In re Gardner

522 B.R. 137, 2014 Bankr. LEXIS 4840, 2014 WL 6674739
CourtUnited States Bankruptcy Court, W.D. North Carolina
DecidedNovember 24, 2014
DocketNo. 11-40659
StatusPublished

This text of 522 B.R. 137 (In re Gardner) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, W.D. North Carolina primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Gardner, 522 B.R. 137, 2014 Bankr. LEXIS 4840, 2014 WL 6674739 (N.C. 2014).

Opinion

ORDER DENYING DEBTOR’S MOTION TO MODIFY PLAN

J. CRAIG WHITLEY, Bankruptcy Judge.

THIS MATTER came before the Court on a motion by the Debtor, Victoria Har-well Gardner, to modify her confirmed plan under Code Section 1229 to afford her additional time to market and sell certain encumbered real estate. The Debtor maintains that the failure of the North Carolina General Assembly to renew historic tax credits potentially useful to her marketing effort constitutes an unanticipated, unforeseeable change in her circumstances that justifies modification.

Junior mortgage creditors Charles Lee Jones and Charles Jones Produce, LLC (collectively “Charles Jones”) object. Charles Jones argues that modification is not warranted because the expiration of these state tax credits (1) was not a change in the Debtor’s financial circumstances, but in law; (2) was reasonably foreseeable; and (3) was not substantial in that the Debtor has enjoyed the full marketing period provided for by the Plan before the tax credits expired. Further, Charles Jones maintains that the proposed modification would unfairly overturn consensual decrees between the parties, including a North Carolina state court consent judgment between it and a nondebtor party.

An evidentiary hearing.was held Friday, October 31, 2014. The Debtor’s attorney and non-filing spouse/codebtor, O. Max Gardner, III, (“Mr. Gardner”) appeared for the Debtor; Kimberly A. Sheek appeared for secured creditor Ocwen Financial Corporation (“Ocwen”); William A. Moore appeared for Charles Jones; and Steven G. Tate appeared as the Chapter 12 trustee.

[139]*139Findings of Fact

This dispute turns on the marketing of a historic property known as Webbley and the three lots that surround it (collectively the “Shelby Property”). Constructed in 1852, Webbley is the former home of North Carolina governor, O. Max Gardner. The residence is listed on the National Register of Historic Places. The Debtor and Mr. Gardner (collectively the “Gard-ners”) purchased Webbley in 1989 and subsequently restored the residence. During the twenty five years that the Gardners’ have owned Webbley, it has been variously used as a residence, law office and an upscale bed and breakfast inn.

As of October 18, 2011, the date that the Debtor filed this bankruptcy case, the Shelby Property and/or the Gardners’ other jointly owned properties, including their residence (collectively the “Casar Property”), served as collateral for debts owed to Ocwen, First National Bank of Shelby, George and Rhonda Malkamus, and Charles Jones. Additionally, the jointly held properties were then and remain encumbered by a federal tax lien. Charles Jones is the junior priority lien holder on both the Shelby Property and the Casar Property to secure his debt of, at that time, some $537,000. At the bankruptcy date, all of the Gardners’ properties were in foreclosure proceedings initiated by Ocwen or Charles Jones or both. The Chapter 12 filing stayed these actions.

On December 27, 2011, the Debtor filed a Chapter 12 plan that proposed to retire secured debts such as Charles Jones’ by selling the Shelby lots, and if necessary, Webbley. The Debtor’s proposed plan allowed her to retain the residence jointly owned by she and Mr. Gardner. The plan further requested a special injunction in favor of Mr. Gardner, a nondebtor, protecting him from all non-bankruptcy claims including collection actions. Secured creditors Ocwen and First National (Bank of Ozarks) objected to confirmation for reasons including the lack of a marketing deadline or sale period. The Debtor countered by seeking to disallow the secured claims of these and other secured creditors. In time, the parties reached a settlement, and the Debtor’s proposed plan was amended. See First Amended Chapter 12 Bankruptcy Plan And Motion To Approve Settlements With Ocwen Loan Servicing, LLC And Deutsche Bank Trust Company Americas dated May 14, 2012 (“Amended Plan”).

The primary components of this first settlement were as follows: (i) a consensual write down of senior Mortgage holder Ocwen’s secured debts; (ii) the Gardner’s agreement to put all of the Shelby property up for sale (including Webbley); and (iii) a marketing deadline containing a “drop dead” provision. As to the marketing and sale deadline, the Amended Plan provided:

If the debtor does not secure a binding offer or offers to purchase the Shelby Property within 27 months of the date of confirmation of the First Amended Plan, then First National Bank and Jones shall be granted immediate relief from the automatic stay without further notice or hearing to do one or more of the following:
A. To purchase the claim of Ocwen secured by the Shelby Property and the claim of the IRS secured by a lien on the Shelby Property and the right-of-way for the Casar Property or any other claim secured by a lien on the Shelby Property and to proceed with a state foreclosure proceeding if such party elects to do so, provided, however, that a notice of assignment of such claim must be filed with the Court;
[140]*140B. To purchase the property from the estate for the amount owed at the time of purchase on all of the claims secured by the Shelby Property plus the amount owed at that time on the Malkamus claim;
C. To proceed with a foreclosure on the Shelby Property subject to any senior or junior liens in accordance with applicable North Carolina law; or
D. To file an election with the Debtor, the Chapter 12 Trustee, all parties in interest and with the Court to continue to receive the adequate protection payments provided for under this First Amended Plan so as to permit the Debt- or to continue in her efforts to market the Shelby Property. Any election under this Section may be terminated upon sixty (60) days notice to the Court, the Debtor, the Chapter 12 Trustee and all parties in interest.

In short, it was agreed that if the Shelby Property was not sold within twenty-seven months, Charles Jones and First National would have immediate relief from stay to pursue their remedies against the Shelby Property, including foreclosure.

Although the Amended Plan was stated to be a settlement with Ocwen/Deutsche, by the time of the confirmation hearing, other secured creditors, including Charles Jones had become heavily involved. Thus, at the joint confirmation and settlement hearing held on May 25, 2012, final changes to the proposed Amended Plan and Settlement were announced on the record and then memorialized in a Confirmation Order dated June 11, 2012. The Confirmation Order expressly stated that all confirmation related disputes between the Debtor and secured creditors Ocwen, First National, Malkamus, and Charles Jones were settled. The Amended Plan as further modified and approved by the Confirmation Order will be hereinafter termed “the Confirmed Plan.” Among other agreed changes made to the Amended Plan, the Debtor’s proposed “special injunction” restraining collection actions against Mr. Gardner was withdrawn. See Amended Plan, Section C Confirmation Order, Findings of Fact ¶ 8, and Confirmation Order ¶ 8.

Charles Jones quickly acted on this concession. Before becoming a lender to the Gardners, Jones was a client of Mr. Gardner’s legal practice. Nine days after confirmation, Jones sued Mr. Gardner in Superior Court, Gaston County, generally asserting that Mr. Gardner had improperly induced him to make this loan. Civil Action No.

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522 B.R. 137, 2014 Bankr. LEXIS 4840, 2014 WL 6674739, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-gardner-ncwb-2014.