In re Moore, C/A No. 04-15363-HB (Bankr. S.C. 4/21/2008)
| Decision Date | 21 April 2008 |
| Docket Number | C/A No. 04-15364-HB. (Substantively Consolidated),C/A No. 04-15363-HB.,Adv. Pro. No. 05-80204-HB. |
| Court | United States Bankruptcy Courts. Fourth Circuit. U.S. Bankruptcy Court — District of South Carolina |
| Parties | In re: Schuyler Lansing Moore and Yvonne Ridings Moore, Chapter 11, Debtors. Moore Family Trust, Debtor. Schuyler Lansing Moore, Yvonne Ridings Moore, Moore Family Trust, Plaintiffs, v. Arthur Whisnant, Gary J. Hoy, Sr., Defendants. |
This matter comes before the Court on cross motions for summary judgment. This is a breach of contract and collection action between Plaintiffs, represented by the Litigation Trustee appointed pursuant to the Chapter 11 plan of the Debtors, and Defendants Whisnant and Hoy. In addition to the arguments made at the hearing on this matter, the parties asked the Court to review transcripts of hearings held on April 11 and 18, 2005, and March 27, 2006, all summary judgment pleadings, a Motion to Sell and an Order Approving Sale filed in the underlying Chapter 11 bankruptcy cases, and various other pleadings on the record in the Chapter 11 cases and this adversary.1
This is a core proceeding and the Court has jurisdiction over this matter and all parties hereto. Schuyler Lansing Moore and Yvonne Ridings Moore filed Chapter 11 bankruptcy proceedings in this Court on December 30, 2004. Thereafter they initiated Chapter 11 proceedings for the Moore Family Trust as well. The cases were substantively consolidated on March 31, 2005.
A Notice and Application for Sale of Property Free and Clear of Liens ("Motion to Sell") was filed in Case No. 04-15364 on March 7, 2005. It proposed a sale of certain real property and improvements to Mansions Unlimited, LLC, for $3,200,000. The pleadings included the following standard sale notice language: The docket indicates that various responses to the Motion to Sell were filed, including some stating an intention to make a higher or better offer for the property.
A sale hearing was held on Monday, April 18, 2005 before Judge Wm. Thurmond Bishop, the judge then assigned to the case. At the hearing the court heard testimony from potential purchasers Arthur H. Whisnant, Jr., and Gary J. Hoy, Sr.,2 and from Johnny Raymond Hoy. Mr. Whisnant testified about his purchase offer:
Q. Would you please . . . advise the Court as to the terms of that contract?
A. The contract states it's 3.2 million; 750,000 down with a loan to be obtained in the amount of 2.5 million.
Q. Do you have the, or have you presented any earnest money towards the purchase?
A. Yes, sir.
Q. How much is that?
A. Ten thousand.
Mr. Whisnant's testimony continued on cross examination:
Q. Mr. Whisnant, I have in my hand the contract dated April 18, 2005 by Gary J. Hoy, Sr. and Art Whisnant, which is four pages in length, and on the last page it bears certain signatures. Do you see those signatures?
A. Yes, sir. Mine is at the top.
Q. Okay. And do you know whose signature appears below yours?
A. Yes, Gary Hoy, Sr. I watched him sign it.
The proposed contract was introduced into evidence along with a copy of the earnest money check for $10,000. The document was not signed by the Debtors or any other party on their behalf. The proposed contract in Paragraph 8 recognizes that the "Sale is subject to the approval of the U.S. Bankruptcy Court." Paragraph 30 of that document is entitled "Expiration of Offer" and reads as follows: "This offer from Purchaser shall be withdrawn at Five o'clock P.m. on April 19, 2005 unless accepted by Seller in written form prior to such time; unless otherwise agreed to by the parties."
Paragraph 3(C) of the proposed contract stated, "$2,500,000 Loan amount ... to be obtained by Purchaser." Mr. Whisnant testified that it was his intention to obtain this loan from Washington Mutual Bank. Mr. Whisnant testified that as he understood it, Washington Mutual had agreed to make a loan sufficient to close the sale and he and Mr. Hoy had done everything necessary to obtain that loan. He identified two documents that supplemented his testimony: a Commitment letter dated March 11, 2005, and a Disclosure letter, both of which were entered into evidence. The parties to the proceeding also agreed to allow into evidence a copy of a letter faxed to the court on the day of the hearing dated April 18, 2005 on behalf of the potential purchasers. It said:
Washington Mutual has approved you for a home loan on the property at 10 Leitner Point Road, Columbia, SC 29210 with a sales price of $3,600,000. Washington Mutual has confirmed the value of the property and you have met all the conditions on the loan in the amount of $2,500,000. Your commitment is valid through May 30, 2005. Please feel free to call me with any questions....
Mssrs. Hoy and Hoy, Sr., confirmed the testimony of Mr. Whisnant.
At the beginning of the sale hearing and at the close of evidence counsel for the Debtors requested that the sale and contract in question be only conditionally approved on that day, and that the court not finalize the matter until the following Friday for the purpose of allowing upset bids by other parties not present in the courtroom. Counsel stated that there would likely be excess in the estate and therefore a possible return to the Debtors. Therefore, the Debtors were highly motivated to hold out for a higher price from another potential purchaser. Counsel stated:
I realize that this being conditional on one side of the table affords the people that have spent all day today putting forth their purchase [Hoy and Whisnant] the opportunity to say, "Our offer is contingent on Friday, also," but I have no choice under the circumstances but to put forth to the Court what my client has, is insisting upon.
Thereafter there was some discussion of a break-up fee for Whisnant and Hoy should another purchase offer later be accepted and approved, but counsel for an objecting creditor holding a security interest in the property and the broker representing Hoy and Whisnant both spoke up to request that, on the contrary, the court approve the sale on that date and approve Hoy and Whisnant's offer to purchase without further delay or opportunity for upset bid. Mr. Jack Cobb, the real estate broker utilized by Mr. Hoy and Mr. Whisnant, spoke on behalf of his clients as follows:
We feel that this sale should be confirmed today, right now, and that we should then be able to go to Washington Mutual and say, "Let's get this thing closed." That's the whole objective. We wait until Friday, that's another five days' time. I mean, Mr. Anderson's [counsel for the debtors in possession] asking us to please try to close by May 15th, but yet, we keep pushing the days out that we actually have a final contract.
So it's our view that we need to have this thing confirmed and have it confirmed, now. If that doesn't occur, then my clients definitely should be left completely open to walk away on Friday, change the terms on Friday, come in with a lower price, if they want to, on Friday. I mean, if they don't get a solid, confirmed deal now, then there's no need for them to be bound through Friday, if someone else is going to be able to come in and upset the contract as it is. That's their feel.
The broker continued:
But, you see, the Court's asking that they be bound to a contract between now and Friday, but yet, they've got nothing. They have no contract at all.
....
What we want is for the Court to confirm the sale today, let us proceed on and let us get this transaction closed.
The court agreed with the arguments made by Mr. Cobb on behalf of Whisnant and Hoy and by the secured creditor's counsel, and Judge Bishop found that, "I think the burden has been met under the Code, under 363(f), and the sales price exceeds the amount of the liens and so the Court approves the sale." The court approved the offer and sale to Hoy and Whisnant only, and did not leave the matter open to other potential purchasers. The transcript indicates that counsel for the secured creditor was to submit a written order. The court's docket reflects an entry on April 18, 2005 of "sale approved, proposed order due" from secured creditor's counsel.
Although the sale was approved, Debtors did not sign the contract. The record includes a version of the proposed contract apparently altered by Debtors, which they signed on May 5, 2005.3 On May 5, 2005, the court's docket reflects submission by secured creditor's counsel of a fifteen-page proposed order approving the sale. On May 11, 2005, the docket reflects electronic submission to the court of a one-page alternative order approving the sale by counsel for the Debtors. The court finally entered the first submitted order on May 16, 2005 on one case docket, and on May 19, 2005 noted that entry on the consolidated case docket.4 The Order Approving Sale included the following language: "the Contract of Gary J. Hoy, Sr. and Arthur H. Whisnant is approved, with a purchase price of $3.2 million and a closing date of on or before May 30, 2005, on such terms as described herein." The court found that "Whisnant and Hoy, Sr. have demonstrated the financial ability to close pursuant to the Contract." The court stated the reasons for this finding, which included a summary of the financial abilities of the purchasers and a finding that Washington Mutual represented in writing that all contingencies or conditions for the loan commitment had been met.
Regarding financing, in an affidavit dated October 11, 2006 Mr. Cobb stated:
6. The contract between Arthur Whisnant and Gary W. Hoy, Sr., and the Bankruptcy Estate, had no financing contingencies.
....
8. It was clear from the beginning of negotiations among Arthur Whisnant and Gary W. Hoy, Sr., the creditors of the Chapter...
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