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DOCKET__2583[1]

DOCKET__2583[1]

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Published by Paula Rush

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Published by: Paula Rush on Nov 01, 2012
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IN THE UNITED STATES BANKRUPTCY COURTFOR THE DISTRICT OF DELAWARE
In re: ) Chapter 11)AMERICAN HOME MORTGAGE, ) Case No. 07-11047 (CSS)INC., et al., ) (Jointly Administered))Debtors. ))CALYON NEW YORK BRANCH , ))Plaintiff and )Counterclaim Defendant, ))v. ) Adv. Proc. No. 07-51704 (CSS))AMERICAN HOME MORTGAGE CORP., )AMERICAN HOME MORTGAGE )SERVICING, INC., AMERICAN )HOME MORTGAGE ACCEPTANCE, INC., )and AMERICAN HOME MORTGAGE )INVESTMENT CORP., ))Defendants and )Counterclaim Plaintiffs. )
OPINION
HUNTON & WILLIAMS LLP ECKERT SEAMANS CHERINBenjamin C. Ackerly & MELLOTT, LLC Jason W. Harbour Michael G. BusenkellRiverfront Plaza, East Tower Margaret F. England951 E. Byrd Street 300 Delaware Avenue, Suite 1210Richmond, VA 23219 Wilmington, DE 19801Peter S. Partee
Counsel to Calyon
 Scott H. Berstein
New York Branch
200 Park Avenue, 53
rd
FloorNew York, New York 100166-0136
 
YOUNG, CONAWAY, STARGATT & QUINN, EMANUEL, URQUHARTTAYLOR, LLP OLIVER & HEDGES, LLP James L. Patton, Jr. Susheel KirpalaniRobert S. Brady James C. Tecce John T. Dorsey 51 Madison Avenue, 22
nd
FloorErin Edwards New York, New York 10010The Brandywine Building1000 West Street, 17
th
Floor
Counsel to American Home Mortgage
Wilmington, DE 19801
Corp.; American Home Mortgage
 
Acceptance, Inc.; American HomeMortgage Servicing, Inc.; andAmerican Home Mortgage InvestmentCorp.
Dated: January 4, 2008Sontchi, J.
INTRODUCTION
This is a case of first impression regarding the application of the amended“safe harbor” provisions of sections 555 and 559 of the Bankruptcy Code to arepurchase agreement involving mortgage loans.The dispute centers on three issues. The first issue is whether the sale andrepurchase of mortgage loans under the contract in question is a “repurchaseagreement” as defined in section 101(47) of the Bankruptcy Code and thus,pursuant to sections 362(b)(7), 555 and 559 of the Bankruptcy Code, the rights ofthe non-debtor party to the contract related to the sale and repurchase ofmortgage loans are not stayed, avoided or otherwise limited by the operation ofany provision of the Bankruptcy Code. The Court finds that, under the plainmeaning of section 101(47) of the Bankruptcy Code, the contract for the sale andrepurchase of mortgage loans in this case is a “repurchase agreement” under thestatute and the “safe harbor” provisions of sections 555 and 559 of theBankruptcy Code are applicable.The second issue is whether the entirety of the contract is a “repurchaseagreement.” Specifically, is the portion of the contract providing for the2
 
servicing of mortgage loans (as opposed to the sale and repurchase of mortgageloans) also protected under the safe harbor provisions? The Court finds that theservicing of mortgage loans is
not
protected under the safe harbor provisionsbecause: (i) under applicable law, the portion of the contract providing for theservicing of the mortgage loans is severable from the portion of the contractproviding for the sale and repurchase of mortgage loans; and (ii) the portion ofthe contract providing for servicing mortgage loans is neither a “repurchaseagreement” nor a “securities contract” under the Bankruptcy Code.The third and final issue is whether the Court should require the Debtorsto transfer the rights and obligations relating to servicing the mortgage loans tothe plaintiff. As the Court finds that the portion of the contract providing for theservicing of the mortgage loans is not subject to the safe harbor provisions, thereis simply no basis to require the Debtors to transfer property of the estate (i.e.,the right to service of the mortgage loans under the contract) to the plaintiff.
 JURISDICTION
This Court has subject matter jurisdiction under 28 U.S.C. § 1334(b).Venue is proper in this district under 28 U.S.C. §§ 1408 and 1409(a). This is a coreproceeding under 28 U.S.C. §157(b)(2)(A), (B), (C), (E), (G), (K) and (O).
PROCEDURAL BACKGROUND
On August 6, 2007, American Home Mortgage Corp. and certain of itsaffiliates filed bankruptcy under Chapter 11. Shortly thereafter, Calyon NewYork Branch, as Administrative Agent, (“Calyon” or “Plaintiff”) filed a complaintagainst American Home Mortgage Corp.,
 
American Home MortgageAcceptance, Inc. (“AHM Acceptance”), American Home Mortgage Servicing, Inc.(“AHM Servicing”), and American Home Mortgage Investment Corp. (“AHMInvestment”) (collectively, the “Debtors” or “Defendants”).
1
In the complaint,
1
Not all of the Chapter 11 debtors are defendants in this adversary proceeding. Unless otherwiseindicated, the term “Debtors” in this Opinion refers only to those Chapter 11 debtors that areparties to this adversary proceeding.
3

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