CHAPTER
13 TRUSTEE ALEJANDRO OLIVERAS’ POLICY ON STEPS TO UNDERTAKE/ITEMS TO CONSIDER
WHEN REVIEWING NOTICES OR MOTIONS FOR SALE OF PROPERTY
(Jul/2008)
I. EXAMINE THE CONTENT OF THE NOTICE. (FRBP 6004 & LBR 6004-1)
(1) time and place of any public (LBR refers to proposed) sale
(2) the terms and conditions of any private sale. LBR calls for a summary of the terms and conditions of the proposed sale. Best practice is to include legible copy of the sales/purchase contract.
(3) the time fixed for filing objections.
(4) the notice of a proposed use, sale, or lease of property, including real estate, is sufficient if it generally describes the property. Tie in the description to that which appears in the schedules.
(5) LBR requires a statement of the aggregate amount of liens or
encumbrances known to the movant. In this area we would be looking for
documentary evidence to support the statement, such as bank pay-off letters and
CRIM certificates of debt. Likewise,
this factor makes the attachment of a title search indispensible.
(6) LBR
requires a statement that the proposed sale price is at least equal to or
more than the value of the property. In order to ascertain this criteria, we
would be looking for an appraisal report. No where is guidance given as to the
situation where the sale price is less than the value of the property. Here we would look in the motion/notice for
facts justifying the sale under that circumstance.
Verify that certificate of service of the notice is filed with the Court. (LBR 6004-1).
II. SALE
FREE AND CLEAR OF LIENS, LIENS TO ATTACH TO THE PROCEEDS
If the sale is free and clear of liens and other interests, liens to attach to the proceeds (bear in mind that this is not the same as paying off the liens at closing) the motion is to be made under Rule 9014, so states FRBP 6004(c). Specific mention is made that the motion shall be served (aside from other parties in interest) on the parties who have liens or other interests in the property to be sold.
As we all know, FRBP 9014 governs in contested matters. Rule 9014, in turn incorporates Rule 7004 as to service of notice. Rule 7004 has special provisions when an entity to be served is an insured depository institution (with the Federal Deposit Insurance Corp., FDIC). Then service shall be made by certified mail addressed to an officer of the institution unless—
(1) the institution has appeared by its attorney, in which case the attorney shall be served by first class mail;
(2) the court orders otherwise after service upon the institution by certified mail of notice of an application to permit service on the institution by first class mail sent to an officer of the institution designated by the institution; or
(3) the institution has waived in writing its entitlement
to service by certified mail by designating an officer to receive service.)
III. SALE
FREE AND CLEAR OF INTERESTS OF OTHERS.
If sale is proposed free and clear of any
interest in such property of an entity other than the estate, then verify which of the following is
alleged to apply. 11
(1)
applicable nonbankruptcy law permits sale of such property free and clear of
such interest; See if the proponent (debtor) has
identified the applicable nonbankruptcy law and determine whether indeed it
allows for the sale.
(2)
such entity consents; verify
the consent, preferably by way of
documentary evidence.
(3)
such interest is a lien and the price at which such property is to be sold is
greater than the aggregate value of all liens on such property; verify value of liens with a comparison of
the property value shown thru an appraisal report and value of liens thru
pay-off statements issued by
lienholders.
(4)
such interest is in bona fide dispute; if
so, seek out the facts that conform the dispute or
(5) such entity could be compelled, in a
legal or equitable proceeding, to accept a money satisfaction of such interest. Identify the Debtor’s averments in support
of this proposition and verify the legal basis therefore
IV. ADEQUATE PROTECTION REQUEST
Review docket to verify if a request has been made by an entity that has an
interest in the property
proposed to be used, sold, or leased, by the Debtor(s) to provide adequate
protection of such interest. 11
V. SALE
OF CO-OWNER’S INTEREST
If notwithstanding subsection (f) of section
363, supra, the Debtor intends to sell both the estate's interest, and the
interest of any co-owner in property in which the debtor had, at the time of
the commencement of the case, an undivided interest as a tenant in common,
joint tenant, or tenant by the entirety, (11 U.S.C. §363(h) then verify if at least
one of the following is averred, and somehow supported by facts/documents, in
the notice/motion:
(1)
partition in kind of such property among the estate and such co-owners is
impracticable;
(2)
sale of the estate's undivided interest in such property would realize
significantly less for the estate than sale of such property free of the
interests of such co-owners;
(3)
the benefit to the estate of a sale of such property free of the interests of
co-owners outweighs the detriment, if any, to such co-owners; and
(4) such property is not used in the
production, transmission, or distribution, for sale, of electric energy or of
natural or synthetic gas for heat, light, or power.
VI.
ADJUDICATION OF COSTS
Where sale proposes distribution to the
debtor's spouse or the co-owners of such property, as the case may be, and to
the estate, verify that costs and expenses, of such sale are apportioned according
to the interests of such spouse or co-owners, and of the estate. 11 U.S.C. §363(j)
VII. VERIFY THE NOTICE PERIOD.
Pursuant
FRBP 6004, Rule 2002 applies, specifically 2002(a)(2) requiring at least 20
days' notice by mail,
unless for cause shown the Court shortens the time or directs another method of
giving notice. If debtor seeks a shortened period look for specific facts that may
nurture a finding of cause. The mere
statement that time is of the essence, without more, should not suffice. LBR 6004-1(a)(2) as to shortening of the
notice period states indicates the Court will undertake the matter under
“appropriate” request. We hold the
position that “appropriate” equals “for cause shown”
VIII.
REVIEW SCHEDULES and POC’s
Schedule A (for disclosed value of property as of petition date); C for claimed exemption if any; D for scheduled amount of lien(s) and relevant Proof of Claims
IX. PLAN(S)
REVIEW
Comparative review of confirmed plan and any subsequently approved or pending post confirmation modified plans. Special attention to be given to plan term and base balance.
X.
OBJECTION FOLLOW-UP
On day 16 from notice of the proposed sale verify if an objection has been filed. FRBP 6004(b); LBR 6004-1(a)(3).
XI.
APPEAL FOLLOW-UP
Verify on day eleven (11) after
entry of order approving the sale, whether an appeal has been taken and/or if
motion to stay the order pending the appeal has been filed.
XII STAY OF ORDER AUTHORIZING USE, SALE, OR
LEASE OF PROPERTY.
An order authorizing the use, sale, or lease of property …is stayed
until the expiration of 10 days after entry of the order, unless the
court orders otherwise. Consequently it is advisable (at the
discretion of the moving party) that urgent motions to sell or for expedited
consideration by the court, contain language seeking to waive this 10 day stay,
obviously by showing cause therefore. If
such request is made, evaluate the merits thereof.
XIII. REPORT ON SALE FRBP 6004 (F)(1)
… Unless it is impracticable, an itemized statement of the property sold, the name of each purchaser, and the price received for each item or lot or for the property as a whole if sold in bulk shall be filed on completion of a sale. …If the property is not sold by an auctioneer, the trustee, debtor in possession, or chapter 13 debtor shall file the statement and transmit a copy thereof to the United States trustee.
The above is what requires a report on sale.
LBR 6004-1 (a)(4) on this matter
states that the trustee or
debtor in possession shall file with the court a report of any sale of estate
property outside the ordinary course of business. The report shall be filed
within thirty (30) days after the sale with a copy to the United States
Trustee.
Regarding the text of
subsection (a)(4) the Chapter 13 Trustees of this District had the following
comment to make when the rule was in its proposal stage:
“As
to the above Rule we suggest the term to file the Report on Sale be reduced to
10 days. First, because the terms of
the sale have already been previously noticed and second, thirty days to file a report on matters that
have been previously noticed appears to be excessive. On the other hand, the sooner the report is
filed the sooner it can be examined to
determine if any deviation from the terms of sale notice occurred and if so an
early remedial action can be undertaken.”
Consequently we will be looking for the report
to be filed as close to the sale date as posible.
XIV. MOTIONS TO RATIFY SALES
We take as given that, during the initial interview with
clients, counsel provides advise to the effect that if debtor(s) were to sell
property, counsel should be notified, prior thereto to determine whether Court
authority therefore is necessary. Thus,
it is our position that it will be rare the case, where a sale that required
Court authority, is justified in closing prior to obtaining the Court order
thereon.
From
our perspective we will be be scrutinizing carefully the grounds given in any
motion to ratify sales.