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In a recent Delaware Supreme Court decision, the Court held that there is no “insolvency exception” to the requirement in Section 271 of the DGCL that a transfer of all or substantially all of a corporation’s assets foreclosure transfer be approved by the corporation’s shareholders.

The Delaware Supreme Court overruled a decision by the Delaware Chancery Court that used Section 271—which requires a shareholder vote when a corporation sells all or substantially all of its assets—to interpret a Class Vote Provision in Stream TV Networks, Inc.’s charter. The Chancery Court also read a Delaware common law board-only insolvency exception into Section 271 while doing so.
Continue Reading There’s No Insolvency Exception to a Shareholder Vote Requirement to Transfer a Corporation’s Assets in Delaware

In a recent appeal to the Second Circuit, Bronx Miracle Gospel Tabernacle Word of Faith (the “Church”), asks the Second Circuit for relief from the sale of its property by a bankruptcy trustee. The Church’s action seeks damages against the trustee and her counsel and the bankruptcy judge who approved the sale. The action claims that the Church’s religious rights under the Religious Freedom Restoration Act (“RFRA”) and the Constitution have been violated in the bankruptcy court. The Church’s appeal is the latest installment in a foreclosure battle that began with a mortgage loan in 2008. Although the Church has been largely unsuccessful in its years of litigation against its lender, this is nevertheless a cautionary tale about how a determined borrower can take advantage of the legal system to fight on for years to recycle previously dismissed claims and to promote claims of misconduct which lack substantiating evidence.
Continue Reading Bronx Miracle Gospel Tabernacle: Lender’s Nightmare Continues

A First Department decision from last month makes it harder for mezzanine borrowers to enjoin UCC foreclosure sales.

When there is a default under mezzanine loan documents, the lenders can retake their collateral by noticing and conducting foreclosure sales under the UCC. But mezzanine borrowers can seek relief from a court to enjoin UCC foreclosure sales.

During the COVID-19 pandemic, some borrowers succeeded in preventing mezzanine lenders from exercising their rights to a prompt UCC sale by obtaining injunctive relief in New York courts. One example was in the supreme court decision appealed from in Shelbourne BRF LLC v. SR 677 Bway LLC, No. 2020-03604 (1st Dep’t Mar. 4, 2021). The supreme court granted plaintiff borrowers’ motion for a preliminary injunction and enjoined a UCC foreclosure sale of interests in LLCs.
Continue Reading Prospective Loss of Equity Is No Basis to Enjoin a UCC Foreclosure, Appellate Division Holds