2747 Camelback, LLC v. Single-Family Residential Neighborhood Pres., Inc. (In re 2747 Camelback, LLC), CASE NO. 16-31846-hdh-11
| Decision Date | 21 October 2016 |
| Docket Number | CASE NO. 16-31846-hdh-11,Adversary Proceeding No. 16-03065-hdh |
| Parties | In re: 2747 CAMELBACK, LLC, Debtor. 2747 CAMELBACK, LLC, Plaintiff, v. SINGLE-FAMILY RESIDENTIAL NEIGHBORHOOD PRESERVATION, INC. d/b/a/ CAMELBACK 24TH STREET SINGLE FAMILY COALITION; ET. AL., Defendants. |
| Court | U.S. Bankruptcy Court — Northern District of Texas |
In re: 2747 CAMELBACK, LLC, Debtor.
2747 CAMELBACK, LLC, Plaintiff,
v.
SINGLE-FAMILY RESIDENTIAL NEIGHBORHOOD PRESERVATION, INC.
d/b/a/ CAMELBACK 24TH STREET SINGLE FAMILY COALITION; ET. AL., Defendants.
CASE NO. 16-31846-hdh-11
Adversary Proceeding No. 16-03065-hdh
UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF TEXAS DALLAS DIVISION
October 21, 2016
The following constitutes the ruling of the court and has the force and effect therein described.
(Chapter 11)
FINDINGS OF FACT AND CONCLUSIONS OF LAW IN SUPPORT OF FINAL JUDGMENT
CAME ON FOR HEARING on the 14th day of October, 2016, the Debtor's Motion for Final Default Judgment and Brief In Support Thereof (the "Motion"). Based on the Court taking
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judicial notice of all documents filed in the Bankruptcy Case and this Adversary Proceeding, based on all declarations and affidavits on file in this Adversary Proceeding, based on all certificates of service and proof of service on file in this Adversary Proceeding, based on the Clerk's entries of default entered in this Adversary Proceeding, based on the factual allegations as pled by the Debtor in its Complaint being admitted as true upon default, and based on the Court's independent review of governing law, the Court hereby enters the following Findings of Fact and Conclusions of Law in support of its Order Granting Debtor's Motion for Default Judgment and Ordering Protection Under Servicemembers Civil Relief Act and its Final Judgment Quieting Title and Permanent Injunction entered in this Adversary Proceeding.
Where appropriate, a Finding of Fact shall be deemed a Conclusion of Law, and a Conclusion of Law shall be deemed a Finding of Fact.
1. 2747 Camelback, LLC (the "Debtor") is a Delaware Limited Liability Company, with its principal place of business in the City of Dallas, Dallas County, Texas.
2. The Debtor owns certain real property and the improvements thereon located in the City of Phoenix, Maricopa County, Arizona, generally described as 2747 E. Camelback Rd., 2725 E. Camelback Rd., and 2735 E. Camelback Rd., Phoenix, Arizona 85016 (the "Property").
3. On May 4, 2016 (the "Petition Date"), the Debtor filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code with this Court, thereby initiating Bankruptcy Case No. 16-31846-hdh-11 (the "Bankruptcy Case").
4. The filing of the Bankruptcy Case created the Debtor's bankruptcy estate (the "Estate"), and all rights and interests of the Debtor in the Property and under the DCA (as defined herein) became property of the Estate.
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5. The Debtor remains a debtor-in-possession in the Bankruptcy Case and manages the Estate. No trustee or examiner has been appointed in the Bankruptcy Case.
6. The Debtor purchased the Property in approximately March, 2007.
7. In October, 2006, the prior owner of the Property, 2725 Office Investors, LLC, entered into that certain Development Cooperation Agreement (the "DCA") with eight individuals referred to in the DCA as the "Party of the Second Part."
8. When the Debtor purchased the Property, the Debtor had no knowledge or notice of the existence of the DCA.
9. Prior to the Debtor purchasing the Property, the Debtor retained a title insurance company which, among other things, ran a title review of the Property which did not disclose the existence of the DCA.
10. The senior lender lending funds to the Debtor secured by the Property was NexBank, SSB, which retains a lien, as agent, against the Property. No disclosure of the existence of the DCA was made to NexBank, and none of its title reviews revealed the existence of the DCA.
11. The DCA was first recorded with Maricopa County on November 4, 2011, at document number 20110917859, by one or more unknown individuals. Since the Debtor purchased the Property prior to this date, and since NexBank, SSB, recorded its deed of trust against the Property prior to this date, the recording of the DCA did not constitute any constructive notice or other notice of the DCA to the Debtor or to NexBank, SSB.
12. The DCA states that, in exchange for the support of the Party of the Second Part (citizens who were active in local neighborhood interests and causes) in assisting the prior owner of the Property in obtaining approval of a rezoning application, the prior owner would
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voluntarily agree to certain deed restrictions being recorded against the Property, which would restrict what could be built on the Property. The substance of those deed restrictions is detailed in the DCA itself; thus, the DCA can be construed as restricting what can be built on the Property by reference to future, contemplated deed restrictions.
13. The DCA specifically states that said deed restrictions would be recorded against the Property only upon the approval of said rezoning application. Therefore, the DCA contemplates that any restrictions upon the Property would be effectuated and recorded in the future, upon the satisfaction of a condition precedent. Said rezoning application was either never sought or never obtained. Said deed restrictions were never recorded.
14. The DCA further provides that said deed restrictions would benefit property owners and their successors in interest within the six hundred (600) feet of the existing south perimeter property boundary line of the Property, and also the Camelback 24th Street Single Family Coalition.
15. When the DCA was recorded, it had the effect of preventing the Debtor from obtaining financing, investments, or partners to develop the Property in a way other than as prescribed by the DCA. The Debtor was unable to obtain title insurance without the DCA being excepted from title insurance. This is because, although the deed restrictions were never recorded, as explained above, the discussion of the substance of the deed restrictions in the DCA itself led others to be concerned that the DCA itself may effectuate the deed restrictions, which was likely the intent of the person or persons who caused the DCA to be recorded.
16. The Debtor learned of the existence of the DCA in September, 2015, as it was preparing plans to develop the Property.
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17. At present, the Property consists of three small buildings, that have been boarded up and welded shut due to squatting, and the Property cannot be meaningfully developed with the DCA recorded against the Property.
18. Thus, the DCA constitutes a cloud on the Debtor's title to the Property and the Debtor's enjoyment of the Property, and an encumbrance against any person's development of the Property. With respect to the Bankruptcy Case, the DCA constitutes a material economic encumbrance preventing creditors in the Bankruptcy Case from being paid because the Debtor is unable to monetize its property for fair market value.
19. On May 4, 2016, the Debtor filed its Debtor's Original Complaint to Quiet Title, for Declaratory Relief, and for Injunctive Relief, thereby initiating this Adversary Proceeding.
20. On May 9, 2016, the Debtor filed its Debtor's Amended Complaint to Quiet Title, for Declaratory Relief, and for Injunctive Relief (the "Complaint").
21. By the Complaint, the Debtor generally seeks a quiet title judgment regarding the DCA. The Complaint seeks declarations that the DCA does not constitute a covenant running with the land, declarations that the DCA is invalid or unenforceable against the Debtor, the Estate, or the Property, a finding that the DCA is avoidable under Arizona law and the Bankruptcy Code, and other relief against the person or persons who recorded the DCA. The fraudulent transfer avoidance of the DCA is moot and has been orally withdrawn by Debtor as a result of the Court granting judgment on the declaratory judgment claims.
22. The Complaint named all the individuals defined as the Party of the Second Part in the DCA.
23. The Complaint further named all known owners of real property within the 600 foot range referenced in the DCA, including whether the 600 foot range was anywhere from the
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south perimeter property boundary line of the Property, or anywhere within a 600 foot radius of the Property. The Debtor fully and appropriately obtained such ownership information by hiring a title insurer and real property records company to review and pull actual title records regarding said 600 foot range(s).
A. JURISDICTION AND VENUE
24. The Court has jurisdiction over this Adversary Proceeding and the Motion under 28 U.S.C. § 1334.
25. This Adversary Proceeding and the Motion are core proceedings within the meaning of 28 U.S.C. § 157(b)(2). Among other things, this Adversary Proceeding adjudicates the extent of various alleged interests in the Property, which is in the custodia legis of this Court, and the extent of potential claims in rem against the Property or against the Debtor under the DCA. See Tennessee Student Assistance Corp. v. Hood, 541 U.S. 440, 448 (2004).
26. Thus, the issues concern the Court's exclusive jurisdiction under 28 U.S.C. § 1334(e) to adjudicate the extent of interests in property of the Estate, which exclusive jurisdiction is by definition core, and the issues are core under 28 U.S.C. § 157(b)(2)(B), (H), (K), and (O).
27. Venue of the Adversary Proceeding before this Court is proper pursuant to 28 U.S.C. § 1409 because the Bankruptcy Case is pending before this Court, and the venue of the Bankruptcy Case before this Court is itself property under 28 U.S.C. § 1408(1) as the District where the Debtor maintains its principal place of business.
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B. THE DEFENDANTS AND SERVICE OF PROCESS
28. In order for the Court to grant in rem relief as against the world with respect to the DCA, it is necessary under fundamental principles of due process to ensure that, first, the Debtor has named in this Adversary Proceeding as a defendant any person or entity with a potential interest in the DCA.
29. To this end, the Complaint names three groups of defendants. First, it names as the...
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