Do Deposit Holders Have Any Interest in the Property?
What sparked off this series of motions in the Levitt & Son’s bankruptcy was the final order approving debtor-in-possession (DIP) financing. According to this DIP financing order, all liens junior to Wachovia’s liens on certain real estate assets were to be stripped in their entirety.
As such, two members of the Deposit Holders Committee, Joseph and Jacqueline D’Alessandro, filed a motion challenging the seniority of Wachovia’s lien to Lot 136 in the Seasons at Lake Lanier. They had tendered $69,041.00 in deposits towards the purchase of a house.
In deposit holders’ motion, Joseph and Jacqueline claim that their contract deposit was to have been held in trust by the Levitt & Son’s subsidiary, and that §13-4-61 of the Georgia Code provides the Homebuyers with a first priority lien on the subject lot.
However, Wachovia responded by saying that its lien is senior, and whatever equitable rights that Joseph and Jacqueline might have were necessarily subordinate to Wachovia’s liens. Being junior, these were in turn exterminated by the final DIP financing order.
What seemed most reasonable was the response by Joseph and Jacqueline – they prayed that if the court would deny them a lien on the Lake Lanier lot, the court should do so without prejudice. In that scenario, one can wait to see what the market value of the Lake Lanier Lot is at the end of the sales process, instead of making a conclusive order extinguishing their interests.
Another Deposit Holder versus Bank Scenario. Wait a minute, aren’t deposit holders also bank customers typically? What happens to value of residential real estate if buyers and potential buyers no longer have the liquidity to put down deposits after losing deposits in earlier deals? Ah well, we’ll just have to wait and see what the resolution is.
