In re Baroni
| Docket Number | 1:12-bk-10986-MB |
| Decision Date | 21 July 2023 |
| Parties | In re: ALLANA BARONI, Debtor. |
| Court | U.S. Bankruptcy Court — Central District of California |
[1] CHAPTER 7 TRUSTEE'S MOTION TO: (1) APPROVE SALE OF REAL PROPERTY FREE AND CLEAR OF ALL LIENS, INTERESTS CLAIMS, ANDENCUMBRANCES WITH SUCH LIENS, INTERESTS, CLAIMS AND ENCUMBRANCES TO ATTACH TO PROCEEDS PURSUANT TO 11 U.S.C. § 363(b) AND (f); (2) APPROVE OVERBID PROCEDURES; (3) HOLD HOMESTEAD EXEMPTION FUNDS IN ESTATE PENDING REINVESTMENT PURSUANT TO CCP § 704.720(b); AND (4)DETERMINE THAT BUYER IS ENTITLED TO PROTECTION PURSUANT TO 11 U.S.C. § 363(m) [CASE DKT. 1830]; and
[2] MOTION OF THE DEBTOR AND JAMES BARONI FOR AN ORDER OF THIS COURT COMPELLING TRUSTEE SEROR TO ABANDON THE BARONIS' CALABASAS RESIDENCE (3339 VIA VERDE COURT, CALABASAS, CA) TO BARONIS, PURSUANT TO 11 USC §554(b), PER JAMES BARONI'S 'PAY ESTATE $150,000 FOR ABANDONMENT' OFFER MADE IN JAMES' DECL. TO OPP. TO SEROR MOTION TO SELL [CASE DKT. 1859]
The chapter 7 trustee, David Seror (the "Trustee"), has filed his Motion to: (1) Approve Sale of Real Property Free and Clear of all Liens, Interests, Claims, and Encumbrances with Such Liens, Interests, Claims, and Encumbrances to Attach to Proceeds Pursuant to 11 U.S.C § 363(b) and (f); (2) Approve Overbid Procedures; (3) Hold Homestead Exemption Funds in Estate Pending Reinvestment Pursuant to CCP § 704.720(b); and (4) Determine that Buyer Is Entitled to Protection Pursuant to 11 U.S.C. § 363(m) regarding the Trustee's agreement to sell property of the estate in Calabasas (the "Sale Motion" and the "Sale Agreement"). Case Dkt. 1830. The chapter 7 debtor, Allana Baroni (the "Debtor"), and her non-debtor spouse, James Baroni, oppose the Sale Motion and have filed their own Motion for an Order of this Court Compelling Trustee Seror to Abandon the Baronis' Calabasas Residence (3339 Via Verde Court, Calabasas, CA) to Baronis, pursuant to 11 U.S.C. § 554(b), per James Baroni's "Pay Estate $150,000 for Abandonment" Offer Made in James' Decl. to Opp. to Seror Motion to Sell (the "Abandonment Motion"). Case Dkt. 1859.
The Court has jurisdiction over the Sale Motion and the Abandonment Motion because both of the matters arise under provisions of title 11 of the United States Code, i.e., the Bankruptcy Code. 28 U.S.C. § 1334(b). For the same reason, the Court's consideration of the Sale Motion and the Abandonment Motion are both constitutionally "core" matters over which the Court has the adjudicative authority to enter final orders. See Wellness Int'l Network, Ltd. v. Sharif, 575 U.S. 665 (2015). Venue is proper under 28 U.S.C. § 1409(a).
Bankruptcy Code section 363(b) authorizes a trustee "after notice and a hearing, [to] sell…, other than in the ordinary course of business, property of the estate." 11 U.S.C. § 363(b). "The court's obligation in § 363(b) sales is to assure that optimal value is realized by the estate under the circumstances." In re Lahijani, 325 B.R. 282, 288-89 (B.A.P. 9th Cir. 2005). Courts also look to whether there is an adequate business justification for the sale and whether it is "in the best interest of the estate, i.e. it is fair and reasonable, that it has been given adequate marketing, that it has been negotiated and proposed in good faith, that the purchaser is proceeding in good faith, and that it is an 'arms-length' transaction." In re Wilde Horse Enters., Inc., 136 B.R. 830, 841 (Bankr. C.D. Cal. 1991).
"Ordinarily, the position of the trustee is afforded deference, particularly where business judgment is entailed in the analysis or where there is no objection." In re Lahijani, 325 B.R. at 289.
Here, the record demonstrates the Trustee has exercised sound business judgment in entering into the Sale Agreement, and proceeding with the sale transaction is in the best interests of the estate. First, as discussed in Section IV below, the Baronis' real property located at 3339 Via Verde Court, Calabasas, California (the "Calabasas Property") is community property. Because community property is property of the estate, see 11 U.S.C. § 541(a)(2), the Trustee is authorized to sell it. Second, the Trustee's decisions to market the Calabasas Property and enter into the Sale Agreement satisfy the Trustee's contractual obligations under his settlement agreement with CIT (the "CIT Settlement Agreement").[1] Among other things, the CIT Settlement Agreement provides: (i) the CIT secured claim against the Calabasas property is allowed as a fully secured claim in the amount of $2,561,235.85, as of September 30, 2022,[2] (ii) the Trustee will market and sell the Calabasas Property, (iii) upon the close of escrow, "CIT shall receive payment in the amount of $1,800,000 and a general unsecured claim in the amount of $255,829 in full satisfaction of the CIT secured Claim," and (iv) "[t]he difference between the CIT Secured Claim and the $1,800,000 actually paid to CIT from escrow shall be deemed avoided and preserved for the benefit of the bankruptcy estate." Case Dkt. 1577 at 23-24.
Third, the economics of the CIT Settlement-approval of which was not appealed and is now final[3]-were very favorable to the estate. Pursuant to the CIT Settlement, CIT agreed to reduce the secured portion of its claim from approximately $2.6 million to $1.8 million, permit the estate to receive the balance of the proceeds of the sale in excess of $1.8 million,[4] and retain only an unsecured claim for $255,829. The unsecured claim will be entitled to a pro rata distribution of whatever funds may be available after administration of the estate, together with the holders of all other unsecured claims. See generally 11 U.S.C. § 726. In approving the CIT Settlement, the Court found that it was "negotiated in good faith and at arm's length between the trustee and his counsel and CIT and its counsel." Case Dkt. 1734 at 55:22-23. The Court also found that the CIT Settlement was "in the best interest of the estate and a proper exercise of [the Trustee's] business judgment." Case Dkt. 1734 at 57:7-8.
Fourth, the Trustee is exercising reasonable business judgment again by fulfilling his contractual obligation to sell the Calabasas Property under the approved CIT Settlement. By fulfilling his obligations under the CIT Settlement, the Trustee will avoid breaching that agreement and incurring any administrative claim in favor of CIT for damages arising from that breach. Further, and perhaps most importantly, the Trustee will unlock, for the benefit of the estate, the substantial value promised by CIT under the agreement. The Sale Agreement, moreover, is itself fair, reasonable and in the best interests of the estate. The record establishes that (i) the property was adequately marketed, (ii) the transaction was negotiated and proposed in good faith, (iii) the purchaser is proceeding in good faith, and (iv) the sale is an "arms-length" transaction.
The Trustee marketed the Calabasas Property with the assistance of Marc Shevin, a licensed California real estate broker, specializing in the marketing and sale of real estate properties in Calabasas and Hidden Hills markets of California. Declaration of Marc Shevin, Case Dkt. 1830 at 25:3-25:4. On February 5, 2023, Shevin listed the Calabasas Property on the local multiple listing service ("MLS"), which feeds other cooperating regional multiple listing services, for $3,395,000. Id. at 25:13-16. The property also was listed on Realtor.com, Zillow.com, Redfin.com and Shevin's website. Id. at 25:16-18. Shevin called and emailed local agents to inform them of the new listing and a broker's open house; he also advertised the broker's open house on the MLS. Id. at 25:18-21, 25:23-24.
Following the listing on the MLS, Shevin received numerous inquiries about the home and began showings on February 9, 2023. Case Dkt. 1830 at 25:22-23. Shevin held his broker's open house on February 14, 2023. Id. at 25:23-25. Before the process was over, Shevin showed the house to 27 potential buyers and nine real estate agents. Id. at 25:22-25, 26:20-21.
On February 24, 2023, Shevin received, on behalf of the Trustee, the first purchase offer, which was from the Purchaser.[5] Case Dkt. 1830 at 26:1-2. The initial offer was $3,000,000. Id. On February 27, 2023, Shevin received additional offers from two other potential purchasers, for $2,549,000 and $2,900,000. Id. at 26:1-4. Following receipt of these offers, Shevin called the agents for other parties who had viewed the properties or expressed an interest to advise that the Trustee had received multiple offers and would be making multiple counteroffers. Id. at 26:5-7. Thereafter, the Trustee did not receive offers from any other potential purchaser. Id.
On February 27, 2023, the Trustee made a multiple counteroffer to the three bidders that had made offers. Case Dkt. 1830 at 26:8-9. All of the Trustee's counteroffers were at the price of $3,200,000. Id. The following day, Shevin received responses on behalf of the Trustee. Id. at 26:10-14. The Purchaser delivered a counteroffer in the amount of $3,115,000, which was presented as a "best and final" offer. Id. at 26:10-11. The same day, Shevin received a counteroffer from the second potential purchaser in the amount of $3,100,000. Id. at 26:11-12. The third potential purchaser declined to make a counteroffer, indicating informally that the maximum they would pay was $3,000,000. Id. at 26:12-14.
On March 1, 2023, the Trustee made counteroffers to the two remaining bidders, each in the amount of $3,150,000. Case Dkt. 1830 at 26:15-16. The following day, the Purchaser sent Shevin an acceptance of ...
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