Smithville Crossing, LLC

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
WILMINGTON DIVISION
IN RE:
SMITHVILLE CROSSING, LLC,
DEBTOR.
CASE NO. 11-02573-8-JRL
CHAPTER 11
ORDER
This matter came before the court on Rialto Real Estate Fund, LP’s (“Rialto”) motion to
set aside an order denying relief from the automatic stay entered by the court on September 28,
2011. A hearing was held on December 13, 2011 in Wilmington, North Carolina.
The debtor filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code
on April 1, 2011. Rialto filed a motion for relief from the automatic stay on June 13, 2011, and a
three-day hearing was held in August 2011. At the hearings, Rialto presented testimony from a
financial expert who stated that, in his opinion, the appropriate interest rate for a loan to the
debtor would be the prime rate plus a 7-8% adjustment. The court entered an order denying
Rialto’s motion on September 28, 2011, after finding that the appropriate interest rate would be
the prime rate plus a 3-5% adjustment. 	Rialto filed a motion to set aside the September 28,
2011 order on October 12, 2011.
SO ORDERED.
SIGNED this 22 day of December, 2011.
________________________________________
J. Rich Leonard
United States Bankruptcy Judge
____________________________________________________________
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DISCUSSION
A motion to reconsider is governed by Rule 59(e) of the Federal Rules of Civil
Procedure, made applicable by Rule 9023 of the Federal Rules of Bankruptcy Procedure. Fed. R.
Bankr. P. 9023(e). The bankruptcy court will deny a motion to reconsider unless the movant can
make a showing of one of the enumerated grounds for relief. The enumerated grounds for relief
are: (1) to accommodate an intervening change in controlling law; (2) to account for new
evidence not available at trial; or (3) to correct a clear error of law or prevent manifest injustice.
In re Mitrano, 409 B.R. 812, 819 (E.D.Va., 2009); see also In re Morris, 365 B.R. 613, 617
(Bankr. E.D. Va. 2007) (citing EEOC v. Lockheed Martin Corp., 116 F.3d 110, 112 (4th Cir.
1997)). Reconsideration of a judgment is “an extraordinary remedy which should be used
sparingly,” Pacific Ins. Co. v. Am. Nat’l Fire Ins. Co., 148 F.3d 396, 403 (4th Cir. 1998), cert.
denied, 525 U.S. 1104, 119 S. Ct. 869 (1999). A motion for reconsideration is not intended to
allow a party to relitigate matters the court has previously heard. Id.
Section 362 of the Bankruptcy Code provides that a debtor’s bankruptcy petition
automatically stays “any act to obtain possession of . . . or to exercise control over property of
the estate,” as well as “any act to collect . . . or recover a claim against the debtor that arose
before the commencement of the case[.]” 11 U.S.C. § 362(a). However, the court may terminate
the automatic stay if the debtor has no equity in the property and the property is not necessary to
an effective reorganization[.]” 11 U.S.C. § 362(d)(2). The threshold necessary to satisfy §
362(d)(2) of the Bankruptcy Code is lower then the standard required to confirm a chapter 11
plan . See United Savings Ass’n v. Timbers of Inwood Forests Assoc., Ltd., 484 U.S. 365,
375–76 (1988) (The debtor must show that it has “a reasonable possibility of a successful
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reorganization within a reasonable time.”).
Rialto contends that the court overlooked the financial expert’s report on risk factors
associated with the appropriate interest rate. However, the court thoroughly reviewed the
financial expert’s report before concluding that the financial expert was “credible but not
dispositive.” The court found that several of the risk factors identified by the financial expert
were macro economic findings that simply bolstered his conclusion that there is currently no
efficient market for the type of loan this debtor would require. In arriving at the appropriate
interest rate, the court looked for unique risk factors that make the interest rate fair and equitable
with regard to this particular project. Specifically, there was evidence that the debtor’s property
was well maintained, completely finished, and generating rents. The court’s finding that the
interest rate should be the prime rate plus a 3-5% adjustment is supported by competent evidence
and thus is not manifestly unjust.
Rialto next argues that the debtor failed to present evidence that the property at issue was
necessary for an effective reorganization. Whether the debtor had a true prospect of
reorganization is an issue previously litigated during the hearings. It was determined by the
court that the debtor made a prima facie showing that there is a real possibility of reorganization
in place. This finding was supported by testimony from the principal of the debtor and the
debtor’s plan projections. Thus the requisite showing under Rule 59(e) for a motion to
reconsider has not been met by Rialto.
Based on the foregoing, the motion to set aside the September 28, 2011 order is
DENIED.
END OF DOCUMENT
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