The Huntington National Bank v. JS & P, L.L.C. et al
Filing
37
ORDER Denying 32 Receiver's Motion for An Order Authorizing Sale of Real and Personal Property Located at 15779 15 Mile Road, Clinton Township, MIchigan and 35125 Utica Road, Clinton Township, Michigan, Free and Clear of All Liens, Claims and Encumbrances. Signed by District Judge Victoria A. Roberts. (LVer)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
The Huntington National Bank,
Successor to Fidelity Bank,
a national banking association,
Case No. 2:13-cv-13841
Honorable Victoria A. Roberts
Plaintiff,
vs.
JS & P, L.L.C., a Michigan limited liability
Company, JAMES J. PRICE, an individual,
FAST TRACK AUTO SERVICE CENTER, L.L.C.,
a Michigan limited liability company, LOYAL
INVESTMENTS, INC., a Michigan corporation,
JAMES M. PRICE, an individual, FAST TRACK
SELF SERVE WASH, L.L.C., a Michigan limited
liability company, SRS, L.L.C., a Michigan
limited liability company, and SUSAN PRICE,
jointly and severally,
Defendants.
/
ORDER DENYING RECEIVER’S MOTION FOR AN ORDER AUTHORIZING
SALE OF REAL AND PERSONAL PROPERTY LOCATED AT 15779 15 MILE ROAD,
CLINTON TOWNSHIP, MICHIGAN AND 35125 UTICA ROAD, CLINTON TOWNSHIP,
MICHIGAN FREE AND CLEAR OF ALL LIENS, CLAIMS & ENCUMBRANCES
This matter is before the Court on motion by Basil T. Simon, Receiver
(“Receiver”), requesting an order authorizing the private sale of real and personal
property located at 15779 15 Mile Road, Clinton Township, Michigan and 35125 Utica
Road, Clinton Township, Michigan (jointly referred to as “Property”) for a sum of
$425,000 (the “Purchase Price”). The Property appraised for $780,000. The Receiver
1
also requests that the Court waive the statutory requirement of three appraisals. This
motion is DENIED.
The sale of realty is governed by 28 U.S.C. §2001(b). It says:
(b)
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.
The Receiver does not fully address the requirements of the statute. In support
of his motion, the Receiver says he found a purchaser who has offered to buy the
Property for $425,000. The Receiver also says that he obtained one appraisal of the
Property which values it at $780,000. The Receiver says there is no benefit to the
estate or to creditors of three appraisals, and that the pending offer is the highest and
best offer received to date. The Receiver says that 28 U.S.C. §2001(b) specifically
allows the Court to order the sale of the Property by the Receiver at a private sale “upon
such terms and conditions as the Court approves, if it finds that the best interests of the
estate will be conserved thereby.” Prairie Lakeside, LLC (“Prairie”), a creditor of
Defendant JS&P, objects to the Receiver’s Motion and says the appraisal is dated
August 14, 2012 and does not reflect current market values. Furthermore, Prairie says
2
the Court should not waive §2001(b)’s requirement to obtain three appraisals. Prairie
says that these appraisals should be dated within the past 90 days but does not cite to
any supporting authority for the 90 day requirement. Prairie also says the proposed
sale price is too low, and falls below the statutory minimum of two-thirds of the
appraised value. Neither party addresses the statutory notice requirement.
The permissive language of §2001(b) upon which the Receiver relies is limited by
the mandatory language of the statute. The beginning of the section contains
discretionary language, allowing courts to order the sale of realty “upon such terms and
conditions as the court approves” as long as the sale is in the best interests of the
estate. However, the statute then says “[b]efore confirmation of any private sale” the
court “shall appoint” three appraisers and “[n]o private sale shall be confirmed at a price
less than two-thirds of the appraised value.” 28 U.S.C. §2001(b). The permissive
language 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. S.E.C. v. T-Bar Res., LLC, No. 3:07CV1994-B,
2008 WL 4790987 (N.D. Tex. Oct. 28, 2008). These standards cannot be waived by
this Court.
Additionally, before confirming a sale, the Court must direct that the terms of the
sale be published in a newspaper of general circulation at least ten days before
confirmation of the sale. 28 U.S.C. §2001(b). Lastly, the sale shall not be confirmed if
another bona fide offer is made which guarantees “at least a 10 per centum increase”
over the price offered. PNC Bank, N.A. v. Gator Piqua Partners, LLLP, No. 3:12-CV369, 2013 WL 6383080 (S.D. Ohio Dec. 5, 2013) (approving private sale pursuant to
3
§2001(b) unless another party makes a bona fide offer, when three appraisals have
been obtained, purchase offer meets the statutory requirement of being at least twothirds the appraised value, and receiver is directed to publish the terms of the sale in a
newspaper of general circulation at least ten days before the confirmation hearing).
The Court does not have discretion to waive the requirements of §2001(b),
contrary to the argument that is inherent in the Receiver’s position. U.S. S.E.C. v.
Wilson, No. 12-CV-15062, 2013 WL 1283437 (E.D. Mich. Mar. 28, 2013). The purpose
of the safeguards in 2001(b) is to prevent “the opportunity for frauds in private sales.”
Acadia Land Co v. Horuff, 110 F.2d 354, 354-355 (5th Cir.1940) (holding that this
purpose cannot be effected if non-compliance with these requirements is permitted and
therefore each requirement is a condition precedent to a valid sale).
A relatively recent case did find that the requirements of §2001(b) could be
waived but it is distinguishable on several grounds. In Huntington Nat'l Bank v. Big Sky
Dev. Flint, LLC, No. 10-10346, 2010 WL 3702361 (E.D. Mich. Sept. 16, 2010), the
receiver and plaintiff Huntington National Bank (“Huntington”), submitted a motion
requesting the approval of a private sale of property after Defendant Big Sky (“Big Sky”)
defaulted on its loans to Huntington. Under the loan agreements, Big Sky consented to
the appointment of a receiver in the event of default. The receivership order contained
broad language granting the receiver the authority to sell the property and providing 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.” Id. at *6-7.
Cohen, (a member of Blue Sky with an ownership interest) intervened to contest the
receivership. Id. at *1. Cohen argued that the proposed sale should be set aside for
4
failure to conform with 2001(b). However, after arguing non-compliance, Cohen then
conceded that 28 U.S.C. § 2001 is inapplicable because these requirements were
waived as part of the receivership order, to which Big Sky stipulated. Cohen argued
that the court should not approve the sale because it is not in the best interest of the
estate. Id. at *7. The court found Cohen’s arguments to be without merit and granted
the motion to approve and confirm the sale. Id.
This Court does not reach the question of whether the requirements of §2001(b)
can ever be waived by a receivership order because it finds that the particular
receivership order here is silent regarding §2001(b). The Order Granting Plaintiff’s
Motion for Appointment of Receiver (Doc. #13) section 13 titled “Sale of Property”
provides in part that:
The receiver is authorized to, on behalf and in the name of Defendants,
expeditiously and diligently sell the Properties, with the approval of the
Court, consistent with the provisions of 28 U.S.C. §2001(a).
28 U.S.C. §2001(a) governs the sale of property at a public sale, which is not at
issue in the motion before the Court. The agreement gives the receiver the power to
sell the properties, but it is conditioned on the approval of the Court. Unlike Huntington
Nat'l Bank v. Big Sky Dev. Flint, LLC, Prairie Lakeside has not conceded that the
requirements of §2001(b) are waived. The Court finds that the plain meaning of the
statute requires adherence to its express terms.
The private sale of the Property cannot be confirmed because the receiver has
obtained only one appraisal of the Property. Additionally, the proposed purchase price
of $425,000 falls below the statutory requirement that the price be no less than twothirds of the appraised market value of $780,000. Furthermore, the parties have not
5
provided information regarding compliance with the other provisions of §2001(b) such
as a hearing and publication. The Court will not confirm the sale unless the Receiver
demonstrates compliance with §2001(b).
The parties have until September 10, 2014, to provide a list to the Court of
agreed upon appraisers. The Receiver’s motion for an order authorizing the private
sale of the Property is DENIED.
IT IS ORDERED.
S/Victoria A. Roberts
Victoria A. Roberts
United States District Judge
Dated: September 4, 2014
The undersigned certifies that a copy of this
document was served on the attorneys of
record by electronic means or U.S. Mail on
September 4, 2014.
s/Linda Vertriest
Deputy Clerk
6
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?