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Texans CUSO wins right to sell development it financed
DALLAS (6/7/11)--A federal court in Dallas has granted the mortgage lending credit union service organization (CUSO) of Texans FCU the right to sell a real estate development it financed with a $31 million loan. The CUSO, Credit Union Liquidity Services LLC (CULS), was granted its motion to dismiss an appeal from Mariah Bay Leasing Corp., which had filed for bankruptcy under Chapter 11 on Feb. 19, 2010, by the U.S. District Court for the Northern District of Texas in Dallas. Mariah Bay had appealed after the U.S. Bankruptcy Court, also in Dallas, denied its reorganization plan. The case centers around a retail development in Rockwall, Texas, which CULS financed. After Mariah Bay filed for Chapter 11 reorganization under the U.S. Bankruptcy Code, it filed an amended version of its reorganization plan. CULS had the first lien on the property, rent, proceeds and profits generated by the property, according to the court records. On Aug. 2, 2010, CULS moved to convert Mariah Bay's bankruptcy case to a liquidation under Chapter 7. Mariah Bay failed to confirm its reorganization plan on Oct. 3, 2010, and CULS foreclosed on the property. The U.S. Bankruptcy Court for the Northern District of Texas granted the motion to convert the case to a Chapter 7 and a Chapter 7 trustee assumed management . On Oct. 5, 2010, the court also denied confirmation of Mariah Bay's Chapter 11 reorganization, and Mariah Bay appealed. CULS filed its motion on March 22, 2011, to dismiss the appeal on the grounds of ripeness (the appeal improperly concerns a non-final order), mootness (the conversion of the underlying bankruptcy case to Chapter 7 renders the appeal unnecessary or the property has been foreclosed and is no longer subject to appeal) and standing (that the Chapter 7 trustee alone could appeal the decision). In its motion to dismiss, the court said that "dismissal is warranted on the grounds of mootness alone and thus does not address the parties' arguments as to standing or ripeness." In the decision, U.S. District Judge Jane J. Boyle said that "while Mariah Bay claims that the Bankruptcy Court's quickly converting to Chapter 7 denied it the opportunity to amend its Chapter 11 reorganization plan, it nevertheless did not appeal the conversion order." She said the "proper course would have been for Mariah Bay to appeal not only the denial of its reorganization plan, but also the granting of CULS' motion to convert and motion to lift stay order. However, because Mariah Bay had the opportunity to resist conversion through objection or appeal and did not, any claim based on the denial of its Chapter 11 reorganization plan is moot. "Mariah Bay's appeal of the denial of the reorganization plan is moot on either of two grounds: (1) Mariah Bay's bankruptcy case was permanently converted from a Chapter 11 reorganization case to a Chapter 7 liquidation case, making confirmation of its reorganization plan impossible; and, alternatively, (2) Mariah Bay no longer owns the real property the reorganization plan was based upon, effectively making the plan impossible to implement." Texans CU was placed into conservatorship by the National Credit Union Administration in April.


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