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In re Red Mountain Machinery Co.

United States Bankruptcy Court for the District of Arizona
448 B.R. 1 (2011)


Facts

Red Mountain Machinery Company (Red Mountain) (debtor) was a machine-rental business owned and operated by Owen and Linda Cowling. Red Mountain had financed its operations through lines of credit with Comerica Bank (Comerica) (creditor). After many successful years, Red Mountain’s business declined and the company filed for reorganization under chapter 11 of the bankruptcy code. At the time of the filing, Red Mountain owed Comerica approximately $33,000,000. Red Mountain’s proposed reorganization plan gave the Cowlings 100 percent of the equity in the reorganized company in exchange for $480,000 in cash and a $1,250,000 loan. Comerica objected to the plan, arguing that the plan violated the absolute-priority rule and failed to satisfy the new-value corollary.

Rule of Law

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Issue

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Holding and Reasoning (Haines, J.)

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  • A “yes” or “no” answer to the question framed in the issue section;
  • A summary of the majority or plurality opinion, using the CREAC method; and
  • The procedural disposition (e.g. reversed and remanded, affirmed, etc.).

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