In Re Zachman Homes, Inc.

83 B.R. 633, 1985 Bankr. LEXIS 6262, 1985 WL 17485
CourtUnited States Bankruptcy Court, D. Minnesota
DecidedApril 24, 1985
Docket19-30588
StatusPublished
Cited by8 cases

This text of 83 B.R. 633 (In Re Zachman Homes, Inc.) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, D. Minnesota primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In Re Zachman Homes, Inc., 83 B.R. 633, 1985 Bankr. LEXIS 6262, 1985 WL 17485 (Minn. 1985).

Opinion

ORDER DETERMINING JURISDICTION

MARGARET A. MAHONEY, Bankruptcy Judge.

The above-entitled matter came on for hearing before the Honorable Margaret A. Mahoney, Bankruptcy Judge, on March 22, 1985. Presently before the Court are motions by Federal Lumber Company for an order determining the procedure for adjudication of mechanic’s lien claims arising out of this bankruptcy case, and of Lyman Lumber Company, Sunrise Electric, Inc., and Lampert Lumber Company (to be referred to collectively herein as Lyman Lumber) for an order determining the validity, priority, and amount of certain mechanic’s liens. Of immediate concern, however, are jurisdictional questions raised by counsel for the construction mortgagees David C. Bell Investment Company and Building Material Wholesalers, Inc. As shall be discussed herein, this Court has both jurisdiction over and the power to hear and finally determine these matters pursuant to 28 U.S.C. §§ 1334 and 157, and Judge Lord’s July 27,1984, Order of Reference.

Before reaching the jurisdictional issue, which appears to be the central concern of all parties interested in this matter, it is necessary to fully understand the procedural context in which the present motions arise. The Debtor, a developer and builder of residential housing units, filed for chapter 11 protection on November 2, 1983. The case was subsequently converted to a chapter 7 case on December 1, 1984. 1 At the date of filing of its bankruptcy petition, approximately 50 housing units of the Debtor remained in various stages of construction. To facilitate completion of these unfinished units this Court established, by way of Standing Order dated December 29, 1983, a procedure whereby the Debtor could complete and sell the housing units free and clear of liens pursuant to section 363(c)(1) and (f).

The December 29 Standing Order specifically provided that subject to the requisite notice and absent any written objection filed with this Court, an Order would issue concerning property sought to be sold authorizing such sale free and clear of all liens and interests therein, with any such lien or interest to attach to the proceeds of sale. The Order further provided as follows:

All disputes as to validity, priority, and extent of claims to the proceeds of sale shall be subsequently determined by the Bankruptcy Court upon notice and hearing to the affected parties. Until a resolution of any such dispute, the amount of the proceeds affected by the same shall be held in an escrow account established by the Examiner for such purpose.

The Court’s records indicate that all parties herein concerned received notice not only of the original motion by the Debtor for a standing order authorizing a procedure for sale of property free and clear of liens, but of such Standing Order as well. Moreover, counsel actually in attendance at the December 28, 1983, hearing which resulted in the Standing Order included counsel for the construction mortgagees. 2 No motion for reconsideration or appeal was ever filed concerning the Standing Order.

*635 By an undated stipulation subsequently filed with the Court, counsel for the construction mortgagees, the Mechanic’s Lien Claimants Secured Creditors’ Committee, Lyman Lumber Company, and the Unsecured Creditors’ Committee consented to the following:

to the issuance of orders by the Bankruptcy Court, pursuant to the Court’s December 29, 1983 Standing Order to Sell Free and Clear, permitting the Debt- or to sell properties free and clear and disbursing the proceeds of sale in accordance with the Examiner’s Report, subject to the escrowing of proceeds of sale claimed by the construction lender as attorneys’ fees and claimed by mechanics and materialmen for pre-order items pursuant to the standing objections by Lyman Lumber Company and David C. Bell Investment Co. regarding the priority, validity and amount of mechanic’s lien claims and subject to standing objections by Lyman Lumber Company and the Mechanic’s Lien Claimants Secured Creditors’ Committee regarding the payment of attorneys’ fees to the construction lender.

In attendance at the hearing in which the stipulation was presented to the Court were the original signatories to the stipulation or their representatives. On February 21, 1984, the Court entered an Order approving the stipulation and further ordering that:

All proceeds which are the subject of standing objections are to be escrowed by the Examiner subject to a later determination by the Bankruptcy Court as to the validity of the claims as to those proceeds.

The signatories to the Stipulation, as well as other parties in attendance at the hearing, were mailed copies of such Order as notice thereof on February 22, 1984. No motion for reconsideration or appeal was ever filed concerning the February 21, 1984, Order.

On May 9, 1984, after a hearing on the motion by the Debtor and the Mechanic’s Lien Claimants Secured Creditors’ Committee, and their appearing no objection to such motion, the Court entered an Order amending the December 29, 1983, Standing Order. The Amended Order provided in relevant part as follows:

Dates for hearings to resolve individual objections and standing objections with respect to sales free and clear of the debtor’s properties and the distribution of proceeds therefrom shall be scheduled by this Court at a scheduling conference to be conducted on May 10, 1984, and thereafter, from time to time in consultation with counsel for the debtor, the Mechanic’s Lien Claimant, [sic] Secured Creditors’ Committee, the Official Committee of Unsecured Creditors and counsel for parties who have asserted individual objections or standing objections.

Counsel originally present at the hearing concerning the December 29, 1983, Standing Order, and who were also signatories to the Stipulation approved pursuant to the Court’s February 21,1984, Order were similarly present at the hearing on the motion to amend the Standing Order. All such counsel received copies of the Amending Order as notice thereof and filed no motion for reconsideration or appeal thereto.

On August 14 through 21, 1984, and upon agreement of the parties to present to the Court four test cases, a hearing was held on the motion of the Mechanic’s Lien Claimants Secured Creditors’ Committee to determine the validity, priority, and extent of mechanic’s liens on four separate properties governed by the December 29, 1983, February 21, 1984, and May 9, 1984, Orders. As a result of that hearing, on November 30, 1984, this Court entered an Order determining that certain mechanic’s liens attached prior to the filing by the construction mortgagees of mortgages on the property concerned therein. Both construction mortgagees have appealed this Court’s November 30, 1984, Order.

Both prior to and during the hearing on the present motions before the Court it was apparent that the bankruptcy estate has no financial interest whatsoever in the funds which were escrowed upon the sales free and clear.

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Bluebook (online)
83 B.R. 633, 1985 Bankr. LEXIS 6262, 1985 WL 17485, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-zachman-homes-inc-mnb-1985.