In re Eastport Golf Club, Inc., C/A No. 07-00085-JW.

• Decision Date: 26 June 2007
• Docket Number: C/A No. 07-00085-JW.
• Court: U.S. Bankruptcy Court — District of South Carolina
• Parties: In re EASTPORT GOLF CLUB, INC., Debtors.

Page 446

373 B.R. 446

In re EASTPORT GOLF CLUB, INC., Debtors.

C/A No. 07-00085-JW.

United States Bankruptcy Court, D. South Carolina.

June 26, 2007.

Julio E. Mendoza, Jr., Kimberly Neel, Nexsen Pruet Adams Kleemeier, LLC, Columbia, SC, for Debtor.

John Timothy Stack, Joseph F. Buzhardt, III, Office of the United States Trustee, Columbia, SC, for U.S. Trustee.

AMENDED JUDGMENT¹

JOHN E. WAITES, Bankruptcy Judge.

Based upon the Findings of Fact and Conclusions of Law made in the attached order of the Court, Debtor's proposed development of its golf course property, as described in the Plan filed February 1, 2007, is prohibited by the plain meaning of the language of the restrictive covenants, which appear to run with the title to the golf course property. The claims of Eastport Community Association, Inc. and Donald E. Metzger (the "Objecting Parties"), to the extent that they hold claims against Debtor's estate, are impaired. The Objecting Parties parol evidence objection is sustained.

AMENDED ORDER¹

This matter comes before the Court for a confirmation hearing on Eastport Golf Club, Inc.'s ("Debtor") proposed Plan of Reorganization ("Plan") and on motions of Eastport Community Association, Inc. ("Association") and Donald E. Metzger ("Objecting Parties") to deny confirmation and to dismiss or convert Debtor's chapter 11 case to a case under chapter 7.² The Court has jurisdiction over this proceeding pursuant to 28 U.S.C.A. § 1334(a) and (b). This matter is a core proceeding pursuant to 28 U.S.C.A. § 157(b)(2)(A), (L), and (0). The Objecting Parties oppose confirmation on several grounds; however the threshold issue in this case is whether the term "facilities related to" Debtor's golf course is ambiguous and whether Debtor's redevelopment of the Property, as proposed in the Plan, violates covenants governing the use of the Property and thereby impairs any claim of the Objecting Parties.³ Pursuant to Rule 52 of the Federal Rules of Civil Procedure, made applicable to this proceeding by Fed. R. Bankr.P. 7052, the Court makes the following Findings of Fact and Conclusions of Law.⁴

FINDINGS OF FACT

1. Debtor is a corporation organized under the laws of the State of South Carolina.

2. On January 4, 2007, Debtor filed a petition under chapter 11 of the Bankruptcy Code.

3. Debtor is a debtor in possession pursuant to 11 U.S.C. §.§, 1107(a) and 1108.

4. Prior to the petition date, Debtor operated a golf course known' as Eastport Golf Club ("Property") in Little River, South Carolina. The Property is comprised of approximately 98.7 acres and is situated among a group of residential neighborhoods known as the Eastport Community.

5. The Property and the Eastport Community appear subject to a Declaration of Covenants, Conditions; and Restrictions for EastPort Country Club ("Declaration") dated December 1, 1987 and recorded in the Horry County register of deeds.

6. The Declaration was executed by EastPort Development Corporation ("Developer") and it sets forth a general plan of development for the property comprising the Eastport Community and the Property. At the time of the Declaration, the Property was owned by EastPort Recreational Corporation ("Recreational Corporation"), an affiliated company of the Developer.

7. The Declaration and its exhibits provides in relevant part:

Declarant⁵ is the owner of the real property described in "Exhibit A"⁶ attached hereto an incorporated herein by reference. Declarant intends by this Declaration to impose upon the Properties (as defined herein) mutually beneficial restrictions under a general plan of improvement for the benefit of all owners of residential property within the Properties.

Declarant hereby declares that all of the property described in "Exhibit A" ... shall be held, sold, and conveyed subject to the following easements, restrictions,' covenants, and conditions which are for the purpose of protecting the value and desirability of and which shall run with the real property subjected to this Declaration and which shall be binding on all parties having any right, title, or interest in the described Properties or any part? thereof, their heirs, successors, successors-in title, and assigns, and shall inure to the benefit of each owner thereof.

Section 20. "Neighborhood" shall mean and refer to each separately developed and denominated residential area comprised of one (1) or more housing types subject to this Declaration.... For example, and by way of illustration and not limitation, each condominium, townhome development, cluster home development, and single-family detached housing development shall constitute a separate Neighborhood. In addition, each parcel of land intended for development as any of, the above shall constitute a neighborhood....

Section 25. "Private Club"⁷ shall mean that certain real property located within the Properties and owned by EastPort Recreational Corporation ... and operated as a recreational and social club, and all related and supporting facilities and improvements thereon, including, without limitation, the golf course, the club house, pools and tennis courts.

Section 26. "Properties" shall mean and refer to the real property described in "Exhibit A"....

Exhibit A

. . .

Description of Private Club

. . .

NOTE: Anything to the contrary contained in the foregoing Declaration notwithstanding, the Private Club has been subjected to the Declaration on the express understanding that the Declaration shall not unreasonably interfere with the use or operation of the Private Club for recreational purposes, which shall include and without limitation, golf facilities, tennis facilities, swimming facilities and exercise facilities, and social facilities, including without limitation, clubhouses, meeting areas, cabanas, and food and beverage facilities.

8. The Developer and the Recreation Corporation filed a petition with this Court for relief under chapter 11 on December 29, 1989 ("Prior Cases"). Pursuant to an order of this Court entered August 23, 1990, Marty P. Ourts, the court appointed examiner, conveyed the assets of the Developer and the Recreation Corporation, including the Property and the Developer's rights under the Declaration, to various lenders ("Lenders") of the Developer and the Recreation Corporation.

9. By separate Indenture Quit-Claim Deeds, the Lenders conveyed their interest in the Property to Debtor. Each deed conveying each Lender's interest in the Property "was signed by Debtor and contains the following provisions:

RESTRICTIONS: The within-described property is hereby restricted to golf course use only and facilities related or incidental thereto. Further, the property is hereby restricted to golf course playing time in daylight hours only. These restrictions shall be appurtenant to and shall run with the land and restrict future owners of the property described herein.

1. Grantee⁸ hereby covenants, assumes, and agrees to observe and perform all of the terms, conditions, covenants, easements, restrictions, obligations, and other provisions contained in the above-described Declaration.... 4. Grantee agrees for itselfrand its successors and assigns, that in order to protect the future development of undeveloped properties in the EastPort project, that the property conveyed herein is restricted to golf course use only and facilities related or incidental thereto. Further, the property is restricted to golf course playing time in daylight hours only. These restrictions shall be appurtenant to and shall run with the land and restrict future owners of the property described herein.

5. The Grantee, for itself and its successors and assigns, hereby agrees to be bound by all of the covenants, agreements and other aforesaid provisions and acknowledges and agrees that all of such covenants, agreements and other aforesaid provisions are fair, reasonable, and equitable.

10. By Indenture Quit-Claim Deed, the Lenders assigned and transferred to the Association all of the Developer's rights under the Declaration and any and all of the Lenders' rights, reserved, retained, and/or held by them, contained in the deeds to Debtor.

11. Debtor operated a public golf course on the Property from approximately 1992 until the petition date.

12. On February 1, 2007, Debtor filed the Plan, which proposes to retain the golf course on the Property but redevelop a portion of the Property into approximately 920 residential condominium units, referred to in the Plan as the "Grande Villas at Eastport" and the "Villas at Eastport," for the purpose of raising revenue to renovate the golf course and restoring the economically viability of the golf course.⁹

13. Debtor's Plan designates the homeowners within the Eastport Community as Class 9 creditors. Debtor asserts that this class is unimpaired because the proposed redevelopment of the Property is within the uses allowed by the applicable restrictions.

14. Numerous homeowners within the Eastport Community have filed proofs of claim and ballots either accepting or rejecting the Plan. Debtor has objected to the majority of claims filed by the homeowners, including those filed by the Objecting Parties, on grounds that these parties do not hold a claim against Debtor.

15. For purposes of this hearing and by stipulation, Debtor is not challenging the right of these parties to vote for the Plan or oppose confirmation. Debtor also stipulates that the homeowners and the Objecting Parties hold an interest for purposes of the Plan by virtue of the asserted restrictions. Debtor and the Objecting Parties further stipulated that they are not, at this hearing, litigating the validity and priority of the restrictions on, the Property.

16. Debtor's principal testified at the first hearing on confirmation. The Objecting Parties objected to his testimony pursuant to the parol evidence rule to the extent that the testimony sought to interpret or supply meaning to the words "facilities" related to...