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In re Broughton

United States District Court, E.D. North Carolina, Western Division

December 15, 2017

In re CELESTE G. BROUGHTON, Debtor.

          ORDER ALLOWING SALE OF ASSETS FREE AND CLEAR OF LIENS AND TRANSFER OF LIENS TO PROCEEDS OF SALE

          MARTIN REIDINGER DISTRICT JUDGE.

         THIS MATTER is before the Court on the Trustee's Motion to Sell Assets Free and Clear of Liens and Transfer Liens to Proceeds of Sale [DE-411] 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-BO]. The United States District Court thereafter docketed the main bankruptcy proceeding as Civil Case No. 5:16-cv-302-BO.[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:

         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 1799 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 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 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. Ci ...


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