United States District Court, S.D. New York
IN RE HOTI ENTERPRISES, L.P. Debtor.
ROBERT L. RATTET, JAMES B. GLUCKMAN, RATTET PASTERNAK, LLP FKA RATTET PASTERNAK & GORDON-OLIVER, LLP Appellees. HOTI ENTERPRISES, L.P., Appellant,
OPINION AND ORDER
VINCENT L. BRICCETTI UNITED STATES DISTRICT JUDGE.
Hoti Enterprises, L.P. (“Hoti”), appeals from the
order of the United States Bankruptcy Court for the Southern
District of New York (Drain, J.) granting the motion of
defendants-appellees Robert L. Rattet, James B. Glucksman
(sued as James B. Gluckman), and Rattet Pasternak, LLP f/k/a
Rattet, Pasternak, & Gordon-Oliver, LLP
(“RPGO” and, together with Rattet and Glucksman,
the “Rattet defendants”) for an order dismissing
the amended complaint.
reasons set forth below, the Bankruptcy Court's order is
Court has subject matter jurisdiction pursuant to 28 U.S.C.
was the owner of a 144-unit apartment complex in Brooklyn
that was pledged as collateral to secure a promissory note
pursuant a first-lien mortgage loan agreement.
defaulted on the mortgage in 2008, and on February 27, 2009,
the purported assignee under the mortgage documents, GECMC
2007-C1 Burnett Street, LLC (“GECMC”), brought an
action in state court to foreclose on the apartment complex,
and sought appointment of a receiver. The state court
subsequently appointed a receiver to take possession and
control of the apartment complex on March 16, 2009.
March 2010, Hoti retained RPGO to assist it in an out of
court restructuring with its creditors and to potentially
commence a chapter 11 proceeding in bankruptcy court. RPGO
did not represent Hoti in connection with the state court
October 12, 2010, Hoti filed a voluntary petition for relief
under chapter 11 of the Bankruptcy Code. On October 22, 2010,
GECMC moved for an order to excuse the state court appointed
receiver from compliance with the turnover requirements of
Section 543 of the Bankruptcy Code based on, inter
alia, Hoti's default under the mortgage documents
and alleged mismanagement of the apartment complex. On
November 5, 2010, GECMC also moved for an order lifting the
automatic stay imposed by the chapter 11 proceeding, so it
could continue to pursue the state court foreclosure action.
The Bankruptcy Court held a hearing on November 22, 2010, to
consider GECMC's motions. During that hearing, the
Bankruptcy Court encouraged the parties to enter into a
consensual cash collateral arrangement. After the
parties-including Hoti's principals-conferred off the
record, they advised the Bankruptcy Court that they agreed in
principal to the entry of a cash collateral stipulation.
December 20, 2010, the Bankruptcy Court held a hearing,
during which Hoti's principals were again present, to
consider the draft cash collateral order the parties had
submitted. During that hearing, the Bankruptcy Court
considered and rejected Hoti's argument that the cash
collateral order should include a stipulation to allow Hoti,
as opposed to the state court receiver, to manage the
apartment complex. On December 22, 2010, the Bankruptcy Court
entered an order approving the revised cash collateral
stipulation the parties had submitted following the hearing.
cash collateral order, effective nunc pro tunc to
the petition date, allowed the state court appointed receiver
to remain in possession and control of the apartment complex,
and to use proceeds from the tenants' rent payments
(i.e., GECMC's “cash collateral”).
The cash collateral order also included a ninety-day
challenge period during which Hoti could bring an adversary
proceeding contesting the validity, enforceability, and
priority of the creditor's claim. If Hoti did not
challenge the claim during the ninety-day period (which
commenced on the petition date, October 12, 2010, and expired
ninety days thereafter, on January 10, 2011), it would be
deemed to have acknowledged that its creditor held a
“perfected valid first priority secured claim . . .
which is not subject to defense, counterclaim or
off-set.” (A.R. at 434).
January 5, 2011, Hoti, by its counsel RPGO, filed an
application for an order of the Bankruptcy Court authorizing
Hoti to examine GECMC and a servicer of the mortgage loan
pursuant to Bankruptcy Rule 2004. On January 12, 2011, GECMC
filed an objection to Hoti's application.
January 18, 2011, RPGO filed a motion for an order permitting
RPGO to be relieved as Hoti's counsel due to strained
communications with Hoti, disagreement over a course of
action, and difficulty obtaining information from Hoti.
same day, the Bankruptcy Court lifted the automatic stay to
permit GECMC to move forward with its foreclosure proceeding
in state court. Thereafter, GECMC simultaneously pursued the
state court foreclosure action and confirmation of a chapter
11 plan that would transfer ownership of the apartment
complex to GECMC.
around January 29, 2011, Hoti retained, subject to the
approval of the Bankruptcy Court, Tanya Dwyer and Dwyer &
Associates, LLC, as counsel in its chapter 11 proceeding and
the state court foreclosure action. On February 9, 2011, the
Bankruptcy Court held a hearing on RPGO's motion to
withdraw. The Bankruptcy Court adjourned the hearing to allow
Hoti to file an application to retain the Dwyer firm, which
Hoti filed on February 12, 2011. On February 14, 2011, the
Bankruptcy Court granted RPGO's motion to withdraw,
effective upon the retention of the Dwyer firm, “but in
no event later than February 28, 2011.” (A.R. at 100).
December 11, 2011, GECMC filed an initial chapter 11 plan of
reorganization, disclosure statement, and motion for an order
approving the disclosure statement.
March 7, 2012, more than fourteen months after its entry,
Hoti sought reconsideration of the cash collateral order
under Bankruptcy Rule 9024 and Federal Rule of Civil
Procedure 60. Hoti principally sought relief from the cash
collateral order based on an alleged flaw in the chain of
title of the underlying mortgage loan documents connecting
GECMC to the original lender.
Bankruptcy Court held a hearing on Hoti's motion, during
which it rejected Hoti's argument that the cash
collateral order was “abnormal” or improper, and
ordered additional briefing on several issues. (A.R. at 172,
174, 175, 219). The Bankruptcy Court subsequently denied
Hoti's requested relief on the grounds that (i) Hoti
delayed more than the one-year period allowed under Rule
60(c)(1) in bringing its motion; (ii) the cash collateral
order allowed for objections within a specified time period