Broughton v. Logan, et al

Filing 471

ORDER denying 419 Debtor's Motion to Dismiss and granting 411 Motion to Sell Assets Free and Clear of Liens and Transfer Liens to Proceeds of Sale. Signed by US District Judge Martin K. Reidinger on 12/15/2017. Certified copy sent to Celeste Broughton via US Mail to 2529 White Oak Road, Raleigh, NC 27601. (Stouch, L.)

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THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION
CIVIL CASE NO. 5:16-cv-00302-RE

In re: CELESTE G. BROUGHTON,

)
)
)
)
)

Debtor.

ORDER ALLOWING SALE OF ASSETS FREE AND CLEAR
OF LIENS AND TRANSFER OF LIENS TO PROCEEDS OF SALE
THIS MATTER is bef9re the Court on the Trustee's Motion to Sell
Assets Free and Clear of Liens and Transfer Liens to Proceeds of Sale [DE411] and the Debtor's "Motion to Dismiss the Motion to Sell" [DE-419]. All
parties in interest were given notice and an opportunity to be heard regarding
said Motion, and a hearing was conducted on December 15, 2017 ("the
Hearing").

I.

PROCEDURAL BACKGROUND
Celeste G. Broughton (the "Debtor") filed a Petition for Relief under
,

Chapter 13 of Title 11 of the United States Bankruptcy Code on December
15,

2014.

[Bankr.

Case

No.

14-07268-5-JNC

(the

"Bankruptcy

Proceeding")]. ·On July 14, 2015, the case was converted to one under
Chapter 7. On July 15, 2015, Walter L. Hinson (the "Trustee") was appointed
as the Chapter 7 Trustee by order of the Bankruptcy Court. On May 19,

2016, on his own motion, the Honorable Terrence W. Boyle, United States
District Court Judge for the Eastern District of North Carolina, entered an
Order withdrawing the reference to the United States Bankruptcy Court for
the Eastern District of North Carolina. [Misc. Case No. 5: 16-mc-19-80]. The
United States District Court thereafter docketed the main bankruptcy
proceeding as Civil Case No. 5: 16-cv-302-80. 1
The estate of the Debtor owns real property located in the City of
Raleigh, Wake County, North Carolina, which is now a part of the bankruptcy
estate and subject to administration by the Court and sale by the Trustee
(hereinafter "the Real Property"). The Real Property is described as follows:
2529 White Oak Road, Wake County, Raleigh, NC
27609, Lots 59-66 PT Lots 67-68 Anderson Heights
BM1920-00235 PIN# 1705536185
On March 6, 2017, the Trustee filed the present motion to sell the Real
Property free and clear of all liens pursuant to 11 U.S.C. § 363. [DE-411].
In his motion, the Trustee identifies a number of liens against the Real
Property that are documented in the public record.

In each case the

respective creditor has filed a Proof of Claim in this proceeding. Those claims
are as follows:

1

On July 21, 2017, this case was reassigned to the undersigned. [DE-436].

2

A.

Wake County Revenue Department: Filed Proof of Claim Nos.

7 and 8, for approximately $85,000.00 plus any taxes, penalties and interest
accruing as of the petition date. The Trustee has not disputed these claims
and has not filed an objection or an adversary proceeding in connection with
such claims. The Trustee anticipates that all appropriate ad valorem taxes
and assessments will be paid as part of the distribution at the closing of any
sale of the Real Property. 2 The Revenue Department, through its counsel,
appeared at the Hearing on this Motion and stated its express consent to the
relief sought by the Trustee in his Motion to Sell.

B.

Bank of New York Mellon, f/k/a The Bank of New York, as

trustee c/o Select Portfolio Servicing: Filed Proof of Claim No. 4 in the
amount of $348,081.16. This claim is based on a Deed of Trust presented
and recorded in Book 12273, Page 17.99 of the Wake County Registry on
November 20, 2006, in the original amount of $350,000.00. While the Wake
County Revenue Department's claim has priority over Bank of New York
Mellon's claim, Bank of New York Mellon has an interest superior to all other
lien creditors, based on a subordination agreement executed by Bank of

2

The parties advised the Court at the Hearing in this matter that the precise amount of
the claim of the Revenue Department has yet to be determined, and there also remains
a question as to whether all of the claims of the Revenue Department remain liens against
the Real Property. These issues, however, need not be resolved for the adjudication of
the present Motion.

3

America and recorded in Book 012273, Pages 01820-01823, Wake County
Registry. While the Trustee disputes Bank of New York Mellon's claim, the
parties are engaged in negotiations to resolve their dispute, and to date the
Trustee has not filed suit challenging the validity of this claim. Bank of New
York Mellon, through its counsel, appeared at the Hearing and expressed its
unconditional consent to the relief sought by the Trustee.

C.

Bank of America, N.A.: Filed Proof of Claim No. 2 in the amount

of $240,028.25. A Deed of Trust was recorded in Wake County on June 19,
2006, purporting to secure the claim against two (2) of the ten (10) parcels
that comprise the real property.

As outlined above, this claimant

subordinated its senior lien position to Bank of New York Mellon. It is a joint
obligation with Justin J. Broughton, one of the sons of the Debtor, who the
Trustee is informed and believes lives in Wilmington, North Carolina. The
Trustee filed an adversary proceeding to avoid the lien of the claimant on
December 29, 2016, in the United States District Court for the Eastern
District of North Carolina, Civil Case No. 5: 16-cv-958-RE:

The parties

arrived at a compromise to settle Bank of America's claim for $20,000. On
December 13, 2017, this Court entered an Order approving the parties'
settlement of this claim pursuant to Rule 9019 of the Federal Rules of
Bankruptcy Procedure.

Pursuant to the settlement agreement between
4

Bank of America and the Trustee, Bank of America has unconditionally
consented to the granting of the relief sought by the Trustee in this Motion.
D.

Citibank, N.A.:

Filed Proof of Claim No. 5 in the amount of

$219,826.37. This claim is based on a Home Equity Line of Credit Deed of
Trust presented and recorded in Wake County on September 27, 2007. The
Trustee filed a complaint to avoid the lien of the claimant on August 25, 2016,
in the United States District Court for the Eastern District of North Carolina,
Civil Case No. 5: 16-cv-757-RE.

Citibank filed a motion to dismiss that

adversary proceeding, which the Court granted on December 13, 2017.
Citibank, through its counsel, has filed with the Court its written unconditional
consent to the Trustee's Motion to Sell [DE-432].
E.

Wells Fargo Bank f/k/a Wachovia Bank and/or Sumner

Broughton, Co-Executors _of the Estate of Robert B. Broughton ("Wells
Fargo as Executor") 3 :

Filed Proof of Claim No. 3 in the amount of

$47,941.14 based upon judgments recorded on November 6, 2012 (file no.
72-CVD-4841) and recorded on June 27, 2014 (file no. 14-CVS-74634) both
in the Office of the Clerk of Superior Court of Wake County, North Carolina.

3

It was represented to the Court at the Hearing in this matter that Wachovia Bank and
Sumner Broughton were duly appointed as the co-executors of the Estate of Robert
Broughton. Sumner Broughton is deceased. The terms of the will of Robert Broughton
call for the survivor of the co-executors to continue serving as the sole executor. Wells
Fargo is the successor in interest to Wachovia. As such, Wells Fargo is now the sole
executor of the Estate of Robert Broughton and appears in that capacity, through counsel.

5

The Trustee does not dispute this claim. Wells Fargo as Executor appeared
through counsel at the Hearing on the Motion, and expressed its
unconditional consent to the relief sought by the Trustee.
The Debtor was given notice and the opportunity to be heard with
regard to the Trustee's Motion to Sell. The Debtor did not appear at the
scheduled hearing. The Debtor, however, filed a written opposition to the
Trustee's Motion to Sell, wherein she moves to dismiss his motion. 4 [DE419]. The Debtor's motion is addressed infra.

II.

DISCUSSION

Section 363(b) of the Bankruptcy Code allows a trustee, after notice
and a hearing, to use, sell or lease property of the estate outside the ordinary
course of business. 1 t U.S.C. § 363(b). Section 363(f) further provides that
the trustee may sell such property free and clear of any entity's interest in
such property if at least one of the following conditions is met:
(1) applicable nonbankruptcy law permits sale of
such property free and clear of such interest;
(2) such entity consents;

4

While the Debtor apparently objects to the Trustee's proposed sale, the Court notes that
in her amended Chapter 13 Plans, the Debtor proposed for the property to be sold and
for "all secured creditors to be paid at [the] closing of sale of [the] property." [Bankr. Case
No. 14-07268-5-JMC, DE-83 at 3; DE-111 at 3].

6

(3) such interest is a lien and the price at which such
property is to be sold is greater thar:i the aggregate
value of all liens on such property;
(4) such interest is in bona fide dispute; or
(5) such entity could be compelled, in a legal or
equitable proceeding, to accept a money satisfaction
of interest.
11 U.S.C. § 363(f). "Selling property through the bankruptcy court requires
a two-step process_. First, the Trustee must obtain permission to sell the
Property free and clear of liens (which is being done here). Second, the
Property will be sold only if the appropriate notice is given to creditors and
parties-in-interest under the Federal Rules of Bankruptcy Procedure." In re
Phillips, Bankr. Case No. 12-09022-8-DMW, slip op. at 4 (Bankr. E.D.N.C.
June 30, 2015).
c

In this Motion, the Trustee relies exclusively on the grounds set out in
§ 363(f)(2).

The Trustee has obtained the consent of the Wake County

Revenue Department, Bank of New York Mellon, Citibank, Bank of America,
and Wells Fargo as Executor to sell the Real Property free and clear of their
respective liens. Accordingly, the Court finds that the requirements of 11
U.S.C. § 363(f)(2) have been satisfied.
The Debtor objects to the Trustee's Motion on grounds unrelated to
any of the provisions under§ 363(f). Rather, she asserts that claimant Wells
7

Fargo as Executor has committed , various acts of fraud and other
"bankruptcy crimes." [DE-491 at 1]. She contends that the Court or the
Trustee should

have reported these crimes and dealt with them

appropriately. Had this been done, she argues, the property "extorted" from
her would have been returned, thus allowing her to pay her lawful creditors.

[!Q]. The Debtor does not in any way address her prior request that the Real
Property be sold. [See Bankr. Case No. 14-07268-5-JMC, DE-83 at 3; DE111 at 3].
The Debtor's purported objections to the Trustee's Motion do not affect
the propriety of the proposed sale but rather challenge the validity of the
judgments underlying Wells Fargo's claim. The validity of those judgments,
however, has already been decided by the Wake County District Court, and
for the reasons previously stated by Judge Boyle, the Debtor is barred from
re-litigating such matters in this Court. See Broughton v. Wells Fargo and
Co., Civil Case No. 5:16-cv-00303-80, slip op. at 4-5 (E.D.N.C. Nov. 3,
2016). Accordingly, the Debtor's Motion to Dismiss the Trustee's Motion to
Sell must be denied. Moreover, consent of the Debtor is not required in order
to allow relief pursuant to § 363(f)(2). All that is needed is the consent of all
the parties who claim a lien in the property to be sold. The Trustee has
demonstrated that all such lien claimants have unconditionally consented,
8

and thus the Trustee is entitled to relief, notwithstanding the Debtor's
allegations.
For all of these reasons, the Court concludes that the Trustee is entitled
to sell the property free and clear of liens, with the proceeds of the sale of
the real property described herein being substituted as collateral for valid
liens against that real property, as provided by§ 363 of the Bankruptcy Code.
The Court finds that it is in the best interest of the bankruptcy estate and all
creditors of this estate, both secured and unsecured, to allow the Trustee to
sell the property free and clear of all liens of the creditors.
'
,'

IT IS, THEREFORE, ORDERED that the Debtor's Motion to Dismiss
[DE-419] is DENIED, and the Trustee's Motion to Sell Assets Free and Clear
of Liens and Transfer Liens to Proceeds of Sale [DE-411] is hereby
GRANTED and such sale is hereby APPROVED. Any court-approved sale

of the property as herein described shall be free and clear of liens. The
proceeds of the sale of the real property shall be substituted as collateral for
all valid liens against that real property as identified in Exhibit A attached
hereto, in the same priority as such liens would have in the Real Property.
Such proceeds shall be further subject to the costs of any sale and other
expenses allowed pursuant to § 506(c) of the Bankruptcy Code, all as

9

hereinafter approved by the Court upon any notice as may be required by
the Code.
IT IS FURTHER ORDERED that the Debtor's "Motion to Dismiss the
Motion to Sell" [DE-419] is DENIED.
IT IS SO ORDERED this the 15th day of December, 2017.

10

EXHIBIT A
SECURED CREDITOR*
David R. DiMatteo, Esq
McGuireWoods LLP
Attorney for Bank of America,
N.A. f/k/a National Banking
Association
201 North Tryon St Suite 300
Charlotte, NC 28202
Zipporcih Basile Edwards, Esq.
Horack Talley Pharr &
Lowndes, P.A.
Attorney for Bank of New York
Mellon f/k/a Capital Bank; f/k/a
MERS; f/k/a the Bank of New
York
301 S. College Street
2600 One Wells Fargo Center·
Charlotte, NC 28202-6038
Renner St. John, Esq.
Brock & Scott, PLLC
Attorney for Citibank
CitiMortgage
5121 Parkway Plaza Blvd.
Charlotte NC 28217
Wells Fargo Bank, Executor**
c/o W. Sidney Aldridge, Esq. ·
P.O. Box 18237
RaleiQh, NC 27619
Wells Fargo Bank and Sumner
Broughton, Co-Executors **
c/o W. Sidney Aldridge, Esq.
P.O. Box 18237
Raleigh, NC 27619
Wake Co. Revenue Dept
Attn: Bankruptcy Dept/Officer
Wake Co. Justice Bldg
301 S. McDowell St,
Suite 3800
P.O. Box 2331
RaleiQh, NC 27602

DESCRIPTION OF
ALLEGED LIEN
Deed of Trust dated June 19,
2006 in the original amount of
$250,000.00 recorded in Book
12016, Page 1429, Wake
County Registry.

LIEN AMOUNT

Deed of Trust dated
November 20, 2006 in the
original amount of
$350,000.00 recorded in Book
12273, Page 1799, Wake
County Registry.

$348,081.16

Deed of Trust dated
September 27, 2009 in the
original amount of
$250,000.00 recorded in Book
12767, Page 1627, Wake
County Registry.
Judgment dated November 6,
2012 in the original amount of
$34,30.08, file no. 12 M 6800
Wake County.
Judgment dated November 6,
2012,
file no. 72-CVD-4841
Judgment dated June 27,
2014, file
no. 14-CVS-7463
Ad Valorem Taxes

$219,826.37

$240,028.25

$34,830.08

$47,941.14

$85,383.71

* This list is intended to address all liens of the listed creditors, including all other alleged
liens of such creditors which may not be specifically described herein. The lien amounts
stated are only estimates and are subject to accruing interest and charges, if applicable.
** The indices found in the Offices of the Clerk of Superior Court and the Register of
Deeds of Wake County name Wells Fargo, Executor, or the Estate of Robert B.
Broughton, or both, as the Plaintiffs in varying ways. The description used in this chart is
meant to include all alleged liens of either or both parties.