Sunday, March 29, 2009

Equitable Esoppel Bars Debtor From Challenging Pre-Petition Obligation in Bankruptcy Court

In this opinion from Judge Ray in the Bankruptcy Court for the Southern District of Florida, the court granted the summary judgment motion and dismissed the debtor's complaint on several grounds. The debtor sued to cancel/disallow the mezzanine lenders' entire $17 million mezzanine loan debt as usurious, or to equitably subordinate the claim under 510(c). The main basis for granting the motion was that the debtor was equitably estopped from challenging the validity/enforceability of the mezzanine lenders' notes due to the debtors pre-petition conduct in treating the mezzanine lenders' claims as valid debt obligations. The debtor delivered a legal opinion letter authored by its counsel at the mezzanine loan closing that acknowledged the loan agreement was a valid debt instrument and actually made payments under the note. The order is can be downloaded here.
*Disclaimer: GrayRobinson, P.A. was involved in the above-referenced action.


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