In re 18 Audubon Place, LLC
| Decision Date | 30 October 2018 |
| Docket Number | CASE NO. 18-12232 SECTION A |
| Parties | IN RE: 18 AUDUBON PLACE, LLC DEBTOR |
| Court | U.S. Bankruptcy Court — Eastern District of Louisiana |
The Motion to Stay Execution of Portions of Order Pending Appeal filed by 18 Audubon Place, LLC ("Debtor"), Richard Goldenberg, and Karen Goldenberg came before the Court on October 30, 2018.1
On August 1, 2018, Debtor filed a Voluntary Petition for Relief under Chapter 11 of the Bankruptcy Code in the Western District of Louisiana under case no. 18-50960.
On August 14, 2018, SBN V FNBC LLC ("SBN") filed a Motion to (A) Immediately Evict Occupier from Collateral, and (B) Authorize Expedited Section 363 Sales Process, or in the Alternative, to Appoint a Chapter 11 Trustee pursuant to 11 U.S.C. § 1104, or in the Alternative to Terminate Exclusivity Period pursuant to Section 1121(D) ("the SBN Motion").
On August 23, 2018, venue was transferred to the Eastern District of Louisiana at Debtor's request, and the August 28th hearing was cancelled.
On August 28, 2018, SBN re-urged the SBN Motion in the transferred case.2 The Court scheduled it for hearing on October 3, 2018.3
At the October 3, 2018, hearing, the Court entered an oral ruling ordering the appointment of a Chapter 11 Trustee under 11 U.S.C. § 1104. The Court continued the SBN Motion to October 10, 2018, for consideration of the requests for eviction and sale after appointment of a Chapter 11 Trustee.4
The U.S. Trustee filed an Application for Order Approving Appointment of Trustee, David V. Adler ("Trustee"), which was granted by the Court on October 10, 2018, prior to the continued hearing. P-47.
At the hearing on October 10, 2018, Trustee joined the SBN Motion and requested that the Court evict the Goldenbergs stating that deferred maintenance issues needed to be addressed prior to sale, and the Goldenbergs presence and belongings on the Property would hinder the sale process.
SBN produced evidence in the form of witness testimony that the Property would be secure without occupants as it is in a gated community with guards and cameras.
A review of the evidence offered at the continued hearing provided:
1. Debtor is a single purpose entity owning 18 Audubon Place, New Orleans, La. ("Property").
2. Debtor's members are Richard Goldenberg (98%) and his son, Robert Goldenberg (2%).
3. Richard Goldenberg previously owned the Property and transferred it to Debtor on May 31, 2012.5
4. The Property is encumbered by a mortgage to secure a note made by Debtor in the original principal amount of $4,420,000, bearing interest at the rate of 4.75% per annum, payablein monthly installments of $26,175.00 beginning on June 15, 2015, and continuing until May 15, 2020, when the all outstanding principal and interest would be due and payable. The note was payable to First NBC Bank ("FNBC"). When FNBC failed, SBN became the holder of the Note ("SBN Note").
5. As of the Petition date, Debtor scheduled a debt to SBN of $4,880,000. The scheduled amount was amended to match SBN's proof of claim. SBN proof of claim no. 1 reflects an outstanding principal balance of $4,416,044.48, accrued and unpaid interest of $1,011,552.82, attorneys fees of $12,534,86, late charges of $6,000.00, force placed insurance premiums of $12,123.26, and expenses and costs of $89.43. No payments have been received on the SBN Note since August 2016. The amount necessary to cure defaults under the SBN Note as of the Petition Date was at least $658,947.55.
6. As of the Petition date, $65,600.00 was due to Orleans Parish in 2018 property taxes for the Property. The Property was sold for nonpayment of 2017 property taxes to Forstall Follies LLC for the price of $71,513.90.6
7. As of the Petition Date, Debtor scheduled an account due by the Goldenbergs for past due rent in the range between $1,200,000- $600,000.00.
8. A written lease between Debtor and the Goldenbergs was signed on July 23, 2018 and recorded in the conveyance records of Orleans Parish on July 31, 2018.7 The lease requires payments of $25,000 per month, the payment of property taxes and insurance against all hazards. The term of the lease purports to be from July 2016 through December 2019.
9. The obligations owed by Debtor to SBN are in default. On October 11, 2016, First NBC, as predecessor in interest to SBN, filed a Petition for Foreclosure Via Executory Process in Orleans Parish.8 A writ of fieri facias was executed by the Clerk of Court for Orleans Parish directing the Sheriff to seize and sell the Property in satisfaction of the SBN Note. A notice of seizure was recorded in the conveyance records of Orleans Parish on October 25, 2016 seizing the Property.
10. The Goldenbergs paid one $25,000.00 payment to Debtor postpetition.
11. The Goldenbergs alleged that the written lease reflects their agreement with Debtor.
12. As of the Petition Date, Debtor's only other asset is a checking account with a balance of approximately $22,000.
13. For purposes of the hearing, the parties estimated the property to be worth $5,200,000.00.
14. The Goldenbergs were present at the hearing and offered no evidence to refute any of the above facts. Specifically, the Goldenbergs did not contest:
Based on a finding of the above facts, this Court held the recorded lease was unenforceable as to third parties pursuant to La. R.S. 13:3888(A).9 But in any event, given that the obligations owed under the alleged agreement between Debtor and the Goldenbergs were in default, the Goldenbergs had not paid rent timely postpetition, and the Trustee was requesting possession of the Property, this Court ordered that the Goldenbergs be vacate the Property no later than November 10, 2018.10
On October 19, 2018, Debtor,11 Richard Goldenberg, and his wife Karen Goldenberg (collectively "Appellants") filed a Notice of Appeal of the Order granting eviction.12 Appellants filed the instant Motion to Stay Execution of Portions of Order Pending Appeal. Appellants seek a stay of the eviction without necessity of a bond. In lieu of posting a supersedeas bond, Appellants propose that the Goldenbergs pay the monthly rent, maintain the Property, pay the Audubon PlaceCommission fees, and escrow taxes. Appellants have not appealed the Order appointing a Chapter 11 Trustee.
SBN and Trustee oppose the Motion to Stay.13
In deciding whether to stay its Order pending appeal, the Court must consider four elements:
(1) whether the movant has made a showing of likelihood of success on the merits; (2) whether the movant has made a showing of irreparable injury if the stay is not granted; (3) whether the granting of the stay would substantially harm the other parties; and (4) whether the granting of the stay would serve the public interest.14
F.R.B.P. 8007 provides that an order of a Bankruptcy Court may be stayed pending appeal, and the court "may condition relief on filing a bond or other security with the bankruptcy court." F.R.B.P. 7062 makes applicable F.R.C.P. 62, which provides that "[i]f an appeal is taken, the appellant may obtain a stay by supersedeas bond."15 While F.R.C.P. 7062 does not automatically apply in contested matters, courts have discretion to make it applicable in a matter to "protect the rights of all parties in interest."16
Local Rule 7062-1 directs that stay of execution of money judgments require a bond in the amount of the judgment plus twenty percent, the order on appeal in this case is not a moneyjudgment. As such, this court must decide whether a bond will adequately compensate the appellee pending the delay for appeal.17
Fifth Circuit law is clear that:
Likelihood of success remains a prerequisite in the usual case even if it is not an invariable requirement. Only "if the balance of equities (i.e. consideration of the other three factors) is ... heavily tilted in the movant's favor" will [the Fifth Circuit] issue a stay in its absence, and, even then, the issue must be one with patent substantial merit.19
Appellants' appeal rests on three (3) errors:
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