In re JCP Props., Ltd.

• Decision Date: 05 November 2015
• Docket Number: CASE NO: 15–70391
• Citation: 540 B.R. 596
• Parties: In re: JCP Properties, Ltd.; aka JCP Properties, Ltd, Debtor
• Court: U.S. Bankruptcy Court — Southern District of Texas

540 B.R. 596

In re: JCP Properties, Ltd.; aka JCP Properties, Ltd, Debtor

CASE NO: 15–70391

United States Bankruptcy Court, S.D. Texas, McAllen Division.

Signed November 5, 2015

Antonio Martinez, Jr., Attorney at Law, McAllen, TX, for Debtor.

MEMORANDUM OPINION REGARDING JCP PROPERTIES, LTD'S MOTION FOR FINAL DECREE, RREF CB SBL II–TX, LLC'S MOTION TO DISMISS & MOTION FOR RELIEF FROM THE AUTOMATIC STAY

[Resolving Case No. 15–70391; ECF Nos. 10 & 14]

&

[Resolving Case No. 11–70827; ECF No. 95]

Eduardo V. Rodriguez, United States Bankruptcy Judge

I. Introduction

Before this Court are three pending motions from two separate, but factually overlapping chapter 11 cases. In October of 2011, Debtor filed its first chapter 11 case, thereafter confirming a plan in October of 2012. The plan has since been substantially consummated. This first chapter 11 case was closed by final decree in November of 2012 but, Debtor reopened that case in June 2015. Debtor now motions for a Final Decree to close the first chapter 11 case.

After the first chapter 11 case was reopened, Debtor filed a second chapter 11 case in August 2015. Debtor has not yet offered a plan, but it seeks to fashion a new chapter 11 plan aimed at liquidation. Debtor's secured creditor now motions to have the successive, second chapter 11 case dismissed and alternatively motions for relief from the automatic stay.

Due to the substantially interrelated nature of these two chapter 11 cases and the three pending motions therein, this Court will now consider the pending motions jointly.

II. Findings Of Fact

To the extent that any Finding of Fact constitutes a Conclusion of Law, it is adopted as such. To the extent that any Conclusion of Law constitutes a Finding of Fact, it is adopted as such.

(A) JCP Properties, Ltd.'s First Chapter 11 (“JCP I”)

1. On December 5, 2011 JCP Properties, Ltd (hereinafter “JCP I” or “Debtor”) filed for relief under Title 11, chapter 11 of the United States Bankruptcy Code.¹[Case No. 11–70827, ECF No. 1].

2. On December 10, 2011, JCP I filed its Schedules and Statement of Financial Affairs. [ECF No. 10].

3. On December 10, 2011, JCP I listed the following real property on Schedule A, [ECF No. 10]:

Property Description	Value	Lien
Lots 3, 4, 7, & 8 Bonita Homes Subdivision, an Addition to the City of Weslaco, Hidalgo County Texas	$414,448.00	$425,433.48
Lots 7, 8, 9, 10, 11 & 12 Bonita Homes Subdivision, an Addition to the City of Weslaco, Hidalgo County Texas	$234,000.00	$153,089.84

4. On December 10, 2011, JCP I listed Compass Bank, f/k/a Texas State Bank, on Schedule D as the lienholder of the above referenced properties. [ECF No. 10].

5. On March 23, 2012, JCP I filed a Motion To Extend the Exclusivity Period For Filing A Plan of Reorganization (hereinafter “Motion To Extend Exclusivity”). [ECF No. 30].

6. On March 16, 2012, this Court granted the Motion To Extend Exclusivity to July 2, 2012. [ECF No. 31].

7. On April 17, 2012, Compass Bank filed its Proof of Claim # 10 in the amount of $137,547.41 and pre-petition arrears in the amount of $2,493.20 (hereinafter “Note # 1”). Note # 1 was issued on September 27, 2005 and carried an interest rate of 9.5%, and the Deed of Trust indicated a Second Lien on Lots 3, 7, 8, & 9 of Bonita Homes and valued the collateral at $414,448.00. Note # 1 called for monthly interest payments only until maturity. The original maturity date of Note # 1 was April 1, 2006, but on February 3, 2006 Note # 1 was extended and renewed and given a new maturity date of May 1, 2011, and it called for monthly installments of principal and interest in the amount of $1,282.08.

8. On April 17, 2012, Compass Bank filed its Proof of Claim # 11 in the amount of $155,268.81 with pre-petition arrears of $475.00 (hereinafter “Note # 2”). Note # 2 was issued on January 6, 2005 and carried an interest rate of 6%. Additionally, the Deed of Trust indicated a First Lien on Lots 9, 10, 11 & 12 Bonita Homes Subdivision in Hidalgo County Texas and valued the collateral at $234,000.00. This was an interest only payable in semi-annual installments until maturity. Note # 2 matured January 6, 2006. On April 7, 2006, Note # 2 was renewed and extended and given a new maturity date of August 11, 2011, and it called for monthly installments of principal and interest in the amount of $1,549.00.

9. On April 17, 2012, Compass Bank filed its Proof of Claim # 12 in the amount of $289,723.38 with pre-petition arrears of $3,494.96 (hereinafter “Note # 3”). Note # 3 was issued on April 1, 2005 and carried an interest rate of 9.5%. Additionally, the Deed of Trust indicated a First Lien on Lots 3, 4, 7 & 8 Bonita Homes Subdivision in Hidalgo County Texas and valued the collateral at $414,448.00. This original $300,000.00 loan was intended for the construction of four two story duplexes. This was an interest only payable in quarterly installments until maturity. Note # 3 was to mature on April 1, 2006. On May 1, 2005 Note # 3 was renewed and extended and given a new maturity date of May 1, 2009, and it called for monthly installments of principal and interest in the amount of $2,783.48. Then on July 10, 2009, JCP I executed a “Change In Terms Agreement” with Compass Bank, which called for monthly payments of principal and interest in the amount of $2,796.02 commencing August 10, 2008 and maturing on July 10, 2028.

10. On June 29, 2012, JCP I filed its Second Motion To Extend Exclusivity. [ECF No. 40].

11. On July 23, 2012, this Court granted JCP I's request and issued an order extending the exclusivity period to August 1, 2012. [ECF No. 42].

12. On August 1, 2012, JCP I filed its Disclosure Statement and Plan of Reorganization. [ECF No. 44 & 45].

13. JCP I's Plan, [ECF No. 45], listed treatment of the Compass Bank's Claims as follows:

Class No.	Claim No.	Amount	Treatment
4	10	$137, 547.41	The Plan indicated that this Note would be consolidated with the Note in Class 4. The Plan further required JCP I to continue its payments to the applicable insurance agency regarding Compass Bank's collateral.
5	11	$155, 268.81	The Plan called for Lots 9, 10, 11, & 12, which JCP valued at $234,000.00 to be surrendered to Compass Bank in full satisfaction of its Lien.
3	12	$289, 723.00	The Plan indicated that this Note would be combined with the Note in Class 4 for a combined total Note of $427,270.41 to be repaid based on an amortization of 30 years with an interest rate of 6% and maturity date of 5 years after the Effective Date of the Plan. The Plan further required that JCP continue its payments to the applicable insurance agency regarding Compass Bank's collateral.

14. On September 9, 2012, this Court approved JCP I's Disclosure Statement and set Confirmation of the Plan for October 24, 2012. [ECF No. 52].

15. On October 22, 2012, Compass Bank filed its Objection To Confirmation. [ECF No. 60]. Essentially, Compass Bank objected to JCP I's proposal of combining its Class 3 and 4 Claims into one single Note, since the Note in Class 4 had already been sold to a third party and was no longer owned by Compass Bank. Compass Bank also objected to the proposed repayment terms, interest rate, and failure to include arrears of $22,268.81 and alleged that JCP I had not made any payments to Compass Bank since December 9, 2011 (or since the filing of the bankruptcy petition).

16. On October 24, 2012, this Court Confirmed JCP I's Plan. [ECF No. 64]. The Order Confirming Plan contained language that presumably cured Compass Bank's Objections. The Order, in essence, contained provisions that provided for (i) $22,368.16 in arrears; (ii) for JCP I to issue a cashier's check in the amount of $30,756.22 (or a lesser agreed amount) to Compass Bank by October 26, 2012; (iii) for the remaining balance of the Note to be refinanced at 6.5% interest amortized over 30 years with a maturity date of 5 years after the Effective Date; (iv) for the Class 4 Claim transferred to Quantum Services, Inc. in the amount of $137,547.41 to be repaid at 6% interest amortized over a 30 year term and with a maturity date of 5 years after the Effective Date; (v) and for the Class 5 Claim transferred to Quantum Services, Inc. in the amount of $289,723.38 to be surrendered to Compass Bank in full satisfaction of its claim.

17. On October 25, 2012, this Court issued its Post Confirmation Order. [ECF No. 65].

18. On October 26, 2012, Compass Bank filed a Motion For Entry of An Agreed Order regarding Conditioning the Automatic Stay (hereinafter “Compass Bank Agreed Order”). [ECF No. 66].

19. On November 19, 2012, the Court entered the Compass Bank Agreed Order. [ECF No. 72]. The Agreed Order directed JCP I to issue a cashier's check to Compass Bank in the amount of $22,368.16 no later than October 26, 2012. The Order also called for JCP I to pay the remaining post-petition arrears in the amount of $8,388.06 by making 5 monthly payments in the amount of $1,000.00 and one final payment in the amount of $3,388.06, with payments commencing November 25, 2012. The Order further stated that JCP I is to remain current on payments called for within its confirmed plan. The Order further called for JCP I to maintain current insurance and the payment of ad valorem taxes on the Bank's collateral. The Order also provided that should JCP I default in any manner provided for under the Agreed Order, then Compass Bank would be required to send no more than two written notices of default to JCP I and provide it with a ten day opportunity to cure, the uncured default of which would terminate the automatic stay and allow Compass Bank to exercise its state law remedies, including foreclosure of Lots 3, 4, 7, & 8. Finally, the Order stated that “[t]his Order supplements the Order Confirming the Plan of Reorganization.” [ECF No. 64].

20. On November 29, 2012, this Court entered its Order of Final Decree, which closed the case. [ECF No. 76].

21. On May 14, 2015, JCP I filed a Motion To Re–Open the Chapter 11 Case. [ECF No. 79]. In the Motion, JCP I alleged that it required the case to be...