Slobodian v. Adams Cnty. (In re Mann Realty Assocs., Inc.)
| Decision Date | 22 October 2019 |
| Docket Number | CASE NO. 1-17-bk-01334-HWV |
| Citation | 608 B.R. 408 |
| Parties | IN RE: MANN REALTY ASSOCIATES, INC., Debtor Markian R. Slobodian, Esq., Trustee for the Bankruptcy Estate of Mann Realty Associates, Inc., Movant v. Adams County, Treasury, Adams County Tax Claim Bureau, Blue Ridge Fasteners, Inc., Agway Petroleum Corporation, Huntington Township, Wilson Brown Motors, Inc., Separation Technologies, Inc., Ppc Lubricants, Pennsy Supply, River Drive Service Center, Inc., Tanya Lamo, Tax Collector for Huntington Township, Robert M. Mumma, II and Susan R. Mumma, Respondents |
| Court | U.S. Bankruptcy Court — Middle District of Pennsylvania |
Mann Realty Associates, Inc., pro se.
Markian R Slobodian, Harrisburg, PA, for Trustee.
This matter came before the court for hearing on August 20, 2019 (the "Hearing") regarding its December 21, 2018 Order (the "Sale Order") Granting the Trustee's Motion for Sale of the Debtor's Real Estate Located at 2008 Idaville Road, Huntington Township, York Springs, Pennsylvania (the "Real Property") Free and Clear of Liens, Claims, and Encumbrances (the "Sale Motion") and the written submissions filed in response thereto by S&T Bank, successor by merger to Integrity ("S&T Bank") and Robert M. Mumma, II and Susan R. Mumma, each requesting distribution of proceeds from the sale.
The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2). Venue is proper in this Court pursuant to 28 U.S.C. §§ 1408 and 1409.
The Debtor filed a voluntary petition under Chapter 11 of Title 11, U.S.C.1 on March 31, 2017. The Debtor thereafter operated its business as a debtor in possession pursuant to § 1107 until January 25, 2018 when the case converted to a proceeding under Chapter 7 of the Code. The chapter 7 trustee (the "Trustee") was appointed in this case on January 26, 2018. Consistent with his duties under § 704(a), the Trustee has been diligently liquidating the Debtor's assets since that time. As part of these efforts, the Trustee filed the Sale Motion on October 9, 2018 seeking an order from this court authorizing the sale of the Real Property and requesting distribution of the proceeds from same. Though not disclosed in the Sale Motion, it is uncontested that the following mortgages and assignments were filed of record in the Office of the Recorder of Deeds for Adams County as of the commencement of this case:
Mumma Exs. 2, 3, 6, 7, 9.3 Mortgage I and Mortgage II were given as security for two notes of even date therewith in the original amounts of $1,000,000.00 and $2,450,000.00, respectively (collectively, the "1994 Notes"). Mortgage III was given as security for a mortgage bond dated May 30, 2001 in the original amount of $1,378,000.00 (the "2001 Mortgage Bond").
In his Sale Motion, and with the consent of Mr. Mumma as assignee of Mortgage I, the Trustee requested authority to sell the Real Property and to distribute proceeds from the sale in the following manner: (1) to pay the ordinary and necessary costs of sale, including the Trustee's costs and expenses up to $10,000.00 and requiring the approval of Mr. Mumma for any costs and expenses exceeding that amount; (2) to deposit the additional sum of $10,000.00 into the Trustee's bank account for the benefit of unsecured creditors and administrative claims (the "Carve-out"); and (3) to pay all remaining proceeds to Mr. Mumma on account of his first priority claim as assignee of Mortgage I. Mot. for Sale 5b, f, g, h, ECF No. 452. A notice regarding the Sale Motion was served by the Trustee upon all creditors and parties in interest on October 10, 2018. The notice contained the distribution provisions cited above and established a deadline of October 31, 2018 to object to the Sale Motion. It also provided notice that a hearing on the Sale Motion and any timely objections filed thereto would be held on November 29, 2018.
Double M Real Estate, LLC, Martin L. Grass and Mark G. Caldwell t/a Double M. Development (collectively "Double M") filed a Limited Objection to the Sale Motion on October 23, 2018 (the "Double M Objection"). In its Objection, Double M did not object to sale of the Real Property but instead limited its objection to the Trustee's proposed distribution of sale proceeds to Mr. Mumma. S&T Bank filed a Joinder to Double M's Limited Objection on October 24, 2018 (the "S&T Bank Joinder"). Also on October 24, 2018, and without the knowledge of the court, the Trustee, or Mr. Mumma, S&T Bank caused a Writ of Execution and Garnishment (the "Writ of Execution") to be issued to the Trustee, as garnishee, directing the county Sheriff to attach any property of Mr. Mumma in the possession of the Trustee. The Writ of Execution was issued to satisfy a judgment obtained by S&T Bank against Mr. Mumma individually (the "S&T Bank Judgment") in the Cumberland County Court of Common Pleas (the "State Court").4 Aside from the Double M Objection and the S&T Bank Joinder, no other objections to the Sale Motion were filed prior to the deadline of October 31, 2018.
At the November 29, 2018 hearing, the parties advised the court that the matter had "hit a snag" as the result of a new issue between S&T Bank and Mr. Mumma regarding distribution of sale proceeds. The exact nature of the issue was not disclosed to the court.5 At the request of the parties, and to provide them with an opportunity to resolve this new issue, the hearing was continued to December 13, 2018. Prior to the continued hearing, however, on December 10, 2018, the Sheriff served the Writ of Execution upon the Trustee, as garnishee, attaching any property of Mr. Mumma in the Trustee's possession.6 As a result of this service, S&T Bank takes the position that it is entitled to payment of any distribution to Mr. Mumma pursuant to Mortgage I or Mortgage II. Also on December 10, 2018, Mr. Mumma filed a Praecipe of Withdrawal of Consent ("Withdrawal of Consent") to the Sale Motion which reads in its entirety as follows:
Notice is hereby given that Robert M. Mumma, II, assignee of the first mortgage [sic] priority mortgage holder, hereby withdraws his consent to the Motion for Private Sale of Debtor's Real Estate located in Huntington, [sic] Township, Adams County, PA as docketed to No. 452 on the Docket in the above-captioned case.
Withdrawal of Consent, ECF No. 503.
Following the filing of the Withdrawal of Consent, S&T Bank became concerned that Mr. Mumma might attempt to subordinate or otherwise relinquish his individual right to payment as assignee of both Mortgage I and Mortgage II in favor of his collective right to payment with his wife, Susan R. Mumma, pursuant to Mortgage III, thereby circumventing the effect of the Writ of Execution. To address this concern, S&T Bank sought and obtained an Order from the State Court on December 11, 2018, enjoining Mr. Mumma "from negotiating, transferring, assigning or otherwise disposing (including subordinating) of his right to ... any property interest ... subject to execution including ... payment under Mortgage I, Mortgage II ... and any Note ... or other document providing for payment to [Mr. Mumma] ... including ... the Sale Motion" (the "State Court Injunction"). Trustee Ex. 7.
At the December 13, 2018 continued hearing, the parties advised the court of the S&T Judgment, the issuance and service of the Writ of Execution, the State Court Injunction, and that the matter had "become something of a complicated mess." Notwithstanding the plight of their self-described condition, the parties remained optimistic that an agreement could be reached with the benefit of additional time. Thus, the hearing on the Sale Motion and the limited objections thereto was once again continued, this time to December 20, 2018, so the parties could attempt to resolve the matter. At the December 20, 2018 hearing, following brief argument and a short recess so the parties could negotiate, the parties advised the court that an order authorizing sale of the Real Property would be submitted to the court for signature with the consent of all parties. Such a consent order was indeed submitted to the court on December 21, 2018. The consent order was promptly signed by the court, thereby becoming the Sale Order in this matter.
The Sale Order authorized the sale of the Real Property as proposed in the Sale Motion. It also authorized distribution of the sale proceeds to pay the ordinary costs of sale, including the Trustee's costs and expenses up to $10,000.00 (and requiring the approval of Mr. Mumma for any costs and expenses exceeding that amount), and to deposit the Carve-out into escrow. However, the Sale Order did not authorize distribution of the remaining proceeds to Mr. Mumma pursuant to Mortgage I as originally proposed by the Trustee and demanded by Mr. Mumma. Instead, it ordered that all "[r]emaining sale proceeds (the "Remaining Proceeds") shall be escrowed by the Trustee in his bank account for Debtors' bankruptcy estate pending further Order of the Bankruptcy Court." Order Granting Mot. for Sale, Dec. 21, 2018, ECF No. 523. The Sale Order also contained the...
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...law. Butner v. U.S. , 440 U.S. 48, 55, 99 S. Ct. 914, 918, 59 L.Ed.2d 136 (1979) ; In re Mann Realty Associates, Inc. , 608 B.R. 408, 415–17, 2019 WL 5405371, at *4 (Bankr. M.D. Pa. Oct. 22, 2019) ; In re GEM Refrigerator Co. , 512 B.R. 194, 208 n.12 (Bankr. E.D. Pa. 2014). The Complaint, t......