In re 222 South Caldwell Street, Ltd. Partnership, Bankruptcy No. 08-31710.

Citation409 B.R. 770
Decision Date17 June 2009
Docket NumberBankruptcy No. 08-31710.,Adversary No. 08-3151.
CourtU.S. Bankruptcy Court — Western District of North Carolina
PartiesIn re 222 SOUTH CALDWELL STREET, LIMITED PARTNERSHIP f/d/b/a, The Park Condominiums, Debtor. Langdon M. Cooper, Trustee in Bankruptcy for 222 South Caldwell Street Limited Partnership v. BB Syndication Services, Inc., et al., Defendants.

Langdon M. Cooper, Gastonia, NC, for Plaintiff.

Constance L. Young, Kerry L. Traynum, Patrick E. Kelly, Johnston, Allison & Hord, P.A., Charlotte, NC, Diane P. Furr, Poyner & Spruill, L.L.P., Charlotte, NC, for BB Syndication Services, Inc.

Ashley L. Ellis, Parker Poe Adams & Bernstein, LLP, Charlotte, NC, for McClure Nicholson Montgomery Architects, P.A., Rita Rochelle Miles, Miles Interior Design, Inc.

Deborah L. Fletcher, Rebecca K. Lindahl, Katten Muchin Rosenman LLP, Charlotte, NC, for Renee C. Miller, Paul D. Miller, Roscoe W. Shiplett, Kathleen M. Shiplett, Robert J. Paratore, Adam M. Gochnauer, Elizabeth Neely, John A. Ferrin, Jr., Howard Kaplan, Wendy Kaplan, Scott Murtaugh, Jeanne Murtaugh, Brendan Murtaugh, Kerry Webster, Teresa Webster, John J. Owens, Bocacaro Properties, LLC, Michael D. Quill, Mirko Djuranovic, Gordanna Djuranovic, Lesley Mills, Christopher S. Varner, Amy Howie Varner, B.S. Sheth, Daniel Ness, Laurie Ness, Joseph L. Bertolami, Keith Rumbley, Ty Edwards, Virginia M. Rumbley.

Schotte 1 Construction, Inc., pro se.

Warco Construction, Inc., pro se.

Southern Steel Company, LLC, pro se.

Kevin L. Sink, Nicholls & Crampton, P.A., Raleigh, NC, for C.P. Buckner Steel Erection, Inc.

James H. Carter, Matthews, NC, for Southeast Builder Supply.

All South Supply, Inc., pro se.

Whitney S. Waldenberg, Troutman Sanders, L.L.P., Raleigh, NC, for Building Logics, Inc.

Performance Fire Protection, LLC, pro se.

Nan E. Hannah, Van & Sheridan, LLP, Raleigh, NC, for IDI Acquisition Corp.

Fraco Products, Ltd., pro se.

Pflow Industries, Inc., pro se.

Professional Police Services, Inc., pro se.

Charlotte Plastering, Inc., pro se.

Sunbelt Rentals, Inc., pro se.

Graybar Electric Company, Inc., pro se.

P.C. Godfrey, Inc., pro se.

The Industrial Electric Company of Charlotte, pro se.

Charles D. Ames, pro se.

Angella W. Gregory, pro se.

Fletcher & Rhoton, P.A., pro se.

Jason M. Baker, pro se.

Jonathan Christenbury, pro se.

Dayne K. Roberts, pro se.

Trajan S. Langdon, pro se.

W. Randall Cline, pro se.

Kathryn A. Cline, pro se.

A. Nouri Motameni, pro se.

Phillip Sain, pro se.

Thomas B. Templeton, Templeton & Raynor, P.A., Charlotte, NC, for William L. McLeod.

John S. O'Donnell, pro se.

JRJ Properties, LLC, pro se.

Ronald A. Faircloth, pro se.

Carolyn Klimas, pro se.

Gerald Bohannon, Jr., pro se.

J. David Maske, pro se.

Kathleen Guzman, pro se.

Timothy P. Guzman, pro se.

Richard J. Wright, pro se.

Maryanne Wright, pro se.

Anthony Colletti, pro se.

Kenneth R. Schmidt, pro se.

Robert M. Willett, pro se.

Howard A. Macke, Jr., pro se.

Jimmie L. Sain, Jr., pro se.

Adam Whalen, pro se.

Michael Whalen, pro se.

Rita Whalen, pro se.

Kathleen Klimas, pro se.

Derek J. Braun, pro se.

Leslie H. Miller, Miller & Hall, P.A., Charlotte, NC, for Sajjan S. Dhaliwal.

Thomas B. Templeton, Templeton & Raynor, P.A., Charlotte, NC, for William L. McLeod, Carole M. McLeod.

Tamara Imobersteg, pro se.

Jeffrey Imobersteg, pro se.

Debra Parrish, pro se.

A. Burton Shuford, Angela M. Heath, Shuford Hunter, PLLC, Charlotte, NC, for Sandra H. Dickinson, Thomas Ricci, Michelle Ricci, Lewis Bibbs, Brenda Bibbs, Jeff Stebbin, Kathleen Stebbin, Candace L. Lukoskie, Enrico Piraino, Diane Piraino, JPT Properties, LLC, Raphael Goldstein, Bette Royster, Nancy Fogt, Chad Danner, Maitland Danner, Tammy Stewart, Clayton D. Muller, Michael T. Whitehead, Giusto Piraino, Ginny Piraino, Richard W. Davis, Jr.

David S. Melin, Rayburn Cooper & Durham, P.A., Charlotte, NC, for Cline Resource and Development Company.

Robert P. Richards, pro se.

Kenneth I. Helfing, The Helfing Law Firm, PLLC, Charlotte, NC, for Philip L. Maung.

Eric D. Levine, Charlotte, NC, for Monica Bew.

Barrett Klutts, pro se.

Stacy C. Cordes, James H. Henderson, P.C., Charlotte, NC, for Timothy M. Keene.

Cypress Homes, LLC, pro se.

James Gamache, pro se.

Glenn C. Thompson, Hamilton Moon Stephens Steele & Martin, Charlotte, NC, for Alexander Cruz.

Joshua Hedrick, pro se.

Paul G. Wamsley, Law Offices of Paul G. Wamsley, Charlotte, NC, for Kalin Godev, Concepcion Godev.

Tak Man Koo, pro se.

Kathy B. Phillips, pro se.

Amy Antoniak, pro se.

Michael A. Phillips, pro se.

Sio Lai Yue, pro se.

Jack L. High, pro se.

Zula High, pro se.

Ronald L. Popp, pro se.

Jerome Geathers, pro se.

Carmella A. Geathers, pro se.

H. Lawson Huggins, Jr., pro se.

Theresa L. Huggins, pro se.

M. Scott Shultz, pro se.

Charles H. Owens, pro se.

David B. Angel, pro se.

Peter J. Verna, Jr., pro se.

Candace L. Lukoskie, pro se.

William A. Stayduar, pro se.

MEMORANDUM OPINION

J. CRAIG WHITLEY, Bankruptcy Judge.

THIS MATTER was before this Court on February 27, 2009 for hearing upon:

1) The Motion to Dismiss filed by the Sheth Defendants, as joined by the Bertolami Defendants; and

2) The Response thereto by BB Syndication Services, Inc. ("BB Syndication");

3) The Motion for Judgment on the Pleadings filed by BB Syndication; and

4) The responses and objections filed thereto by:

a) McClure Nicholson Montgomery Architects, PA ("McClure");

b) Cline Resources Development Co. ("Cline");

c) Rita Rochelle Miles & Miles Interior Design, Inc ("Miles");

d) The deposit purchaser Defendants represented by Katten Muchin Rosenman LLP ("Bertolami Defendants");

e) The deposit purchaser Defendants represented by Shuford Hunter, PLLC ("Sheth Defendants"); and

f) Langdon M. Cooper, Chapter 7 Trustee ("Trustee").

I. INTRODUCTION & PRIOR PROCEEDINGS.

222 South Caldwell Street Limited Partnership ("Debtor") is a single purpose entity, which was formed to construct, develop and sell units in a twenty-two (22) story residential condominium tower (the "Project") located at 222 South Caldwell Street, Charlotte, North Carolina. Construction of the Project stopped in January 2008 with the construction less than seventy percent (70%) complete.

The Debtor is indebted to BB Syndication for construction lending in the approximate amount $28,721,634.31 (as of October 27, 2008). BB Syndication's loan is secured by a deed of trust ("Deed of Trust") on the Project. In February 2009, with the note both matured and in default, BB Syndication made demand on the Debtor. A foreclosure followed. The Project was sold at foreclosure on August 7, 2008. BB Syndication bid in, but only to the extent of $17,900,000. Summit Shores LLC ("Summit") upset BB Syndication's bid at $18,795,000. Four (4) days before the upset bid period was to expire, three creditors of the Debtor filed an involuntary bankruptcy petition with this Court on August 14, 2008.

On August 28, 2008, Langdon M. Cooper was appointed Trustee for the Debtor, supplanting the state court receiver. The Debtor did not contest the petition and an Order for Relief was entered on October 6, 2008.

The Trustee then reached an agreement with Summit to purchase the Project For $19,000,000 at a § 363 sale free and clear of liens, subject to higher and better offers and Court approval. A sale at that price would not pay BB Syndication in full, much less the numerous other parties owed money by the Debtor. BB Syndication generally supported the Trustee's "short" sale; however, objections were filed by numerous other parties, who for one reason or another asserted in rem interests in the Project and whose claims would not be paid under the proposed sale. A hearing on the motion was set for October 28, 2008. Summit posted a $1,000,000 earnest money deposit ("Deposit") with the Trustee towards its purchase.

Also on the docket was BB Syndication's Motion for Relief from Stay. With its partially constructed collateral exposed to the weather and deteriorating1; under secured by a significant amount ($29+ million debt versus a $19 million bid value) on its debt; and with the Trustee lacking any funds or other assets, BB Syndication was clearly not receiving adequate protection. Thus, the hearings promised that either a sale would be approved or the Project would return to foreclosure.

The sale hearings began with Summit attempting to withdraw its offer. The prospective additional bidders that all parties hoped for never appeared, so the hearings might have ended there with BB Syndication receiving relief from stay to foreclose. However, all concerned believed this to be the worst possible outcome.

After a week of negotiations between the parties, on November 4, 2008, the buyer's issues were resolved and an agreement was reached. The sale of the Project, free and clear of liens and interests, to Summit was approved. (Order Authorizing and Confirming Private Sale of Property and Transferring Liens to Proceeds, Nov. 4, 2008, Case No. 08-31710)("Sale Order").

The Sale Order envisioned a bifurcated process: (1) a sale of the Project free and clear of liens and interests to Summit, (2) accompanied by a follow up adversary proceeding to determine entitlement to the net sale proceeds.

To protect BB Syndication, the lender was granted relief from stay to re-notice its foreclosure sale, and if the Summit sale did not close within forty-five (45) days, to foreclose. (Order Referencing Motion for Relief from Stay, Nov. 4, 2008, Case No. 08-31710)("Stay Order").

The agreed procedure offered benefits to all: the sale would generate a pot of money against which the parties could assert their in rem claims; the bankruptcy...

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