Martha J Lance Bankruptcy

UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF NORTH CAROLINA

CHARLOTTE DIVISION IN RE: ) ) Case No.: 14-30262 MARTHA J. LANCE ) Chapter 11 ) ) SS #: XXX-XX-4330 ) ) Debtor(s) )

MOTION TO APPOINT CHAPTER 11 TRUSTEE OR CONVERT TO CHAPTER 7 ON SHORTENED NOTICE

The undersigned, United States Bankruptcy Administrator for the Western District of

North Carolina, moves the Court to appoint a Chapter 11 Trustee or convert this case to Chapter 7 and says:

1. This is a Chapter 11 proceeding in which a voluntary petition was filed on February 19, 2014.

2. On November 19, 2014, the Debtor filed the Motion for Order Approving

Exclusive Right of Sale Listing Agreement and Motion for Authority to Sell Real Property Located at 1311 Atlantic Street, Melbourne, Florida on Shortened Notice (the “Florida Motion”) [docket # 73]. The Debtor sought to sell real property and improvements wholly owned by the Debtor to the unrelated parties, Timothy S. and Kimberlee D. Marshall for $1,100,000.00. The closing was to take place on or before December 2, 2014. The Florida Motion sought to pay:

a. all ordinary and necessary closing costs, including commissions pursuant

to the Listing Agreement;

b. payments as are required for the release of any valid liens;

c. other payments which may be necessary to provide clear or insurable title to the purchasers;

d. payment of any outstanding ad valorem taxes;

e. payment of $32,810.42 to The Henderson Law Firm on account of this

Court's November 17, 2014 Order Awarding Interim Compensation to Attorney James H. Henderson; and,

f. the balance to the Debtor.

Case 14-30262 Doc 83 Filed 12/19/14 Entered 12/19/14 12:51:25 Desc Main Document of 7

3. This Court heard the Florida Motion on December 1, 2014. Appearing at that hearing were: James H. Henderson on behalf of the Debtor and the undersigned, United States Bankruptcy Administrator. The undersigned objected to the distribution of the proceeds of the sale to the Debtor and requested that the Court order the net proceeds to be paid to and held in escrow by the Debtor’s attorney.

4. On December 1, 2014, the Court entered the Order Approving Exclusive Right of

Sale Listing Agreement and Granting Debtor’s Motion for Authority to Sell Real Property Located at 1311 Atlantic Street, Melbourne, Florida (the “Florida Order”) [docket # 76]. The Florida Order allowed the sale and the closing to take place with the following disbursements to be made at closing:

a. all ordinary and necessary closing costs, including commissions pursuant

to the Listing Agreement;

b. payments as are required for the release of any valid liens;

c. other payments which may be necessary to provide clear or insurable title to the purchasers;

d. payment of any outstanding ad valorem taxes;

e. payment of any other ordinary and usual obligations that are required to

consummate the sale of the Property pursuant to the terms of the Contract; and

f. the balance to The Henderson Law Firm to be held in trust for the

Debtor pending further orders of this Court (emphasis added).

5. The Florida Order also allowed the Henderson Law Firm to pay from escrow:

a. The legal fees and expenses that are payable to The Henderson Law Firm which accrued in this proceeding, as set forth in this Court’s November 17, 2014 Order Awarding Interim Compensation to Attorney James H. Henderson and the subsequent Application for Fees filed with the Court on November 25, 2014. Other disbursements are subject to approval of this Court;

b. Up to $10,000.00 to the Debtor to pay for expenses related to the sale,

such as the cost of movers, which counsel for the Debtor may release upon submission of proper documentation; and

c. Any quarterly fees owed by the Debtor.


6. The Florida Order specifically stated: “Otherwise disbursements are subject to

the approval of this Court.”

7. The Court, in the Florida Order, allowed the Debtor to “consummate the sale of the Property on the terms set forth in the Contract and this Order” and authorized the closing agent “to make disbursements from the proceeds of sale in accordance with the terms of the Contract and this Order.”

8. The Florida Order also required, “Upon closing, the Debtor shall file a report of

sale with the Court that includes a copy of the executed settlement statement.”

9. On December 18, 2014, the Debtor filed the Debtor’s Report of Sale pursuant to the Florida Order (the “Report of Sale”) [docket # 81]. The Report of Sale included the following information:

a. Settlement date of December 5, 2014 and disbursement date of

December 8, 2014.

b. Payoff of first mortgage loan to Ocwen of $795,727.48. (Note that the Florida Motion and the Florida Order identified the first lienholder as the “Christiana Trust,” not Ocwen.)

c. Net proceeds payable to The Henderson Law Firm of $167,071.25.

d. Settlement charges to the Seller (Debtor) of $138,858.03. The settlement

charges included:

i. Moving bill requested by seller to pay to Brand Transfer & Storage in the amount of $9,571.00.

ii. Reimbursement of expenses to Charles R. Lance in the amount of

$49,000.00.

10. Upon information and belief, the Debtor has not submitted any documentation to her attorney for the payment of expenses.

11. The Debtor has violated the requirements of the Florida Order and may be found

in contempt.

12. On October 23, 2014, the Debtor filed the Motion for Authority to Sell Residential Real Property Located at 9204 Heydon Hall Circle, Charlotte, North Carolina (the “NC Motion”) [docket # 64]. The NC Motion requested that the Court allow the sale of real property and improvements to American Financial Group (“AFG”) or its assigns for $1,000,000.00. AFG is solely owned by the Debtor’s spouse. The Debtor represented in the NC Motion that:


a. There was no equity in the property located at 9204 Heydon Hall,

Charlotte, North Carolina (the “NC Property”).

b. The Debtor had negotiated agreements with the secured creditors, BSI Financial Services (“BSI”) and SunTrust Bank (“SunTrust”), such that BSI would accept $1,000,000.00 in satisfaction of its note and SunTrust would accept $7,500.00 in consideration of the release of its deed of trust.

c. The negotiated agreements with BSI and SunTrust would “reduce the debt

service required to retain the Property, allowing the Debtor to continue using the Property as her residence and making it more likely that a Chapter 11 plan can be confirmed by this Court.”

d. The Debtor believed “it will be for the benefit of the estate to sell the

Property”.

e. “The Debtor believes the Sale is being made at a fair price.”

f. “The Debtor does not have any meaningful income.”

13. On November 14, 2014, this Court entered the Order Granting Authority to Sell Residential Real Property Located at 9204 Heydon Hall, Charlotte, North Carolina (the “NC Order”) [docket # 71]. The NC Order found and/or provided:

a. The agreements the Debtor negotiated with BSI and SunTrust “will reduce

the debt service required to retain the Property, allowing the Debtor to continue using the Property as her residence and making it more likely that a Chapter 11 plan can be confirmed by this Court.”

b. “BSI has agreed to accept the sum of $1,000,000.00 in satisfaction of its

note if the payment is received on or before December 15, 2014.”

c. “SunTrust has now agreed to accept the sum of $7,500.00 in consideration of the release of its Deed of Trust prior to confirmation.”

d. “The Debtor alleges in the Motion that it will be for the benefit of the estate

to sell the Property at a private sale . . ..”

e. “Based on the forgoing, the proposed sale is in the best interest of the Debtor and the estate and should be approved.”

14. Upon information and belief, on or about November 21, 2014 (approximately one

week after entry of the NC Order), AFG listed for sale the NC Property for the asking price of $1,395,000.00.


15. Upon information and belief, there is currently an offer to purchase the NC Property for $1,085,000.00 and counter offers of $1,275,000.00 and $1,250,000.00.

16. It appears that the Debtor may have misrepresented to the Court the “benefit to

the estate” of the sale of the property to AFG, the value of the NC Property, and that the sale to AFG would allow the Debtor “to continue to use the Property as her residence.” The listing of the NC Property a week following entry of the NC Order for an amount substantially in excess of the price represented as a “fair price” indicates the Debtor’s true, undisclosed intent with respect to the sale of the NC Property to AFG. In essence, it appears the Debtor misrepresented material facts to the Court to induce it to allow the sale to AFG in order to obtain property for her or her spouse’s benefit that would otherwise be property of the estate.

17. The Debtor’s Monthly Status Reports filed with the Court for the period February

28, 2014 through October 31, 2014 list receipts from AFG and Charles Lance totaling $50,185.00 (not including a nominal amount of interest) [docket #s 25, 38, 54, 57, 60, 61, 67, 79]. The Debtor’s ending cash position on October 31, 2014 was $53.92 [docket # 79]. In addition, the February 2014 Report listed no receipts, but listed disbursements to secured creditors paid by the Debtor’s husband in the amount of $4,940.66 [docket # 24].

18. 11 U.S.C. § 1104 requires the Court to appoint a trustee or examiner “for cause,

including fraud, dishonesty, incompetence, or gross mismanagement . . . or similar cause, . . .” or “if such appointment is in the interests of creditors, . . .”

19. 11 U.S.C. § 1112 requires the Court, unless other factors are established, and

upon request of a party in interest, to convert a case to Chapter 7 or to dismiss it, whichever is in the best interests of creditors and the estate, for cause unless the court determines the appointment of a trustee or examiner is in the best interests of creditors and the estate pursuant to 11 U.S.C. § 1104(a). “Cause” includes but is not limited to:

a. “substantial or continuing loss to or diminution of the estate and the

absence of a reasonable likelihood of rehabilitation;” and,

b. “failure to comply with an order of the court; . . .”

20. The Debtor’s material misrepresentations to the Court and willful disregard of this Court’s order are sufficient grounds for the relief requested in this Motion. In addition, the Debtor’s actions have caused a loss and diminution to property of the estate and, based on the Debtor’s lack of “any meaningful income,” there is no reasonable likelihood of rehabilitation.


21. There is already a hearing scheduled for Monday, December 22, 2014 at 9:30 a.m. in this case [docket # 80]. There will be no prejudice to the parties for the Court to also hear this Motion at that time.

Wherefore, the undersigned requests that the Court convert this case to Chapter 7

or appoint a Chapter 11 trustee and for such other and further relief as the Court deems just and proper. Dated: December 19, 2014. /s/ Linda W. Simpson

Linda W. Simpson United States Bankruptcy Administrator 402 W. Trade Street, Suite 200 Charlotte, NC 28202-1669 N.C. Bar #12596 Tel: 704-350-7590 Fax: 704-344-6666 [email protected]


UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF NORTH CAROLINA

CHARLOTTE DIVISION IN RE: ) ) Case No.: 14-30262 MARTHA J. LANCE ) Chapter 11 ) ) SS #: XXX-XX-4330 ) ) Debtor(s) )

CERTIFICATE OF SERVICE

The undersigned certifies that the pleading(s) or paper(s) to which this Certificate is affixed was served upon the party(s) to this action listed below by depositing a copy of the same, enclosed in a first-class postpaid, properly addressed wrapper, in a Post Office or official depository under the exclusive care and custody of the United States Postal Service and/or by means of the Electronic Filing System of the Bankruptcy Court on December 19, 2014. Martha J. Lance 9204 Heydon Hall Circle Charlotte, NC 28210 James H. Henderson -Served Electronically /s/ Linda W. Simpson Linda W. Simpson

United States Bankruptcy Administrator 402 W. Trade Street, Suite 200 Charlotte, NC 28202-1669

N.C. Bar #12596 Telephone: (704)-350-7587 Fax: (704)-344-6666

E-mail: [email protected]


Martha J Lance Bankruptcy

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