The Huntington National Bank v. Najero, Inc. et al

Filing 42

OPINION AND ORDER denying 37 receiver's Expedited Motion to Confirm Contract for Sale of Real Property. Signed by District Judge Robert H. Cleland. (LWag)

UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

THE HUNTINGTON NATIONAL BANK,
Plaintiff,
Case No. 13-11632

v.
NAJERO, INC., et al.,
Defendants.
/

OPINION AND ORDER DENYING WITHOUT PREJUDICE RECEIVER’S EXPEDITED
MOTION TO CONFIRM CONTRACT FOR SALE OF REAL PROPERTY
On November 23, 2011, Plaintiff extended a $1,000,000 loan to Defendant
Najero, Inc., which was secured by, inter alia, a guaranty of repayment executed by the
remaining defendants (Dkt. # 32-3, Pg. ID 563-66) and a mortgage on property located
at 22100 Telegraph Road, Brownstown Township, Michigan (the “Norian Property”).
(Dkt. # 1-6, Pg. ID 65.) The court entered a stipulated order on June 19, 2014,
appointing M. Shapiro Development Company LLC (“Receiver”) as receiver for the
Norian Property and additional mortgaged properties. (Dkt. # 30, Pg. ID 516.) On
September 15, 2014, the court granted Plaintiff’s motion for summary judgment and
entered judgment in favor of Plaintiff and against Defendants in the amount of
$1,552,140.11. (Dkt. ## 35, 36.)
Now before the court is a motion by the Receiver to waive the requirements of 28
U.S.C. § 2001 and confirm the sale of the property located at 22100 Telegraph Road,
Brownstown Township, Michigan (the “Norian Property”) for a sum of $400,000. After
listing the Norian Property on a real estate marketing website and installing a marketing

sign, the Receiver received a phone call from Ed Boutrous expressing interest in the
property. (Dkt. # 37, Pg. ID 679-80.) Negotiations concluded with execution of the
purchase agreement for which the Receiver now seeks the court’s approval. (Dkt. # 372, Pg. ID 684-95.) Defendants object to the Receiver’s motion on the ground that the
proposed sale price is one-third below the value of the property. (Dkt. # 40, Pg. ID 848.)
The motion will be denied.
The private sale of realty is governed by 28 U.S.C. § 2001(b), which provides:
After a hearing, of which notice to all interested parties shall be given by
publication or otherwise as the court directs, the court may order the sale of
such realty or interest or any part thereof at private sale for cash or other
consideration and upon such terms and conditions as the court approves, if
it finds that the best interests of the estate will be conserved thereby. Before
confirmation of any private sale, the court shall appoint three disinterested
persons to appraise such property or different groups of three appraisers
each to appraise properties of different classes or situated in different
localities. No private sale shall be confirmed at a price less than two-thirds
of the appraised value. Before confirmation of any private sale, the terms
thereof shall be published in such newspaper or newspapers of general
circulation as the court directs at least ten days before confirmation. The
private sale shall not be confirmed if a bona fide offer is made, under
conditions prescribed by the court, which guarantees at least a 10 per
centum increase over the price offered in the private sale.
While § 2001(b) contains discretionary language that allows courts to order the
sale of realty “upon such terms and conditions as the court approves, if it finds that the
best interests of the estate will be conserved thereby,” the statute also includes
mandatory language stating that (1) the court “shall appoint” three appraisers, (2) “[n]o
private sale shall be confirmed at a price less than two-thirds of the appraised value,”
(3) the sale “shall be published” in newspapers at least ten days before confirmation,
and (4) the sale “shall not be confirmed” if a bona fide offer guaranteeing “at least a 10
per centum increase” is made. 28 U.S.C. § 2001(b). “The permissive language
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allowing the Court discretion to determine what is in the best interests of the estate is
therefore limited by the minimum standards delineated by Congress of what satisfies
the best interest standard. These standards cannot be waived by this Court.”
Huntington Nat. Bank v. JS & P, L.L.C., No. 2:13-cv-13841, 2014 WL 4374355, at *2
(E.D. Mich. Sept. 4, 2014) (citation omitted); see also U.S. S.E.C. v. Wilson, No. 12-cv15062, at *2 (E.D. Mich. Mar. 28, 2013) (“The word shall in § 2001(b) unambiguously
means must, and so this Court interprets the word just so. Before confirmation of any
private sale, a court must appoint three disinterested persons to appraise the property.
One will not do.” (emphasis in original)).
Although the court cannot waive the requirements of § 2001(b), the requirements
can be waived by the parties. See Huntington Nat’l Bank v. Big Sky Dev. Flint, No. 1010346, 2010 WL 3702361, at *2 (E.D. Mich. Sept. 16, 2010). In Big Sky Dev. Flint,
upon the concession of the defendant-intervenor, the court found that the § 2001(b)
requirements were waived where the parties stipulated to a receivership order which
provided that the receiver has “the fullest powers and duties of a receiver permitted
under applicable law and equity” including the power to “negotiate and execute sales
agreements with potential buyers of the Property . . . .” Id. at *2. While the stipulated
order appointing the Receiver in the instant case contains broad language authorizing
the Receiver to “recommend and consummate the sale of [the properties] (subject to the
approval of the Court), as he deems appropriate . . . ” (Dkt. # 30, Pg. ID 516), the order
contains further language narrowing the Receiver’s authority:

The Receiver is authorized to . . . expeditiously and diligently sell . . . the
Norian Property [and other properties and assets], with the approval of the
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Court, consistent with the provisions of 28 U.S.C. §2001(a), under the
following conditions: (a) Each sale shall be for cash, unless otherwise
authorized by the Court, for an amount subject to the approval of the Court
....
(Id. at 522-23 (emphasis added).)1
The court finds that the stipulated order did not waive the § 2001 requirements,
as it specifically authorizes the Receiver to sell the properties “with the approval of the
Court, consistent with the provisions of 28 U.S.C. § 2001(a).” (Id. at 522-523.)
Section 2001(a) governs the public sale of realty, and § 2001(b) governs the
private sale of realty. Defendants do not argue that the Receiver lacks authority to
consummate a private sale of the Norian Property under § 2001(b); instead, Defendants
challenge the proposed sale only on the ground that the sale price is unfair. (Dkt. # 40,
Pg. ID 851.) Irrespective of whether the sale price is fair, the court does not have
authority to confirm the proposed contract for sale of the Norian Property because the

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Section 2001(a) provides:

(a) Any realty or interest therein sold under any order or decree of any court
of the United States shall be sold as a whole or in separate parcels at public
sale at the courthouse of the county, parish, or city in which the greater part
of the property is located, or upon the premises or some parcel thereof
located therein, as the court directs. Such sale shall be upon such terms and
conditions as the court directs.
Property in the possession of a receiver or receivers appointed by one or
more district courts shall be sold at public sale in the district wherein any
such receiver was first appointed, at the courthouse of the county, parish, or
city situated therein in which the greater part of the property in such district
is located, or on the premises or some parcel thereof located in such county,
parish, or city, as such court directs, unless the court orders the sale of the
property or one or more parcels thereof in one or more ancillary districts.
28 U.S.C. § 2001(a).
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mandatory requirements of the § 2001(b) have not been fulfilled. The statute requires
that the court “appoint three disinterested persons to appraise such property or different
groups of three appraisers each to appraise properties of different classes or situated in
different localities.” 28 U.S.C. § 2001(b). The three appraisals have not been
conducted. Accordingly, the court does not have authority to grant the Receiver’s
motion.
IT IS ORDERED that Receiver’s Expedited Motion to Confirm Contract for Sale
of Real Property, Proof of Service (Dkt. # 37) is DENIED WITHOUT PREJUDICE.

s/Robert H. Cleland
ROBERT H. CLELAND
UNITED STATES DISTRICT JUDGE
Dated: October 27, 2014

I hereby certify that a copy of the foregoing document was mailed to counsel of record
on this date, October 27, 2014, by electronic and/or ordinary mail.
s/Lisa Wagner
Case Manager and Deputy Clerk
[phone]

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