In re Community Churches of America

57 B.R. 562, 1986 Bankr. LEXIS 6816
CourtDistrict Court, District of Columbia
DecidedJanuary 27, 1986
DocketBankruptcy Nos. 85-00405, 85-00494
StatusPublished

This text of 57 B.R. 562 (In re Community Churches of America) is published on Counsel Stack Legal Research, covering District Court, District of Columbia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Community Churches of America, 57 B.R. 562, 1986 Bankr. LEXIS 6816 (D.D.C. 1986).

Opinion

OPINION AND ORDER

GEORGE FRANCIS BASON, Jr., Bankruptcy Judge.

Following a hearing held on November 12, 1985 this Court, albeit reluctantly and with serious reservations, provisionally denied a motion by Walter Kendall et al. (“the Movants”)1 to transfer these two related cases immediately to the bankruptcy court in California having proper venue. This Court’s oral ruling provisionally denying the motion at that time was based largely upon the recommendation of the U.S. Trustee, whose recommendation was in turn based largely upon representations by the Debtors concerning an offer to purchase what the Debtors have stated is the sole significant tangible asset of either Debtor. That asset is the “Concord” housing facility for the elderly located in Pasadena, California. The Debtors’ counsel created the impression by his representations at the November 12, 1985 hearing that the proposed sale (1) could (and, in order to satisfy the prospective purchaser, would have to be) completed by December 31, 1985, (2) would satisfy all the legitimate concerns of the Movants, (3) would result in prompt, 100% payment to the Movants and other creditors, (4) would benefit the low-income, elderly occupants of the Concord by assuring their continued occupancy at low rents, pursuant to the commitment made to the U.S. Department of Housing and Urban Development (“HUD”) when HUD financing was first obtained for the project, and (5) would satisfy HUD’s concerns (HUD’s approval being necessary before the proposed sale could go through).

Subsequently, on November 15, 1985, this Court signed a written order submitted by the U.S. Trustee pursuant to the Court’s oral ruling. The Debtors have complied with the literal language of that written Order in every respect save one: they were one day late in sending out notice of the disclosure statement hearing, notwithstanding the explicit, handwritten commands added to the Order by the undersigned Judge that their compliance with all conditions of the Order must be “timely” and that “Time is of the essence.” The Debtors have sought to excuse their noncompliance on the basis of an apparent breakdown of communication between their counsel and this Court’s Clerk’s Office. In view of the factors set forth below, this Court, in now ordering these cases transferred, will not rely solely or even substantially upon the Debtors’ untimeliness.

Rather, this Order transferring these cases to California is based largely upon the original reasons which prompted this Court in the first instance to be extremely reluctant to retain the cases here at all, even for the brief period posited by the Debtors’ counsel. (That brief period — until December 31, 1985 — has in any event now expired.)

The facts are: (a) the real property at issue is located in California; (b) most of the Debtors’ principals reside in California; (c) HUD’s regional office, which must first pass on any proposed sale of the real property, is located in California; (d) most of the Debtors’ creditors are located in California, and hardly any creditors have been shown to be located in or near the District of Columbia; (e) the proposed purchaser is [564]*564located in California; and (f) neither Debtor has any significant contact with or assets in the District of Columbia.2 As this Court observed at the hearing on November 12, 1985 and noted again in its written Order of November 15, 1985, it appears that these Debtors, by filing their petitions in this District, were seeking a forum removed as far as possible from their creditors. That is precisely opposite to the intention of the venue statutes. 28 U.S.C. §§ 1408 and 1412; see Barnes v. Whelan, 689 F.2d 193 (D.C.Cir.1982).

In addition, at the December 13, 1985 disclosure statement hearing it became painfully obvious that every one of the impressions created by the Debtors’ counsel at the November 12, 1985 hearing, by which he obtained the temporary retention of these cases here, was completely false. Indeed, the representations and predictions made on November 12 were so far from reality as to create a strong impression that these Debtors, and perhaps others acting in concert with them, have deliberately abused the judicial process (see Bankruptcy Rule 9011) and sought to perpetrate a fraud not only upon their creditors but also upon the courts.3

(1)Contrary to the impression created on November 12, 1985, the proposed sale obviously could not be completed by December 31, 1985. Among many other reasons, the proposed purchaser is not a non-profit organization, as required by HUD, whose consent is essential. Indeed, HUD’s basic statutory authority prohibits HUD from approving such a sale. See paragraph 5 below.

(2) Contrary to the representation on November 12 that all of the Movants’ legitimate concerns would be satisfied, the Mov-ants’ written Objection to Confirmation, filed on December 6, 1985 (“Movants’ Objection”), sets out numerous concerns about the proposed sale and plan which appear to this Court to be not only legitimate but very substantial and probably determinative.4 Those concerns include the plan’s preferential treatment of insiders, its lack of feasibility, its unfairness to the housing facility’s tenants, and the proposed purchaser’s prior criminal conviction for conspiracy to defraud and defrauding HUD in “a large-scale kickback scheme.” 5

(3) Contrary to the impression created on November 12, instead of paying all creditors 100% promptly, the plan filed less than a week later proposes to defer the bulk of payments for up to 15 years.6 As the Movants’ counsel has pointed out, “Most of these creditors are senior citizens and many are in poor health.”7 Robert Grant, who has identified himself as a major creditor, made the same point as follows in a letter to this Court: “Many of the creditors will not be around in future years to make use of their funds. They are elderly and many are in very poor health.”8 Grant’s [565]*565letter sought to convince this Court of the urgency of approving the proposed sale before December 31, 1985. It appears that either Grant was ignorant of the Plan’s true provisions (calling for lengthy deferral of the bulk of payments), or else he deliberately sought to mislead this Court, as well as creditors.

(4) Contrary to the November 12 promise of benefit to the housing facility’s low-income occupants, both the Movants and HUD have pointed out that under the November 18 Plan it will be impossible for the proposed purchaser to maintain the cash flow needed to make the projected payments over the next 15 years without substantially increasing rents (or else obtaining HUD subsidies which HUD is not willing to provide). Movants’ Objection, p. 7; [HUD] Secretary’s Objections to Sale of Concord Senior Housing Facility Disclosure Statement and Consolidated Plan of reorganization (“HUD’s Objections”), filed on December 11, 1985, pp. 4-6.

(5) Contrary to the representations on November 12 that HUD’s concerns would be satisfied, HUD’s concerns have not been and cannot be satisfied. In the nature of things, HUD’s non-financial concerns can never be satisfied by this proposed sale.

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Related

In Re Leonard
55 B.R. 106 (District of Columbia, 1985)
Barnes v. Whelan
689 F.2d 193 (D.C. Circuit, 1982)

Cite This Page — Counsel Stack

Bluebook (online)
57 B.R. 562, 1986 Bankr. LEXIS 6816, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-community-churches-of-america-dcd-1986.