Cornerstone Log & Timber Homes, Inc.

1 The court, finding that the Tortoretes failed to carry the burden of proof under 11 U.S.C.
§ 350(b), did not reach the issue of whether pursuit of criminal proceedings violated 11 U.S.C. §
524(a).
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
RALEIGH DIVISION
IN RE:
CORNERSTONE LOG & TIMBER 	CASE NUMBER: 09-04503-8-JRL
HOMES, INC., 	CHAPTER 7
DEBTOR.
ORDER DENYING MOTION FOR RELIEF FROM STAY
This matter came before the court on the creditor’s motion for relief from stay. A hearing
was held on January 24, 2011 in Raleigh, North Carolina.
On May 30, 2009, the debtor filed a petition under chapter 7 of the Bankruptcy Code.
William Shaw, Jr. (“Shaw”) was president and fifty percent (50%) owner of the debtor. Shaw
filed an affiliated case under chapter 7, as an individual, on May 27, 2009 (Case No. 09-04409-
8-RDD). Discharge in the individual case was granted on December 23, 2009; the case was
closed on the same date. Mary Lou and Paul Tortorete, unsecured creditors of Shaw, moved to
reopen the individual case. On February 2, 2011, the motion to reopen was denied. 1 The
Tortoretes are also creditors of the debtor.
SO ORDERED.
SIGNED this 09 day of February, 2011.
________________________________________
J. Rich Leonard
United States Bankruptcy Judge
____________________________________________________________
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2
In this instance, relief from the automatic stay is sought for the purpose of approaching
appropriate government authorities with facts of the debtor’s business dealings. Specifically, the
Tortoretes contend that the debtor, through its principals and agents, acted fraudulently when it
accepted funds for the construction of a log home, but failed to complete construction or refund
money. At the hearing, Mary Lou Tortorete testified that she and her husband contracted with
the debtor in July 2008 for a $700,000.00, three bedroom, two and a half bath log house. The
house was intended to be a retirement home for the couple. Fees in the approximate amount of
$23,644.00 were paid to the debtor as “start up.” Funds were then wired to the debtor in
increments upon receipt of invoices.
Based on invoices, the Tortoretes believed construction was progressing as intended.
Emails were exchanged with Terri Groves, Shaw’s business partner and a principal of the debtor,
regarding placement of a superior wall foundation; installation of well and septic systems; and
the milling of logs, which further led to the belief that the home was being built. However, in
December 2008, Mrs. Tortorete visited the property and discovered unimproved raw land. When
the Tortoretes later met with Shaw and Groves, they explained that the business was failing and
a petition for bankruptcy was pending. No explanation was offered for the whereabouts of the
$233,199.41 wired to the debtor by the Tortoretes. Mrs. Tortorete further stated that she is fully
aware that the debtor is insolvent and will be unable to refund her money through either
bankruptcy or criminal proceedings. If relief from the stay were granted, the Tortoretes’ interest
is the pursuit of “justice,” making certain no other individuals would be harmed by the acts of
the debtor.
Section 362(b)(1) does not prevent commencement or continuation of criminal
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3
proceedings against the debtor. This court previously noted a possible exception in the case of a
creditor approaching prosecutorial entities to prompt a criminal action with the primary purpose
of debt recovery. In re Negrete, Case No. 07-00540-8-JRL (Bankr. E.D.N.C. August 10, 2009);
In re Byrd, 256 B.R. 246 (Bankr. E.D.N.C. 2000). Mrs. Tortorete’s unimpeached testimony does
not fit within the exception. The stark reality of the present case is that nearly a quarter million
dollars from a retirement account is gone without explanation or beneficial return. Fully
understanding that the debtor is an insolvent corporation without an ability to pay restitution, and
with no intention to collect a debt, the Tortoretes would not be in violation of 11 U.S.C.
§362(b)(1) were they to approach the appropriate governmental authorities. Relief from the stay
is not necessary.
Based on the foregoing, the motion for relief from stay is DENIED.
END OF DOCUMENT
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