United States District Court, E.D. North Carolina, Western Division
WALTER L. HINSON, Trustee for CELESTE G. BROUGHTON Plaintiff,
BANK OF AMERICA, N.A., Defendant. ASSOCIATED IN RE CELESTE GOLD BROUGHTON, Debtor.
ORDER APPROVING COMPROMISE OF BANK OF AMERICA
LITIGATION PURSUANT TO BANKRUPTCY RULE 9019(A)
REIDINGER, UNITED STATES DISTRICT JUDGE
MATTER is before the Court on the Chapter 7
Bankruptcy Trustee's Motion to Approve Compromise
Pursuant To Bankruptcy Rule 9019(a). [DE-20].
FACTUAL AND PROCEDURAL BACKGROUND
The Bankruptcy Proceeding
December 15, 2014, Celeste G. Broughton (the
"Debtor") filed a voluntary petition for bankruptcy
under Chapter 13 of Title 11 of the United States Bankruptcy
Code. [Bankr. Case No. 14-07268-5-JNC (E.D. N.C. ) ("the
Bankruptcy Proceeding")]. The Bankruptcy Court
subsequently converted this case to one under Chapter 7 on
July 14, 2015. On July 15, 2015, Walter L. Hinson (the
"Trustee") was appointed as the Chapter 7 Trustee
by order of the Bankruptcy Court.
19, 2016, the Honorable Terrence W. Boyle, United States
District Court Judge for the Eastern District of North
Carolina, entered an Order sua sponte withdrawing
the reference to the Bankruptcy Court pursuant to 28 U.S.C.
§ 157(d). With the withdrawal of the reference, Civil
Case No. 5:16-cv-00302-RE was opened, and all matters
relevant to the Bankruptcy Proceeding became subject to the
exclusive jurisdiction of the United States District Court
for the Eastern District of North Carolina. That action and
the present adversary proceeding were reassigned to the
undersigned for all further proceedings on July 21, 2017.
The Present Adversary Proceeding
primary asset of the Debtor's estate is a parcel of real
property, consisting often (10) lots, located at 2529 White
Oak Road, Raleigh, North Carolina 27609 ("the Real
Property"). Several claimants have filed proofs of claim
alleging that they hold secured claims as to the Real
Property, including the Defendant in the present action, Bank
of America ("BOA"). BOA filed its Proof of Claim on
February 5, 2015, alleging that it holds a secured claim in
the amount of $248, 028.25 with an interest rate of 2.74%,
with respect to two (2) of the ten (10) parcels of land that
comprise the Real Property.
support its Proof of Claim, BOA attached a copy of a document
entitled "Equity Maximizer Agreement and Disclosure
Statement" dated April 18, 2006, which provides that
Justin J. Broughton, son of the Debtor, and the Debtor
Celeste G. Broughton borrowed $250, 000.00 from BOA
("the BOA Note"). In an attempt to collateralize
the BOA Note, a Deed of Trust was executed on April 18, 2006,
and notarized on May 27, 2006 ("the BOA Deed of
Trust"). The BOA Deed of Trust describes the Borrower as
"CELESTE GOLD BROUGHTON, TRUSTEE UNTER [sic] THE TRUST
AGREEMENT DATED THE 19TH DAY OF SEPTEMBER, 1997 [sic]"
and refers to the BOA Note as the "Home Equity Line of
Credit signed by the Borrower." The BOA Deed of Trust was
executed by Celeste Gold Broughton, individually and as
trustee under a trust agreement dated the 19th day of
September 1977 and which was recorded in Wake County on June
19, 2006 in Book 012016 at Page 01429 of the Wake County
BOA executed a Subordination Agreement whereby it agreed
to subordinate any lien it may hold in favor of the purported
lien of Capital Bank (now held by Bank of New York Mellon).
The Subordination Agreement was recorded on November 20,
investigating the claims, the Trustee began to question
whether BOA holds a valid security interest against the Real
Property. The Trustee and BOA entered into negotiations but
were unable to obtain an executed settlement agreement or
tolling agreement before the statute of limitations would
have expired. Accordingly, on December 29, 2016, the Trustee
initiated the present action by filing a complaint seeking to
avoid any security interest that BOA purports to hold against
him and the Real Property.
to the filing of the complaint in this proceeding, the
Trustee and counsel for BOA continued their efforts to
resolve the claims asserted by the Trustee. On May 4, 2017,
before BOA had even filed an answer to the Trustee's
complaint, the Trustee filed the present motion, seeking
approval of the parties' settlement agreement. [DE-20].
The Terms of the Proposed Settlement Agreement
proposed settlement agreement purports to fully resolve all
claims that the Trustee may have against BOA in this
proceeding or any other claims that the Trustee may have in
the bankruptcy proceeding captioned as In re: Celeste G.
Broughton, Civil Case No. 5:16-cv-00302-RE (E.D. N.C. ).
Furthermore, the agreement purports to resolve any claims
that BOA may have against Walter L. Hinson, the duly
appointed Chapter 7 Trustee in this proceeding.
to the terms of proposed agreement, the Trustee will
liquidate the Real Property as quickly as he is able to do
so. The Real Property may be sold as one single parcel; sold
in different parcel groupings; or, sold as individual lots
among the 10 lots. The Trustee agrees to sell the lots in a
fashion so as to generate the largest return for the estate.
The manner in which the ...