In an adversary proceeding arising out of the Chapter 11 case of Residential Capital, LLC (“ResCap”), the bankruptcy court denied in part and granted in part a secured lenders’ motion to dismiss certain claims in the case. Official Comm. Of Unsecured Creds. V. UMB Bank, N.A. (In re Residential Capital, LLC), Adv. P. No. 13-01277, -- B.R. --, 2013 WL 4069512 (Bankr. S.D.N.Y. Aug. 13, 2013). At issue was certain collateral, which was part of the secured lenders’ collateral, that the lenders released to enable ResCap to pledge it to different third parties. Once pledged, the collateral was designated as an “excluded asset” under the applicable loan documents. The third parties later released a large portion of the pledged collateral. In the lawsuit, the Committee asserted that these assets were unencumbered, “excluded assets” that were available to unsecured creditors. In response, the secured lenders asserted that the assets were restored to their collateral package once the pledged collateral was released. Finding that it would benefit from further evidence and citing ambiguity in the definition of “excluded assets” in the underlying documents, the Court refused to dismiss the Committee’s claims. The Court did, however, dismiss with prejudice the Committee’s claim for recharacterization based upon the clear intent of the parties as evidenced by the documents.
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The court in ResCap denies in part and grants in part secured lenders’ motion to dismiss committee complaint challenging secured status
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