In re Roberson
| Decision Date | 22 October 2020 |
| Docket Number | CASE NO. 18-05432-5-JNC |
| Court | U.S. Bankruptcy Court — Eastern District of North Carolina |
| Parties | IN RE: KENNETH H. ROBERSON, JR. VICKIE H. ROBERSON DEBTORS |
In its order of September 9, 2020 (Dkt. 164; the "Order"), the court denied the relief sought in the Motion for Private Sale (Dkt. 153; the "Motion") filed August 20, 2020, by Kenneth H. Roberson, Jr. and Vickie H. Roberson (the "Debtors"). The Motion sought approval of the private sale of two tracts of agricultural real property owned by the Debtors pursuant to 11 U.S.C. § 363(f) known as the "Bunting Farm" for $155,000 and the "Johnson Farm" for $190,000 (collectively, the "Properties") to identified parties. The Motion also sought to reinstate the automatic stay of 11 U.S.C. § 362(a) as to the Properties to halt a pending state court foreclosure action and pending auction filed by creditor, Rabo AgriFinance, LLC ("Rabo"), after a default in the Debtors' confirmed chapter 12 plan. See the Affidavit of Default filed January 24, 2020 (Dkt. 129). On September 2, 2020, Rabo filed its response (Dkt. 161; the "Response") objecting to approval of the proposed section 363 sales and reinstatement of the stay. At the conclusion of the hearing on the Motion and Response, held September 3, 2020 in Greenville, North Carolina, the court announced its decision in open court and the Order was subsequently entered. This Memorandum Opinion provides a further explanation of the basis of the court's ruling.
The Debtors filed a voluntary petition for relief under chapter 12 of title 11 of the United States Code, 11 U.S.C. §§ 101 et seq. (the "Bankruptcy Code") on November 18, 2018 (the "Petition Date"). They filed a proposed chapter 12 plan on February 25, 2019 (Dkt. 57). Objections to the plan were filed by multiple creditors, including Rabo. The Debtors agreed to modifications that were subsequently incorporated into the chapter 12 plan, and a confirmation order was entered on June 21, 2019 (Dkt. 92; the "Confirmed Plan").
Rabo is the holder of an allowed secured claim (Proof of Claim No. 18) originally in excess of $3 million with a present remaining principal balance of $2,831,285.42. Class 10 of Article V of the Confirmed Plan addresses its claim.1 Under the terms of the Confirmed Plan, Rabo's claim would be paid in conjunction with lease payments received from the related chapter 11 case of K&J Farms, LLC ("K&J"), Case No. 17-01480-5-JNC, the operational arm of the Debtors' farming organization, and the chapter 11 plan of reorganization confirmation order in that case (17-01480-5-JNC, Dkt. 288; the "K&J Chapter 11 Plan"). At issue in the Motion are two of eleven tracts of real property secured by a Deed of Trust dated July 23, 2015 in favor of Rabo and recorded in the Martin County Register of Deeds in Deed Book 0Z-25, at Page 365 (the "Deed of Trust") that secure its claim in this case and the K&J case. At the time the Debtors filed their chapter 12petition, they still owned nine of these tracts. Subsequent to filing the petition, consistent with the terms of the Confirmed Plan and the K&J Chapter 11 Plan, and with Rabo's consent, the Debtors have sold three tracts.
The Confirmed Plan treatment for Rabo in Class 10 provides that a consent order entered in the K&J chapter 11 case (17-01480-5-JNC, Dkt. 350; the "K&J Consent Order") sets the stipulated treatment of its claim in this case as well.2 The terms of the K&J Consent Order are incorporated into the Confirmed Plan in Class 10, providing in pertinent part:
Section II, paragraph 17 of the K&J Chapter 11 Plan defined the "Marketed Collateral" as:
[F]our (4) parcels of real estate, being known as the "Beverly Farm" located in Pitt County and comprising 36.5 acres, more or less, and bearing PID number 81425; the "Staton Farm" located in Martin County and comprising 70.5 acres, more or less, and bearing PID numbers 0702563 and 0702921; and the "Ross Farm" located in Martin County and comprising two (2) tracts, 378 acres, more or less, and bearing PID numbers 0600487 and 0600482. The Marketed Collateral is not property of the estate. The Marketed Property is owned by Kenneth Roberson, Jr., and wife, Vickie Roberson; Kenneth Roberson III, and wife, Starla Roberson; and Josh Roberson ....
Further, Article VIII of the Confirmed Plan states in pertinent part:
The Confirmed Plan required that K&J make a $50,000.00 payment to Rabo under the K&J Chapter 11 Plan by August 1, 2019.3 K&J failed to meet that deadline, thereby defaulting under the K&J Chapter 11 Plan and causing the Debtors to default under the Confirmed Plan in this case. K&J's chapter 11 case was dismissed on March 16, 2020 due to its plan payment defaults.4 As a result, Rabo filed the Affidavit of Default (Dkt. 129) and properly commenced foreclosure proceedings on the Properties on April 15, 2020 in the Superior Court of Martin County, North Carolina. At the foreclosure hearing held June 4, 2020, an order of foreclosure was entered by theMartin County Clerk of Superior Court. The foreclosure sale of the Properties was scheduled for 10:00 a.m. on September 9, 2020, at the Martin County Courthouse in Williamston, North Carolina.
The Motion was filed in an effort to forestall the foreclosure sale by obtaining permission to sell the Properties at private sale to identified buyers. No provision for the acceptance of counteroffers or a bidding process was provided. The proposed buyers verbally agreed to lease the Properties back to the Debtors or K&J so that farming operations could continue on the land during 2020 and 2021. The Motion further sought to have the order declare that any sale of the Properties would be made free and clear of any and all liens and interests, including those in favor of Rabo, with the liens attaching to the sale proceeds. It made no provision for Rabo to credit bid its unchallenged secured claim in competition with the proposed buyers. It also sought reinstatement of the automatic stay of section 362 against the Properties in order to prevent title from passing to the high bidder at the foreclosure sale before the contemplated section 363 sales could be closed. If approved, the section 363 sales and stay reimposition would prevent Rabo from completing its foreclosure and deprive it of the benefit of bidding its debt in protection of its secured claim.
In the Response, Rabo contended that: (a) the court lacks subject matter jurisdiction to approve the Properties sales free and clear of Rabo's interest; (b) section 363(f) is not applicable because the Properties are not property of the estate; (c) the Debtors do not satisfy any of the conditions in section 363(f); (d) Rabo is entitled to credit bid to purchase the Properties; (e) the Confirmed Plan cannot be modified to reimpose the stay; and (f) the proposed buyers are not harmed by denial of the Motion, as they can attend and purchase the Properties at the state court foreclosure sale scheduled approximately one week after the hearing on this matter.
This court has jurisdiction over the subject matter of this proceeding pursuant to 28 U.S.C. §§ 151, 157 and 1334, and the General Order of Reference entered August 3, 1984 by the United States District Court for the Eastern District of North Carolina. The matter is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2)(A), which this court has the jurisdiction to hear and determine. The following constitutes this court's findings of fact and conclusions of law as required by Federal Rule of Bankruptcy Procedure 7052.
The Motion for private sale is made pursuant to 11 U.S.C. §§ 363(f) and 105. In the alternative, in open court the Debtors added 11 U.S.C. § 1206 as a statutory sale vehicle. The Motion also sought to reinstate the automatic...
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