Westbrook v. Parker (In re Parker)
| Decision Date | 06 February 2018 |
| Docket Number | CASE NO. 12–05848–8–SWH,ADV. PRO. NO. 17–00007–8–SWH |
| Citation | 581 B.R. 468 |
| Court | U.S. Bankruptcy Court — Eastern District of North Carolina |
| Parties | IN RE: Teddy Dale PARKER, Victoria Stone Parker Margaret Westbrook, Plan Trustee, and RREF BB Acquisitions, LLC, Plaintiffs, v. Teddy Dale Parker, Victoria Stone Parker, Parker Manufacturing 2, LLC, and Parker Manufacturing, Inc., Defendants. |
Terri L. Gardner, Nelson Mullins Riley & Scarborough, LLP, Raleigh, NC, for Plaintiffs.
William H. Kroll, Stubbs & Perdue, P.A., Raleigh, NC, for Defendants.
ORDER DENYING DEFENDANTS' MOTION TO DISMISS
The matter before the court is the motion to dismiss adversary proceeding filed by Teddy Dale and Victoria Stone Parker (the "Debtors" or "Parkers"), Parker Manufacturing 2, LLC ("PM2"), and Parker Manufacturing, Inc. ("PMI") (collectively, the "Defendants") on October 10, 2017, Dkt. 3 (the "Motion"). A response in opposition and memorandum of law were filed by the Plaintiffs on November 3, 2017, Dkt. 5. A hearing was held in Raleigh, North Carolina on December 6, 2017, at which the court took the matter under advisement. For the reasons that follow, the court will deny the Motion.
Teddy Dale and Victoria Stone Parker (the "Debtors" or the "Parkers") filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code on August 10, 2012. On their schedules, the Debtors listed assets in the aggregate amount of $7,681,772.02 and liabilities totaling $8,399,194.20. The Debtors' scheduled the fair market value of their residence located at 7446 Highway 72, Lumberton, North Carolina (the "Residence") as $3,010,700, encumbered by a secured claim in the total amount of $739,934. The Debtors also listed ownership of an office building in Lumberton, North Carolina on Long Branch Road (the "Long Branch Property") with a scheduled value of $140,800.
Mr. and Mrs. Parker also scheduled ownership interests in one North Carolina corporation named Parker Manufacturing, Inc. ("PMI") and one North Carolina limited liability company named Parker Manufacturing 2, LLC ("PM2") as assets on Schedule B. Their interests in PMI were valued at $750,000, and their interests in PM2 were valued at $3,000,000. Through PM2, the Debtors owned and operated two mobile home parks as of the petition date: (1) Lafayette Plantation in Fayetteville, North Carolina and (2) Waynesville Plantation in Lumberton, North Carolina. As of the petition date, the Debtors' primary income source was the rents received from the two mobile home parks.
On September 26, 2012, Branch Banking & Trust Company ("BB & T") filed a proof of claim in the amount of $826,414.20. Proof of Claim No. 16–1. BB & T's claim was based on a promissory note executed by the Parkers in August of 2001 and secured by a deed of trust on real property owned by PMI in Greenville County, South Carolina. BB & T's secured claim was subsequently assigned to RREF BB Acquisitions, LLC ("RREF" or "Creditor"), and RREF filed a proof of claim in the amount of $826,414.20 on February 4, 2013 to reflect its ownership of the debt. Proof of Claim No. 26–1.
In December of 2012, PM2 sold real property in Fayetteville, North Carolina ("Lafayette Plantation") for the sum of $3,460,000. PM2 received an estimated $986,000 in net proceeds from the sale. The Plaintiffs contend that the Parkers personally used these proceeds and further contend that the sale was never disclosed to creditors through the disclosure statement or other form of notice.
On June 3, 2013, prior to confirmation, the Parkers and RREF entered into a consent order regarding RREF's voting rights as to the chapter 11 plan, Dkt. 155 (the "Consent Order"). The Consent Order provided that for purposes of chapter 11 plan voting, RREF would be permitted to vote a $526,414.20 secured claim in Class 14 and a $300,000 claim in the general unsecured creditors' class (Class 18).
The Debtors initially filed a plan of reorganization (the "Plan") on December 7, 2012, Dkt. 60. In order to fund the Plan, the Debtors anticipated continued income from the ongoing operation of Waynesville Plantation. The Plan defined the Effective Date as "14 days from the date of entry of the Order Confirming Plan." Dkt. 173 at 3.
Class 14 of the Plan proposed to treat BB & T's claim as impaired. Specifically, the Parkers, through PMI, proposed to surrender the Greenville County, South Carolina property (the "South Carolina Property") to BB & T and allow BB & T ninety days to file an unsecured deficiency claim. The Plan was subsequently amended on April 11, 2013, Dkt. 130 and again on August 2, 2013, Dkt. 173 (the "Second Amended Plan"). The Second Amended Plan reflected RREF's ownership of BB & T's debt and proposed to allow the Parkers to market and sell, rather than surrender, the South Carolina Property. The Plan described the treatment of RREF's claim as follows:
Dkt. 173 at 16–17. Pursuant to the Second Amended Plan, RREF was to receive the proceeds from the sale of the South Carolina Property. Should the proceeds fail to satisfy RREF's claim in full, any deficiency balance was to be treated in accordance with Class 18 of the Second Amended Plan. Pursuant to the Consent Order, RREF was allowed a $526,414.20 secured claim for voting purposes in Class 14 and a $300,000 general unsecured claim for voting purposes in Class 18.
The Second Amended Plan provided general unsecured creditors with two options. First, each unsecured creditor could elect to receive payment of its claim in full within three years of the Plan's Effective Date ("Option One"). In order to generate the capital necessary to make such lump sum payments, the Debtors intended to sell or refinance their Residence. To guarantee this payment, the Debtors also proposed to execute a promissory note in favor of the unsecured creditors who elected to Option One in the total amount of their collective claims, which was to be secured by a second-position deed of trust on the Debtors' Residence. The promissory note would mature within three years of the Plan's Effective Date, and the Debtors were not required to make payments on the promissory note until their Residence sold or was refinanced.
In the alternative, creditors in Class 18 could elect to receive the sum of ten percent of their individual claims within seven days of the Plan's Effective Date ("Option Two"). In order to fund the Option Two, the Debtors intended to borrow funds on hand from PM2. In voting to accept the Plan, RREF chose Option One. RREF was the sole unsecured creditor to choose the treatment offered pursuant to Option One.
Section V of the Second Amended Plan, entitled "Means of Execution," expressly provided for the creation of a plan trust and appointment of a plan trustee in order to ensure payment of two classes of creditors: (1) Class 8, Personal Investments, Inc., holder of a note in the approximate amount of $800,000 secured by a first-position deed of trust on the Residence and (2) those members of Class 18 who chose Option One. A copy of the proposed trust agreement (the "Trust Agreement") was attached to the Second Amended Plan as Exhibit 1. In addition, Section XI of the Second Amended Plan, entitled "Effect of Confirmation," stated that "except as otherwise provided ... the confirmation of the [Second Amended] Plan vests all of the property of the estate in the Debtors."
RREF filed an accepting ballot as the sole creditor in Class 14 and also filed an accepting ballot in the amount of $300,000 as one of two creditors in Class 18, Dkt. 197. After conducting a hearing regarding confirmation on October 16, 2013, the court issued an order confirming plan on November 19, 2013, Dkt. 203. No party objected to confirmation, and the Effective Date of the Second Amended Plan was December 3, 2013.
On December 6, 2013, the Parkers executed a promissory note in favor of the Plan Trustee in the amount of $826,414.20 (the "Note"), which was secured by a second-position deed of trust on their residence (the "Deed of Trust"). The Note and Deed of Trust were executed contemporaneously with the Trust Agreement, and the Note stated a maturity date of December 3, 2016. The Deed of Trust was...
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