous goals, including for example:

 7             A.     To preserve and protect the value of Asset Resolution’s direct lender interests

 8                    by, among other things, staying adverse actions against the collateral properties
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                      for tax foreclosures while the Court resolved the 892 direct lenders’ motion to
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                      terminate the Debtor as loan servicer;
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               B.     To provide a court-supervised, open-to-all procedure for soliciting the consent
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13                    of direct lenders in the loans being serviced by Asset Resolution for matters

14                    requiring their consent (such as, for example, the raising of funds to pay taxes

15                    or make repairs; the selection of a new servicer in the event of a termination;
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                      the sale, "joint venture," or other dispositions of collateral properties; and
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                      resolution of disputes with borrowers and/or guarantors by settlement or
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                      otherwise);
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20             C.     To provide for an orderly procedure for determining which putative creditors

21                    were creditors of Asset Resolution or the affiliated 5PEs or whether they should

22                    instead look to the properties and the direct lenders for payment because such
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                      costs for goods and services were incurred in servicing the loans or maintaining
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                      the properties and related collateral; and
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                D.    To provide for a determination binding on all direct lenders of the amount of
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                      service advances and the amount and priority of fees due to Asset Resolution
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     I   SILAR’S RESPONSE TO MOTION TO DISMISS IDOC 15081 - Page 2
       Case 09-32824-rcj     Doc 1521      Entered 05/26/11 16:47:07       Page 3 of 7



 1                 and/or any amounts due by Asset Resolution with respect to all of the loans for
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                   which it acted as servicer.
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            4.     Over the course of the eighteen months of the bankruptcy proceedings, the
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     Court has made numerous rulings that have mooted or addressed Asset Resolution’s reasons
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 6   for filing the bankruptcies. For example:

 7         A.     The Court ruled that the bankruptcy proceedings were not required in order to
 8                 make rulings binding on all direct lenders in the loans;
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            B.    The Court terminated the loan servicing agreements;
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            C.    The Court entered an order acknowledging Cross as the servicer of most of the
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                   loans;
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13          D.    The Court ruled that most of the putative creditors listed in Asset Resolution’s

14                 schedules were in fact service-related creditors that did not hold claims against

15                 the estate;
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            E.    The Court established a procedure for those creditors to file claims with Cross
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                   and have them adjudicated separately;
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            F.     In several property-specific hearings (like the Harbor Georgetown redemption
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20                 transaction, the Huntsville sale, and the Gramercy sale), the Court indicated that

21                 neither the bankruptcy cases nor the 892 case is the proper proceedings to seek

22                 adjudications of loan-related matters taking place post-termination (such as, for
23                                                   51% rule to force direct lenders to become
                   example, application of the
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                   members of new joint ventures, to impose servicer-related fees and charges on
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                   non-consenting direct lenders, or to waive property rights of non-consenting
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     SILAR’S RESPONSE TO MOTION TO DISMISS [DOC 15081          - Page 3
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 1                 direct lenders), and that direct lenders must look to other courts or other
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                   proceedings to assert such issues.
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            5.     Respondents readily admit that they objected to many of the Court’s rulings on
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     these matters, filed appeals from those rulings (to the extent appeals could be filed), and
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I    continue to believe that the Court committed error in making such rulings.

 7          6.     However unless and until reversed, those rulings are law of the case and shape

     what is "left" in the bankruptcies.
 X
            7.      Respondents therefore respectfully submit that continued maintenance of the
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     bankruptcy cases is no longer necessary and in fact harms creditors of the estate and the valid
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     interests of Respondents.
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13          8.      In support, Respondents would show that:

14          A.     The assets of the estate presently include many millions of dollars of cash,

15   substantial direct lender interests, millions of dollars of service advances (a category of claims
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     that the Court has ruled to be at the "top" of the waterfall), base servicing fees (another
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     category of claims that this Court ruled to be at the tope of the waterfall, and which the Court
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     ruled at the 892 trial to be equal to 1.5% of ultimate collections), and the potential to receive
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     additional default interest and other fees if and when direct lenders in the loans receive their
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21   principal and interest. As was shown at trial in the 892 case, the assets also include claims

22   against lawyers who provided advice giving rise to Respondents’ interpretation of the LSAs
23   and USACM bankruptcy plan and related documents. The value of the assets of the estate
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     would also increase if the Court’s rulings on these matters are overruled by the Ninth Circuit
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     in presently-pending or soon-to-be filed appeals. The Trustee has filed suit against Silar
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     asserting, among other things, that Silar is liable for "all sums awarded against [the estate]
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     SILAR’S RESPONSE TO MOTION TO DISMISS IDOC 15081 - Page 4
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 I   and for all legal fees, costs, and other expenses incurred by it in defending the claims in the
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     892 case." [Case 11-01100, Doc. 1, at 8/lines 15-19] Silar does not agree with this position.
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     However, dismissing the bankruptcy and allowing Silar to "defend" the pending litigation
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     directly would save duplicative expenses (which will be substantial) to the benefit of the valid
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 6   creditors of the estate.

 7          B.     The Court’s rulings concerning creditor claims in the conversion hearing support
 8   valid objections to the bulk of the creditor claims asserted against the estate that, when
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     sustained, would confirm the existence of real, substantial equity in favor of Respondents.
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     But the Trustee has filed almost no objections to any claims over the past eighteen months.
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            C.     Although the Trustee’s counsel timely filed proofs of claims to protect the
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13   estate’s claims for service advances, base-servicing fees, and bottom-of-the-waterfall default

14   fees (with the substantial assistance of Respondents), no formal proceeding has been invoked

15   to obtain a prompt determination of those rights and/or to obtain liens or other judicial
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     protection of them. The failure to prosecute these claims to conclusion jeopardizes recovery
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     of claim amounts because there is no assurance that monies received through liquidation of
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     loans will be set aside to pay the amounts due to the estate. Indeed, upon information and
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20   belief, Cross has taken the position that its fees (and any loans to has arranged for) come

21   ahead of the amounts due to the estate.

22          D.     The value of the direct lender interests owned by the estate are directly
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     impacted by the servicing of loans by Cross. Upon information and belief, Cross asserted
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     that, under the 51% rule, cash otherwise due and payable to direct lenders (such as the
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     estate) may be reduced by substantial fees and high interest for short-term loans charged by
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27   Cross or others with whom it has done business. Cross also asserted that, under the Sl%

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     SILAR’S RESPONSE TO MOTION TO DISMISS [DOC 15081           - Page 5
       Case 09-32824-rcj      Doc 1521     Entered 05/26/11 16:47:07        Page 6 of 7



 1   rule, it has the right to settle with guarantors for pennies on the dollar despite objections by
2
     direct lenders (such as the estate). One such example is a recent proposal by Cross to settle
 3
     with the guarantor on the Stubbs/ Comvest loan for three cents on the dollar. At least one
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     direct lender has already filed suit to challenge such conduct (Case No. 2:11-cv-669 in this
 5

 6   District) but, on information and belief, the Trustee declined to join apparently so as not to

 7   "take sides." This is particularly troubling in light of this Court’s open questioning of the

 8   constitutionality of application of the 51% rule to impact non-consenting direct lender’s
 9
     property interests. Dismissing the bankruptcy so that Respondents can protect the value of
10
     the direct lender interests will therefore benefit all valid creditors of the estate.
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            E.     The bankruptcy poses a structural impediment to the possibility of settling the
12

13   claims brought by the 892 and the 210 direct lenders, who fall (if at all) in the unsecured

14   creditor class (or for some of them, lower due to equitable subordination) of the bankruptcy

15   distribution scheme. Because the Trustee has not vigorously pursued objections to proofs
16
     of claim (which would eliminate substantial numbers and amounts of claims), it is impossible
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     to make disbursements of Asset Resolution’s assets to certain direct lender "creditors."
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     Dismissal of the bankruptcy would obviate that problem and thereby serve the interests of
19

20   all creditors and other parties in interest.

21          9.      Respondents reserve the right to supplement or amend this response and/or to

22   offer additional grounds in response to the Motion To Dismiss.
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            10. WHEREFORE, Respondents request that the Court grant the Motion To Dismiss
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     and enter such other relief supported by the law and the facts.
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     SILAR’S RESPONSE TO MOTION TO DISMISS IDOC 15081 - Page 6
          Case 09-32824-rcj     Doc 1521   Entered 05/26/11 16:47:07     Page 7 of 7



 1        Dated: May 27, 2011
2
                                                  THE MAJORIE FIRM, LTD.
3
                                                  By: Is! Francis B. Majorie
4
                                                        Francis B. Majorie, Pro Hac Vice
                                                 3514 Cedar Springs Road
 6                                               Dallas, Texas 75219
 7                                               Phone: 214-522-7400
                                                 Fax: 214-522-7911
 8

 9
                                                 Melanie A. Hill
10
                                                 Nevada Bar No. 8796
11                                               LAW OFFICE OF MELANIE HILL
12                                               9345 W. Sunset Road, Suite 100
                                                 Las Vegas, Nevada 89131
13
                                                 Phone: 702-362-8500
14                                               Fax: 702-362-8505
15
                                                 Counsel for Silar Advisors, LP, and
16                                                Silar Special Opportunities Fund, LP
17

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     I   SILAR’S RESPONSE TO MOTION TO DISMISS IDOC 15081     - Page 7

				
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