
    In re SCHMITT FARM PARTNERSHIP, Debtor-Appellant.
    Nos. 93 C 5885, 93 B 12008.
    United States District Court, N.D. Illinois, E.D.
    Nov. 15, 1993.
    
      Bruce M. Friedman, Joel A. Stein, Chicago, IL, for Schmitt Farm Partnership.
    George M. Hoffman, Lawrence M. Benjamin, Chicago, IL, for USAA Real Estate.
   MEMORANDUM OPINION AND ORDER

SHADUR, Senior District Judge.

Debtor Schmitt Farm Partnership (“Schmitt Farm”) has appealed the August 12, 1993 order of Bankruptcy Judge Thomas James, in which he granted the motion of mortgagee USAA Real Estate Company (“USAA”) to lift the automatic stay imposed by Bankruptcy Code § 362,11 U.S.C. § 362. That order, if upheld, will permit USAA to proceed with its state court foreclosure proceedings against Schmitt Farm’s sole asset— a 150-acre tract of vacant real estate in Aurora, Illinois (the “Property”).

Briefing on the appeal has been completed, and this Court has read through the entire record comprising:

1. both sides’ written submissions filed before Judge James;
2. the Real Estate Sale Contract (“Contract”) between “Noddle Development Company [“Noddle”] or Nominee” as designated purchaser and Merchants National Bank of Aurora, Trust No. 4481 (“Land Trust 4481”) as designated seller relating to the Property;
3. 177 pages of transcript (cited “Tr. — ”) of the August 12 hearing before Judge James; and
4. Judge James’ one-paragraph minute order of that same date, granting USAA’s motion “[f]or the reasons stated in open court_”

For the reasons stated in this memorandum opinion and order, Judge James’ order lifting the stay is affirmed.

Facts

Until a few months before Schmitt Farm sought to wrap itself in the mantle of Chapter 11, both the Property (which lies north of Indian Trail Road on the east and west sides of Orchard Road in Aurora) and some 350 acres to the south of Indian Trail Road (the “South Acreage”) were equitably owned by Orchard Valley Partnership (“Orchard Valley”). Originally USAA had owned both parcels and had sold them to Primus West Corporation (“Primus”) in December 1989 (Pri-mus placed title in a different land trust with Merchants National Bank, its Land Trust 4251) for about $2.4 million in cash and about $9.7 million represented by a nonrecourse purchase money mortgage having a one-year maturity.

Primus assigned the beneficial interest in Land Trust 4251 to Orchard Valley Partnership, a partnership among Primus (which had a 37.5% interest), Dearborn Investments Limited Partnership (“Dearborn Limited,” which had a 57.5% interest) and Crislar Enterprises, Inc. (“Crislar,” which had a 5% interest). In December 1990 another $2.6 million was paid to USAA, and at that time the relationship among the parties took a different form:

1. USAA released its mortgage on the South Acreage (thus facilitating the separate development of that parcel, for which purpose Orchard Valley obtained a development loan from Continental Bank, which took a first mortgage on the South Acreage).
2. USAA’s remaining mortgage of some $7.1 million (now encumbering only the Property) was extended for one year to December 1991.

Instead of Land Trust 4251 remaining in title to both parcels, new Land Trust 4481 took title to the Property (subject, of course, not only to USAA’s mortgage but also to its right to approve or disapprove any assignments of beneficial interest in that land trust).

When USAA’s mortgage remained unpaid at maturity, the parties engaged in post-default negotiations for the possible further restructuring of the debt. Those negotiations collapsed in March 1992, and on April 13 of that year USAA filed a state court action to foreclose on the Property and collect its indebtedness. Orchard Valley and other defendants delayed that action for nearly a year by filing groundless counterclaims asserting that USAA had breached a draft letter agreement (one never signed by USAA) looking to the possible restructuring of the indebtedness.

In March 1993 the state court granted partial summary judgment in favor of USAA, finding (1) that USAA was entitled to judgment as to liability on its Complaint and (2) that defendants’ counterclaims raised no genuine issues to preclude such a judgment. That left open for determination only the amount due under the USAA note and mortgage, a subject that was set for trial before the state court on June 4, 1993.

Meanwhile, in March 1993 (either shortly before or after the entry of summary judgment in the state court) Orchard Valley executed an assignment of its beneficial interest in the Property to Schmitt Farm. That assignment was not consented to by USAA, so that it never took effect in the records of the Trustee under Land Trust 4451. As with the other entities already referred to, Schmitt Farm had no other assets and no employees — its only function was to hold the beneficial interest in the Property, and it had no expected source of income other than from a potential sale of the Property.

Originally the partners and their percentage interests in Schmitt Farm were identical to those already reflected in this opinion as to Orchard Valley. Then just one day before the June 4 trial date in the state court forc-closure proceeding, those interests were reorganized: Primus and Dearborn Limited traded their interests, so that Primus then owned 95% of Orchard Valley and Dearborn Limited owned 95% of Schmitt Farm. Cris-lar assigned the other 5% interest in Schmitt Farm to Dearborn Investments, Inc. (“Dear-born Inc.,” the general partner of Dearborn Limited and another single-asset entity).

" Less than two hours before the June 4 state court trial, Schmitt Farm filed' its Chapter 11 bankruptcy petition. Nearly two months after that Chapter 11 filing — and just two weeks before the August 12 evidentiary hearing before the Bankruptcy Judge— James Avgeris (“Avgeris”) as the purported agent for Land Trust 4481 entered into the Contract with Noddle.

After the August 12, 1998 evidentiary hearing, during which Judge James heard testimony from Primus’ sole shareholder and President Richard Faltz (“Faltz”) and Dear-born Inc.’s President Avgeris, followed by counsel’s oral argument, Judge James concluded that “neither the Bankruptcy Courts nor the creditors in this ease should be subjected to the costs and delays of a bankruptcy proceeding under the conditions that [have] been brought to the Court’s attention” (Tr. 171). Judge James found that Schmitt Farm’s filing lacked good faith, and he lifted Code § 362’s automatic stay to allow USAA to continue with the state foreclosure action.

Schmitt Farm’s Lack of Good Faith

Judge James’ determination that Schmitt Farm’s filing lacked the requisite good faith poses a substantial hurdle for the debtor. As In re Love, 957 F.2d 1350, 135.4 (7th Cir.1992) (citations omitted) teaches:

The bankruptcy court’s good faith finding is a purely factual finding evaluated under the clearly erroneous standard of review. The clearly erroneous standard requires this court to give great deference to the bankruptcy court, the trier of fact. Under this standard, if the trial court’s account of the evidence is plausible in light of the record viewed in its entirety, a reviewing court may not reverse even if convinced that it would have weighed the evidence differently as trier of fact. Indeed, reversal under the clearly erroneous standard is only warranted if “the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.”

Schmitt Farm attempts to dilute (or to avoid entirely) the force of that principle by repeatedly emphasizing that Avgeris’ testimony was assertedly unrebutted. But that contention of. course glosses over — or more accurately ignores entirely — the basic proposition that the trier of fact is empowered to determine both the credibility and the weight of the testimony and other evidence. No “unrebutted” but noneredible testimony needs to be given any weight by the factfinder.

Twice this past week this Court has instructed juries — one civil, one criminal — by repeating the familiar instructions as to all of the factors to be taken into account in determining both the witnesses’ erfedibility and the weight (if any) to be ascribed to their testimony, and by adding the following equally familiar instruction:

You should consider this evidence in the light of your own observations and experiences in life.

If a lay juror is thus entitled to bring his or her common sense and life experience through the courtroom door to aid in evaluating evidence, it would be bizarre indeed to give less credence to the common sense and knowledge of an experienced bankruptcy judge. Nor is this Court required to divorce itself from its own background in reviewing Judge James’ findings.

It was certainly well within Judge James’ competence to determine that what was at work on the part of Schmitt Farm and its predecessor entity was really a further effort at delay — additional obstructionist tactics pursued in the Micawber-like hope that “something will turn up.” In the fall of 1992 the Orchard Valley partners had discussed the possibility of filing in bankruptcy, a filing that would have provided USAA with materially greater security than the current proceeding. But Faltz (then Orchard Valley’s managing partner) viewed that prospect as “personally abhorrent” and believed that any bankruptcy filing would hurt his reputation in the marketplace (Tr. 27-28, 45, 75). By contrast, such a filing posed no problems for Avgeris.

Immediately before the Chapter 11 filing the partners restructured their arrangements to readjust their shares in the South Acreage (which was residential in character) and the Property (which was commercial in nature). Avgeris attributed that restructuring to Faltz’ and Avgeris’ preferences and to Avgeris’ own greater experience in developing commercial properties, but even so it can scarcely be viewed as lacking in significance that:

1. Dividing up the parcels by breaking the pre-existing partnership arrangements put Avgeris into a position to invoke bankruptcy (as he preferred), while at the same time sparing Faltz the step that he found unpalatable.
2. Faltz had been the developer of the “auto mall” idea that was hoped to be an important component of the commercial use of the Property — and if that idea were to bear fruit, Faltz would be entitled to a commission (thus retaining a material interest, albeit not the same ownership interest, in the Property even after the transfers).
3. Faltz was substantially experienced in commercial brokerage and development, and Orchard Valley (of which it will be recalled Faltz was managing partner) was well qualified to develop the Property commercially.

It is no accident, given Faltz’ aversion to any bankruptcy filing, that Orchard Valley did not in fact call Chapter 11 to its aid after the split. Although Orchard Valley was indeed in default of its obligations (and although Schmitt Farm seeks to emphasize that Orchard Valley was thus insolvent in one of the senses of that term relevant for bankruptcy purposes), it clearly had a very substantial equity (a multimillion dollar one) in the South Acreage. That equity enabled Orchard Valley to work out its problems without having to go down the tubes. Bankruptcy Judge James was entitled to look askance at the very different manner in which Orchard Valley ultimately sought to treat USAA from the treatment that it gave its other creditors (see Tr. 170).

As suggested a bit earlier, Schmitt Farm’s lack of good faith is underscored by an obvious factor that, though not heavily relied on by Judge James, this Court is entitled to consider in applying the clearly erroneous standard to his decision {Love, 957 F.2d at 1362). Orchard Valley was more than healthy in the net worth sense (the other relevant standard of a debtor’s solvency or insolvency):

1. In the fall of 1992 the South Acreage was appraised at about $9.9 million, encumbered by mortgages of less than one-third that amount.
2. Orchard Valley also owned unencumbered promissory notes aggregating some $450,000.

Even though USAA was in a nonrecourse position outside of bankruptcy, Section 1111(b) and bankruptcy ease law applying that provision would give USAA a claim (to the extent that it would prove to be underse-eured as against the Property alone) that could provide it with the same benefits as the owner of a recourse indebtedness In re N.R. Guaranteed Retirement, Inc., 112 B.R. 263 (Bankr.N.D.Ill.1990), aff'd, 119 B.R. 149, 154 (N.D.Ill.1990)).

Hence the Orchard Valley split-up of the two parcels enabled it (through the new entity, Schmitt Farm) to place USAA at major risk, while at the same time Orchard Valley insulated its other valuable assets — the high-equity South Acreage and the promissory notes — from sharing in that risk. Were it not for that split-up, the Property could not have been put under the protection of the Bankruptcy Court, thus blocking USAA’s proposed foreclosure, without also subjecting the South Acreage and the promissory notes to a possible USAA claim if the value of the Property did not satisfy the entire debt owed to it. As the later discussion reflects, such a course of conduct has frequently been viewed by the courts as an indicium of bad faith. And that remains true even if it is not treated as an independent ground under the rubric of the “new debtor syndrome” referred to later in this opinion.

What did Schmitt Farm and Avgeris have in June 1993 when — already having brought more than a year’s delay in the foreclosure action by repeated delays without their having developed any viable future for the Property — they made their last-second-Chapter 11 filing to stave off entry of a foreclosure decree? Nothing: no business, no employees, no source of income, no source of fresh capital- — only a single asset in substantial default with no identifiable prospects. Then when 60 days later they did produce an asserted prospect, it fell far short of what Judge James was required to credit as evidencing good faith to support the original filing: That asserted prospect was evidenced only by the Contract, which Judge James had every right to view as a combination of smoke and mirrors.

Although it helps to have substantial experience in major real estate transactions to see all of the obvious shortcomings in the Contract, no such degree of sophistication in the area is necessary to tick off enough to justify Judge James’ “pie in the sky” characterization of that last-ditch submission:

1.For a stated $11 million sale transaction, $10,000 in earnest money is frankly ludicrous — less than 0.1%. Even if the additional $90,000 recited to be paid in 120 days were to bring the earnest money to a bit less than 1% of the sale price, that is not at all representative of substantial bona fide real estate transactions.
2. That comparatively small amount of earnest money is linked closely to the essentially one-way nature of the Contract— the thing that leads USAA’s counsel to label it accurately as an “option” in their current brief. Although the front of the printed Contract form reads as though the purchase and sale were unconditional, the conditions on the reverse side present a totally different picture. Here is what Condition 5 says (with deletions from the printed form indicated by a dashed line through the language, and with typed insertions indicated by underlining):
If within 120 days from the date hereof this contract is terminated without Purchaser’s fault, and upon notice to Seller the earnest money shall be returned to the Purchaser but if the termination is caused by the Purchaser’s fault, then at the -option- of-the Seller and upon notice to the Purchaser, the earnest money shall as Seller’s sole and exclusive remedy be forfeited to the Seller and applied first to the payment of Seller’s expenses and then to payment of broker’s commission; the balance, if any, to be retained by the Seller as liquidated damages.

That is truly the language of an option: Noddle is free to default and walk away from the deal, and only the earnest money ($10,000 or $100,000, depending on when it walks away) is forfeited.

3. Relatedly, the Contract’s listing of the purchaser as “NODDLE DEVELOPMENT COMPANY or Nominee” also gives no assurance of personal liability on Noddle’s part to perform — such reference to a “nominee” is a frequently-employed vehicle to put only a contract’s earnest money at risk. And even were the two hedges discussed in the preceding paragraph and this paragraph not present, Avgeris’ characterization of Noddle as a “nationally recognized developer” is no as-suranee whatever that Noddle has the wherewithal to consummate an $11 million deal.

4. Even apart from its patent character as a purely contingent document (or at least one containing no firm commitment on Noddle’s part to purchase), the Contract contains another express hedge in addition to the obvious and stated contingency of bankruptcy court approval:

This contract- and closing is [sic] expressly subject to and contingent upon the City of Aurora approving at least $2,700,000.00 of sales tax increment assistance to the development.
Closing under the Contract was required to be made within 180 days. All that Schmitt Farm tendered at the hearing before Judge James as to the prospect of tax increment financing (“TIF”) was Avgeris’ optimism, not required to be credited by Judge James. Nor was the Judge required to give credence to Avgeris’ airy statement that if the required TIF were not available the Contract price could be renegotiated to a price that would still pay off the USAA loan.

Schmitt Farm can beat the drums all that it wishes as to Avgeris’ testimony being “un-rebutted” and “uncontradicted.” Surely it cannot be considered clearly erroneous for an objective and informed observer — Judge James in the court below, and here this Court as well — to'find that Schmitt Farm’s Chapter 11 filing, followed 60 days later by nothing more than the just-described Contract, reflected bad faith in the bankruptcy sense. Whether the absence of hard evidence of any prospects of reorganization (to say nothing of the absence of any persuasive showing of real value in the Property over and above USAA’s mortgage) were to be measured in terms of the 16 or more months since the foreclosure proceedings began (hardly an illogical perspective), or in terms of the few months that have elapsed since the Chapter 11 filing, the speculative and iffy nature of what Schmitt Farm came up with justifies Judge James’ finding that Schmitt Farm had no good faith prospect of reorganization when it further frustrated the foreclosure by making that filing (accord, In re Northland Construction Co., 560 F.2d 756, 760 (7th Cir.1977)).

Despite Schmitt Farm’s vigorous protest that Judge James operated on a “mechanical basis,” it offers nothing substantive — only its own unsupported high hopes — to negate the bankruptcy judge’s findings and conclusions. Judge James accurately identified the presence here of every factor spoken of in the course of In re Little Creek Development Co., 779 F.2d 1068 (5th Cir.1986), the Fifth Circuit’s analysis of a like bad faith filing. It takes only a recitation of those factors to demonstrate how startlingly applicable they are to the current case (id. at 1072-73):

Several, but not all, of the following conditions usually exist. The debtor has one asset, such as a tract of undeveloped or developed real property. The secured creditors’ liens encumber this tract. There are generally no employees except for the principals, little or no cash flow, and no available sources of income to sustain a plan of reorganization or to make adequate protection payments pursuant to 11 U.S.C. §§ 361, 362(d)(1), 363(e), or 364(d)(1). Typically, there are only a few, if any, unsecured creditors whose claims are relatively small. The property has usually been posted for foreclosure because of arrearages on the debt and the debtor has been unsuccessful in defending actions against the foreclosure in state court. Alternatively, the debtor and one creditor may have proceeded to a standstill in state court litigation, and the debtor has lost or has been required to post a bond which it cannot afford. Bankruptcy offers the only possibility of forestalling loss of the property.

But Judge James did not simply parrot a formulaic treatment of the matter. Before he went on to match up Schmitt Farm’s situation with those factors, he had quoted with approval (Tr. 168) this language from Little Creek Development, 779 F.2d at 1072 that preceded the Fifth Circuit’s statement of relevant factors:

Determining whether the debtor’s filing for relief is in good faith depends largely upon the bankruptcy court’s on-the-spot evaluation of the debtor’s financial condition, motives, and the local financial realities. Findings of lack of good faith in proceedings based on §§ 362(d) or 1112(b) have been predicated on certain recurring but non-exclusive patterns, and they are based on a conglomerate of factors rather than on any single datum.

All of the realities of the Schmitt Farm filing, not just a mechanistic application of a formula, support Judge James’ determination (Love, 957 F.2d at 1355). Schmitt Farm has failed even what its own statement of the bad faith standard would demand: “whether there is a reasonable prospect of successful reorganization within a reasonable time” (its Mem. 14).

Repetition of an already-familiar theme becomes boring as well as unnecessary. There is no way in which Judge James’ determination of Schmitt Farm’s lack of good faith can be labeled as “clearly erroneous.”

“New Debtor" Syndrome

Although Judge James did not find it necessary to go on to rule, as an independent ground, on USAA’s contention that Schmitt Farm’s acquisition of the Property was legally vulnerable, that contention provides added support for the result reached below. This opinion has already adverted to the nature and effect of the transaction by which Schmitt Farm received the assignment of beneficial interest in the Property. Those factors bear some elaboration in terms of bankruptcy case doctrine.

Bankruptcy provides substantial benefits to parties in financial distress. It may give additional time and relieve immediate pressures to permit the realization of values that are really present, but that cannot be taken advantage of without the protection that a bankruptcy court can afford. But those benefits must be purchased at the price of submitting all of the debtor’s assets to the bankruptcy administration, so that creditors do not run the risk of being shortchanged.

So it is that courts have developed what has come to be known as the “new debtor syndrome,” under which specific assets cannot be segregated and made the subject of bankruptcy filing that places in a more precarious position the creditor that is thus limited to an interest in those assets (and not all of the other assets of the debtor). That doctrine was explicated at length in N.R. Guaranteed Retirement, 112 B.R. at 273-76 and formed the basis for relief to the creditor there, id. at 277-79, aff'd, 119 B.R. at 153-56.

Judge James did suggest that principle as a possible alternate ground for his decision — and this Court does more: It expressly finds that doctrine separately supports the lifting of the stay. Schmitt Farm’s very creation, when followed by its Chapter 11 filing, operated to deprive USAA of access to the millions of dollars of equity in Orchard Valley if USAA could not recover full payment out of the proceeds of sale of the Property — an access that USAA would have had in the event of an Orchard Valley Chapter 11 filing, the only other way in which USAA’s foreclosure action could have been forestalled. That independently buttresses Judge James’ decision that the Schmitt Farm Chapter 11 filing lacked good faith.

Schmitt Farm’s Lack of Ownership

Still another flaw in Schmitt Farm’s position may alternatively be thought of either as supplemental to the just-described “new debtor” issue or as a separate ground for lifting the stay. As already stated, the assignment of beneficial interest that Schmitt Farm received from Orchard Valley was not a perfected transfer because of its noncom-plianee with the Land Trust Agreement:

No assignment of any beneficial interest hereunder shall be binding on the trustee until the original or executed duplicate of the assignment is delivered by the trustee, in form satisfactory to it and accepted by it in writing....

USAA’s lack of approval of the attempted assignment caused the Trustee to refuse such acceptance — a lack of approval that was fully justified by Section 17.01 of USAA’s mortgage:

Except as may be otherwise provided in Article XIII of the Agreement or in the Transfer Restrictions Agreement, Mortgagor shall not transfer, sell, convey or assign (by operation of law or otherwise) the Mortgaged Property or all or any part of the beneficial interest therein without the prior written approval of Mortgagee.

Schmitt Farm misses the point entirely by arguing that under Illinois law a claimed assignment of beneficial interest is valid as between the assignor and assignee. So much is of course true, but so what? After all, the dispute here is not one between those two parties (in which event that doctrine would be relevant). Instead the controlling factors are these:

1. Because the transfer is not valid and binding as to USAA, it has standing to object that Schmitt Farm does not own the Property so as to enable it to invoke the Code’s protection. At most Schmitt Farm would own a claim against its assignor Orchard Valley, unenforceable as against USAA.
2. Even were that not so, the purported Contract with Noddle (as flawed as it is) is really invalid as an agreement binding the Property to begin with. Avgeris signed that Contract as the claimed “agent” for Merchants National Bank. But with his principal (Schmitt Farm) not being the beneficial owner vis-a-vis that Bank as Trustee, neither Schmitt Farm nor Avgeris had any authority to act or sign for the Land Trust. Merchants National Bank would have no duty to honor the Contract by conveying the Property, just as it has no duty to honor the assignment of beneficial interest to Schmitt Farm.

Accordingly it seems clear that the only even arguable support for Schmitt Farm’s position, the Contract (an inadequate prop for other reasons, as already demonstrated), is itself ineffective in contractual terms. But it should once more be stressed that this added fillip is only that — it is really unnecessary to justify the result reached here.

Conclusion

From whatever perspective Judge James’ decision is viewed, it is sound. It is truly an understatement to characterize his determination as not being “clearly erroneous.” In fact it is entirely free from error, and Judge James’ decision is affirmed. 
      
      . All further citations to the Bankruptcy Code will take the form "Code § ■ — ,” referring to the numbering in Title 11.
     
      
      . Ex. 1 to this opinion is a photocopy of the entire Contract, though Schmitt Farm had tendered an unintentionally incomplete version as part of its Appendix supporting its initial brief. More on this subject later.
     
      
      .This section sets out a summaty of the record before Judge James. As the later discussion reflects, the issues between the parties relate not to those facts as such, but rather to the inferences and conclusions to be drawn from them.
     
      
      . Like Schmitt Farm, all of those entities were single-asset entities (owning either vacant land or interests in the other entities whose sole asset was vacant land). None had any employees.
     
      
      . Typically real estate mortgages — at least on nonresidential properties — include acceleration clauses if the property is conveyed (after all, even in nonrecourse situations the mortgagee has an interest in the identity of the owner, whose dealings with the property may of course affect the mortgagee’s security). Where land trusts are involved, a mortgagee invariably also includes a veto power or other control over any assignment of the beneficial interest, to close the loophole under which the property could effectively be sold or transferred via such an assignment without the need to convey record title and thus trigger the acceleration clause.
     
      
      . More of this later too.
     
      
      . Schmitt Farm’s Reply Brief studiously avoids mentioning that aspect of USAA's argument, nor does it offer up any authority to question USAA's contention in that respect.
     
      
      . This Court has found it disturbing that Schmitt Farm’s inch-thick appendix submitted with its brief provided a photocopy only of the front of the Contract, not of its reverse side. Even though USAA’s responsive brief made the point discussed in the text here, Schmitt Farm's reply brief (like its original brief) remained totally silent on the subject — not even acknowledging that USAA was right in what it said about Noddle's total lack of personal liability. If viewed as the issuers of a prospectus in the form of its briefs and appendix, Schmitt Farm’s counsel would have violated the securities laws and Rule 10b-5.
     
      
      . At least that contingency was disclosed to this Court by the photocopy in the Appendix.
     
      
      . Nothing Came from the Aurora authorities in that respect — -just Avgeris' say-so about what he believed Aurora was likely to do.
     
      
      .Nothing came from Noddle in that respect— again just Avgeris’ say-so about what he believed some future negotiations would generate.
     
      
      . [Footnote by this Court] That reference is to the transaction by which USAA originally sold the Properly to Primus. That provision allowed Primus to assign that purchase contract before its closing, and has no relevance here.
     
      
      . [Footnote by this Court] Those restrictions also provide no warrant for the transfer to Schmitt Farm, among other reasons because any permission to transfer under that document required that the note and mortgage not be in default at the time — clearly not true in this case.
     