In re Evergreen Site Holdings, Inc.
| Decision Date | 08 March 2023 |
| Docket Number | 22-52799 |
| Parties | IN RE: EVERGREEN SITE HOLDINGS, INC. Debtor. |
| Court | U.S. Bankruptcy Court — Southern District of Ohio |
Chapter 11, Subchapter V
The Motion of Reg Martin for Relief from Stay (Doc. #44) (the "Motion") came on for preliminary hearing on December 6, 2022 and final hearing on February 7, 2023. Evergreen Site Holdings, Inc. ("Debtor") and Timber View Properties, Inc. ("Timber View")[1] filed responses objecting to the Motion (Docs. #59 and #68, respectively). Karry Gemmell filed a Response in Support and Joinder With Respect to the Motion of Reg Martin for Relief From Stay (Doc. #59).
At the request of the Court, the parties filed additional memoranda of law on specific issues.[2]Present at the final hearing were John W. Kennedy, Esq representing movant Reg Martin Denis E. Blasius, Esq., Darlene E. Fierle, Esq. and Beth M Miller, Esq representing Debtor, Kevin E. Humphreys, Esq representing Timber View, Philip K. Stovall, Esq representing Karry Gemmell, and the SubChapter V trustee Matthew T. Schaeffer, Esq.
The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334 and Amended General Order 05-02 entered by the United States District Court for the Southern District of Ohio, referring all bankruptcy matters to this Court. This is a core proceeding pursuant to 28 U.S.C. Section 157(b)(2)(G).
Based upon arguments presented and evidence submitted at the hearings, the Court makes the following findings and conclusions.
The facts relevant to resolving this Motion are largely without serious dispute and may be summarized as follows:[3]
Debtor is the owner of two (2) adjoining parcels of real estate of approximately 142 acres, located on State Route 664 South, Logan, Ohio (the "Property"). Debtor acquired the Property from M&T Property Investments, Ltd. ("M&T"). M&T had financed the Property through The Citizens Bank of Logan, and granted mortgages on the Property, dated December 2, 2004 (recorded December 13, 2004) and December 13, 2005 (recorded December 16, 2005).
During the time M&T owned the Property, M&T leased part of the Property to Hocking Peaks Park, LLC. Karry Gemmell ("Gemmell") and Mark Anthony ("Anthony") owned the membership interests in Hocking Peaks Park, LLC. In 2013, Gemmell brought suit against Anthony, M&T, Hocking Peaks Adventure Park, LLC, and other parties, a "business divorce" action, in the Hocking County Court of Common Pleas (the "Trial Court"), Case No. 13CV0046 (the "State Court Action").
On or about June 13, 2014, the Trial Court appointed Reg Martin ("Martin") as the receiver ("Receiver") in the State Court Action for Hocking Peaks Adventure Park, LLC (the "Receiver Order"). The Receiver Order did not appoint Martin as a receiver of the Property or any other real estate, but solely for the business Hocking Peaks Adventure Park, LLC. The day after his appointment, the Receiver closed the zipline business and discharged all employees. During his tenure, the Receiver never reopened the zipline business.
On March 21, 2018, the Court rendered a judgment against M&T and others in the State Court Action, awarding Gemmell damages and awarding the Receiver fees and administrative costs (the "2018 Judgment"). Inasmuch as Debtor was not a party to the State Court Action, the 2018 Judgment did not impose any relief against Debtor. Within days, in connection with the 2018 Judgment, Gemmell had the Hocking County Clerk of Courts issue and file a certificate of judgment against M&T (the "2018 Gemmell Judgment Lien"). About a month later, Martin had the Hocking County Clerk of Courts issue and file a certificate of judgment against M&T, among others (the "2018 Martin Judgment Lien"). At the time of entry of the 2018 Judgment, and issuance of the 2018 Gemmell Judgment Lien and the 2018 Martin Judgment Lien (collectively the "2018 Liens"), M&T still owned the Property.
M&T and others appealed the 2018 Judgment to the Court of Appeals for the Fourth Appellate District (the "Appellate Court"), Case No. 18 CA 008. On February 5, 2019, the Appellate Court entered a Decision and Judgment Entry (the "Appellate Decision") dismissing the appeal for lack of a final appealable order. Debtor acquired the Property from M&T on August 7, 2019, subject to the mortgages granted by M&T. M&T had financed the Property through The Citizens Bank of Logan, and granted mortgages on the Property, dated December 2, 2004 (recorded December 13, 2004) and December 13, 2005 (recorded December 16, 2005). Citizens Bank assigned its mortgages to Timber View.
As a result of the Appellate Decision, the Trial Court rendered a Judgment Entry in the State Court Action on August 29, 2019, which judgment was a final appealable order (the "Final Judgment"). Shortly after entry of the Final Judgment, Gemmell and Martin each obtained another certificate of judgment against M&T dated in September 2019. At the time that the Final Judgment was entered and certificates of judgment were issued, M&T no longer owned the Property. These certificates of judgment are not at issue in determination of the Motion.[4]
At the time of Debtor's acquisition of the Property in 2019, there was no active commercial use of the Property. Remnants of the abandoned adventure park and zipline business (which had been closed since June 2014) were located on portions of the Property. On or about May 1, 2020, Debtor entered into a lease with Eventuresencore, Inc., which lease permitted Eventuresencore to operate a new adventure park and zipline business on specific areas of the Property.
On January 22, 2021, Gemmell initiated a foreclosure action against Debtor and the Property in the Trial Court, Case No. 21CV0004 (the "Foreclosure Action") seeking to foreclose the 2018 Gemmell Judgment Lien. Gemmell named Martin as a party defendant to the Foreclosure Action. Martin filed an answer and cross claim asserting that the 2018 Martin Judgment Lien was a valid lien on the Property. Gemmell also named Timber View a party-defendant as it is the holder of the two mortgages on the Property granted to Citizens Bank and recorded in 2004 and 2005.[5]
On March 3, 2022, the Trial Court granted a partial summary judgment on motion of Gemmell, concluding that the 2018 Gemmell Judgment Lien created a valid lien on the Property in March 2018. On March 18, 2022, the Trial Court granted another partial summary judgment upon motion of Martin, concluding that the 2018 Martin Judgment Lien created a valid lien on the Property in April 2018 (the "2022 Summary Judgment"). Each judgment foreclosed the subject lien and ordered sale of the Property. In each judgment, the Trial Court observed that it "will determine the priority" of all of the liens. However, the Trial Court has not yet made such determination(s).
On March 28, 2022, the Trial Court entered a Judgment Entry and Decree in Foreclosure (the "Foreclosure Decree") in the Foreclosure Action, ruling that "unless the sums found to be due to Plaintiff . . . be fully paid within three (3) days from the date of the entry of this decree, the equity of redemption in the Property shall be foreclosed and the Property shall be sold free and clear of all interests . . . ." See Gemmell Exh. H p. 3. The Foreclosure Action case docket indicates that shortly thereafter, Debtor and Timber View filed a joint notice of appeal. They also sought a stay of the foreclosure sale pending appeal. Although successful, Debtor did not meet the terms of the order conditionally granting the stay. The county sheriff proceeded with a foreclosure sale on August 19, 2022. The successful bidder offered $1,701,100 for the Property, and it appears that the bidder placed a deposit of $10,000 with the appropriate entity. As of the final hearing, it did not appear that the bidder has deposited the remainder of the bid price. Pursuant to Ohio foreclosure procedure, the Trial Court scheduled a hearing for September 23, 2022 to confirm the sale.
Debtor filed a petition for relief under Chapter 11, Subchapter V of the Bankruptcy Code on September 22, 2022, the day before the scheduled hearing to confirm the sale. Upon commencement of this case, the automatic stay intervened, stalling the hearing. As a consequence, the Trial Court has not confirmed the foreclosure sale. The automatic stay also stalled the appeal of the Foreclosure Decree.
Martin filed the Motion in early November.
Martin seeks relief from the automatic stay to allow the Trial Court to proceed with a hearing to confirm the foreclosure sale, and allow the sheriff to collect the bid price and issue to the successful bidder a deed for the Property. Martin's ultimate objective is, of course, to obtain payment for his fees, awarded by the 2018 Judgment and purportedly secured by the Property by virtue of the 2018 Martin Judgment Lien. Martin argues that there exists cause to grant relief from the stay pursuant to 11 U.S.C. §362(d)(1) because he has a lien on the Property, and, inasmuch as a foreclosure sale of the Property was successfully held, the Property is no longer an asset of Debtor, Debtor's only interest in the Property is the right to redeem the Property under Ohio law, that right to redeem has expired, and the right to redeem is a not a debt or an interest that can be modified or paid over time through a plan of reorganization.
Debtor counters that, contrary to Martin's theory, Debtor remains owner of the Property inasmuch as the Foreclosure Sale has not been confirmed and the Property is property of the bankruptcy estate. More pointedly, Debtor posits that the 2018 Martin...
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