## Facts

- Phoenix Piccadilly, Ltd., a limited partnership, owned a four-phase apartment complex in Louisville, Kentucky.
- Multiple institutional lenders held first mortgage liens on the property’s phases, and an additional note was secured by a wraparound mortgage on the entire property.
- After a secured creditor began foreclosure proceedings in Kentucky state court, a receiver was appointed for one phase and a hearing was set to consider receivership for the remaining phases.
- The debtor filed a Chapter 11 petition in the Middle District of Florida the day before the state-court hearing on receivership for the remaining phases.
- Evidence showed the debtor had minimal unsecured debt, few or no employees, and essentially one significant asset (the apartment complex).
- Testimony indicated the filing was intended to delay foreclosure, including statements about filing bankruptcy far from Louisville to delay proceedings for years.

## Issues

1. Whether the bankruptcy court clearly erred in finding the Chapter 11 petition was filed in bad faith.
2. Whether, after a bad-faith finding, alleged equity in the property and the possibility of reorganization required denying dismissal and stay relief.

## Decision

- The Eleventh Circuit affirmed the district court’s judgment upholding the bankruptcy court’s orders.
- The court held the bad-faith finding was supported by the record and was not clearly erroneous.
- The court held that potential reorganization prospects and alleged equity did not, as a matter of law, override a supported finding of bad faith.
- The court upheld both dismissal of the Chapter 11 case and relief from the automatic stay for the secured creditors.

## Legal Principles

- A Chapter 11 petition must be filed in good faith; lack of good faith constitutes cause to dismiss under 11 U.S.C. § 1112(b).
- Bad faith may also constitute cause for relief from the automatic stay.
- Indicators of bad faith in a single-asset real estate setting include: a single primary asset, few unsecured creditors, few or no employees, a pending foreclosure or comparable enforcement action, and timing suggesting the filing was intended to stall creditor remedies rather than reorganize.
- The existence of some equity in the property or a conceivable reorganization plan does not cure a petition filed primarily to delay or frustrate secured creditors’ enforcement efforts.

## Conclusion

The Eleventh Circuit held that Chapter 11’s good-faith requirement is a threshold constraint and affirmed dismissal and stay relief where the debtor filed a single-asset petition on the eve of state-court receivership proceedings to impede secured creditors’ foreclosure remedies.


Phoenix Piccadilly, Ltd. v. Life Ins. Co. of Va. (In re Phoenix Piccadilly, Ltd.), 849 F.2d 1393 (11th Cir. 1988)