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Full title: Objection to (related document(s): 406 Motion to sell property free and clear of liens under Section 363(f) / Debtors' Expedited Motion for Entry of an Order Authorizing Sale Procedures for Sale of Personal Property Assets Free and Clear of All Liens, Claims, and Encumbrances an filed by Debtor Studio Movie Grill Holdings, LLC) filed by Creditor Veritex Community Bank. (Attachments: # 1 Exhibit 1 # 2 Exhibit 2 # 3 Exhibit 3 # 4 Exhibit 4 # 5 Exhibit 5 # 6 Exhibit 6 # 7 Exhibit 7 # 8 Exhibit 8 # 9 Exhibit 9 # 10 Exhibit 10) (Zabarauskas, Bruce)

Document posted on Jan 12, 2021 in the bankruptcy, 8 pages and 0 tables.

Bankrupt11 Summary (Automatically Generated)

1 The Debtors in these Chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, include: Studio Movie Grill Holdings, LLC (6546) (“SMG Holdings”); OHAM Holdings, LLC (0966); Movie Grill Concepts Trademark Holdings, LLC (3096); Movie Grill Concepts I, Ltd. (6645); Movie Grill Concepts III, Ltd. (2793); Movie Grill Concepts IV, Ltd. (1454); Movie Grill Concepts IX, LLC (3736); Movie Grill Concepts VI, Ltd. (6895); Movie Grill Concepts VII, LLC (2291); Movie Grill Concepts X, LLC (6906); Movie Grill Concepts XI, LLC (2837); Movie Grill Concepts XII, LLC (6040); Movie Grill Concepts XIII, LLC (5299); Movie Grill Concepts XIV, LLC (4709); Movie Grill Concepts XIX, LLC (9646); Movie Grill Concepts XL, LLC (4454); Movie Grill Concepts XLI, LLC (4624); Movie Grill Concepts XLII, LLC (2309); Movie Grill Concepts XLIII, LLC (9721); Movie Grill Concepts XLIV, LLC (8783); Movie Grill Concepts XLV, LLC (2570); Movie Grill Concepts XV, LLC (4939); Movie Grill Concepts XVI, LLC (1033); Movie Grill Concepts XVII, LLC (1733); Movie Grill Concepts XVIII, LLC (8322); Movie Grill Concepts XX, LLC (7300); Movie Grill Concepts XXI, LLC (1508); Movie Grill Concepts XXII, LLC (6748); Movie Grill Concepts XXIV, LLC (5114); Movie Grill Concepts XXIX, LLC (5857); Movie Grill Concepts XXV, LLC (4985); Movie Grill Concepts XXVI, LLC (5233); Movie Grill Concepts XXVII, LLC (4427); Movie Grill Concepts XXVIII, LLC (1554); Movie Grill Concepts XXX, LLC (1431); Movie Grill Concepts XXXI, LLC (3223); Movie Grill Concepts XXXII, LLC (0196); Movie Grill Concepts XXXIII, LLC (1505); Movie Grill Concepts XXXIV, LLC (9770); Movie Grill Concepts XXXIX, LLC (3605); Movie Grill Concepts XXXV, LLC (0571); Movie Grill Concepts XXXVI, LLC (6927); Movie Grill Concepts XXXVII, LLC (6401); Movie Grill Concepts XXXVIII, LLC (9657); Movie Grill Concepts XXIII, LLC (7893); Studio Club, LLC (3023); Studio Club IV, LLC (9440); Movie Grill Concepts XI, LLC (2837); Movie Grill Concepts XLI, LLC (4624); Movie Grill Concepts XLVI, LLC (2344); Movie Grill Concepts XLVII, LLC (5866); Movie Grill Concepts XLVIII, LLC (8601); Movie Grill Concepts XLIX, LLC (0537); Movie Grill Concepts L, LLC (5940); Movie Grill Concepts LI, LLC (7754); Movie Grill Concepts LII, LLC (8624); Movie Grill Concepts LIII, LLC (3066); Movie Grill Concepts LIV, LLC (2018); Movie Grill Concepts LV, LLC (4699); Movie Grill Partners 3, LLC (4200); Movie Grill Partners 4, LLC (1363); Movie Grill Partners 6, LLC (3334); and MGC ManagementSpecifically, the Leases consist of: (i) a Master Lease Agreement, dated March 10, 2017, between Presidio as lessor and Movie Grill XXIV as lessee, related to Movie Grill XXIV’s operation of a Studio Movie Grill located at 2332 University Mall Ct.,Tampa, Florida 33612-5552, which includes a Master Lease Schedule (including Exhibit A thereto) and an Equipment Addendum (the “Tampa Lease”)3; (ii) a Master Lease Agreement, dated December 4, 2018, between

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Bruce J. Zabarauskas Texas Bar No. 24095654 Thompson & Knight LLP 1722 Routh Street, Suite 1500 Dallas, Texas 75201 Telephone: 214-969-2511 email: bruce.zabarauskas@tklaw.com Attorneys for Veritex Community Bank UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF TEXAS DALLAS DIVISION § Case No. 20-32633-SGJ-11 In re: § Chapter 11 § STUDIO MOVIE GRILL HOLDINGS, § Jointly Administered LLC, et al.1, § § Debtors. § VERITEX COMMUNITY BANK’S LIMITED OBJECTION TO DEBTORS’ MOTION FOR ENTRY OF AN ORDER AUTHORIZING SALE PROCEDURES FOR SALE OF PERSONAL PROPERTY ASSETS FREE AND CLEAR OF ALL LIENS, CLAIMS AND ENCUMBRANCES (Related To Dkt. No. 406) TO: THE HONORABLE STACEY G.C. JERNIGAN, U.S. BANKRUPTCY JUDGE 1 The Debtors in these Chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, include: Studio Movie Grill Holdings, LLC (6546) (“SMG Holdings”); OHAM Holdings, LLC (0966); Movie Grill Concepts Trademark Holdings, LLC (3096); Movie Grill Concepts I, Ltd. (6645); Movie Grill Concepts III, Ltd. (2793); Movie Grill Concepts IV, Ltd. (1454); Movie Grill Concepts IX, LLC (3736); Movie Grill Concepts VI, Ltd. (6895); Movie Grill Concepts VII, LLC (2291); Movie Grill Concepts X, LLC (6906); Movie Grill Concepts XI, LLC (2837); Movie Grill Concepts XII, LLC (6040); Movie Grill Concepts XIII, LLC (5299); Movie Grill Concepts XIV, LLC (4709); Movie Grill Concepts XIX, LLC (9646); Movie Grill Concepts XL, LLC (4454); Movie Grill Concepts XLI, LLC (4624); Movie Grill Concepts XLII, LLC (2309); Movie Grill Concepts XLIII, LLC (9721); Movie Grill Concepts XLIV, LLC (8783); Movie Grill Concepts XLV, LLC (2570); Movie Grill Concepts XV, LLC (4939); Movie Grill Concepts XVI, LLC (1033); Movie Grill Concepts XVII, LLC (1733); Movie Grill Concepts XVIII, LLC (8322); Movie Grill Concepts XX, LLC (7300); Movie Grill Concepts XXI, LLC (1508); Movie Grill Concepts XXII, LLC (6748); Movie Grill Concepts XXIV, LLC (5114); Movie Grill Concepts XXIX, LLC (5857); Movie Grill Concepts XXV, LLC (4985); Movie Grill Concepts XXVI, LLC (5233); Movie Grill Concepts XXVII, LLC (4427); Movie Grill Concepts XXVIII, LLC (1554); Movie Grill Concepts XXX, LLC (1431); Movie Grill Concepts XXXI, LLC (3223); Movie Grill Concepts XXXII, LLC (0196); Movie Grill Concepts XXXIII, LLC (1505); Movie Grill Concepts XXXIV, LLC (9770); Movie Grill Concepts XXXIX, LLC (3605); Movie Grill Concepts XXXV, LLC (0571); Movie Grill Concepts XXXVI, LLC (6927); Movie Grill Concepts XXXVII, LLC (6401); Movie Grill Concepts XXXVIII, LLC (9657); Movie Grill Concepts XXIII, LLC (7893); Studio Club, LLC (3023); Studio Club IV, LLC (9440); Movie Grill Concepts XI, LLC (2837); Movie Grill Concepts XLI, LLC (4624); Movie Grill Concepts XLVI, LLC (2344); Movie Grill Concepts XLVII, LLC (5866); Movie Grill Concepts XLVIII, LLC (8601); Movie Grill Concepts XLIX, LLC (0537); Movie Grill Concepts L, LLC (5940); Movie Grill Concepts LI, LLC (7754); Movie Grill Concepts LII, LLC (8624); Movie Grill Concepts LIII, LLC (3066); Movie Grill Concepts LIV, LLC (2018); Movie Grill Concepts LV, LLC (4699); Movie Grill Partners 3, LLC (4200); Movie Grill Partners 4, LLC (1363); Movie Grill Partners 6, LLC (3334); and MGC Management I, LLC (3224). VERITEX COMMUNITY BANK’S LIMITED OBJECTION TO DEBTORS’ MOTION FOR ENTRY OF

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Veritex Community Bank (“Veritex”) as assignee of Presidio Technology Capital, LLC (“Presidio”), by and through its undersigned counsel, submits this limited objection (the “Objection”) to the Debtors’ Motion For Entry Of An Order Authorizing Sale Procedures For Sale Of Personal Property Assets Free And Clear Of All Liens, Claims And Encumbrances [Dkt. No. 406] (the “Motion”), and respectfully states as follows: Introduction 1. The Motion seeks approval to sell personal property assets from locations where the Debtors have already rejected, or may in the future reject, their real property leases. Veritex is the assignee of the lessor under four equipment leases with certain of the Debtors, including in connection with two locations where the Debtors have already rejected their real property leases. Veritex’s sole objection to the Motion is that any order approving the Motion should exclude the Leased Assets (as hereafter defined) from any assets which the Debtors are authorized to sell. Background 2. On October 23, 2020 (the “Petition Date”), the Debtors filed voluntary Chapter 11 bankruptcy petitions with this Court. Since the Petition Date, the Debtors have been operating their businesses and managing their properties pursuant to Bankruptcy Code §§ 1107 and 1108. 3. By order dated October 27, 2020, the Debtors’ bankruptcy cases are being jointly administered for administrative purposes only. [Dkt. No. 48]. The Leases 4. As set forth in more detail below, Veritex is the assignee of Presidio as lessor under four leases (the “Leases”) pursuant to which certain of the Debtors as lessees (collectively, the “Lessee-Debtors”) leased equipment, software, accessories and other property (the “Leased VERITEX COMMUNITY BANK’S LIMITED OBJECTION TO DEBTORS’ MOTION FOR ENTRY OF

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Assets”) from the lessor.2 See Declaration of Michael Carp in support of this Objection, a copy of which is annexed hereto as Exhibit 1 at ¶ 3. 5. Specifically, the Leases consist of: (i) a Master Lease Agreement, dated March 10, 2017, between Presidio as lessor and Movie Grill XXIV as lessee, related to Movie Grill XXIV’s operation of a Studio Movie Grill located at 2332 University Mall Ct., Tampa, Florida 33612-5552, which includes a Master Lease Schedule (including Exhibit A thereto) and an Equipment Addendum (the “Tampa Lease”)3; (ii) a Master Lease Agreement, dated December 4, 2018, between Presidio as lessor and Movie Grill XXX, LLC as lessee related to Movie Grill XXX’s operation of a Studio Movie Grill located at 3204 Margaritaville Blvd., Kissimmee, Florida 34747 (the “Kissimmee Lease”), which includes a Master Lease Schedule (including Exhibit A thereto) and an Equipment Addendum4; (iii) a Master Lease Agreement, dated September 19, 2019, between Presidio as lessor and Movie Grill XXXII, LLC as lessee, related to Movie Grill XXXII’s operation of a Studio Movie Grill located at 5336 Docia Crossing Rd., Charlotte, North Carolina 28269 (the “Charlotte Equipment Lease”), which includes a Master Lease Schedule (including Exhibit A thereto) and an Equipment Addendum5; and (iv) a Master Lease Agreement, dated September 19, 2019, between Presidio as lessor and Movie Grill XL, LLC related to Movie Grill XL’s operation of a Studio Movie Grill located at 128-130 N. Artsakh Street, Glendale, California 91206 (the “Glendale Equipment Lease”), which includes a Master Lease Schedule (including Exhibit A thereto) and an Equipment Addendum.6 (Exhibit 1 at ¶ 4). 2 The Lessee-Debtors are: (i) Movie Grill XXIV, LLC (“Movie Grill XXIV”); (ii) Movie Grill XXX, LLC (“Movie Grill XXX”); (iii) Movie Grill XXXII, LLC (“Movie Grill XXXII”); and (iv) Movie Grill XL, LLC (“Movie Grill XL”). 3 A copy of the Tampa Lease is annexed here as Exhibit 2. 4 A copy of the Glendale Lease is annexed hereto as Exhibit 3. 5 A copy of the Kissimmee Lease is annexed hereto as Exhibit 4. 6 A copy of the Charlotte Lease is annexed here as Exhibit 5. VERITEX COMMUNITY BANK’S LIMITED OBJECTION TO DEBTORS’ MOTION FOR ENTRY OF

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Presidio’s Assignments Of The Leases To Veritex 6. Section 24 of each Lease provides, in part: ASSIGNMENT BY LESSOR: LESSOR MAY, WITHOUT THE CONSENT OF OR NOTICE TO LESSEE, ASSIGN, SELL OR ENCUMBER ALL OR ANY PART OF THIS LEASE AGREEMENT, ANY SCHEDULE, THE EQUIPMENT AND THE PAYMENTS AND OTHER AMOUNTS DUE HEREUNDER OR THEREUNDER, OR THE RIGHT TO ENTER INTO ANY SCHEDULE… ANY SUCH ASSIGNEE SHALL HAVE ALL OF THE RIGHTS, BUT NONE OF THE OBLIGATIONS (UNLESS EXPRESSLY ASSUMED BY SUCH ASSIGNEE) OF LESSOR UNDER THIS LEASE AGREEMENT, AND LESSEE SHALL NOT ASSERT AGAINST ANY SUCH ASSIGNEE ANY DEFENSE, COUNTERCLAIM OR SET-OFF WHICH LESSEE MAY HAVE AGAINST LESSOR FOR ANY REASON WHATSOEVER. 7. Pursuant to § 24 of the Leases, Presidio and Veritex entered into an Assignment of Lease and Security Agreement (each hereafter referred to as an “Assignment”) with respect to each of the Leases, whereby Presidio assigned all of its rights to the payments under the Leases and lessor’s remedies under the Leases, and any guarantees thereof, to Veritex.7 While title to the Leased Assets remains in Presidio, under the Assignments Presidio granted a security interest in the Leased Assets to Veritex. (Exhibit 1 at ¶ 7; Exhibit 6 at p. 1, Exhibit 7 at p. 1; Exhibit 8 at p. 1; Exhibit 9 at p. 1). The Leased Assets At The Charlotte And Glendale Locations 8. The Debtors have already rejected the real estate leases for their Charlotte, North Carolina (the “Charlotte Location”) and Glendale, California (the “Glendale Location”) locations where Leased Assets are or were located. Under this Court’s order authorizing the Debtors to 7 A copy of the Assignment in connection with the Tampa Lease is annexed hereto as Exhibit 6, A copy of the Assignment in connection with the Kissimmee Lease is annexed hereto as Exhibit 7. A copy of the Assignment in connection with the Charlotte Lease is annexed hereto as Exhibit 8. A copy of the Assignment in connection with the Glendale Lease is annexed hereto as Exhibit 9. VERITEX COMMUNITY BANK’S LIMITED OBJECTION TO DEBTORS’ MOTION FOR ENTRY OF

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reject their real estate leases for the Charlotte Location and Glendale Location, the Debtors were required to remove “any personal property that is not property of the Debtors, or property of the landlord,” which would include the Leased Assets at the Charlotte Location and Glendale Location. [Dkt. No. 333 at ¶ 8] However, as of the date hereof, the Debtors have not confirmed to Veritex whether the Leased Assets have, in fact, been moved from the Charlotte Location and Glendale Location, and if so, where such Leased Assets were moved to, and are currently located. The Leased Assets Are Not Property Of The Debtors’ Bankruptcy Estate And Cannot Be Sold By The Debtor 9. Bankruptcy Code § 363 provides that the Debtors may sell “property of the estate.” 10. Bankruptcy Code § 541(a)(1) defines property of the estate as “all legal or equitable interests of the debtor in property as of the commencement of the case.” 11. The determination as to whether property constitutes property of a bankruptcy estate is determined by state law. See, e.g., Butner v. United States 440 U.S. 48 (1979). Similarly, the determination as to whether an agreement is a “true lease” is determined by state law. See, e.g., In re Royal T Energy, LLC, 596 B.R. 525, 529 (Bankr. E.D. Tex. 2019); In re Jarrells, 205 B.R. 994,996 (Bankr. M.D. Ga. 1996). 12. Each of the Leases is governed by Georgia law. (Exhibit 1 at ¶ 13; Exhibit 2 at §30; Exhibit 3 at §30; Exhibit 4 at §30; Exhibit 5 at §30). 13. Under Georgia law, where a lease provides for a significant or fair market value purchase option at the end of its term, the lease is a “true lease” and the lessee holds a leasehold, and not an ownership, interest in the leased property. See, e.g., Aniebue v. Jaguar Credit Corp., 708 S.E.2d 4, 7 (Ga. Ct. App. 2011)(in determining whether agreement is a ‘true lease’ or financing arrangement, court looks to “whether lessee has an option to become the owner of the goods for VERITEX COMMUNITY BANK’S LIMITED OBJECTION TO DEBTORS’ MOTION FOR ENTRY OF

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no additional consideration or nominal consideration upon compliance with lease agreement.”); Coleman v. DaimlerChrysler Services of N. Am., 623 S.E.2d 189 (Ga. Ct. App. 2005)(consideration to purchase property at end of lease is not nominal if based upon fair market consideration at the time purchase option is to executed). 14. In this case, each of the Leases provides that at the end of its term, the lessee may purchase the Leased Assets for the greater of a fixed dollar amount which is not less than several hundred thousand dollars, or the “then fair market value” of the equipment. (Exhibit 1 at ¶ 8; Exhibit 2 at Exhibit A to Master Lease Schedule; Exhibit 3 at Exhibit A to Master Lease Schedule; Exhibit 4 at Exhibit A to Master Lease Schedule; Exhibit 5 at Exhibit A to Master Lease Schedule). Therefore, under Georgia Law, the Debtors hold only a leasehold interest, and not an ownership interest, in the Leased Assets. Accordingly, the Leased Assets are not property of the Debtors’ bankruptcy estate and cannot be sold pursuant to Bankruptcy Code § 363.8 15. Undersigned counsel for Veritex has reached out to counsel for the Debtors on three occasions requesting that any order approving the Motion contain language excluding the Leased Assets from those assets being included in any sale. (A copy of such emails is annexed hereto as Exhibit 10.) Debtors’ counsel has failed to respond to such requests. 16. Accordingly, Veritex respectfully requests that any order entered by the Court, granting the Motion contain a provision stating: Notwithstanding anything to the contrary contained in this Order, the Debtors are not authorized to sell any of the property that they have leased from Presidio Technology Capital LLC (whose interests in such leases were assigned to Veritex Community Bank), with respect to the following locations, without the prior written consent of Veritex Community Bank: (i) 128-130 N. Artsakh Street, Glendale, California 91206; (ii) 5336 Docia 8 The Debtors’ sole avenue to transfer its leasehold interest in the Leased Assets is to seek the assumption and assignment of the Leases. VERITEX COMMUNITY BANK’S LIMITED OBJECTION TO DEBTORS’ MOTION FOR ENTRY OF

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Crossing Rd., Charlotte, North Carolina 28269; (iii) 12332 University Mall Ct., Tampa, Florida 33612-5552; and (iv) 3204 Margaritaville Blvd., Kissimmee, Florida 34747. WHEREFORE, Veritex respectfully requests that any order granting the Motion provide that it does not authorize the Debtors to sell the Leased Assets. DATED: January 13, 2021 Respectfully submitted, THOMPSON & KNIGHT LLP /s/ Bruce J. Zabarauskas Bruce J. Zabarauskas Texas Bar No. 24095654 1722 Routh Street, Suite 1500 Dallas, Texas 75201 Telephone: 214-969-2511 e-mail: bruce.zabarauskas@tklaw.com Attorneys for Veritex Community Bank VERITEX COMMUNITY BANK’S LIMITED OBJECTION TO DEBTORS’ MOTION FOR ENTRY OF

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CERTIFICATE OF SERVICE I hereby certify that on January 13, 2021, a true and correct copy of the foregoing (with exhibits) has been served on all parties entitled to service via this Court’s Case Management/Electronic Case Filing System (“CM/ECF”). /s/ Bruce J. Zabarauskas Bruce J. Zabarauskas VERITEX COMMUNITY BANK’S LIMITED OBJECTION TO DEBTORS’ MOTION FOR ENTRY OF