800 Bourbon Street, LLC v. Bay Bridge Building Ltd. (In re 800 Bourbon Street, LLC)

541 B.R. 616
United States Bankruptcy Court, E.D. Louisiana·Decided November 20, 2015·No. CASE NO. 14-12770; ADVERSARY NO. 15-1052·Published·Cited by 2 cases

Opinion

MEMORANDUM OPINION

Hon. Elizabeth W. Magner, U.S. Bankruptcy Judge

This matter came before the Court on October 14, 2015, on cross Motions for Summary Judgment filed by Bay Bridge Building Limited Company, LLC’s (“Bay Bridge”) and 800 Bourbon' Street, LLC (“800 Bourbon or Debtor”).1 At the conclusion of the hearing, the Court set a deadline of October 28, 2015, to file post-hearing briefs. Upon submission of the briefs, the Court took the matters under advisement.

I. Summary Judgment Standard

Summary Judgment is proper when no genuine issues of material fact exist, and the moving party is entitled to judgment as a matter of law.2 The Court must view the evidence introduced and all factual inferences in a light most favorable to the party opposing summary judgment.3 The movant bears the burden of proving “absence of genuine issue of material fact.”4 “An issue is material if its resolution could affect the outcome of the action.”5

II. Findings of Fact

On June 11, 2008, 800 Bourbon filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code (“2008 Bankruptcy”).6 Bay Bridge filed a secured claim (“2008 claim”) in 800 Bourbon’s case.7 The Court confirmed 800 Bourbon’s Plan of Reorganization in 2009 (“2009 Plan”). The 2009 Plan provides the following treatment for Bay Bridge’s 2008 claim:

Guarantor, John L. Chisholm, Jr., and Chisholm Properties Circuit Events, LLC, assume full payment of all obligations of the Debtor to this Class Claimant, ...
To the extent this Class Claimant has an allowed secured claim, the Collateral Mortgage, Collateral Mortgage Note, Hand Note, and/or auxiliary Promissory Notes, properly paraphed, shall remain as collateral security, but “in rem” only. Amended collateral security documents and notes will be prepared, executed and recorded in the Parish of Orleans if requested by this Class Claimant.... 8

The 2Q08 Bankruptcy was closed on August 17, 2011. Chisholm and Chisholm Properties Circuit Events, LLC have not paid Bay Bridge’s 2008 claim in full.

On October 15, 2014, 800 Bourbon and Louisiana’ Interests, Inc. filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code (collectively “Debtors”). Debtors filed a Joint Disclosure Statement [620]*620and Plan of Reorganization which proposed a sale by court auction of substantially all Debtors’ assets combined in one package. The auction was scheduled for the date of the confirmation hearing. The Court approved the Disclosure Statement for the Second Amended Joint Plan of Reorganization (“Disclosure Statement”)9 on June 17, 2015.10 Also on June 17, 2015, the Court granted Debtors’ Motion for Sale of Property Free and Clear of Liens which provided procedures for the auction to be held by the Court.11

On July 15, 2015, after the Disclosure Statement was approved, Bay Bridge filed proof of claim no. 5 in 800 Bourbon’s bankruptcy case (“Bay Bridge claim”). The Bay Bridge claim for $1,979,886.47 is allegedly secured by the building owned by 800 Bourbon and with the same address. Bay Bridge’s claim is evidenced by four (4) promissory notes signed by Johnny Chisholm on behalf of 800 Bourbon more particularly described:

1) Promissory Note dated April 21, 2005, in the amount of $2,000,000.00;
2) Promissory Note dated April 2005 in the amount of $1.200,000.00;12
3) Promissory Note dated May 31, 2005, in the amount of $200,000.00;
4) Promissory Note dated May 10, 2006, in the amount of $110,000.00.13

Bay Bridge also holds a collateral mortgage note dated April 21, 2005, secured by a collateral mortgage (“Mortgage”) on the property at 800 Bourbon Street. The same Promissory Notes and Mortgage formed the basis for Bay Bridge’s proof of claim in the 2008 Bankruptcy.

On July 21, 2015, 800 Bourbon filed the instant adversary proceeding objecting to Bay Bridge’s proof of claim.

On July 22, 2015, directly prior to the confirmation hearing, the Court held an auction of substantially all of the assets of Debtors, including Bay Bridge’s collateral. The prevailing bid for for $8,175,000 was approved by an Order entered on August 3, 2015.14 On that same date, the Court confirmed Debtors’ Second Amended Joint Chapter 11 Plan (“Plan”).15 By agreement between Bay Bridge and Debtors, the Order approving the sale and the Confirmation Order provided for the escrow of $1,649,000 of sale proceeds subject to Bay Bridge’s lien. The escrow was to be held until further order of the Court.

As a result of the agreement, Bay Bridge released its lien against 800 Bourbon’s property and now seeks distribution of the funds held in escrow.

Bay Bridge recorded its Mortgage on April 29, 2005. Bay Bridge reinscribed the Mortgage on July 23, 2015.

III. Conclusions of Law

A properly filed proof of claim constitutes “prima facie evidence of the validity and amount of the claim.”16 Because 800 Bourbon has objected to Bay Bridge’s proof of claim, it is 800 Bourbon’s “burden to present enough evidence to overcome the prima facj,e effect of the claim” 17

[621]*621800 Bourbon contends that because Bay Bridge reinscribed the Mortgage after cessation of its effectiveness, Bay Bridge does not have a secured claim. It also challenges the existence of any claims against the estate based on the 2009 Plan. On the other hand, Bay Bridge contends that it has a valid in rem Mortgage properly perfected on the petition date. It also asserts that because its secured interest existed on the petition date, reinscription of the Mortgage was unnecessary. Bay Bridge also claims that 800 Bourbon is estopped from challenging the validity of its secured position and that the 2009 Plan is res judicata on the issue.

A. 2009 Plan

1. Does Bay Bridge have an in rem claim?

800 Bourbon contends that Bay Bridge has no claim under the 2009 Plan because the 2009 Plan provides, “Bay Bridge shall not be entitled to receive any payments from the Debtor/Reorganized Debtor or the Bankruptcy Estate, for any hand notes signed by the Debtor.” However, the 2009 Plan also provides that Bay Bridge has an in rem claim:

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800 Bourbon Street, LLC v. Bay Bridge Building Ltd. (In re 800 Bourbon Street, LLC), 541 B.R. 616 (La. 2015).

541 B.R. 616 (800 Bourbon Street, LLC v. Bay Bridge Building Ltd. (In re 800 Bourbon Street, LLC)) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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