Harbour East Dev. Ltd. v. 7935 NBV, LLC (In re Harbour East Dev. Ltd.), Case No. 10-20733-BKC-AJC
| Decision Date | 31 January 2012 |
| Docket Number | Adv. No. 10-03584-AJC-A,Case No. 10-20733-BKC-AJC |
| Parties | In re: HARBOUR EAST DEVELOPMENT, LTD., Debtor. HARBOUR EAST DEVELOPMENT, LTD., Plaintiff, v. 7935 NBV, LLC and WHIRLPOOL CORPORATION, Defendants. |
| Court | U.S. Bankruptcy Court — Southern District of Florida |
ORDERED in the Southern District of Florida on January 31, 2012.
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This matter came before the Court for hearing on September 28, 2011 at 11:00 a.m. upon Debtor's Motion for Partial Summary Judgment on Count I of Complaint toAvoid NBV's Security Interests [ECF No. 51] (the "Motion") and 7935 NBV, LLC's Response to Debtor's Motion for Partial Summary Judgment (the "Response") [ECF No. 56].
Plaintiff Harbour East Development, Ltd. ("Harbour East" or the "Debtor") is a real estate developer that developed and built a 35-unit luxury residential condominium development known as Cielo on the Bay ("Cielo" or the "Property") located at 7935 East Drive in North Bay Village, Florida. The Debtor has sold 4 of the residential condominium units in Cielo and currently owns the remaining 31 residential condominium units (the "Unsold Condominium Units").
On or about December 28, 2005, the Debtor executed a construction loan agreement with Northern Trust Bank ("Northern Trust"), whereby Northern Trust made a construction loan (the "Loan") to the Debtor in the aggregate principal amount of $16.9 million (the "Loan Agreement"). The Loan was evidenced by a promissory note (the "Note") executed by the Debtor in favor of Northern Trust in the principal amount of $16.9 million, which in turn was secured by a first priority mortgage, assignment of rents, security agreement, financing statement, and fixture filing executed by the Debtor in favor of Northern Trust that encumbers the Property, fixtures affixed to the Property and rents derived from the Property (the "Mortgage").
On or about February 14, 2006, Northern Trust perfected its security interest in the real property and in "fixtures" by recording the Mortgage with the clerk of court for Miami-Dade County at OR Book 24237, Page 3301-3323, as CFN 2006R0162511. The Mortgage also states that
As set forth in the section of the Mortgage designated as the "Granting Clause" (the "Granting Clause"), Harbour East, as mortgagor granted Northern Trust, as mortgagee, a security interest in a list of property owned by Harbour East (the "Mortgaged Property"). Importantly, subsection (f) of the Granting Clause is entitled "Personal Property" and granted a security interest to Northern Trust in all tangible equipment, fixtures and personalty (the "Goods").
Specifically, subsection (f) of the Granting Clause reads as follows:
To the extent owned by Mortgagor, all fixtures, fittings, appliances, apparatus, equipment, machinery, furnishings and any other tangible or intangible personal property, now or hereafter attached or affixed to, placed upon or used in any way in connection with the use, enjoyment, operation or occupancy of the Premises, including all heating, air conditioning, incinerating, refrigerating, monitoring, water, cleaning and communications apparatus and equipment whatsoever, all computers, computer software, televisions, systems, photocopiers, telecopiers, medical equipment, fire sprinkler and alarm systems, all boilers, engines, motors, dynamos, generating equipment, piping and plumbing fixtures, ranges, cooking utensils and apparatus and mechanical kitchen equipment, refrigerators, cooling, ventilating, sprinkling and vacuum cleaning systems, fire extinguishing and prevention apparatus, gas and electrical fixtures, elevators, escalators, partitions, built-in mirrors, planters, shelves, spotlighting equipment, lockers, cabinets, window covering and all hardware therefor, carpeting and other floor covering, vacuum cleaning systems, floor cleaning, waxing and polishing equipment, lighting fixtures, lamps, bulbs, electrical and other signs, office furniture, window shades, blinds, screens, storm sash, awnings, furnishings and artwork in public spaces, halls and lobbies, and shrubbery and plants (and including, all interest of Mortgagor in any of such items, at any time acquired under any security agreement, conditional sale contract, chattel mortgage or other security instrument), wherever located (collectively, the "Personal Property").
On or about December 21, 2009, Northern Trust, as Seller, and TMS FL 2, Inc., as Purchaser ("TMS"), entered into a Loan Sale Agreement, pursuant to which Northern Trust sold the Loan to 7935 NBV LLC ("NBV") as assignee of TMS.
On September 10, 2010, the Debtor initiated the present adversary proceeding by filing its complaint (the "Complaint") against NBV and Whirlpool Corporation seeking a determination as to the validity, priority and extent of lien or other interest in property. [ECF No. 1]. Although the Complaint seeks a determination as to the extent of NBV's lien on personal property, it does not make any allegations regarding the language in the Mortgage or the intent of such language. Further, the Complaint does not seek declaratory relief as to any specific property or its character as a fixture or otherwise.
On August 14, 2011, the Debtor filed the Motion, by which it seeks to avoid NBV's lien specifically as to the Goods. The Debtor argues that NBV was required under Article 9 of the Uniform Commercial Code as enacted in Florida (the "UCC") to file a UCC-1 Financing Statement in order to perfect its security interest in the Goods, and that because NBV failed to do so, the Debtor's estate may avoid NBV's security interest with respect to the Goods pursuant to section 544(a) of the Bankruptcy Code.
The party moving for summary judgment bears the initial burden of demonstrating to the Court "by reference to materials on file, that there are no genuine issues of material fact that should be decided at trial." Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir. 1991). A court "must draw all reasonable inferences in favor of the nonmoving party, and it may not make credibility determinations or weigh the evidence." Hinson v. Clitch County Bd. of Educ., 231 F.3d 821, 826-827 (11th Cir. 2000).As summary judgment is a drastic remedy, it should not be granted unless movant establishes that the other party is not entitled to recover under any discernable circumstances. Mercantile Bank & Trust Co, 750 F.2d 838, 842 (11th Circ. 1985); Walker v. CIT Fin. Servs. Corp. (In re Lease Purchase Corp.), 1992 WL 12004358, *2 (Bankr. S.D. Ga. 1992). In determining whether a genuine dispute of material fact exists to defeat a motion for summary judgment, the evidence is viewed in the light most favorable to the party opposing summary judgment, drawing all inferences in the opposing party's favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986); Bruno v. Mona Lisa at Celebration, LLC (In re Mona Lisa at Celebration LLC), 436 B.R. 179, 188 (Bankr. M.D. Fla. 2010).
The Bankruptcy Code permits debtors-in-possession and trustees to avoid unperfected liens pursuant to the "strong-arm powers" of section 544(a) and to preserve those liens for the benefit of the estate. In re Maison Grande Condo. Ass'n, Inc., 425 B.R. 684, 698 (Bankr. S.D. Fla. 2010); In re Trafford Distrib. Ctr., Inc., 414 B.R. 849 (Bankr. S.D. Fla. 2010).
As alleged by the Debtor in the Complaint and acknowledged by NBV in the Response, there is no dispute that both NBV and Northern Trust failed to file a UCC-1 Financing Statement with the Florida Secured Transaction Registry describing the Goods.
As a result of NBV's failure to file a UCC-1 Financing Statement describing the Goods as collateral, Harbour East is entitled to avoid NBV's liens and security interests pursuant to section 544(a) of the Bankruptcy Code with respect to any of Harbour East'sproperty in which a lien or security interest can only be perfected by filing a UCC-1 Financing Statement with the Florida Secured Transaction Registry. To the extent that there is no genuine issue of material fact as to whether particular property constitutes goods for which a UCC-1 Financing Statement must have been filed, Harbour East would be entitled to summary judgment as to that specific property. However, based upon the record before the Court, there appears to be an issue of fact as to whether these items of property constitutes goods for which a centrally-filed UCC-1 Financing Statement must have been filed prior to the commencement of the Debtor's bankruptcy case.
Although an interest in goods generally can only be perfected by filing a UCC-1 Financing Statement or by possession, this rule has exceptions. NBV correctly identifies three situations where a security interest in goods is perfected absent the filing of a UCC-1 Financing Statement.
First, goods acquired with the proceeds of NBV's collateral (including rents collected by the Debtor) on which NBV has a perfected lien pursuant to the Mortgage remain subject to NBV's lien for 20 days pursuant to Fla. Stat. § 679.3151(4) (). Accordingly, to the extent the 20-day period had not lapsed prior to Harbour East's bankruptcy filing, NBV's liens on the Goods acquired within the 20 days prior to the Petition Date would have been valid on the petition date and therefore not avoidable pursuant to section 544(a).
Second, pursuant to section 552 of the Bankruptcy Code, NBV's lien and security...
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