A June 2013 decision from the United States Bankruptcy Court for the Eastern District of North Carolina Greenville Division, In re L.L. Murphrey Company, 2013 WL 2451368 (Bankr. E.D.N.C. June 6, 2013), highlights the importance of due diligence in connection with assignments of security interests.
L.L. Murphrey Company (the “debtor”) filed a voluntary Chapter 11 petition on June 8, 2000. In 2000, the debtor was in default to Wachovia Bank, N.A. (“Wachovia”) for approximately $12,800,000 secured by the debtor’s real property and personal property by appropriate loan documents (“PreBankruptcy Loan Documents”).
In July 2001, the court confirmed a plan of reorganization, which restructured the debt into two notes and provided that: