In re Flyboy Aviation Props., LLC

• Decision Date: 24 October 2013
• Docket Number: No. 13–55775–BEM.,13–55775–BEM.
• Citation: 501 B.R. 828
• Parties: In re FLYBOY AVIATION PROPERTIES, LLC, Debtor.
• Court: U.S. Bankruptcy Court — Northern District of Georgia

501 B.R. 828

In re FLYBOY AVIATION PROPERTIES, LLC, Debtor.

No. 13–55775–BEM.

United States Bankruptcy Court,

N.D. Georgia,

Atlanta Division.

Oct. 24, 2013.

Leon S. Jones, Leslie M. Pineyro, Jones & Walden, LLC, Atlanta, GA, for Debtor.

James H. Morawetz, Office of U.S. Trustee, Atlanta, GA, for U.S. Trustee.

ORDER GRANTING MOTION FOR AUTHORIZATION TO SELL REAL PROPERTIES FREE AND CLEAR OF LIENS, CLAIMS, ENCUMBRANCES AND INTERESTS

BARBARA ELLIS–MONRO, Bankruptcy Judge.

This matter came before the Court for consideration of Debtor's “Motion for Authorization to Sell Real Properties Free and Clear of Liens, Claims, Encumbrances, and Interests” (the “Motion”), [Doc. No. 46], the objections to sale by Richard Franck, Oliver Walter Propheter, Ken Franck, and Mathis Airpark Residences Association (“MARA”), and Debtor's responses thereto. [Doc. No. 50, 60, 71, 72, 76, 77, 81, 82, 83]. The Court held hearings on August 15 and 16, 2013, to consider the objection of Richard Franck, and on October 15, 2013 (collectively, the “Hearing”), to consider the additional objections filed by Ken Franck, Oliver Walter Propheter and MARA. A trial was also held in the related adversary proceeding on September 23, 2013, captioned Flyboy Aviation Properties, LLC v. Franck, Adv. Pro. No. 13–5111 (the “Adversary”), to determine what interest, if any, Richard Franck has in Debtor's property.

Present at the Hearing were Plaintiff's managing member, Joe Voyles and counsel for the Debtor, Edward McCrimmon, Lisa McCrimmon, Leon Jones and Leslie Pineyro. Also present were objecting parties Ken Franck, Richard Franck (individually and as president of MARA), Oliver Walter Propheter, and their counsel, William Mitchell. After carefully considering the pleadings, the evidence presented and the applicable authorities, the Court enters the following findings of fact and conclusions of law in accordance with Fed. R. Bankr.P. 7052.

I. Background

Debtor proposes to sell two pieces of real property: a 14.07 acre parcel located at 3747 Mathis Airport Drive, comprised of Mathis Airport (the “Airport”), and a 1.99 acre parcel adjacent to the Airport on which there are several airplane hangars. (the “Subdivision Property” with the Airport, the “Property”). [Ex. D–4, 5].¹ The proposed buyer, JEH Homes, LLC (“JEH Homes”), has offered the Debtor $90,000 per acre for the Property for a total purchase price of $1,446,147. JEH Homes proposes to turn the Property into a planned residential subdivision, razing the Airport and its facilities. The purchase price is the best offer Debtor has received in the last three and one-half years, although it is not sufficient to pay the two mortgages on the Property.² Debtor believesthe offer represents the best price available for the sale of the Property and is in the best interest of the estate and its creditors.

Through the Motion, Debtor seeks entry of an order authorizing the sale of the Property free and clear of all liens, claims, encumbrances, and interests, and to disburse the sales proceeds as follows: 6% sales commission to Debtor's Broker, customary closing costs, and then all net proceeds less a $35,000 “carve-out” for the bankruptcy estate, to Gwinnett Community Bank to the extent of its secured claim and the remainder, to the estate of Claudy Mathis. [Doc. No. 75]. Each of the individuals who have objected to the sale (the “Individual Objectors”), assert that they hold easements to use the Airport taxiways and runways and, argue that Debtor cannot sell the Property free of their interests. MARA objects to the sale to the extent that JEH Homes would use Mathis Air Park Road, the private road through the Subdivision ³, without permission, burdening the residents of the Subdivision and trespassing on private property. [Doc. No. 77].

The parties agreed that all evidence submitted at each of the August 15 and 16 hearing, and the September 23 trial would be included in the record for the final hearing on the Motion held on October 15. The parties presented additional testimony and documentary evidence at the October 15 hearing.

This Court has jurisdiction to consider the Motion and the relief requested therein pursuant to 28 U.S.C. §§ 157 and 1334 and this is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A) and (N). Venue is proper pursuant to 28 U.S.C. § 1409(a).

II. Facts

L.G. Mathis owned, in whole or in part, Mathis Airport until 1990 when he sold his remaining one-half interest to his brother C.J. Mathis. [Ex. F–11, F–12]. During the early 1980's, L.G. Mathis and Patrick McLaughlin began selling off lots in the Subdivision adjacent to the Airport. [Ex. F–16, 26; O–8]. As more fully set forth in the Trial Order, Oliver Walter Propheter (“Propheter”) purchased property in the Subdivision in 1983, Richard Franck purchased property in the Subdivision in 2004 and 2005, Ken Franck bought property from Richard in 2005, and Debtor purchased a Subdivision lot and the Airport in 2004. [Ex. D–4; Ex. F–16, 23; FB–3, 7, 9].

In November, 2007, McLaughlin and L.G. Mathis deeded the private roads in the Subdivision to MARA. [Ex. FB–5; Ex. F–19]. MARA was incorporated approximately 21 days prior to receiving the quit claim deed (the “Quit Claim”) for the roads and was created for that purpose. See also, Trial Order at 7–8. At the time MARA accepted the Quit Claim there were two lis pendens regarding the litigation over the use of the Subdivision roads (the “Road Litigation”) of record. [Ex. D–8, 9]. MARA, through its President, Richard Franck, had actual knowledge of the Road Litigation at the time the Quit Claim was delivered. After twelve years of litigation in the Road Litigation and four days after MARA accepted the Quit Claim, a consent order was entered by the Superior Court of Forsyth County on November 28, 2007 (the “State Court Order”). [Ex. D–10; Ex. F–29] There is a county road, Mathis Airport Drive, which provides the general public access to the Airport. Mathis Air Park Road begins on Mathis Airport Drive and ends in a cul-de-sac in the Subdivision. Mathis Air Park Road remains private. [Ex. O–1; D–10, 12; F–29].

As discussed in the Trial Order, Richard Franck purchased property from Musgrove and then purchased an additional half acre parcel of property from the executor of the Wilson estate. [Ex. O–3; FB–3]. See Trial Order at 8. The half acre parcel was owned by “Pappy” Tate and then sold to Mr. Wilson, predecessor in title to Richard Franck and then, Ken Franck. [Ex. O–2, 3]. This parcel was combined with the Musgrove property and then subdivided into four lots. [Ex. FB–12]. Lot # 4, which is now owned by Ken Franck, is made up of Musgrove property and the Wilson property and has a boundary on Mathis Air Park Road. [Ex O–4; FB–7, 12].

Exhibit O–5, is a document titled “Addendum to Settlement Statement,” (the “Wilson Addendum”), which states:

As part of consideration of this purchase and sale, Seller agrees that Purchaser shall be allowed to join taxiways to airport taxiways of Mathis Airport and to have use of landing strip; and Purchaser agrees that they will not operate an aircraft repair service on subject property so long as an aircraft repair service is maintained at Mathis Airport.

[Ex. O–5]. Richard Franck testified that he received a copy of the Wilson Addendum from Wilson's son when he purchased the property, and that he recognized the signature of Patrick McLaughlin. The Wilson Addendum is signed by Patrick McLaughlin, and is signed by one witness and a notary. There are blanks for the signatures of L.G. Mathis and Tom and Pat Wilson as well as for additional witnesses, to sign, however the only signatory to the document is Patrick McLaughlin. The document is not dated, but does contain the following: “[a]s to Patrick E. McLaughlin, Sr., Signed, sealed and delivered in the presence of: this 23 day of August, 1983.” The Wilson Addendum identifies McLaughlin and Mathis as Sellers and Tom and Pat Wilson as Purchaser. The deed from Tate to Wilson conveying the property that became part of Lot # 4 is dated July 20, 1998. [Ex. O–2].

Propheter testified that he received an easement from L.G. Mathis and Patrick McLaughlin when he purchased his property in the Subdivision in 1983. Propheter relies upon the sales contract for the purchase of his property in the Subdivision (the “Sales Contract”) in asserting this easement. [Ex. O–8]. Mrs. Propheter stated that she was in charge of maintaining the couples' important documents which includes the Sales Contract, and that, the Sales Contract was maintained in a file at the Propheters' home. [Ex. O–8].

The Propheters are not pilots, have never owned a plane, do not have a hangar on their property and have never used the Airport property for flying. Since at least 1994, the Propheters have walked on the Airport property and used the Airport taxiways and runways for other recreational purposes. Mrs. Propheter is interested in taking flying lessons and Mr. Propheter has always had an intent to build a kit plane wanted to build one when he retires. The Propheter property has a ten foot driveway entrance and several large hardwood trees along the driveway. [Ex. D–13, 14, 15]. The Propheter property would have to be physically altered by cutting down trees and perhaps reconfiguring the house and garage on the property in order to taxi a plane from the property to Mathis Air Park Road.

Debtor has sought to sell the Property for three and one-half years and has engaged a commercial broker on two occasionsin that effort. Based on that experience, Debtor has concluded it is not feasible to sell the Property as an airport. Several witnesses testified that the area has changed substantially within the last twenty years and that numerous large housing developments have been built nearby. Debtor has no relationship with JEH Homes and the contract to sell the property (the “Contract”) was negotiated at arms-length.

III. Conclusions of Law

Section 363(b)(1)...