In re Valid Value Props., LLC

In re: VALID VALUE PROPERTIES, LLC, Debtor.

Case No. 16-13299

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK

January 5, 2017

NOT FOR PUBLICATION

Chapter 11

MEMORANDUM OPINION AND ORDER GRANTING MOTION TO LIFT THE STAY NUNC PRO TUNC TO THE PETITION DATE, DISMISSING CASE AS BAD FAITH FILING, AND ENJOINING ADDITIONAL BANKRUPTCY PETITION FILINGS FOR TWO YEARS

APPEARANCES:

WINDELS MARX LANE & MITTENDORF, LLP

Attorneys for TPG CW REO, L.L.C., assignee of TPG CW, L.P.

156 West 56^th Street

New York, NY 10019

By: Leslie S. Barr, Esq.

Mark Slama, Esq.

WILLIAM K. HARRINGTON

United State Trustee for Region 2

201 Varick Streeet, Room 1006

New York, NY 10014

By: Greg M. Zipes, Esq.

MARTIN GLENN UNITED STATES BANKRUPTCY JUDGE

Pending before the Court are the following motions:

1. The Motion of TPG CW REO, L.L.C., Assignee of TPG CW, L.P. for Order (A) Dismissing Debtors' Bankruptcy Case for Cause, Including Bad Faith, Nunc Pro Tunc to the Filing Date, or in the Alternative, (B) Annulling the Automatic Stay for Cause, Including Bad Faith and Lack of Adequate Protection, or (C) Granting Movant Adequate Protection (the "TPG Motion," ECF Doc. # 4), filed by TPG CW REO LLC as assignee of TPG CW LP ("TPG") on December 14, 2016. In support of the TPG Motion, TPG filed the Affidavit of Julie Melander (the "Melander Affidavit," ECF Doc. # 4-1) and certain exhibits attached thereto.¹

2. The Memorandum of Law of the United States Trustee in Support of Motion for an Order to Convert this Case to Case Under Chapter 7 of the Bankruptcy Code or Dismiss this Chapter 11 Case (the "UST Motion," ECF Doc. # 7), filed by the United States Trustee (the "UST") on December 19, 2016.

3. The Response of TPG CW REO, L.L.C., Assignee of TPG CW L.P., in Partial Opposition to Motion of the United States Trustee for Order Converting This Chapter 11 Case to a Case Under Chapter 7, or in the Alternative, Dismissing Debtor's Chapter 11 Case for Cause (the "TPG Response," ECF Doc. # 9), filed by TPG on December 29, 2016.

Valid Value Properties, LLC (the "Debtor") did not respond to these motions, and neither the Debtor nor Farrel Donald, counsel to the Debtor, appeared at the January 5, 2017 hearing on the TPG Motion and the UST Motion.

I. BACKGROUND

This chapter 11 case was filed on November 21, 2016. (ECF Doc. # 1.) The petition is signed by the Debtor's president, Geoffrey Ukekweh ("Ukekweh"), and by counsel, Farrel Donald, Esq. The Debtor has yet to file any schedules or other required filings in this case, so the facts set forth below are taken from the pleadings filed by TPG and the UST.

A. The Debtor's Business

The Debtor is the apparent owner of non-residential real property located at 701-703 East 219th St., a/k/a 3800 White Plains Road, Bronx New York (the "Property"). (TPG Mot. at 5.) As set forth in the Melander Affidavit, on May 29, 2007, Ukekweh executed and delivered to TPG a Promissory Note (the "Note") relating to a commercial loan made to him in the amount of$1,000,000.00 (the "Loan"). (Melander Affidavit at 1, Ex. A.) Ukekweh also executed and delivered to TPG a mortgage dated May 29, 2007 (the "Mortgage"), which provided security for payment of money owing to TPG under the Note. (Melander Aff. at 2, Ex. B.) As additional security for the Note and Loan, Ukekweh executed and delivered to TPG an assignment of leases and rents (the "ALR," ECF Doc. # 4-4) also dated May 29, 2007, whereby all right, title and interest in current and future leases and rents were assigned unconditionally to TPG. (Melander Aff. at 2, Ex. C.) UCC-1 Financing Statements were filed to perfect TPG's security interest in Ukekweh's pledged property. (Melander Aff. at 3, Ex. D.) The Melander Affidavit indicates that on February 7, 2008, Ukekweh transferred title to the Property to Valid Value Properties, LLC. (Melander Aff. at 3.)

TPG maintains that the Debtor and Ukekweh rent the Property to commercial tenants, and retain the rental payments in violation of the ALR in favor of TPG. TPG also states that Ukekweh defaulted on obligations under the loan documents by, among other things, "failing to make regularly scheduled payments of principal and interest . . . commencing in September 2012 and continuing thereafter unabated; (ii) failing to pay real estate taxes and municipal assessments against the Property; (iii) causing numerous liens to be placed on the Property [e.g. New York City Environmental Control Board Liens]; (iv) failing to timely provide requested financials to TPG, including proof of insurance; and (v) failing to pay to [TPG] all rents, issues, and profits of the Property under the terms of the ALR." (Melander Aff. at 3-4.) TPG asserts that the "Debtor and Ukekweh have not paid taxes or water and sewer charges which encumber [TPG's] collateral and prior to the November 21, 2016 sale the amount of these liens exceeded $101,374.88, plus interest and penalties." (TPG Mot. at 5.)

The Melander Affidavit indicates that the Debtor is indebted to TPG in the amount of $1,523,645.34 as of May 31, 2016, which amount is secured by a lien on the Property. (Melander Aff. at 7.)

B. The Debtor's Previous Filings and the Chapter 13 Dismissal Orders

On July 15, 2014, the Debtor's principal, Ukekweh, filed a chapter 13 case, purportedly to stay TPG's foreclosure proceedings. (TPG Motion at 2.) This chapter 13 case (the "First Ch. 13 Case") was dismissed after less than two months for, among other things, failure to remit timely plan payments, failure to timely file documents, and failure to provide the trustee with copies of federal and state tax returns. (Id.; see also In re Ukekweh, Case No. 14-12069, ECF Doc. # 14 (Bankr. S.D.N.Y. Sept. 8, 2014).) Ukekweh seems to have appeared pro se in the First Ch. 13 Case.

On May 5, 2016, Ukekweh again filed for chapter 13 relief (the "Second Ch. 13 Case") before Judge Garrity. In re Ukekweh, a/k/a Geoffrey Ukekweh, d/b/a Valid Value Properties, LLC, d/b/a Geodana Realty, Corp., Case No. 16-11307 (Bankr. S.D.N.Y.) (JLG) (emphasis added). On September 27, 2016, Judge Garrity entered an order granting a motion to dismiss the case with prejudice, and barred Ukekweh from filing for bankruptcy under any chapter for one year. In re Ukekweh, Case No. 16-11307, ECF Doc. # 20 (Bankr. S.D.N.Y. Sept. 27, 2016). Dismissal was ordered in that case for the following reasons: Ukekweh's noncontingent, liquidated, secured debts exceeded the statutory limit; Ukekweh failed to file information required under Bankruptcy Code § 521; Ukekweh caused unreasonable delay that was prejudicial to creditors; Ukekweh failed to timely file a plan and remit timely plan payments; and Ukekweh failed to provide the trustee with tax returns. (Id.)

C. The State Court Foreclosure Proceedings

On December 14, 2012, TPG filed a complaint against Ukekweh and the Debtor in the Supreme Court of the State of New York, Bronx County (the "State Court"). (Melander Aff. at 4.) Following proceedings in the State Court, TPG obtained a judgment of foreclosure and sale entered on February 25, 2016 (the "Judgment"), in the case titled TPG CW, L.P., Plaintiff, against Geoffrey O. Ukekweh, et al., Defendants, Index No. 35166-12 (the "Foreclosure Action"). (TPG Mot. at 4-5.) TPG states that "Ukekweh was found to be in contempt of the state court's order appointing a receiver by continuing to collect rents generated by the real Property after the State Court appointed the receiver to do so and operate the Property." (TPG Mot. at 5.) TPG maintains that Ukekweh "has never purged that contempt, nor paid the sanctions imposed upon him by the State Court." (Id.)

D. The Sale

A public auction sale of the Property (the "Sale") was set to be held on November 21, 2016, at 2:00 p.m. (Melander Aff. at 6.) On the morning of November 21, 2016, the Debtor filed an order to show cause with the State Court seeking to stay the public auction, but the State Court declined to stay the Sale. (Melander Aff. at 6, Ex. K.) The Sale, which was held before TPG received notice of the Petition, produced a winning bid of $1,050,000, and the winning bidder tendered a deposit of $101,000 and executed a memorandum of sale. (Melander Aff. at 6, Ex. L.)

E. The Petition

At 2:12 p.m. on November 21, 2016, Valid Value Properties LLC filed a petition for relief under chapter 11 of the Bankruptcy Code (the "Petition," ECF Doc. # 1). TPG asserts that "[t]he Debtor filed this chapter 11 petition within minutes of the State Court ordered foreclosuresale and immediately after the State Court denied his third request for a stay." (TPG Mot. at 5.) The Petition includes the following information:

1. The Petition is signed by Ukekweh, the Debtor's president and principal, and by attorney Farrel Donald ("Donald"), of the law offices of Farrel Donald, who signed the Petition as the Debtor's attorney. (Petition at 5.)

2. The Petition lists only two unsecured creditors: TPG CW, L.P., with an unsecured claim of $400,000 on account of "bank loans"; and Windels Marx Lane & Mittendorf (counsel to TPG), with an unsecured claim of $20,000 also on account of "bank loans." (Petition at 7.) "National City Bank" is listed on the "List of Creditors (Matrix)" but does not appear on the list of unsecured creditors. (Petition at 6.)

3. The Petition estimates the Debtor's assets at $100,000 to $500,000, with liabilities estimated at $500,000 to $1,000,000. (Petition at 3-4.)

4. The "Single Asset Real Estate" box on the Petition is not checked. (Petition at 2.)

The Debtor has not filed any schedules to date, and the deadline to do so was December 5, 2016. See ECF entry on November 21, 2016 ("Incomplete Filings due by 12/5/2016").

II. THE MOVING PARTIES' CONTENTIONS

A. TPG's Contentions

TPG argues that the filing of the Petition is a clear violation of the Second Ch. 13 Dismissal Order, and that the Court should dismiss this case pursuant to Bankruptcy Code sections 105 and 349(a). (TPG Mot. at 7.) TPG argues further that pursuant to sections 109(g), the Debtor is...