In re Orange Park South Partnership, Bankruptcy No. 87-4224.
| Decision Date | 22 October 1987 |
| Docket Number | Bankruptcy No. 87-4224. |
| Citation | 79 BR 79 |
| Parties | In re ORANGE PARK SOUTH PARTNERSHIP, Debtor. |
| Court | U.S. Bankruptcy Court — Middle District of Florida |
James H. Post, Jacksonville, Fla., for debtor.
Douglas D. Chunn, Jacksonville, Fla., for Great Southern Sav. Bank.
ORDER ON MOTION TO DISMISS
THE MATTER under consideration in this Chapter 11 case is the Motion to Dismiss filed by Great Southern Savings Bank (Great Southern). It is the position of Great Southern that based on undisputed facts as appear from the record and based on the facts which are not in dispute, this is a classic case of "bad faith" filing and, therefore, the Chapter 11 case should be dismissed pursuant to 11 U.S.C. § 1112(b). The facts which are indeed without dispute and admitted by the Debtor are as follows:
On May 22, 1985, Blanding Partnership (Blanding), a Florida general partnership, executed two promissory notes in favor of Great Southern, one in the principal amount of $7,600,000.00 and a second in the principal amount of $5,300,000.00. These obligations were secured by a mortgage and a security agreement executed on the same date by Blanding in favor of Great Southern. Both notes were to mature in five years from date and included a two-year extension provision, although it is not clear whether or not the right of extension was granted to Blanding or to Great Southern. Be that as it may, it is without dispute that both notes fell into default in June, 1986 and were accelerated by Great Southern in October, 1986. Great Southern filed its foreclosure action in November, 1986, in the Circuit Court in and for Clay County, Florida.
At this point it should be noted that the Debtor's property involved in the controversy, which is a shopping center, was originally owned by Mr. and Mrs. Fleming and one Mr. Constain (Fleming Group). In July 1986, the original owners sold the shopping center to Blanding and took back a second mortgage, securing a $300,000.00 note. It further appears that Blanding defaulted on its obligation to the Fleming Group who then filed a mortgage foreclosure action in order to enforce their second mortgage lien in July 1986. It is without dispute that on October 4, 1986, a final judgment was obtained.
In due course the foreclosure of their lien was scheduled and the shopping center was in fact sold at the foreclosure sale in December, 1986, back to the Fleming Group, who in turn conveyed the subject property to O.P.S. Shopping Center, Inc. (O.P.S.). All these events took place after Great Southern filed its own foreclosure action naming the Fleming Group and this entity controlled by Mr. and Mrs. Fleming as defendants.
On December 24, 1986, Great Southern and the Defendants named in the foreclosure action entered into a stipulation. According to its terms, the Defendants acknowledged that they are indebted to Great Southern in the principal amount of $9,752,516.44, $696,009.26 in interest, $300 for the title search and additional interest accrued in the amount of $4,674.30. In addition the defendants also waived any and all defense to the claim of Great Southern or to its mortgage; conceded that there is no equity in the subject property; and agreed that the receivership originally imposed during the Fleming Group's foreclosure action shall be continued. They also agreed to the entry of a final judgment in the event the obligation due to Great Southern is not paid in full by April 1, 1987. Most importantly, however, the Defendants also agreed that in the event a bankruptcy is filed by the new owner, the O.P.S., Inc., the filing would be admitted to be totally unfounded and that it was filed solely for the purpose of delay. As part of the stipulation, Mr. and Mrs. Fleming also personally guaranteed the performance of the terms of the stipulation agreement, and again conceded that there is no equity in the subject property.
It is without dispute that the Defendants failed to satisfy the mortgage obligation by April 1, 1987, as required by the stipulation. As the result Great Southern proceeded with its foreclosure and in due course obtained a final judgment in the amount of $10,726,548.74, and the property was ordered to be sold and scheduled to be sold on May 26, 1987, the day after the Memorial Day holiday.
It further appears and it is without dispute that on Friday, May 22, 1987, the Flemings formed Orange Park South Partnership (Debtor), a general partnership composed of O.P.S., Inc., in which the Flemings are the sole stockholders, and an entity known as the Marina Center, Inc., a non-related entity. On Friday afternoon, May 22, 1987, or four days prior to the scheduled foreclosure sale, this newly formed partnership filed its Petition for Relief under Chapter 11. It is without dispute that the shopping center was never owned as a matter of public record by the Debtor partnership and is still recorded in the public record as owned by O.P.S. Shopping Center, Inc., the non-debtor. The Debtor's contention that the partnership agreement which was filed for record shows a beneficiary interest in the subject property is without significance in the context of the issue raised by the Motion under consideration.
The schedules filed by the Debtor indicate three unsecured debts, one in the amount of $1100.00 in favor of an entity named as Gator Cleaning; one in the approximate amount of $25,000.00, in favor of Mr. and Mrs. Fleming, the President of O.P.S. Shopping Center, Inc.; one in favor of one G.E. Carter, who turns out to be the state court receiver who had never been released from the receivership, thus technically he is still the receiver. The debt allegedly owed to him is not based on his receiver's fee. It should be noted that money allegedly paid by Carter to The First Trust Bank was paid not on behalf of the Debtor, but on behalf of O.P.S. Shopping Center, Inc. Be that as it may, it is clear that the debt claimed to be owing to Mr. and Mrs. Fleming long pre-dates the formation of the Debtor and it clearly is not an obligation incurred by the Debtor. Neither is the claim of Mr. Carter or the First Trust Bank, although it is contended that all these debts have been assumed by the Debtor.
There is no question that this newly born Debtor never had and has no employees; conducts no business, and it is a mere shell entity created on the eve of the foreclosure sale by Mr. Fleming. Its sole interest in the subject property...
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