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Pratt's Journal of Bankruptcy Law: A Routine Foreclosure May Be A Preferential Transfer

A bankruptcy judge in Dallas recently issued an opinion that exposes foreclosing lenders who credit bid to possible attack. The court ruled that a lender that credit bid to purchase its collateral at a foreclosure sale prior to the bankruptcy of the borrower could be sued for a preference to recover the purchased property, even though the debtor could not bring a fraudulent transfer suit regarding the foreclosure sale. The authors of this article discuss the case and its ramifications. >>

The Inside Track: Section 363 Sales and the Advantages (and Disadvantages) of being the Stalking Horse in the US

In United States bankruptcy proceedings, debtors are permitted to sell property of their estate free and clear of all liens, claims, and encumbrances pursuant to 11 U.S.C. § 363. This can be an excellent opportunity for potential purchasers, as they are able to buy these assets under the protection of a court order barring most creditors of the seller from asserting any of their claims against the purchaser. >>

Weathering the Storm: A Routine Foreclosure May Be A Preferential Transfer

As many creditors have unfortunately discovered, the Bankruptcy Code allows a debtor to sue the creditor for certain payments – called preferences – that the creditor received from the debtor prior to the bankruptcy. The creditor is deemed “preferred” over other creditors if the transfer resulted in a payment on the creditor’s claim against the debtor that was larger than the payment the creditor would have received if the transfer had not been made and the creditor had instead participated in distributions from the debtor’s bankruptcy estate. >>



John Middleton

Associate

Dallas


2323 Victory Avenue
Suite 700
Dallas, Texas 75219
T +1 214.651.5809
F +1 214.200.0606

Areas of Practice

Education

  • J.D., Baylor University School of Law, 2007, magna cum laude, Baylor Law Review - Executive Editor; National Trial Competition - Regional Semifinalist
  • B.A., Baylor University, 2004, magna cum laude, University Scholars, Phi Beta Kappa

Bar Admissions

  • Texas, 2007

Court Admissions

  • U.S. District Court for the Northern District of Texas
  • U.S. District Court for the Southern District of Texas
  • U.S. District Court for the Western District of Texas
  • U.S. District Court for the Eastern District of Texas
  • U.S. Court of Appeals for the Fifth Circuit

John Middleton is an associate in the Bankruptcy and Business Restructuring practice group in the Dallas office of Haynes and Boone, LLP.

Selected Cases

  • Represented the largest secured and unsecured creditors in the bankruptcy cases of one of North America's and Mexico's leading retail home decor companies.
  • Represented Jiffy Lube International, Inc. in the Chapter 11 proceedings of its largest franchisee, Heartland Automotive Holdings, Inc., in Fort Worth, Texas. The debtor operates more than 400 franchised Jiffy Lube service centers across the nation, raising complex issues regarding franchise agreements, non-residential real property leases, and franchisee relations.
  • Represented CrossPoint Energy Company and its subsidiaries in their Chapter 11 proceedings in Dallas, Texas. Obtained confirmation of a plan of reorganization for the debtor.
  • Represented American LaFrance in its Chapter 11 case in Delaware. The case involved the re-negotiation of substantial vendor and lessor relationships and resulted in American LaFrance's successful reorganization.
  • Represented Lothian Oil Company in its Chapter 11 case in the bankruptcy court in San Antonio, Texas.
  • Represented Bombay Company, a major national and international home furnishings retailer in efforts to raise capital to continue as a going concern and then in its efforts in Chapter 11 to implement an orderly liquidation of the company's assets. The Canadian assets were sold as a going concern. U.S. and other international assets were liquidated yielding a full recovery to Bombay’s secured and an approximately 25 to 30 percent recovery to Bombay's unsecured creditors.

Recent Speeches and Publications

  • "The Inside Track: Section 363 Sales and the Advantages (and Disadvantages) of being the Stalking Horse in the US," co-author with Larry Pascal, Recent Trends in Restructuring and Distressed M&A in Latin America, International Bar Association, Beunos Aires, Argentina, September 4-5, 2011.
  • "Weathering the Storm: A Routine Foreclosure May Be A Preferential Transfer," co-author with Robert Albergotti and Robin Phelan, Haynes and Boone Client Alert, August 9, 2011.
  • "Evidence," interactive trialroom presentation, with Eric Weiting Hsu, Starting Out Right CLE presented by the Young Lawyers Committee of the Bankruptcy Section of the State Bar of Texas, January 28, 2011.
  • "Where the Wild Things Are: An Update of Recent 'Ethical' Decisions," co-author with Stacy Brainin, 2010 Northern District of Texas Bankruptcy Bench/Bar Conference, May 14, 2010.
  • "SI Restructuring: Insiders May Provide a Secured Loan of Last Resort - If Careful," Business Law Section of the State Bar of Texas Newsletter, December 2008.
  • "The Current State of Retention of Professionals - Enlightened Solutions or Clever Avoidance?" Co-author, for presentation at the 27th Annual Jay L. Westbrook Bankruptcy Conference, November 2008.
  • "Putting Preventative Practices to Work" Co-author, for presentation at the National Business Institute conference, February 2008.

Selected Representative Experience


Acquisition of Infinity Resources, Inc.
Represented CD Listening Bar, Inc., an Internet-based distributor of entertainment media, in its acquisition of Infinity Resources, Inc.

American LaFrance Corporation
Represented American LaFrance in its Chapter 11 case in Delaware. The case involved the re-negotiation of substantial vendor and lessor relationships and resulted in American LaFrance's successful reorganization.

Bankruptcy Case - Retail
Represented the largest secured and unsecured creditors in the bankruptcy cases of one of North America's and Mexico's leading retail home decor companies.

Bombay Company
Represented Bombay Company, a major national and international home furnishings retailer in efforts to raise capital to continue as a going concern and then in its efforts in Chapter 11 to implement an orderly liquidation of the company’s assets. The Canadian assets were sold as a going concern. U.S. and other international assets were liquidated yielding a full recovery to Bombay’s secured and an approximately 25%-30% recovery to Bombay’s unsecured creditors.

Camp Cooley, Ltd.
Representation of the senior secured lender owed approximately $25 million in a Chapter 11 proceeding of an owner/operator of a large seed stock cattle and genetics operation and owner of minerals including producing natural gas wells. Representation included a successful challenge to the debtor's proposed plan of reorganization, which was litigated over the course of a six-day trial involving substantial questions of plan feasibility, valuation of real property of over 10,700 acres, minerals ownership and rights issues, wetland mitigation easement rights issues, livestock, and other assets.

Cornerstone E&P Company - Debtor Representation
Represented an oil and gas exploration and production company and its affiliate in their Chapter 11 proceedings in the Northern District of Texas. The court has approved a unique vendor-financing program in lieu of traditional DIP financing, which allowed Cornerstone to finish completion operations on vital wells.

Cornerstone E&P Company - Lien Priority Adversary
Defended Cornerstone in a complex adversary proceeding involving challenges to the validity and priority of mineral liens and bank liens under Texas and Oklahoma law. Following a three-day trial, negotiated a successful resolution of all issues.

CrossPoint Energy Company
Represented oil and gas production and exploration company and its subsidiaries in their Chapter 11 proceedings in Dallas, Texas. Obtained confirmation of a plan of reorganization for the debtor.

Jiffy Lube Franchisee Heartland Automotive
Represented Jiffy Lube International, Inc. in the Chapter 11 proceedings of its largest franchisee, Heartland Automotive Holdings, Inc., in Fort Worth, Texas. The debtor operates over 400 franchised Jiffy Lube service centers across the nation, raising complex issues regarding franchise agreements, non-residential real property leases, and franchisee relations.

Lone Star Park - Magna Entertainment Bankruptcy
Representation of the City of Grand Prairie and the Grand Prairie Sports Facilities Development Corporation in the Magna Entertainment Corporation Chapter 11 proceedings in Delaware, which led to Bankruptcy Court approval of the assumption and assignment of the lease with the debtors governing the Lone Star Park racing facilities.

Lothian Oil Company
Represented this privately held oil and gas exploration and production company in its Chapter 11 case in the bankruptcy court in San Antonio, Texas.

Moll Industries, Inc.
Representation of the agent for the secured lenders in the Chapter 11 case of this plastics injection molding company pending in Delaware, including the negotiation of the use of cash collateral and the sale of a substantial portion of the debtors' business. The lenders are owed in excess of $70 million.

Memberships

  • American Bankruptcy Institute
  • Federal Bar Association
  • Dallas Association of Young Bankruptcy Lawyers - Social Chair
  • Dallas Bar Association
  • Dallas Association of Young Lawyers
  • American Bar Association

Online Publications

09/27/2011 - Pratt's Journal of Bankruptcy Law: A Routine Foreclosure May Be A Preferential Transfer
A bankruptcy judge in Dallas recently issued an opinion that exposes foreclosing lenders who credit bid to possible attack. The court ruled that a lender that credit bid to purchase its collateral at a foreclosure sale prior to the bankruptcy of the borrower could be sued for a preference to recover the purchased property, even though the debtor could not bring a fraudulent transfer suit regarding the foreclosure sale. The authors of this article discuss the case and its ramifications.

09/04/2011 - The Inside Track: Section 363 Sales and the Advantages (and Disadvantages) of being the Stalking Horse in the US
In United States bankruptcy proceedings, debtors are permitted to sell property of their estate free and clear of all liens, claims, and encumbrances pursuant to 11 U.S.C. § 363. This can be an excellent opportunity for potential purchasers, as they are able to buy these assets under the protection of a court order barring most creditors of the seller from asserting any of their claims against the purchaser.

08/09/2011 - Weathering the Storm: A Routine Foreclosure May Be A Preferential Transfer
As many creditors have unfortunately discovered, the Bankruptcy Code allows a debtor to sue the creditor for certain payments – called preferences – that the creditor received from the debtor prior to the bankruptcy. The creditor is deemed “preferred” over other creditors if the transfer resulted in a payment on the creditor’s claim against the debtor that was larger than the payment the creditor would have received if the transfer had not been made and the creditor had instead participated in distributions from the debtor’s bankruptcy estate.

05/14/2010 - Where the Wild Things Are: An Update of Recent “Ethical” Decisions
This paper is designed to provide a brief update of recent decisions of note that concern various ethical issues bankruptcy attorneys often encounter, focusing on conflicts of interest and privilege issues.

12/01/2008 - SI Restructuring: Insiders May Provide a Secured Loan of Last Resort - If Careful
The Fifth Circuit Court of Appeals recently provided guidance to Texas lawyers on the equitable subordination of insider loans of last resort to a financially troubled company. Equitable subordination generally has been understood to involve moving a creditor’s valid claims behind the claims of others in order to remedy some misconduct by the creditor that harmed the debtor or other creditors. This judge-made doctrine predates the Bankruptcy Code (adopted in 1978), but its application, for the most part, has not changed.

11/13/2008 - The Current State of Retention of Professionals: Enlightened Solutions or Clever Avoidance?
In this article, Robert Albergotti and John Middleton provide an overview of the current state of retention of professionals in bankruptcy and reorganization scenarios.

02/07/2008 - Putting Preventive Practices to Work
It is no secret that consumers are facing a crunch in the current economy. Mortgages continue to escalate into foreclosure as a result of the subprime crisis, resulting in a number of unsavory records.
 

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