City of Winston Salem v. Nw. Child Dev. Ctrs. (In re Nw. Child Dev. Ctrs.)
| Decision Date | 24 June 2021 |
| Docket Number | Adv. Pro. No. 20-6194,Case No. 20-50632 |
| Court | United States Bankruptcy Courts. Fourth Circuit. U.S. Bankruptcy Court — Middle District of North Carolina |
| Parties | IN RE: Northwest Child Development Centers, Inc., Debtor. City of Winston Salem and County of Forsyth, Plaintiffs, v. Northwest Child Development Centers, Inc., Defendant. |
IN RE: Northwest Child Development Centers, Inc., Debtor.
City of Winston Salem and County of Forsyth, Plaintiffs,
v.
Northwest Child Development Centers, Inc., Defendant.
Case No. 20-50632
Adv. Pro. No. 20-6194
UNITED STATES BANKRUPTCY COURT FOR THE MIDDLE DISTRICT OF NORTH CAROLINA WINSTON-SALEM DIVISION
June 24, 2021
Chapter 11
MEMORANDUM OPINION AND ORDER
THIS ADVERSARY PROCEEDING comes before the Court on the motion for summary judgment filed by the City of Winston-Salem and County of Forsyth (collectively, the "Plaintiffs") and the cross-motion for summary judgment filed by Northwest Child Development Centers, Inc. (the "Defendant"). The Plaintiffs seek a
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declaratory judgment that (1) the Defendant breached a restrictive use condition within the warranty deed on real property at 2530 Pittsburg Avenue, Winston-Salem, North Carolina (the "Property"), (2) that fee simple interest in the Property has reverted back to the Plaintiffs, and (3) the Defendant no longer has title or a cognizable interest in the Property. In its cross-motion for summary judgment, the Defendant counters that its current use of the Property for storage of child care equipment and technology conforms to the deed's use restriction, any reverter clause has not been triggered, and summary judgment should be entered in its favor.
For the reasons set forth below, the Court finds there are no material facts in dispute, concludes the Plaintiffs are entitled to judgment as a matter of law, and therefore, grants the Plaintiffs' motion for summary judgment and denies the Defendant's cross-motion for summary judgment.
The Defendant-Debtor filed a petition for relief under chapter 11 of the Bankruptcy Code on August 17, 2020 and elected to proceed under subchapter V. The Defendant operates a daycare center in Mocksville, North Carolina, offering full and part-time child care for children with special needs. In its amended schedules, the Defendant also included an ownership interest in the Property, which formerly served as an additional daycare operation for the Defendant before the Defendant closed the facility in 2014. In its § 1188(c) status report filed on October 6, 2020, the Defendant represented that it was investigating a potential sale, improvement, and
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leaseback of the building space and had already interviewed several real estate brokers to aid the Defendant in that endeavor.
After forecasting its position on the Defendant's intended sale of the Property, the City of Winston-Salem filed a motion for relief from stay to allow the City to pursue a resolution of the matter in state court. The City sought a state-court determination that the Defendant failed to utilize the Property in the required manner and, as a result, the Property had reverted back to the City and Forsyth County. The Court denied the stay relief motion, finding the balance of the pertinent factors derived from In re Robbins, 964 F.2d 342, 345 (4th Cir. 1992) supported denial, specifically that the matter could be more efficiently resolved in the bankruptcy court and that a timely determination on ownership of the Property was critical to advancing the subchapter V bankruptcy case. The Court also noted that both the Plaintiffs and the Defendant consented to bankruptcy court adjudication of this matter.
The Plaintiffs initiated this adversary proceeding against the Defendant on December 30, 2020, seeking a declaratory judgment under 28 U.S.C. § 2201 that the Defendant's use of the Property did not conform to the conditions placed upon the Defendant in the deed, that the deed's reverter clause had been triggered, and that the Plaintiffs were now the holders of fee simple interest in the Property. The Defendant quickly filed an Answer on January 6, 2021 (Docket No. 6), asserting that its current use of the Property is permitted under the deed and it remains the title holder of the Property. The Defendant also asserted several generic affirmative
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defenses, including estoppel, waiver, and laches, but without any detailed connection to the underlying facts of this proceeding.
The Plaintiffs filed a motion for summary judgment and supporting brief on May 7, 2021 (Docket No. 12, 13),1 and the Defendant filed its cross-motion for summary judgment and supporting brief the same day (Docket No. 14, 15). The Defendant filed a response opposing the Plaintiffs' motion for summary judgment on May 28, 2021 (Docket No. 16). After all response and reply deadlines expired, the Court determined a hearing to be unnecessary and the motion and cross-motion for summary judgment were fully submitted as of June 11, 2021.
Summary judgment is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a); Fed. R. Bankr. P. 7056. In applying this standard, a court will "view all reasonable inferences drawn from the evidence in the light that is most favorable to the non-moving party." Smith v. Collins, 964 F.3d 266, 274 (4th Cir. 2020). "Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial." Shee Atika Languages, LLC. v. Glob. Linguist Sols., LLC, 601 F. App'x 224, 225 (4th Cir. 2015) (quoting Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)). If there clearly exist material, factual issues "that properly can be resolved only by a finder of fact because they may reasonably be
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resolved in favor of either party," then summary judgment is inappropriate. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986); JKC Holding Co. LLC v. Washington Sports Ventures, Inc., 264 F.3d 459, 465 (4th Cir. 2001).
"[T]he substantive law will identify which facts are material. Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (citation omitted). Though viewed in the light most favorable, "the nonmoving party must rely on more than conclusory allegations, mere speculation, the building of one inference upon another, or the mere existence of a scintilla of evidence." Humphreys & Partners Architects, L.P. v. Lessard Design, Inc., 790 F.3d 532, 540 (4th Cir. 2015) (citation omitted).
When presented with cross-motions for summary judgment, as in this proceeding, "the court must consider each motion separately on its own merits to determine whether either of the parties deserves judgment as a matter of law. When considering each individual motion, the court must take care to resolve all factual disputes and any competing, rational inferences in the light most favorable to the party opposing that motion." Rossignol v. Voorhaar, 316 F.3d 516, 523 (4th Cir. 2003), cert. denied, 540 U.S. 822 (2003) (internal quotation marks omitted). The court must deny both motions if it finds there is a genuine issue of material fact, "[b]ut if there is no genuine issue and one or the other party is entitled to prevail as a matter of law, the court will render judgment." 10A CHARLES A. WRIGHT &
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ARTHUR R. MILLER, FEDERAL PRAC. & PROC. CIV. § 2720 (4th ed. 2021). Accordingly, here, the uncontested material facts are construed in the light most favorable to the Defendant for the purposes of the Plaintiffs' motion for summary judgment; for purposes of the Defendant's cross-motion for summary judgment, the facts are viewed in the light most favorable to the Plaintiffs.
The Court finds the following facts to be undisputed and material to the adjudication of these cross-motions for summary judgment. The following facts are taken from the statements of fact and responses thereto submitted in support of the cross-motions for summary judgment (Docket No. 13, 16),2 as well as exhibits offered by the parties that are not challenged. The Court recites only those facts relevant to the claims and defenses at issue.
1. The real property at issue before the Court is located at 2530 Pittsburg Avenue, Winston-Salem, Forsyth County, North Carolina. The Property is approximately 1.41 acres in size, consists of a one-story brick building and playground structures, and is located in a residential community within Winston-Salem and Forsyth County. (Docket No. 1, ¶ 9; Docket No. 13, ¶ 1; Docket No. 15, p. 1).
2. The City and the County each acquired a one-half interest in the Property by warranty deed dated October 26, 1972 and recorded in Book 1040 at Page 284 of the Forsyth County Registry. (Docket No. 1, ¶ 11).
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3. Defendant Northwest Child Development Centers, Inc., f/k/a Northwest Child Development Council, Inc. d/b/a Mud Pies Child Development began leasing the Property from the Plaintiffs shortly thereafter for the purposes of operating a childcare center. (Docket No. 1, ¶ 11)....
4. By Resolution dated October 27, 1997, the Winston-Salem Board of Alderman authorized conveyance of the City of Winston-Salem's one-half interest in the Property to the Defendant, pursuant to N.C. Gen. Stat. § 160A-279. (Docket No. 1, Ex. C). The Resolution states the Defendant "has leased the site since 1971 and used it as a child care facility" and that the Defendant requested the Plaintiffs convey the Property to enable the Defendant "to better serve child care needs within the area." (Docket No. 1, Ex. C).
5. By Resolution dated November 10, 1997, the Forsyth County Board of Commissioners authorized conveyance of the County's one-half interest in the Property to the Defendant, pursuant to N.C. Gen. Stat. § 160A-279. (Docket No. 1, Ex. D). The Resolution states that the Defendant "has leased the site for several years and used it as a child day care facility as a community development program," and that the Defendant requested that the
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