In Matter of Meruelo Maddux Properties, Inc.

There is no basis in the plain language of the single asset real estate provisions of the Bankruptcy Code § 101(51)(b) for a “whole business enterprise” exception.

Meruelo Maddux Properties - 760 S. Hill Street LLC (“MMP Hill”) was a Chapter 11 debtor and subsidiary of Meruelo Maddux Properties, Inc. (“MMPI”). MMPI, a Los Angeles real estate developer was a parent company to more than 50 subsidiaries including MMP Hill. Bank of America was an unsecured creditor of MMPI and also loaned MMP Hill more than $28 million to renovate a 92 unit apartment complex. MMPI and all subsidiaries entered Chapter 11 in 2009 and were not substantively consolidated. The Bankruptcy Court held that Bank of America could obtain relief from stay despite the appearance of MMP Hill falling under the single asset real estate provisions of § 101(51)(b) because of the “consolidated and interrelated nature of the business operations of MMPI and its subsidiaries.” The district court reversed. The Ninth Circuit upheld the district court, finding that there is no basis in the plain language of the single asset real estate provisions of the Bankruptcy Code § 101(51)(b), for a “whole business enterprise” exception. Therefore, the Court “must accept MMP Hill’s chosen legal status as a separate and distinct entity from its parent corporation.” AFFIRMED.