In re William Edwin Lindsey Dba Lindsey & Associates Aka Bill Lindsey Aka William E. Lindsey

• Decision Date: 05 August 2011
• Docket Number: No. 10–31694.,10–31694.
• Citation: 453 B.R. 886
• Court: U.S. Bankruptcy Court — Eastern District of Tennessee
• Parties: In re William Edwin LINDSEY dba Lindsey & Associates aka Bill Lindsey aka William E. Lindsey, Debtor.

453 B.R. 886

In re William Edwin LINDSEY dba Lindsey & Associates aka Bill Lindsey aka William E. Lindsey, Debtor.

No. 10–31694.

United States Bankruptcy Court, E.D. Tennessee.

Aug. 5, 2011.

Jenkins & Jenkins Attorneys, PLLC, Michael H. Fitzpatrick, Esq., Knoxville, TN, for Debtor.Hodges, Doughty & Carson, PLLC, Thomas H. Dickenson, Esq., Knoxville, TN, for Pinnacle National Bank and Mountain National Bank.Winchester, Sellers, Foster & Steele, P.C., Walter N. Winchester, Esq., Knoxville, TN, for FirstBank.Daniel M. McDermott, Esq., United States Trustee, Patricia Foster, Esq., Howard H. Baker, Jr. United States Courthouse, Knoxville, TN, for United States Trustee.

MEMORANDUM ON MOTIONS FOR SUMMARY JUDGMENT

RICHARD STAIR, JR., Bankruptcy Judge.

These contested matters are before the court upon the Motion for Summary Judgment filed by Pinnacle National Bank and Mountain National Bank on June 27, 2011 (Joint Bank Motion) and the Motion by FirstBank for Summary Judgment With Supporting Memorandum of Law filed on July 12, 2011 (FirstBank Motion). ¹ Both motions seek a determination that the First Amended Plan of Reorganization (Amended Plan) filed by the Debtor on April 6, 2011, cannot be confirmed as a matter of law because it allows the Debtor to retain pre-petition property in violation of 11 U.S.C. § 1129(b)(2)(B)(ii) (2006) (the “absolute priority rule”).

The Joint Bank Motion is accompanied by a brief and a Statement of Undisputed Material Facts in Support of Motion for Summary Judgment (Joint Bank Statement of Undisputed Facts), in which Pinnacle National Bank and Mountain National Bank, pursuant to Rule 9017 of the Federal Rules of Bankruptcy Procedure, applying Rule 201 of the Federal Rules of Evidence to bankruptcy cases, ask the court to take judicial notice of certain material undisputed facts of record in the Debtor's bankruptcy case. Pursuant to E.D. Tenn. LBR 7056–1, the Debtor filed a Response to the Joint Bank Motion and a Response to the Joint Bank Statement of Undisputed Facts on July 18, 2011, in which he does not dispute any of the stated facts, together with a responsive brief in opposition to the Joint Bank Motion.

The FirstBank Motion incorporates therein a brief and is accompanied by FirstBank's Statement of Undisputed Material Facts in Support of Motion for Summary Judgment (FirstBank Statement of Undisputed Facts). Pursuant to E.D. Tenn. LBR 7056–1, the Debtor filed a Response to the FirstBank Motion and a Response to the FirstBank Statement of Undisputed Facts on July 26, 2011, in which he does not dispute any of the stated facts, together with a responsive brief in opposition to the FirstBank Motion.²

I

The Debtor filed the Voluntary Petition commencing his bankruptcy case under Chapter 11 on April 5, 2010, and has operated as a Debtor–in–Possession pursuant to 11 U.S.C. § 1107 (2006). FirstBank Stmt. of Undisp. FactsS at ¶ 1. The Amended Plan provides for twelve classes, Classes 2 through 12 of which are impaired, and is to be implemented through the sale of property as designated in the Amended Plan, through the Debtor's income, and through the commencement of required payments. Amended Plan at 10, 19; Joint Bank Stmt. of Undisp. FactsS at ¶¶ 1, 3; FirstBank Stmt. of Undisp. FactsS at ¶ 5. Specifically, the Amended Plan proposes the sale of the following: (1) the Debtor's tenancy in common interest in real property located at Briarthicket Road in Cocke County, Tennessee; (2) his stock in Ultimate Toys Motorsports, Inc.; (3) his membership in BTRG, LLC; (4) his membership in Ultimate Toys, LLC; and (5) his membership in WL & MC Development, LLC. Amended Plan at 19; Joint Bank Stmt. of Undisp. FactsS at ¶ 4; FirstBank Stmt. of Undisp. FactsS at ¶ 10.

The following property owned by the Debtor, disclosed in the Amended Disclosure Statement filed on February 21, 2011, is not proposed for sale and is to be retained by the Debtor: (1) real property located at 826 Loop Road, Knoxville, Tennessee; (2) real property located at Lot # 88 Ladd Landing, Roane County, Tennessee; (3) real property located at 708 Eagleton Road, Maryville, Tennessee; (4) real property located at 400 Henderson Street, Maryville, Tennessee; (5) real property located at 7111 Clinton Highway, Knoxville, Tennessee; (6) a lease with Mercy Partners in Cocke County, Tennessee; (7) a note in the amount of $87,000.00 with Ms. Chitwood secured by residential real property located at 723 E. Churchwell Avenue, Knoxville, Tennessee; (8) 100,000 shares of WIN stock; (9) 50% membership in Jefferson Plaza, LLC; (10) 100% interest in Eastland Capital, LLC; (11) 50% interest in Lindsey Leasing, LLC; (12) 50% interest in JS & A, LLC; (13) 30% interest in LEC Properties; (14) 30% interest in LHC Properties; (15) 33.33% interest in LECH; (16) 50% interest in L & C Properties; (17) a pistol; (18) a note with the Maupin Estate; (19) a 1995 Jeep; (20) a 1997 pick-up truck; (21) office equipment; and (22) a note in the amount of $470,961.00 with Danika Lindsey. Amended Discl. Stmt.. at 20–35; Joint Bank Stmt. of Undisp. FactsS at ¶ 5; FirstBank Stmt. of Undisp. FactsS at ¶¶ 4, 11.

The Banks' claims are addressed individually in Classes 5 and 6 (Pinnacle National Bank), Class 7 (FirstBank), and Classes 8 and 9 (Mountain National Bank), and collectively as part of Class 11. The proposed treatment for each is as follows:

Class 5. PINNACLE NATIONAL BANK SECURED CLAIM # 8

Class 5 consists of the pre-petition secured claim of Pinnacle National Bank filed as Claim # 8 in the amount of $1,203,900.00 as a secured claim in 10267 Kingston Pike, Knoxville, TN. It foreclosed its deed of Trust. It amended the claim. The $243,900.00 deficiency will be treated as an unsecured claim.

Class 6. PINNACLE NATIONAL BANK SECURED CLAIM # 9

Class 6 consists of the pre-petition secured claim of Pinnacle National Bank filed as Claim # 9 in the amount of $953,186.45 as a secured claim in the insurance claim on the destroyed mining equipment [of Lindsey Leasing, LLC]. It shall retain its lien and contract rights in the personal property insurance claim. Any deficiency after recovery shall be an unsecured claim if determined prior to January 1, 2013.

Class 7. FIRSTBANK SECURED CLAIM # 13

Class 7 consists of the pre-petition secured claim of FirstBank filed as Claim # 13 in the amount of $4,301,941.72 as a secured claim in the real property of the Debtor. Suit has been filed to avoid the lien. If the lien is avoided, then the claim will be treated as unsecured.

If the lien is not avoided and the creditor does not make the election provided in § 1111(b), then the interest of the debtor in any land subject to the lien claim will be sold by auction (unless a more specific sale is provided elsewhere in the plan) and the net after prior liens will be paid to this claim. The deficiency after liquidation of its collateral will be paid as unsecured.

If the creditor makes the § 1111(b) election, then the lien will remain in place subject to the provisions of T.C.A. § 25–5–105 and the creditor will not be allowed an unsecured claim.[ ³]

Class 8. MOUNTAIN NATIONAL BANK SECURED CLAIM # 5

Class 8 consists of the pre-petition secured claim of Mountain National Bank filed as Claim # 5 in the amount of $413,762.44 as a secured claim in the Briarthicket Road, Cocke County property owned jointly with Mr. Davis. The Debtor will quit claim the property to Mr. Davis if there is no equity and Mr. Davis will deal directly with Mountain National Bank. If there is equity, the Debtor will sell Mr. Davis his interest. Mountain National Bank shall retain its lien until paid in full. There will be no unsecured claim.

Class 9. MOUNTAIN NATIONAL BANK SECURED CLAIM # 9

[sic]

Class 9 consists of the pre-petition secured claim of Mountain National Bank filed as Claim # 6 in the amount of $809,802.86 as a secured claim in the real property of Samuel Spivey in Greene County, TN. The claim will be treated as a general unsecured claim if there is a default and a deficiency if determined prior to January 1, 2013.

....

Class 11. GENERAL UNSECURED CLAIMS:

Class 11 consists of the pre-petition General Unsecured Claims scheduled by the Debtor in Schedule F, unless listed as disputed, contingent or unliquidated, or filed by the creditor prior to the claims bar date in this case (unless not listed by the Debtor or the creditor did not receive notice in sufficient time to file a claim by the bar date), to the extent allowed by the Court if the Debtor objected thereto and any deficiency claim of an under-secured creditor having a lien on property of the estate who does not make the election provided in 11 U.S.C. § 1111(b). This class will be paid not less than $1,275,000.00 over the life of the plan. This class will NOT be paid in full.

Amended Plan at 13–15, 19; Joint Bank Stmt. of Undisp. FactsS at ¶ 2; FirstBank Stmt. of Undisp. FactsS at ¶ 6. The Debtor's interest is dealt with under Class 12 of the Amended Plan, which provides that upon confirmation, “[a]ll property of the estate will vest” in him. Amended Plan at 15; Joint Bank Stmt. of Undisp. FactsS at ¶ 5; FirstBank Stmt. of Undisp. FactsS at ¶ 12. As reflected by the Ballot Summary filed on April 13, 2011, Pinnacle National Bank, Mountain National Bank, and FirstBank have all rejected the Amended Plan. Ballot Summ.; Joint Bank Stmt. of Undisp. FactsTS at ¶ 2; FirstBank Stmt. of Undisp. FactsS at ¶ 9.⁴

II

Pursuant to Rule 56 of the Federal Rules of Civil Procedure, “[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law[,]” with the procedures concerning summary judgment requiring the following:

(1) Supporting Factual Positions. A party asserting that a fact cannot be or is genuinely disputed must support the assertion by:

(A) citing to particular parts of materials in the record, including depositions, documents,...