Bank of America v. 203 North LaSalle Partnership - Oral Argument - November 02, 1998

Bank of America v. 203 North LaSalle Partnership

Media for Bank of America v. 203 North LaSalle Partnership

Audio Transcription for Opinion Announcement - May 03, 1999 in Bank of America v. 203 North LaSalle Partnership

Audio Transcription for Oral Argument - November 02, 1998 in Bank of America v. 203 North LaSalle Partnership

William H. Rehnquist:

We'll hear argument next in Number 97-1418, Bank of America National Trust and Savings v. 203 North LaSalle Street.

Mr. Englert.

Roy T. Englert, Jr.:

Mr. Chief Justice, and may it please the Court:

Bank of America lent 203 North LaSalle Street Partnership 92 million dollars.

The loan was secured by 15 floors of an office building in the Loop, in Chicago.

Outside of bankruptcy, the bank would have been entitled to be repaid 93 million dollars in January of 1995, or to foreclose on the real estate.

In the bankruptcy proceeding that the Court is reviewing today, the bank was denied the right to foreclose.

Its right to receive a 93 million dollar repayment in January 1995 was converted into a right to receive 60 million dollars worth, present value, of payments over a period extending to the year 2005.

Ownership of the real estate was left in the hands of 203 North LaSalle Street Partnership, despite its default on the loan, in exchange for a promise to contribute 4.1 million dollars net present value of new value into the estate over 5 years.

John Paul Stevens:

May I ask just a... I'm a little fuzzy on the facts.

It retained the same part... it was the same owners as before?

Roy T. Englert, Jr.:

It's the same partnership.

It's been reconstituted with the percentage ownerships changing.

John Paul Stevens:

It's reconstituted with the... some partners contributed and some did not; is that right?

Roy T. Englert, Jr.:

That's correct, Your Honor.

Some partners exercised their option; some did not.

John Paul Stevens:

So that it's actually a different group of individuals than it was before?

Roy T. Englert, Jr.:

It is a--

John Paul Stevens:

If it's a different partnership, in effect, do they have different partners?

Roy T. Englert, Jr.:

--It is the reorganized debtor.

It was not reconstituted as a separate partnership, but as a reorganized debtor.

William H. Rehnquist:

Are there any individuals in the new partnership that were not in the former one?

Roy T. Englert, Jr.:

I don't know the answer to that question, Your Honor.

Ruth Bader Ginsburg:

Well, the new partnership still preserved the tax shelter, right?

I mean the... the whole problem here was that if there is a default which constitutes a sale, there's... there's this enormous tax bill to be paid.

Roy T. Englert, Jr.:

That's correct, Your Honor.

Certainly the owners of the equity are mostly old equity owners.

They may be all old equity owners.

I'm just not sure whether anybody new came in.

But the main purpose of this plan was to save the individual partners from suffering tax losses on transfer of ownership.