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River Parishes Dirt & Gravel, LLC v. Bankplus (In re Willow Bend Ventures, LLC)

Name
IN RE: WILLOW BEND VENTURES, LLC, Debtor River Parishes Dirt & Gravel, LLC, Plaintiff v. BankPlus, Defendant
Attorney(s)
Mark C. Landry, Newman, Mathis, Brady & Spedale, APLC, Metairie, LA, for Plaintiff., Madison M. Hentze, Jones Walker LLP, Mark Mintz, Jones Walker, et al., New Orleans, LA, for Defendant., Jerry A. Brown, U.S. Bankruptcy Judge This matter came before the court on February 22, 2019 as a hearing on a motion for summary judgment filed by defendant BankPlus (P-16). The adversary proceeding is an objection to the claim of BankPlus. The issue is whether BankPlus was obligated to re-inscribe its mortgage to maintain its secured position on property of the estate. BankPlus, in its motion, maintains that it was not required to reinscribe the mortgage, because 11 U.S.C. 108(c) extends the time fixed for it to reinscribe its mortgage until 30 days after the automatic stay is no longer in effect, which has not happened yet. The court agrees. At the hearing the court stated that it would grant the motion but would provide written reasons for its decision. Accordingly,, IT IS ORDERED that the motion for summary judgment is GRANTED., On May 9, 2017, Willow Bend filed a petition for relief under Chapter 11 of the U.S. Bankruptcy Code. On September 6, 2017, BankPlus timely filed a proof of claim in the amount of $ 6,570,668.43. The debtor filed a motion for sale of property free and clear of liens under 11 U.S.C. 363(f) (R.Doc. 84) on October 13, 2017. Several objections were filed, and after a hearing, the court entered an order dated January 4, 2018, approving the sale of the debtor's property to River Parishes Dirt & Gravel, LLC ("River Parishes"), the plaintiff in this adversary proceeding (R.Doc. 152). The motion to sell listed the three BankPlus loans, with the approximate amounts still due, and the balance the debtor expected to receive from the sale after the BankPlus loans were paid. The motion stated that the balance was to be placed in the registry of the court until certain tax claims pending against the debtor could be resolved. An immaterial modification to the motion to sell was filed on November 10, 2017 (R.Doc. 107). The modification proposed that all proceeds from the sale be deposited into the registry of the court., After the motion to sell was approved, the debtor amended its disclosure statement and plan and continued to try to work out its issues with various creditors. A few adversary proceedings were filed by the debtor in connection with various claim objections. On March 19, 2018 after holding a hearing on the disclosure statement, the court entered an order continuing the hearing to June 11, 2018 and ordered the debtor and the Louisiana Department of Revenue ("LDR") to file motions for summary judgment on the LDR's claims against the debtor., On April 10, 2018, the debtor filed a motion to reject lease or executory contract (R.Doc. 210) asking the court to cancel the sale to River Parishes, citing difficulties with River Parishes that were hindering the closing of the sale. After a hearing on the motion to reject, the court set a status conference to attempt to get the sale back on track and ordered both the debtor and River Parishes to produce certain documents related to the sale. On May 22, 2018 River Parishes filed an adversary proceeding against the debtor seeking damages for an alleged breach of an agreement to sell the membership interests of the debtor to River Parishes that had been entered into after the filing of the bankruptcy petition, but without requesting approval of the court (or even notifying the court of the agreement). This agreement preceded the filing of the motion to sell that the court later approved., On June 18, 2018 yet another status conference was held (R.Doc. 280), and the court ordered the debtor to file motions to cancel all liens on the property, as well as for the production of additional documents from the debtor to River Parishes. The court further ordered that the sale would close on or before July 30, 2018. Pursuant to that order, the debtor filed several motions to avoid lien on June 28, 2018; among those motions was a motion to avoid lien with BankPlus (R.Doc. 297), which sought to cancel the inscription of the BankPlus mortgage on the debtor's property. Because of a conflict with BankPlus's counsel, the judge assigned to the case cancelled the hearing on the motion to avoid the BankPlus lien, and entered an order transferring the hearing of that matter to this section of the court (R.Doc. 313). No such hearing was held, however, because eventually the parties agreed to an order on the motion, and that order was entered on July 24, 2018 (R.Doc. 323). On August 2, 2018, an order was entered directing that the purchase price of the debtor's assets, $ 7.2 million, be deposited into the registry of the court (R.Doc. 343)., Shortly thereafter, the debtor filed its second amended disclosure statement and plan (R.Docs. 356 & 358). On September 20, 2018, River Parishes filed an objection on the basis that the plan would pay funds from the sale proceeds in the registry of the court to BankPlus (R.Doc. 376). In this motion River Parishes alleged for the first time that the BankPlus mortgage had lapsed on January 4, 2018 because BankPlus had not reinscribed its mortgage within ten years of its date. On October 8, 2018 River Parishes filed this adversary proceeding, objecting to the secured status of BankPlus's claim. At an October 10, 2018 hearing, the court ordered the debtor to file an adversary proceeding against River Parishes seeking a declaratory judgment that River Parishes does not have an administrative claim in the bankruptcy proceeding (R.Doc. 401); the debtor filed that complaint on October 26, 2018., Shamus Holdings, the primary case upon which BankPlus relies, involved a Massachusetts statute that required the holder of a mortgage, on pain of forfeiture, to take action to enforce the mortgage within five years after the end of the mortgage's stated term. In Shamus the deadline had not arrived when Shamus, the debtor, initiated the bankruptcy proceeding. The First Circuit reasoned that this Massachusetts statute did not operate in a vacuum. Rather, the bankruptcy petition triggered the automatic stay provisions of § 362 (a), by stopping collection efforts and giving the debtor breathing room. Further, § 108(c) extends statutes of limitations for creditors who are barred by the automatic stay from taking timely action against the debtor. In Shamus , just as in this case, the argument was raised that 11 U.S.C. § 362 (b)(3) contains an exception to the automatic stay because it allows to a creditor "to perfect, or to maintain or continue the perfection of, an interest in property." Thus, went the argument, the tolling provisions of § 108(c) should not apply. The First Circuit rejected this argument, stating that "neither the case law nor the language of section 362(b)(3) itself suggests that the action it contemplates is mandatory rather than permissive. It clearly is not.", The case upon which River Parishes relies, 800 Bourbon Street , reached the opposite result. 800 Bourbon Street concerns a debtor in its second Chapter 11 proceeding. In the first Chapter 11, a plan was confirmed giving creditor Bay Bridge, who had filed a secured proof of claim in the first case based on several promissory notes and a mortgage, an "in rem " claim against property of the debtor as security for its notes and mortgage. In the second Chapter 11 proceeding, Bay Bridge filed a proof of claim based on the same notes and mortgage. Bay Bridge's mortgage lapsed during the pendency of the second bankruptcy case, and it reinscribed the mortgage shortly after the adversary proceeding objecting to its claim was filed. Bay Bridge responded with several different theories as to why its claim was a secured claim. The 800 Bourbon Street opinion discussed why Bay Bridge's failure to reinscribe was fatal to its claim, and how it could not avail itself of § 108(c) because § 362(b)(3) did not prevent Bay Bridge from reinscribing the mortgage. The court explicitly held that, "the filing of a bankruptcy does not excuse a creditor from maintaining its security interest postpetition." This is in direct contradiction to the holding of Shamus , which states:

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