In re Nolan, Case Number 09-31456

CourtU.S. Bankruptcy Court — Western District of North Carolina
Writing for the CourtLaura T. Beyer
Docket NumberCase Number 09-31456
PartiesIn re: William Joseph Nolan, III and Martha Louise Hemphill-Nolan, Debtors.
Decision Date19 June 2013

In re: William Joseph Nolan, III and Martha Louise Hemphill-Nolan,1 Debtors.

Case Number 09-31456


June 19, 2013

Laura T. Beyer
United States Bankruptcy Judge

Chapter 11


This matter came before the Court on May 29, 2013 upon the Motion for Order Surcharging Exemptions (D.E. 764) (the "Motion") of Edward P. Bowers (the "Trustee"), the chapter 11 trustee for William Joseph Nolan, III, and Martha Louise Hemphill-Nolan (the "Debtors") and the trustee of the Marvin-Waxhaw Associates/Nolan Liquidating Trust established by agreement dated January 25, 2011 (the "Liquidating Trust"). The Trustee and his attorney, Michael L. Martinez of Grier Furr & Crisp, PA, were present at the hearing. The Debtors did not attend, or otherwise make an appearance at, the hearing. It appears that notice of the Motion was proper, and no objections were filed with respect to the Motion. The Court,

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having reviewed the pleadings and the record in this case and having considered the arguments of counsel at the hearing, finds and concludes as follows:


1. The Debtors filed a voluntary petition (the "Petition") for relief under chapter 11 of the United States Bankruptcy Code, 11 U.S.C. §§ 101 et seq. (the "Bankruptcy Code") on June 5, 2009 (the "Petition Date"), initiating the above-captioned bankruptcy case (this "Bankruptcy Case"). Pursuant to §§ 1107 and 1108 of the Bankruptcy Code and prior to December 16, 2009, the Debtors were in possession of their property and were managing their affairs as debtors-in-possession. On December 30, 2009, the Court appointed the Trustee as the Debtors' chapter 11 trustee in this Bankruptcy Case.

2. On September 29, 2010, the Trustee filed his Plan of Liquidation of Marvin-Waxhaw Associates, LLC and William Joseph Nolan, III and Martha Louise Hemphill-Nolan (the "Plan"). On January 20, 2011, the Court entered an order confirming the Plan, as modified therein (the "Confirmation Order"). Pursuant to the Plan and Confirmation Order, all valuable assets of the Debtors' bankruptcy estate were transferred to the Liquidating Trust as of the February 4, 2011 effective date.

3. This Court has jurisdiction over this proceeding pursuant to 28 U.S.C. § 1334 and § 10.1 of the confirmed Plan. Venue is proper pursuant to 28 U.S.C. §§ 1408 and 1409. This matter is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(O). The relief requested in the Motion would be dispensable but for this Bankruptcy Case; therefore, this matter necessarily stems from the Bankruptcy Case itself. See Stern v. Marshall, 131 S.Ct. 2594, 2618 (2011).

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4. On Schedule B to the Petition, the Debtors listed the following as interests held by the Debtors in automobiles, trucks, trailers, and other vehicles and accessories as of the Petition Date: (a) "2003 600 Mercedes Benz (60,000 mi)" (the "Mercedes"); and (b) "1956 T-bird (96,192 mi)" (the "Thunderbird"). On Schedule C to the Petition, the Debtors claimed $3,500.00 of the $60,000.00 scheduled value of the Mercedes as exempt and $3,500.00 of the $20,000.00 scheduled value of the Thunderbird as exempt, for a total combined $7,000.00 exemption in automobiles (the "Automobile Exemption").

5. On November 25, 2011, the Trustee sold the Thunderbird at a public auction, which generated $23,500.00 for the Liquidating Trust. Also, on September 27, 2012, the Trustee sold the Mercedes at a public auction, which generated $10,100.00 for the Liquidating Trust. The Trustee has not paid any portion of the Automobile Exemption from the proceeds of the auction of the Thunderbird or the Mercedes to the Debtors.

6. Despite the Trustee expressly informing the Debtors on several occasions of the Trustee's intent to liquidate the Mercedes, and despite the Trustee previously prosecuting an adversary proceeding against the Debtors for turnover of the Thunderbird,2 the Trustee learned in the summer of 2011 that the Debtors had given the Mercedes to a friendly business associate.3 As a result, the Trustee was compelled to initiate an adversary proceeding against the Debtors to regain possession of the Mercedes, adversary proceeding number 11-3214. The Liquidating

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Trust incurred no less than $4,354.00 in attorneys' fees and costs in regaining possession of the Mercedes.


7. On February 2, 1998, the Debtors acquired a fee simple interest in a house and surrounding 6.898 acres of land off of Matthews-Weddington Road in Union County, North Carolina (the "Real Property"). On Schedule C to the Petition, the Debtors claimed a $37,000.00 homestead exemption in the Real Property (the "Homestead Exemption").

8. After the Petition Date, the Debtors continued to live on the Real Property. Basic costs of maintaining the Real Property, such as bills for electricity, gas, water, trash and insurance premiums, were paid first by the bankruptcy estate and then the Liquidating Trust. The Trustee did not require the Debtors to pay rent for the use of the Real Property; however, the Debtors were responsible for the upkeep and maintenance of the premises while they lived there.

9. From the time of the Trustee's appointment until around June 21, 2011, the Trustee worked with the Debtors in an attempt to find a scenario whereby: (a) the Debtors would remain in possession of the Real Property, and (b) the Debtors' creditors would...

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