Article courtesy of Kevin Braun, Claire Santaniello, and Paige Forcier (Morgan, Lewis & Bockius LLP)
WM Cap. Partners 85, LLC v. Cashman Equip. Corp., No. CV 23-11658-FDS, 2024 WL 2962710 (D. Mass. June 12, 2024).
On June 9, 2017, each of Cashman Equipment Corp., Cashman Scrap & Salvage LLC, Servicio Marino Superior, LLC and James M. Cashman (collectively, the “Debtors”) filed Chapter 11 bankruptcy petitions in the Bankruptcy Court for the District of Massachusetts. The Bankruptcy Court confirmed a plan of reorganization that required the Debtors to make monthly payments to MW Capital Partners 85, LLC, a secured creditor under certain credit agreements, guarantees and maritime security agreements (the “Secured Creditor”), including vessel mortgages granting liens over certain vessels, in connection with the Secured Creditor’s allowed secured claim against the Debtors in connection with such loan documents. It is undisputed that the amounts that the Debtors owed to the Secured Creditor under the plan and the relevant loan documents were not paid and there was a default under the reorganization plan on March 16, 2023.
On July 25, 2023, the Secured Creditor sued the Debtors in the District Court for the District of Massachusetts in connection with the default under the Debtors’ reorganization plan and, based on that and the undisputed facts leading to the default and the terms of the underlying mortgage agreements, granted the Secured Creditor’s partial motion for summary judgment as to liability. The Court needed additional information to consider the precise form of relief to be granted.
On April 26, 2024, the Secured Creditor filed a motion to compel specific performance under the ship mortgages and charter assignment and turnover of charter revenue. The Secured Creditor also moved to establish a vessel sale process or compel assembly of the vessels. The Debtors opposed this motion, noting that while certain payments were missed, they did pay the Secured Creditor over $1,000,000 since the suit was filed and planned to pay almost $1,000,000 more by the end of 2024. The Debtors contested that they worked in good faith and put forth their best efforts to cooperate and satisfy the claims of all their lenders, even during the pandemic. They further argued that granting the relief that the Secured Creditor sought could lead to a total liquidation of the Debtors’ business.
The District Court for the District of Massachusetts noted that “the question in this case is not whether a business solution would be preferable to the defendants, or indeed more beneficial in the long run to all parties” but rather “[t]he question instead is what powers and remedies are available to [the Secured Creditor] in the event of default.” The Court pointed to two vessel mortgages that provided a broad range of different powers and remedies to the Secured Creditor in the event of a default, such as the right to seek specific performance, the right to take possession of the vessels and sell them and the right to direct Debtors to surrender the vessels at a location of the Secured Creditor’s choosing. The Court also noted that both mortgages allow the Secured Creditor to seek equitable relief in furtherance of its other powers. Therefore, the Court granted the Secured Creditor’s motion to compel specific performance of the ship mortgages and charter assignments, compel turnover of charter revenue and establish a vessel sale process.
