Kenneth Rijock

Kenneth Rijock

Saturday, February 25, 2012

FEDERAL JUDGE COMMENTS ON ATLANTIC RIM

A recent court ruling may provide some guidance to individuals and entities seeking to conduct due diligence on a company holding itself out as a funding source to borrowers seeking multi-million dollar loans.

The United States Bankruptcy Judge in the Elkins Park* case, Eric Frank, on 21 February, has entered an Order that  reflect the Court's observations concerning the Debtor's unsuccessful efforts to secure funding, and to later obtain the return of its escrowed deposit, from the Las Vegas corporation known as Atlantic Rim Funding Corp.

The debtor, the Land Conservancy of Elkins Park, Inc., had sought to obtain a loan early last year from Atlantic Rim Funding, to finance real property it had purchased from the Dominican Congregation of St. Catherine De'Ricci, and it had deposited, into what it understood to be escrow, $600,000, whilst funding was being processed. When 5 July, 2011, the funding date, came and went, it sought a refund of the escrow, which did not occur, and an Adversary Complaint, within the context of the Chapter Eleven  proceeding, was filed in December.

The debtor, believing that it would get the funding timely, or in the alternative, repayment from escrow of the $600,000, entered into a Settlement Agreement with the Congregation, that provided for three interim payments, and the balance in 2012. Neither the promised funding, nor the oft-promised return of the escrowed funds occurred, and the Congregation sought relief from the Automatic Stay of any non-bankruptcy legal proceedings, so that it could obtain possession of the subject property.

The debtor has opposed this, citing a legal principle that holds where performance is rendered impossible, due to the actions of a third party, which was not foreseeable, enforcement is barred, on equitable grounds. it sought to vacate the parties' agreement.

The Court denied Elkins Park's motion, and stated, in the Order

" In this case, given the history of the Debtor's relationship with Atlantic Rim, which consisted of a series of Atlantic Rim's broken promises to fund a loan, it was certainly foreseeable that Atlantic Rim might not timely perform its obligation to return the Debtor's $600,000 deposit. "

Readers, who are urged to review the complete opinion, can access it at:  www.leagle.com/
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*Case No.: 10-19522 ELF ( ED PA) [Bankruptcy]
 Adversary Case No.: 10-0449

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