In re Stoneridge Apartments

• Decision Date: 28 September 1990
• Docket Number: Bankruptcy No. 90-41931-3-11,90-41932-2-11.
• Citation: 119 BR 706
• Parties: In re STONERIDGE APARTMENTS, Northwood Village Apartments, Debtors.
• Court: U.S. Bankruptcy Court — Western District of Missouri

119 B.R. 706 (1990)

In re STONERIDGE APARTMENTS, Northwood Village Apartments, Debtors.

Bankruptcy Nos. 90-41931-3-11, 90-41932-2-11.

United States Bankruptcy Court, W.D. Missouri.

September 28, 1990.

Ronald S. Weiss, James F.B. Daniels, Kansas City, Mo., for debtors.

Mark V. Bossi, Cheryl Kelly, St. Louis, Mo. for creditor.

Stephen B. Strayer, Liberty, Mo.

MEMORANDUM OPINION

FRANK W. KOGER, Chief Judge.

The same questions are involved in the two adversary actions in the Chapter 11 cases of Stoneridge Apartments, Case No. XX-XXXXX-X-XX, and Northwood Village Apartments, Case No. 90-41932-2-11. In each case we have the same creditor and the same management. Only somewhat different ownership is present and so the complaints as to cash collateral filed by Home Savings of America, F.A., hereinafter HSA, in each case, were heard together. In each case HSA's loan balance exceeded the value of the apartment complex; in each case HSA's debt was secured by a deed of trust, assignment of rents, and security agreement on any and all personalty; in each case all recording and filing needed to "perfect" the interests of Home Savings of America in the collateral had been accomplished. In addition HSA had filed petitions in the Clay County Circuit Court for the appointment of receivers. Apparently counsel for HSA were in the chambers of the Circuit Judge discussing who would be an appropriate receiver when they were notified of the bankruptcy filing. HSA had made demand, declared its balance due, filed its receivership suit, and done everything short of taking possession that a secured party could do. Under these circumstances, do the rents from the apartment projects equate to cash collateral that can be used by the debtor only under restricted circumstances, or are they assets freely available for use by debtor in its proposed reorganization?

Recognizing the semantics that some courts have engaged in to describe the condition of an assignee's lien in rents (i.e., perfected, possessory, enforceable, effective, or their respective antonyms), this Court apprehends that the language used has to some extent created at least a portion of the confusion that courts and commentators have faced in determining whether and/or when creditors who were assignees of rents could enforce those assignments, post petition. It seems to this Court that rather than attempt to distinguish one adjective from the other it is better to take relatively simple steps to break the problem into components.

First, the issue is one of state law because the interest of the assignee must be enforceable under applicable state law, i.e., the law of Missouri since there is no federal issue involved. Butner v. United States, 440 U.S. 48, 99 S.Ct. 914, 59 L.Ed.2d 136 (1979) and United States v. Landmark Park & Associates, 795 F.2d 683 (CA 8, 1986). Second, it seems the issue has been plumbed by both state and bankruptcy courts in Missouri, at least in the Eastern District of Missouri. While those later cases are not controlling on this Court, they seem well reasoned and soundly based, and it strikes the Court that there is considerable merit in presenting a united front to the world and establishing a uniform rule for the state, wherever possible.

Based then on such state court cases as Pine Lawn Bank & Trust Company v. M.H. & H., Inc., 607 S.W.2d 696 (Mo.App.1980) and Grafeman Dairy Co. v. Mercantile Club, 241 S.W. 923 (Mo. banc 1922) the Court believes that Missouri law requires the following steps before an assignee is entitled to the assigned rents:

1. Proper documentation of the assignments;

2. Proper recording of the assignments in the form required for an interest in real estate;

3. Default on the part of the assignor; and

4.

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