Culp v. Stanziale

550 B.R. 683
CourtDistrict Court, D. Delaware
DecidedNovember 17, 2015
DocketBankr. Case No. 14-11592-BLS; Civ. No. 15-914-LPS, Civ. No. 15-916-LPS, Civ. No. 15-917-LPS
StatusPublished
Cited by12 cases

This text of 550 B.R. 683 (Culp v. Stanziale) is published on Counsel Stack Legal Research, covering District Court, D. Delaware primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Culp v. Stanziale, 550 B.R. 683 (D. Del. 2015).

Opinion

[686]*686MEMORANDUM ORDER

HON. LEONARD P. STARK, UNITED STATES DISTRICT COURT

At Wilmington on this 17th day of November, 2015:

This matter coming before the Court upon Appellants’ Motion to Stay Pending Appeal, filed in each of the above-captioned cases (15-914 (LPS), D.I. 5; 15-916 (LPS), D.I. 5; 15-917 (LPS), D.I. 5) (the “Motion to Stay”); and having considered the parties’ papers submitted in connection therewith; and for the reasons stated below,

IT IS HEREBY ORDERED that:

The Motion to Stay (15-914 (LPS), D.I. 5; 15-916 (LPS), D.I. 5; 15-917 (LPS), D.I. 5) is DENIED.1

I. Relevant Background2

These appeals arise, from a Chapter 7 trustee’s proposed sale of real property that has suffered significant fire damage, has been vacant for nearly five years, and is encumbered by liens in excess of $350,000. Appellants owned certain mixed-use real property known as 30680 Cedar Neck Road in Ocean View, Delaware (the “Property”), which they previously operated as a bed and breakfast establishment. On or about August 8, 2005, Appellants executed a promissory note in the amount of $309,000. To secure their obligations under the promissory note, Appellants executed a mortgage encumbering the Property. On November 8, 2010, the Property sustained significant fire damage. Thereafter, Appellants were the beneficiaries of certain insurance proceeds for their fire-related loss as well as other insured losses. On February 26, 2013, the promissory note and mortgage were assigned to Green Tree Servicing, LLC (“Green Tree”).

On June 27, 20 14 (“Petition Date”), Appellants filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) (C.A. No. 14-11592 D.I. (hereinafter “B.D.I.”) 90-1), and Charles A. Stanziale, Jr. was appointed as Chapter 7 Trustee (the “Trustee”) in the case. Appellants did not claim an exemption in the Property or in the insurance proceeds. (See B.D.I. 1, 7, 46 (listing value of claimed exemption as $0.00)) As of the Petition Date, Green Tree asserted a secured claim against the Property for approximately $280,000 and was holding approximately $74,000 in cash in an escrow account. (B.D.I. 90-1 at ¶ 6) Accord Restoration, Inc. (“Accord”) asserted a mechanic’s hen against the Property in the amount of $39,630.71, plus unpaid interest, which was related to certain construction activities undertaken by Accord for which it did not receive payment. (Id.) Accord filed a proof of claim in the Chapter 7 case in the amount of $131,210.33, asserting that $74,409.75 of its claim was secured. (Id.)

This dispute arises from the parties’ disagreement regarding the value of the fire-damaged Property. At their Section 341 examination, Appellant Mark Culp testified that the fire damage to the Property was significant,3 and Appellants have esti[687]*687mated the fair market value of the Property at $100,000. (See B.D.I. 90-1 at ¶¶ 7,13-14; see also B.D.I. 1, 7, 46) Appellants’ estimate was based on “a general price that you would find on Trulia or Zillow” minus the cost of repair and restoration (established by a contractor’s quote for approximately $308,000). (See B.D.I. 90-1, Ex.Bat 7, 22-23) The estimated cost of the repair was also listed on the Appellants’ Schedules at $308,078. (B.D.I. 90-1, Ex. A (Amended Schedule G)) Based upon his initial review, the Trustee valued the Property at approximately $143,423. (B.D.I. 90-1 at' ¶ 16) The Trustee subsequently engaged in negotiations with Accord for sale of the Property. (Id. at ¶ 18) Accord made an initial offer of $260,000, which the Trustee rejected. (Id.) Negotiations between the parties continued for several months, until the Trustee ultimately negotiated an asset purchase agreement to sell the Property “as is” to Accord for $290,000. (Id.)

A. The Sale Motion

On July 2, 2015, the Trustee filed a motion with the Bankruptcy Court (the “Sale Motion”) seeking approval of the Trustee’s sale and marketing efforts, bid deadlines, and a form of asset purchase agreement pursuant to which Accord would purchase the Property. (See B.D.I. 47) On July 28, 2015, the Bankruptcy Court approved the bidding and sale procedures. (B.D.I. 61) Thereafter, the Trustee retained an appraiser, which estimated the value of the Property to be $175,000 (the “Buckley Appraisal”). (B.D.I. 90-1 at ¶¶ 22-24, Ex. G) The Trustee also approached several real estate brokers regarding the marketing of the Property, each of which declined due to the condition of the Property and liens encumbering it. (Id. at ¶25) The Property was advertised for sale online and in two local news publications. (Id. at ¶ 26, Ex. H & I) No bids were received by the deadline. (Id. at ¶ 27)

The Bankruptcy Court scheduled a final hearing on the Sale Motion for September 23, 2015. Appellants objected to the proposed sale on the bases that the Trustee had failed to establish the fair market value of the Property and that Appellants had filed a motion to convert their Chapter 7 case to Chapter 13 (discussed below). (See B.D.I. 83) In support of the Sale Motion, the Trustee filed a reply and declaration, which incorporated the Buckley Appraisal by reference. (See B.D.I. 90-1 at ¶ 24; Ex. G) The Trustee asserted that the proposed- sale, at a price that significantly exceeded the value of the Property as estimated by Appellants and by the Trustee’s appraiser, would result in the payoff of the secured lender in full, the satisfaction of all professional fees, full distribution on claims to all known allowed unsecured creditors, and a considerable distribution to the Appellants — and, therefore, the proposed sale was a sound exercise of the Trustee’s business judgment. (See B.D.I. 90 at ¶¶ 1, 32-35)

B. The Conversion Motion

On August 27, 2015, Appellants filed a motion to convert their Chapter 7 case to a case under Chapter 13 (the “Conversion Motion”). (B.D.L 80)4 The Conversion Mo[688]*688tion was four sentences in length. (See id.) Appellants .did not attach any documents, or any proof of income, or cite to case law in support of the relief sought. (See id.) The Trustee and Accord opposed the Conversion Motion asserting, inter alia, that Appellants were ineligible to be debtors under Chapter 13, pursuant to Sections 109 and 706 of the Bankruptcy Code. (See B.D.I. 82, 84)

C. The Fee Application

On September 3, 2015, the law firm of McCarter & English (“McCarter”), as counsel to the Trustee, filed its first interim fee application, covering the period of June 27, 2014 through August 31, 2015 (the “Fee Application”). (B.D.I. 81) The Fee Application set forth a description of legal services McCarter had rendered to the Trustee in connection with the Chapter 7 case. (See id. at ¶¶ 8-26) Appellants filed an objection to the Fee Application, alleging generally that the case had “languished,” that significant legal fees could not have accrued during the period covered by the Fee Application, and that legal fees associated with the proposed sale of the Property and Sale Motion should not be approved because the Sale Motion had conferred no benefit on the estate. (See B.D.I.

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Bluebook (online)
550 B.R. 683, Counsel Stack Legal Research, https://law.counselstack.com/opinion/culp-v-stanziale-ded-2015.