In re Best View Constr. & Dev.
| Decision Date | 24 August 2021 |
| Docket Number | 20-00674-JMM |
| Court | U.S. Bankruptcy Court — District of Idaho |
| Parties | In re: BEST VIEW CONSTRUCTION & DEVELOPMENT, LLC, Debtor. |
Matthew Todd Christensen, ANGSTMAN JOHNSON, PLLC, Boise Idaho, attorney for Debtor.
Matthew W. Grimshaw, Boise, Idaho, Subchapter V Trustee.
Thomas E. Dvorak, GIVENS PURSLEY, LLP, Boise, Idaho, attorney for creditors Sherman Leibow and Susan Perry.
Heidi Buck Morrison, RACINE OLSON, PLLP, Pocatello, Idaho, attorney for creditor Josiah Silva Trust.
Trevor L. Hart, PERRY LAW, P.C., Boise, Idaho, attorney for BRMK Lending, LLC.
Jason R. Naess, Boise, Idaho, Assistant United States Trustee.
For consideration in this decision are objections filed by debtor Best View Construction & Development, LLC ("Debtor") to proofs of claim filed by creditors Susan Perry ("Perry"), Sherman Leibow ("Leibow"), and the Josiah M. Silva Living Trust ("Silva") (collectively "Creditors") in this chapter 11, subchapter V[1] case.
Following briefing on the issues, the Court conducted an evidentiary hearing on the objections and took the matters under advisement. After consideration of the briefing, testimony exhibits, and oral argument presented, as well as the applicable law, the Court issues the following decision which resolves the objections. Fed.R.Bankr.P. 7052; 9014.
In 2019, Debtor was developing a tract of land in the City of Nampa, Canyon County, Idaho. Gaven[2] J. King ("King") was the owner of the Debtor, and is also a licensed realtor and broker. Debtor began the development process with the city, and after its initial name for the development was rejected, apparently because there was another development with the same or similar name, Debtor settled on "Best View Quads" as the name of the project. It had a preliminary or conceptual plat created which provided for six separate lots on the parcel. Ex. 307. On each lot, a quadplex was to be constructed. Id. Debtor then lined up buyers for each of the lots and entered into a Pre-Sold New Construction Real Estate Purchase and Sale Agreement ("PSA") with each buyer. At issue here are the PSAs executed by Perry, Leibow, and Silva. Exs. 219; 300- 301.
Each of the PSAs were supplemented with a number of addenda. All addendums were on a form provided or prepared by King, and the specific information inserted into the forms, except the signatures and the "X" designating the particular lot to be purchased, were filled in by someone other than King, Perry, Leibow, or Silva; likely the Debtor's realtor. Moreover, all addenda except Addendum #1 to each of the PSAs, contain the following provision:
To the extent the terms of this ADDENDUM modify or conflict with any provisions of the Purchase and Sale Agreement including all prior Addendums or Counter Offers, these terms shall control. All other terms of the Purchase and Sale Agreement including all prior Addendums or Counter Offers not modified by this ADDENDUM shall remain the same. Upon its execution by both parties, this agreement is made an integral part of the aforementioned Agreement.
(emphasis in originals).
A final plat was recorded on September 23, 2019 in Book 48, page 47, [3] Ex. 308, and construction on the quadplexes began in the Fall of 2019. King testified the lot boundaries changed somewhat between the preliminary and final plats, but the buildings remained the same. See also Exs. 307-08. Ultimately, the project foundered, and before the quadplexes were completed, on July 22, 2020, Debtor filed a bankruptcy petition under chapter 11, subchapter V. Dkt. No. 1. That same day, it moved to reject a number of contracts, including Perry's PSAs for Lots 2 and 3, Leibow's PSA for Lot 4, and Silva's PSA for Lot 6. Dkt. No. 5. Those contracts were ultimately rejected. Dkt. Nos. 40 (); 138 (oral ruling granting motion as to Silva contract). According to King's testimony, on the date the bankruptcy petition was filed, Lot 2 was 50% completed; Lot 3 was 55% completed; Lot 4 was 60% completed; and Lot 6 was 65-70% completed.[4]
Perry filed a proof of claim on September 22, 2020 in the amount of $633, 432.84, with $150, 000 of that amount listed as secured and the remaining balance unsecured. Claims Reg. No. 4-1. Leibow filed a proof of claim that same day in the amount of $349, 910.34, of which $125, 000 is listed as secured. Claims Reg. No. 5. Finally, Silva filed a proof of claim on September 29, 2020, but the claim was amended twice. The most recent amendment was filed on November 19, 2020 and lists a claim in the amount of $619, 100 with $400, 000 secured. Claims Reg. 8-3.
Debtor objected to each of these proofs of claim on October 20, 2020, alleging in each objection that the legal description of the subject property contained in the PSA was insufficient under the statute of frauds and that the method used to compute the unsecured portion of each claim was incorrect. Dkt. Nos. 62-64. Debtor subsequently completed the construction and sold all six lots in the development, including the lots at issue here, to an individual purchaser. Exs. 102-07.
1. Contract Provisions
On September 20, 2018, Perry executed a PSA to buy Lot 3. Ex. 300 at Ex. C, p. 26 of 48. The document was signed six days later by King. Id. The total purchase price was $499, 000, and Perry was to pay $20, 000 earnest money down. Id. Closing was to occur on May 31, 2019. Id. at 33 of 48. The PSA refers to Lot 3, and lists the address of the property as "TBD E. Maine Ave." in the City of Nampa, Canyon County, Idaho and lists the subdivision as "0 Not Applic." It refers to the plat of record or an alternative legal description as "TBD." The contract also refers to Addendum #1. Id. at p. 27 of 48 line 103; p. 34 of 48 lines 445, 478.
The same day Perry signed the PSA, she also executed an addendum to the contract. Id. at pp. 35-40 of 48. Addendum #1 provides the property address as "Lot 3 TBD Nampa Idaho" but goes a step further and includes a photocopy of the preliminary plat. Id. at p. 35 of 48. It further directed Perry to mark the lot she intended to purchase, and she marked a handwritten "X" on the border between Lots 2 and 3; however, Lots 1 and 2 were marked "Pending" in red lettering. Id. King testified that he added the term "pending" to indicate the lot was under contract and unavailable. Addendum #2, executed nine days later, provides the address as "TBD Lot 3 Best View Quads, Nampa, Idaho." Id. at p. 40 of 48. This second addendum also increased the total earnest money to $25, 000, and extended the completion deadline to July 31, 2019. Id. at p. 35 of 48. The Court's record does not contain Addendum #3. Addendum #4, dated July 24, 2019, provides the address is "TBD Unit 3 E. Maine Ave., Nampa, Idaho," and extends the completion date to November 31 [sic], 2019. Id. at p. 41 of 48.
Between the execution of Addendums 4 and 5, the final plat was recorded. Ex. 308. Addendum #5 moved the closing date to on or before April 30, 2020. Ex. 300 at Ex. C, p. 42 of 48. It further provided the address was "TBD Unit 3 E. Maine Ave., Nampa, Idaho" but the agreement section of that addendum indicates that the "final property address is 1908 Sunnyridge Road, Nampa, Idaho 83686." Id.
Perry contracted to purchase a second lot, this time Lot 2.[5] Ex. 300 at Ex. B, p. 7 of 48. The PSA for Lot 2 was signed on January 9, 2019 by Perry and by King on February 13, 2019. Id. The total purchase price was $549, 900, and according to the PSA, Perry was to pay $25, 000 earnest money down. Id. The PSA includes the lot number, the City, County, and State, as well as the name of the subdivision - Best View Quads. Id. It provides for a closing date of May 31, 2019. Id. at p. 8 of 48.
This PSA also referred to Addendum #1. Id. at p. 8 of 48 line 103; p. 15 of 48 lines 445, 478. That addendum, executed the same day as the purchase agreement, [6]states the lot number and references "Best View Quads," but also includes a photocopy of the preliminary plat, upon which Perry marked Lot 2 with a handwritten "X" indicating her intention to purchase that lot. Id. at p. 16 of 48. Addendum #2, also executed that same day, refers to the property as "TBD Lot 2 Best View Quads, Nampa, Idaho, 83686," and extends the closing date to August 31, 2019. Id. at pp. 20-21 of 48. Addendum #3, executed on February 13, 2019 by Perry and one week later by King, referred to the address as "TBD Unit B E. Maine Ave., Nampa, Idaho" and agreed the address was to be "Lot 2 Best View Quads, Nampa ID until lot and block are given." Id. at p. 23 of 48. This addendum also increased the total earnest money to $125, 000. Id.
Addendum #4 was executed on July 24, 2019, extended the construction completion deadline to November 31 [sic], 2019, and provided the address as "TBD Unit 2 E. Maine Ave., Nampa, Idaho." Id. at p. 23 of 48. Between the execution of Addendums 4 and 5, the final plat was recorded. Addendum #5 provided the address of the property was "TBD Unit 2 E. Maine Ave., Nampa, Idaho," but in the agreement section indicated the "final property address is 1906 Sunnyridge Road, Nampa, Idaho 83686." Id. at p. 24 of 48. It further extended the closing date to April 30, 2020. Id.
Perry filed a joint proof of claim covering the purchase of lots 2 and 3, totaling $633, 432.84. Claims Reg. at 4-1. It lists Lots 2 and 3 as having a combined value of $1, 500, 000 ($750, 000 each), and indicates that $150, 000 of the claim is secured, representing the $25, 000 and $125, 000 down payments. Id...
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