In re Learned Family LLC

555 B.R. 747, 2016 Bankr. LEXIS 2781, 2016 WL 4132467
CourtUnited States Bankruptcy Court, W.D. Washington
DecidedAugust 1, 2016
DocketCase No. 11-16337-MLB
StatusPublished

This text of 555 B.R. 747 (In re Learned Family LLC) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, W.D. Washington primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Learned Family LLC, 555 B.R. 747, 2016 Bankr. LEXIS 2781, 2016 WL 4132467 (Wash. 2016).

Opinion

MEMORANDUM OPINION AND ORDER GRANTING IN PART FOUNDATION BANK’S MOTION FOR ORDER REQUIRING THE DEBTOR AND ITS MEMBERS TO COMPLY WITH THE CONFIRMED PLAN

Marc Barreca, U.S. Bankruptcy Court Judge

Foundation Bank (the “Bank”)' has brought a Motion for Order Requiring the [749]*749Debtor and its Members to Comply with the Confirmed Plan (the “Motion,” Dkt. No. 178). The Motion was opposed by the debtor, Learned Family LLC (the “Debt- or”). Following oral argument on July 21, 2016, I took the matter under advisement and set a further hearing for August 2, 2016. As discussed below, the motion is GRANTED IN PART.

Background

On May 27, 2011 the Debtor filed for bankruptcy under Chapter 11 of the Code.1 The Debtor’s members are Grant Learned Sr. and his wife, Carolyn Learned (the “Sr. Learneds”), and their son, Grant Learned Jr. (“Learned Jr”). The Debtor’s primary asset was the Kachess Lodge, located in Kittitas County at 950 Via Kachess Road, Easton, WA.

On November 13, 2012, I entered an order (the “Confirmation Order,” Dkt. No. 102) confirming the Debtor’s Chapter 11 Plan of Reorganization (the “Plan”). Under the Plan the Bank has two claims: (1) a Class 2 secured claim in the amount of $1.7 million, secured by the Kachess Lodge (the “Secured Claim”), to be paid in part with a balloon payment due by no later than January 1, 2016 (the “Balloon Payment”), and (2) a Class 3 unsecured claim in the amount of $2.2 million (the “Unsecured Claim”) to be paid only in the event of default, and to be paid pro rata with other unsecured claims.

The Plan expressly incorporates a Release and Settlement Agreement between the Debtor, the Sr. Learneds, Learned Jr. and his wife, and the Bank (the “Settlement Agreement,” Dkt. No. 83, Ex. D) Specifically, the Plan provides that: “The Settlement Agreement is incorporated into the Plan by reference and forms an integral part of the Plan.”2

The Settlement Agreement sets forth revised payment terms between the Debt- or and the Bank, and provides that if the Debtor defaults, the Bank can record a Deed-in-Lieu of Foreclosure (the “Deed-in-Lieu”).

Concurrently with the execution of this Agreement, the LLC shall deliver to the Bank a Deed-in-lieu of Foreclosure, signed and acknowledged and in recordable form. In the event of the LLC’s default, the Bank may, in its sole discretion, record the Deed-in-lieu of Foreclosure in the records of Kittitas County.3

The Settlement Agreement further requires all parties to the agreement to cooperate with one another in implementing the Settlement Agreement:

The Bank, the LLC, and the other Plaintiffs agree to fully cooperate with each other to ensure that each party obtains the benefits of the rights afforded to it under the LLC’s Plan.
a) The LLC shall provide quarterly and annual operating statements to the Bank
b) The LLC shall permit the Bank to appraise the Kachess Property throughout the term of the loan upon one week’s notice and will assist and cooperate with any such appraisals. Such appraisals shall be at the Bank’s own expense. The Bank and the LLC shall cooperate regarding scheduling to avoid interfering with paying guests.
(c) If the LLC defaults under the terms of the LLC’s confirmed Plan, and the Bank initiates proceedings to foreclose on the Kachess Property, whether by recording the Deed in Lieu of Foreclo[750]*750sure, or by commencing a non-judicial or judicial foreclosure action, the LLC shall not interfere with those foreclosure proceedings.4

The Debtor defaulted under the terms of the Plan. The Debtor has made no payments on the Bank’s Secured Claim since November 2015, it failed to make the Balloon Payment due on January 1, 2016, and has made no pro rata payments on the Unsecured Claim.

On or around January 4, 2016, Learned Jr., in his capacity as a member of the Debtor, executed and recorded a Quit Claim Deed which conveyed the Kachess Lodge from the Debtor to himself and to the Sr. Learneds. That same day, three hours later, the Sr. Learneds filed a Chapter 11 bankruptcy petition, commencing a bankruptcy case in the Eastern District of Washington (No. 16-00010-FLK, the “Sr. Learneds’ Bankruptcy Case”). Shortly thereafter, the Bank commenced an adversary proceeding (Adv. No. 19-01005-MLB) in which I ruled that the conveyance of the Kachess Lodge from the Debtor to its members was an avoidable fraudulent transfer and a violation of Washington’s Limited Liability Company Act (the “Partial Summary Judgment Order”). Thereafter, in the Sr. Learneds’ Bankruptcy Case, Judge Kurtz granted the Bank relief from stay to enforce my Partial Summary Judgment Order.

On June 20, 2016, the Sr. Learneds, Learned Jr. and his wife, and the Debtor filed a lawsuit against the Bank in Kittitas Superior Court, for quiet title, breach of contract, and declaratory and injunctive relief (Cause No. 16-2-00180-0, the “Superior Court Action”). Among other things, the Learneds and the Debtor are seeking damages for alleged breach of the Settlement Agreement and are challenging the Banks’ recording of the Deed-in-Lieu as an ineffective and improper method of foreclosing on its security interest under state law.

On June 22, 2016, pursuant to the confirmed Plan, the Bank recorded the Partial Summary Judgment Order and the Deed-in-Lieu, effectuating transfer of the Ka-chess Lodge to the Bank pursuant to the court-approved Plan.

On June 24, 2016, the Bank’s counsel requested the Sr. Learneds’ cooperation with a Bank site inspection scheduled for June 29. Debtor’s counsel responded by stating that, “The Learned’s object to this alleged inspection. Any attempt to enter the property at this juncture will be considered a trespass.” The Bank deferred the planned inspection.

Thereafter the Bank filed this Motion seeking to enforce the terms of the confirmed Plan.

Analysis

Section 1142

Section 1Í42 requires a Debtor to carry out a confirmed plan, and authorizes the bankruptcy court to issue orders requiring the performance of any act that is necessary for the confirmation of the confirmed plan. Specifically, it provides that:

(a) Notwithstanding any otherwise applicable nonbankruptcy law, rule, or regulation relating to financial condition, the debtor and any entity organized or to be organized for the purpose of carrying out the plan shall carry out the plan and shall comply with any orders of the court.
(b) The court may direct the debtor and any other necessary party to execute or deliver or to join in the execution or delivery of any instrument required to [751]*751effect a transfer of property dealt with by a confirmed plan, and to perform any other act, including the satisfaction of any lien, that is necessary for the consummation of the plan.

“Subsection (b) implicitly contemplates a creditor, shareholder, or other party affected by the plan moving for an order which triggers the court’s authority to direct a recalcitrant debtor or other party to perform acts necessary to consummate the plan.” In re Harlow Properties Inc., 56 B.R. 794, 798 (9th Cir. BAP 1985).

Jurisdiction

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Bluebook (online)
555 B.R. 747, 2016 Bankr. LEXIS 2781, 2016 WL 4132467, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-learned-family-llc-wawb-2016.