Martha Ann Hollowell

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
RALEIGH DIVISION
IN RE:
MARTHA ANN HOLLOWELL
DEBTOR
CASE NO.
06-01179-5-ATS
ORDER ALLOWING DEBTOR'S MOTION
TO SELL PROPERTY FREE AND CLEAR OF LIENS
AND TO EMPLOY REAL ESTATE AGENT
The matter before the court is the motion filed by the chapter 13
debtor, Martha Ann Hollowell, to sell real property free and clear of
liens. S.T. Wooten Corporation, which holds a judgment in the amount
of $7,969.93 plus interest and costs that is a lien against a one-half
undivided interest in the real property, objected. The debtor also
seeks authorization to employ a real estate agent to conduct the sale.
A hearing was held in Raleigh, North Carolina on December 5, 2006.
Ms. Hollowell filed a petition for relief under chapter 13 of the
Bankruptcy Code on August 3, 2006. S.T. Wooten filed a secured proof
of claim asserting a lien of $7,969.93 against the debtor's residence
in Cary, North Carolina. S.T. Wooten's secured claim is based on a
SO ORDERED.
SIGNED this 13 day of December, 2006.
________________________________________
A. Thomas Small
United States Bankruptcy Judge
____________________________________________________________
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judgment that it obtained on March 13, 2003, against James J. Gerow,
who at that time was the owner, with Ms. Hollowell as tenants in
common, of the debtor's Cary residence. Subsequently, on November 11,
2003, Mr. Gerow conveyed his interest in the property to Ms. Hollowell.
In an order dated November 9, 2006, the court ruled that S.T.
Wooten had a valid secured claim on the real property, but that the
secured claim only extended to the one-half undivided interest that Mr.
Gerow owned at the time that the judgment lien became effective.
Furthermore, the court stated in the order that "a sale of the real
property and apportionment of the proceeds is the best way to deal with
S.T. Wooten's secured claim." Order of November 9, 2006 at p. 2.
S.T. Wooten argues that the debtor cannot sell the property unless
S.T. Wooten's secured claim is paid in full. According to S.T. Wooten,
at the time that Mr. Gerow transferred his one-half interest in the
property to Ms. Hollowell, there was sufficient equity in the real
property to pay S.T. Wooten's claim in full. Consequently, S.T. Wooten
contends that its claim must be paid in full and, if it cannot be paid
in full, that the sale should not be authorized under § 363(f). The
debtor acknowledges that the proceeds from any sale may not be
sufficient to pay S.T. Wooten's secured claim in full, but maintains
that payment in full is not required under § 363(f).
Real property may be sold free of liens only if one of the five
provisions of 11 U.S.C. § 363(f) is met. Three of those provisions
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clearly have not been satisfied. S.T. Wooten has not consented to the
sale as required by § 363(f)(2); the debtor cannot show that the sale
will satisfy the lien in full under § 362(f)(3); and S.T. Wooten's lien
is not the subject of a bona fide dispute under § 362(f)(4). However,
the sale does meet the requirements of both §§ 363(f)(1) and (f)(5),
and that is a sufficient basis to justify proceeding with the sale.
A sale free of liens is permitted by § 363(f)(1) if "applicable
nonbankruptcy law permits sale of such property free and clear of such
interest." The applicable nonbankruptcy law in this case is North
Carolina real property law.
North Carolina law permits the sale or partition of land held by
tenants in common. See N.C. Gen. Stat. § 46-22 (2005) (discussing the
bases for sale in lieu of partition); see also, e.g., Brown v. Boger,
263 N.C. 248, 256, 139 S.E.2d 577, 582-83 (1965); Chamberlain v. Beam,
63 N.C. App. 377, 380, 304 S.E.2d 770, 773 (1983). Although the
property is no longer held by tenants in common, partition or sale is
still necessary for S.T. Wooten's lien on a one-half undivided interest
to be satisfied. Because the property is now held entirely by Ms.
Hollowell, there is no reason to prefer partition to sale, and Ms.
Hollowell's motion to sell free and clear of liens should be allowed.
A sale free of liens is permitted by § 363(f)(5) if "such entity
[S.T. Wooten] could be compelled, in a legal or equitable proceeding,
to accept a money satisfaction of such interest." In effect, a sale
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authorized under North Carolina law to realize an undivided interest in
property, such as is held by S.T. Wooten, would compel the holder of
the interest to accept a money satisfaction from the proceeds of the
sale in satisfaction of that interest.
S.T. Wooten's argument that its claim must be paid in full because
the value of the real property at the time Mr. Gerow conveyed his
interest to the debtor was sufficient to satisfy its claim is not
persuasive. S.T. Wooten's judgment lien reaches only the undivided
one-half interest that Mr. Gerow formerly owned, and the amount that
can be realized on that judgment is not determined by the value (high
or low) at any point in time prior to the filing of the bankruptcy
petition. If the debtor were going to keep the real property and pay
the secured claim through her plan, the court would value the one-half
undivided interest as of the date of the bankruptcy petition. However,
the debtor does not intend to keep the property, and the best way to
ascertain the amount to which S.T. Wooten is entitled is through a
sale as proposed by the debtor in her motion.
The debtor's motion to sell the property free and clear of liens,
and to employ McHugh & Associates Realty as a real estate agent to
conduct the sale, is ALLOWED.
SO ORDERED.
END OF DOCUMENT
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