Comm 2013 CCRE12 Crossing Mall Road, LLC et al v. Tara Retail Group, LLC et al

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
IN RE: 	) 	CHAPTER 11
)
TARA RETAIL GROUP, LLC 	) 	Case No. 1:17-bk-00057
Debtor. 	)
)
COMM 2013 CCRE12 CROSSINGS MALL 	)
ROAD, LLC 	)
Plaintiff, 	)
)
v. 	)
)
TARA RETAIL GROUP, LLC 	)
Defendant, Cross Plaintiff 	) 	Adversary Proceeding
and Third-Party Plaintiff, 	) 	No. 1:21-ap-00001
)
v. 	)
)
COMM 2013 CCRE12 CROSSINGS MALL 	)
ROAD, LLC 	)
Cross Defendant and 	)
)
WELLS FARGO COMMERCIAL 	)
MORTGAGE SERVICING 	)
Third-Party Defendant. 	)
MEMORANDUM OPINION
This matter comes before the Court on cross motions for summary judgment filed by the
Defendant, Cross Plaintiff and Third-Party Plaintiff and Reorganized Debtor, Tara Retail Group,
LLC (“Tara” or “Debtor”), and by the Plaintiff, Comm 2013 CCRE12 Crossings Mall Road,
SIGNED: January 6th, 2022
THIS ORDER HAS BEEN ENTERED ON THE DOCKET.
PLEASE SEE DOCKET FOR ENTRY DATE.
________________________________
Paul M. Black
UNITED STATES BANKRUPTCY JUDGE
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LLC (“Comm 2013”), and Third-Party Defendant, Wells Fargo Commercial Mortgage Servicing
(“Wells Fargo”). Comm 2013 and Wells Fargo are sometimes referred to herein collectively as
the “Lending Parties.” This is the latest dispute in a long running battle between Tara and the
Lending Parties, which has resulted in nearly fifteen hundred docket entries, tens of thousands of
pages of pleadings and exhibits, multiple adversary proceedings, numerous contested matters,
three failed mediations, and several appeals. By last count, a Westlaw search revealed fifteen
(15) written opinions generated in connection with this bankruptcy case, many of which are
between the Debtor and the Lending Parties. This case has been fraught with hostility among the
parties, and with sometimes what can only charitably be described as hard-ball gamesmanship —
if not worse.
PRELIMINARY SUMMARY
The genesis of the current dispute arises from the Court’s confirmation opinion and order,
entered by the Honorable Patrick M. Flatley, on January 27, 2020 (collectively the
“Confirmation Opinion”). In short, the primary unanswered issue is what loan and security
documents control the relationship between Tara and the Lending Parties post-confirmation. The
Court will address that issue in more detail below. Nevertheless, the road map of how this case
reached this point is worthy of some explanation.
Judge Flatley retired on March 11, 2020. After the confirmation order was entered, but
before Judge Flatley retired, the Debtor filed a motion to alter or amend judgment on February 5,
2020, and the Lending Parties filed on February 10, 2020 a motion for clarification of the terms
of the confirmation order. ECF 1326, 1345. The parties argued the motions before Judge Flatley
the day before he retired, and at that hearing he advised the parties that it was unlikely he would
rule on the issues raised before his retirement was effective. He did suggest, however, that the
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parties attempt to mediate the dispute before United States Magistrate Judge Robert W. Trumble
in the Northern District of West Virginia. Judge Trumble is an experienced mediator and, prior
to taking the bench, was a former Chapter 7 bankruptcy trustee. With this knowledge and
experience, Judge Trumble seemed the perfect mediator. Unfortunately, that mediation was
unsuccessful.1
Judge Flatley’s successor could not hear the case, having previously been involved with it
through the Office of the United States Trustee. United States District Judge Frank W. Volk was
assigned to the case after Judge Flatley’s retirement, but Judge Volk was hearing the bankruptcy
case as a United States District Judge after serving as the United States Bankruptcy Judge for the
Southern District of West Virginia. Judge Volk was confirmed as a United States District Judge
on October 16, 2019, and he continued to hear bankruptcy cases until his successor was
appointed. While Judge Volk considered the clarification motion during his tenure on the case,
he did not issue a decision or written opinion. His successor as a bankruptcy judge also had a
conflict with this case, and the undersigned was designated to hear the matter effective
September 14, 2020. By order entered September 24, 2020, the Court entered what is now
referred to as the “Clarification Order.”2 Unfortunately, despite the Court’s ruling, the parties
continue to disagree over the Confirmation Opinion and Clarification Order’s meanings as well
as the governing post-petition loan documents.
1 It appears a mediation was held with Chief United States Bankruptcy Judge Jeffery A. Deller of the Western
District of Pennsylvania in November 2017 pertaining to contested claims. That mediation, too, was unsuccessful.
ECF 453. It appears that this mediation involved other claims and parties in addition to Comm 2013 and the Debtor,
not just the current combatants.
2 The initial order of confirmation was appealed to the United States District Court for the Northern District of West
Virginia. No separate appeal was taken from the Clarification Order.
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On February 4, 2021, Comm 2013 filed a declaratory judgment complaint against the
Debtor initiating the current adversary proceeding. In paragraph 50 of the Complaint, Comm
2013 alleges as follows:
An actual, present, and justiciable controversy has arisen between the Secured
Creditor and Debtor concerning (a) the interpretation and implementation of the
Plan; (b) the Loan terms in effect post-confirmation; (c) the legal relationship
between the Secured Creditor and the Debtor, including Secured Creditor’s right
to exercise state-law remedies under the Loan Documents following the Defaults;
(d) the scope of the Post-Confirmation Injunction and its application to Secured
Creditor’s enforcement of the Defaults, and (e) whether the Lien Release is a legal
nullity.
A.P. ECF 1. The “Lien Release” referred to is a document dated February 5, 2020 prepared and
filed by counsel for the Debtor and recorded in the land records of Kanawha County, West
Virginia on February 6, 2020 releasing a $13,650,000.00 Deed of Trust securing the Lending
Parties.3 Counsel for the Debtor represented in the Lien Release that the release of the Deed of
Trust was authorized by the Confirmation Opinion, a fact the Lending Parties vehemently
dispute. A later document dated February 18, 2021 executed by the Debtor captioned
“Reinstatement of Deed of Trust by Bankruptcy Court Order” was recorded in the Kanawha
County, West Virginia land records on February 25, 2021. The reinstatement document
provided, in part, as follows:
WHEREAS, following a motion filed by COMM2013 on February 10, 2020,
seeking to clarify, amend or reconsider the order confirming Tara’s Chapter
11 plan, the Bankruptcy Court entered a Memorandum Opinion and Order on
September 24, 2020 (the “September 24, 2020 Memorandum Opinion and
Order”), clarifying that Tara’s modification of COMM2013’s claim against
Tara would continue to be secured by the Deed of Trust. A true and correct
copy of the September 24, 2020 Memorandum Opinion and Order is attached
hereto and made a part hereof as Exhibit A.
3 The Lien Release reflects it was prepared by Jonathan Nicol of Kay Casto & Chaney PLLC. Steven Thomas, the
Debtor’s lead counsel, represented to the Court the Lien Release was prepared by Nicol at his direction.
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A.P. ECF 5, Ex. C. Once the Clarification Order was entered, the Debtor knew the Court’s
expectation that the existing security documents remained effective. More significantly, for over
a year, there appears to have been nothing in the land records of Kanawha County, West Virginia
to reflect that the substantial indebtedness the Debtor owed to the Lending Parties was secured
by the Debtor’s real estate.4 When the Court references hard-ball gamesmanship, or worse, this
is a prime example.5
After Comm 2013 filed the declaratory judgment action, the Debtor filed a counterclaim
against Comm 2013 and a third-party complaint against Wells Fargo demanding that those
parties turn over funds paid by tenants pre-petition so that those funds could be applied against
the debt to the secured lender. Comm 2013 and Wells Fargo have denied that the Debtor is
entitled to that relief. Both the Debtor and the Lending Parties have filed motions for summary
judgment, which were argued August 19, 2021. At oral argument, the Court suggested that the
parties once again try mediation, and the Honorable Keith L. Phillips, United States Bankruptcy
Judge for the Eastern District of Virginia, was appointed by the Fourth Circuit as a judicial
settlement officer. The case was mediated over multiple days in October and November, 2021,
and on November 16, 2021, Judge Phillips filed a notice of impasse and the mediation
concluded. A.P. ECF 53. The summary judgment motions are now ripe for resolution.
4 Comm 2013’s amended proof of claim filed in this case lists the claim as secured in the amount of $13,100,000.00,
and unsecured in the amount of $5,914,111.65. POC 2-3.
5 The Court notes that the same counsel for the Debtor who was involved in releasing the deed of trust also replied
to the Lending Parties’ notice of default by copying U.S. Senators Shelley Moore Capito and Joe Manchin, and U.S.
Representatives David McKinley, Alex Mooney, and Carol Miller. See Declaration of Steven L. Thomas at Ex. D
attached to Ex. 5. A.P. ECF 20. Other than to potentially ratchet up pressure on the Lending Parties from outside
sources unrelated to this bankruptcy case, what this was intended to accomplish is unclear.
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CONCLUSIONS OF LAW
This Court has jurisdiction of this matter pursuant to 28 U.S.C. §§ 1334(a) and 157(a)
and the delegation made to this Court by Order of the United States District Court for the
Northern District of West Virginia. This Court further concludes that this matter is a “core”
bankruptcy proceeding within the meaning of 28 U.S.C. § 157(b)(2)(A), (L), and (O).
I. 	The Applicable Legal Standard
Federal Rule of Civil Procedure 56, applicable in adversary proceedings through Federal
Rule of Bankruptcy Procedure 7056, states that “[t]he court shall grant summary judgment if the
movant shows that there is no genuine dispute as to any material fact and the movant is entitled
to judgment as a matter of law.” Fed. R. Civ. P. 56(a). “When faced with cross-motions for
summary judgment, the court must review each motion separately on its own merits ‘to
determine whether either of the parties deserves judgment as a matter of law.’” Rossignol v.
Voorhaar, 316 F.3d 516, 523 (4th Cir. 2003) (citing Philip Morris Inc. v. Harshbarger, 122 F.3d
58, 62 n.4 (1st Cir. 1997)). “When considering each individual motion, the court must take care
to ‘resolve all factual disputes and any competing, rational inferences in the light most favorable’
to the party opposing that motion.” Rossignol, 316 F.3d at 523 (citing Wightman v. Springfield
Terminal Ry. Co., 100 F.3d 228, 230 (1st Cir. 1996)). See In re Terry Properties, LLC, No. 16-
71449, 2017 WL 507277, at *3 (Bankr. W.D. Va. Feb. 3, 2017), aff'd, No. 16-71449, 2017 WL
3736772 (W.D. Va. Aug. 30, 2017).
II. 	The Issues in Dispute
A. The Governing Loan Documents
In addressing the current dispute between the parties, it is necessary to lay some factual
groundwork. The following facts are taken in large part from Judge Flatley’s Memorandum
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Opinion of January 27, 2020. The Debtor owns The Crossings Mall in Elkview, West
Virginia. It is a multi-tenant commercial property encompassing about 200,000 square feet.
Public access to it is limited to a single bridge—formerly spanning a culvert—over Little Sandy
Creek. The Debtor purchased The Crossings Mall in 2013 after the then-owner, Interstate
Properties, LLC, filed a Chapter 11 bankruptcy in the Northern District of Georgia. To
finance its purchase of The Crossings Mall, the Debtor obtained a loan from UBS Real Estate
Securities, Inc. (“UBS”). UBS agreed to finance the Debtor’s $13,650,000.00 purchase on
certain conditions. In that regard, the Debtor executed a Loan Agreement and Promissory Note,
the repayment of which the Debtor secured by executing a Deed of Trust and an Assignment of
Leases and Rents. 	Additionally, the Debtor executed a Cash Management Agreement and
Management Agreement. ECF 1313, at p. 1. UBS subsequently assigned the loan to U.S. Bank
N.A., as trustee for Comm2013 CCRE12 Commercial Mortgage Pass Through Certificates. In
2017, that entity assigned the loan to Comm 2013. Wells Fargo services the loan and
administers certain escrow accounts consistent with its role in that regard. Id. at p. 2.
Among other subaccounts created by the Original Loan Agreement, Wells Fargo
maintains an account for Capital Expenditures, which the Loan Agreement defines as “the
amounts expended for items required to be capitalized under GAAP (including
expenditures for replacements, building improvements, major repairs, alterations, tenant
improvements and leasing commissions).” Specifically, the Debtor was to deposit $3,493.62
monthly into the Capital Expenditure Account, and Section 6.4.2 of the Loan Agreement
controls the release of those funds. 	It provides, among other things, that the Defendants
“disburse to [the Debtor] the Capital Expenditure Funds upon satisfaction by [the Debtor]”
of various conditions. Among those conditions is that the Lending Parties “shall have received
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an Officer’s Certificate (A) stating that all items to be funded by the requested disbursement are
Capital Expenditures, [and] (B) stating that all Capital Expenditures to be funded by the
requested disbursement have been completed in a good and workmanlike manner . . . .” ECF
1313, at p. 2. In January 2016, the Debtor’s management company obtained a quote for
$9,200.00 to “replace a drop inlet culvert at the entrance of the Crossings Mall in Elkview.”
In a subsequent email to Wells Fargo, the Debtor’s property manager related that if this matter
“is not resolved immediately the only entrance to the center could collapse.” 	Notably, the
Debtor had not yet effectuated the repair at the time its property manager requested the Capital
Expenditure Funds. It was apparently unable to make the repair without use of the Capital
Expenditure Funds. On January 22, 2016, Wells Fargo responded that it first wanted an
explanation of why rent rolls were below the expected receipts. Collected rents were between
$89,000 and $96,000 per month, and the scheduled rent was $128,420.80. Ultimately, Wells
Fargo did not release the requested funds for the culvert repair.
In June 2016, due to a flood of historic proportions, significant rainfall caused debris
and water to accumulate at the culvert bridge providing access to The Crossings Mall.
Ultimately, Little Sandy Creek overflowed its banks and flooded bordering properties before
washing away the culvert bridge. After the flood, the Debtor’s tenants were unable to
operate, and rents eventually stopped. 	The Debtor was therefore unable to service its debt to
Comm 2013, which ultimately filed a civil action against the Debtor in the District Court for
the Southern District of West Virginia, in which it sought the appointment of a receiver. That
precipitated the Debtor’s bankruptcy case. During this case, the Debtor successfully restored
access to its property with the construction of a bridge spanning Little Sandy Creek. To fund the
construction, it obtained post-petition financing from the entities employed to build the
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bridge who, in turn, obtained super-priority over Comm 2013’s secured interest in certain rents
payable from Kroger and Kmart. They agreed to undertake the construction with no payment from
the Debtor until tenants resumed operating. Specifically, the Debtor agreed to repay the post-
petition financing with rents generated from Kroger and Kmart. Notably, the Debtor also
recently obtained a favorable resolution of its claim against Emerald Grande, LLC, resulting in
a partial reimbursement of the cost of the bridge construction. Both the Debtor and Comm
2013 solicited acceptances of their respective plans.
Ultimately, the overwhelming majority of claimants, including the many individuals
affected by the flood and lack of access to The Crossings Mall, voted to accept the Debtor’s
proposed plan. Specifically, sixty-eight of seventy individuals in Class Three, and the three
tenant claimants with allowed claims, which voted in Class Two, accepted the Debtor’s plan.
Comm 2013 itself is the only entity with an allowed claim that voted to accept its own
competing plan. In May 2019, the Court convened a confirmation hearing over two
nonconsecutive days. 	In that regard, the Court heard testimony from several witnesses,
including representatives from the Debtor and Comm 2013 and experts that opined as to whether
the Debtor’s proposed plan was feasible and whether the Debtor proposed an adequate interest
rate for the repayment of Comm 2013’s allowed secured claim.
The Court confirmed the Debtor’s plan, and therein lies the rub. In the Debtor’s plan, the
Debtor made at least two references to cancel the Original Loan Agreement and enforce a New
Loan Agreement. As noted by the Debtor, Section 4.1 of the Confirmed Plan states that
“[p]ursuant to Section 5.8 of the Plan, on the Confirmation Date, the New Promissory Note and
New Loan Agreement will be issued to Comm 2013, and the existing Promissory Note and Loan
Agreement will be cancelled.” Additionally, Section 5.8 of the Plan states that “[o]n the
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Confirmation Date, the Loan Agreement relating to the Class 1 Claim of Comm 2013 will be
cancelled and discharged, without further act or action under any applicable agreement or Law,
and the New Loan Agreement will be issued to Comm 2013.” After testimony by an expert
witness and over objection by Comm 2013, the Court stated in the Confirmation Opinion that
“[s]imply put, while Comm2013 may be unhappy with the Debtor’s proposed changes to the
documents governing their relationship, the court does not perceive the changes to critically
impair confirmation of the Debtor’s plan. The court’s focus here is not upon the marketability of
the underlying trust to investors or the economic risk to which they are exposed but is on the
potential reorganization of a seemingly viable economic enterprise.” ECF 1313, at p. 10. The
Debtor relied on this statement in its filings that the New Loan Agreement should be fully
enforced.
After the plan was confirmed, Comm 2013 filed an appeal to the United States District
Court for the Northern District of West Virginia.6 Additionally, Comm 2013 filed a Motion to
Clarify, Amend and/or Reconsider Confirmation Order with the Court. This resulted in the
Clarification Order discussed above. In pertinent part, the Clarification Order provided as
follows:
Although perhaps implicit in the Debtor’s plan, the Court neither perceived
wholesale changes to the loan agreement or note, other than terms necessary to
implement the confirmed plan, nor the Debtor requesting a release of existing
security interests in favor of subsequent pledges. To the contrary, it appears the
Court believed that the Debtor’s modification of its relationship with Comm 2013
would be incorporated into existing security documents.
ECF 1411, at p. 5.
Part of what motivated the Court in the Clarification Order was its understanding of prior
caselaw that “[t]he covenants to be included in the loan documents of a cramdown need not
6 At the present time, the appeal is stayed by the District Court.
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precisely track the covenants in the parties’ existing loan agreement.” In re P.J. Keating Co.,
168 B.R. 464, 473 (Bankr. D. Mass. 1994) (quoting In re Western Real Estate Fund, Inc., 75
B.R. 580 (Bankr. W.D. Okla. 1987)); see also In re Stratford Assocs. Ltd. P’ship, 145 B.R.
689, 703 (Bankr. D. Kan. 1992) (finding that if a debtor could not modify loan documentation it
would make the whole reorganization process unworkable). As stated in In re American Trailer
& Storage, Inc., “[t]he Court finds that the question of whether modification of loan
documents is appropriate requires consideration of the following factors: (1) whether the
proposed terms and covenants unduly harm the secured creditor with respect to its collateral
position; and (2) whether the inclusion of terms and conditions from the pre-bankruptcy loan
documents would unduly impair the debtor’s ability to reorganize.” 419 B.R. 412, 441 (Bankr.
W.D. Mo. 2009). Without citing the relevant case law, Judge Flatley essentially made that
finding in his Confirmation Opinion that the loan covenants may change upon reorganization.
However, wiping out all existing security documents and replacing them with entirely new ones
to fit the Debtor’s desires seemed overboard to the Court’s interpretation of the Confirmation
Order and the record developed in the case.7
In fact, attached to the Plan confirmed by the Court was only a New Loan Agreement.
The Plan attached the New Loan Agreement as Exhibit 2. ECF 831-1, at 69. Under the terms of
the New Loan Agreement, “Note” means the Promissory Note described and defined in Article II
of the Agreement. Id. at 97. Under Article II, Section 2.5 states that “[t]he Principal Amount of
the Loan shall be evidenced by a promissory note from the Borrower . . . substantially in the
form of Exhibit 2.5, attached hereto and incorporated by reference.” The Confirmed Plan,
however, does not include an attached Promissory Note. At Exhibit 2.5 of the Confirmed Plan,
7 Pursuant to Federal Rule of Bankruptcy Procedure 9028 and Federal Rule of Civil Procedure 63, the Court certifies
familiarity with the record in this case.
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the only attachment is a cover sheet labeled “EXHIBIT 2.5— Promissory Note” with no other
documents. Id. at 107.8
Where does that leave the parties? At the hearing on the motions for summary judgment,
counsel for the Debtor conceded that based on the Clarification Order, the original deed of trust
and security agreement, the original note, the original assignment of leases, and the original
guaranty agreements are not at issue. The reinstatement document also acknowledges that the
original deed of trust continues in effect. It is the Original Loan Agreement and cash
management provisions that are the issue.
At the confirmation hearing of the plan confirmed, Judge Flatley had before him the New
Loan Agreement as an exhibit to the plan. Specifically, the New Loan Agreement, attached to
the Second Amended Plan as Exhibit 2, provided as follows:
Security for Loan. The Loan and the Note shall be secured by a valid, perfected and
enforceable first priority lien on the Collateral [with Collateral defined as the “real
property . . . described in the Deed of Trust”] and entitled to the benefits of the other
Loan Documents and agreements relating to Lender’s interest in the Collateral.
New Loan Agreement, at Section 2.6 (emphasis added) .9
8 The Debtor acknowledged in a footnote in its memorandum of law in response to the Lending Parties’ motion for
summary judgment that it only attached the New Loan Agreement to the Confirmed Plan and that the Debtor’s plan
proposed to cancel the existing promissory note, deed of trust and other loan documents and enter into a new
promissory note, new loan agreement, new deed of trust, and other loan documents. However, only the New Loan
Agreement was attached to the confirmed plan and only the New Loan Agreement was considered by the Court at
confirmation. The Debtor contends that these documents were filed with a prior plan, replaced by the Second
Amended Plan. In fact, at the initial hearing on the clarification motion before Judge Flatley, counsel for the Debtor
advised he had only just provided a proposed note and deed of trust to Comm 2013’s counsel in connection with the
confirmed plan the night before.
9 The Court cannot reconcile this provision with the Lien Release. Even if there was to be a new deed of trust, the
Court can envision no circumstance where there would have been a gap with nothing recorded in the land records to
secure the Lending Parties. Further, the Court can find no provision in the confirmed plan that expressly provides
that the Lending Parties will retain their liens, unless the loan agreement is read to do so as part of the plan. It
appears Judge Flatley reached that conclusion in finding that the plan was fair and equitable under 11 U.S.C. §
1129(b)(2)(A)(i)(I). This would be consistent with paragraphs 1.66 and 13.10 of the Second Amended Plan.
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It had no cash management component, and the parties seem to agree that if the old loan
agreement and cash management provisions are still in effect, the Debtor is in default. See
Declaration of Christopher P. Schueller, A.P. ECF 23, Ex. H. However, the Debtor further
appears to be performing on its obligations post-petition as called for in its confirmed plan and
Judge Flatley’s opinion, with the possible exception of payment of post-confirmation, year 2020
real estate taxes and some additional covenants under the Original Loan Agreement. Id.10
One thing that Judge Flatley made abundantly clear in his opinion is that this Chapter 11
debtor is an enterprise worth having a chance to reorganize.11 This Court agrees. If all the
original security documents are in effect as the Debtor concedes, except the original loan
agreement and cash management provisions, this Debtor appears to be in compliance with its
confirmed plan. The loan terms should be adjusted to fit the terms of the confirmed plan, and the
Clarification Order was not intended to disrupt that. With the benefit of hindsight, would (or
should) this Court have put a finer point on that issue when it issued the Clarification Order?
Yes, and it does so now.12 Being new to the case, the Court concedes that at the time it issued
the Clarification Order, it did not have a full appreciation of the level of animosity between the
10 The Court can find no express obligation in the Lending Parties’ deed of trust to pay real estate taxes against the
property, which in the Court’s experience is unusual, but both the old loan agreement and the new loan agreement
each have obligations to do so. Compare Original Loan Agreement Section 4.1.2 with New Loan Agreement
Section 3.1(c).
11 Specifically, the Court observed “ Comm2013 proposes to take title to the Debtor’s property and liquidate its
interest therein, but its liquidation in that regard will likely result in it receiving far less than under the Debtor’s
plan and will almost assuredly result in the end of the Debtor. Given a choice, the court finds that its discretion is
better employed to promote the Debtor’s reorganization, particularly when the Debtor’s principals originally
developed The Crossings Mall many years ago and the Debtor experienced its recent financial pressure only after a
significant weather event that shuttered The Crossings Mall.” ECF 1313, at p. 17-18.
12 Federal Rule of Civil Procedure 60(a), made applicable by Federal Rule of Bankruptcy Procedure 9024, provides:
“The court may correct a clerical mistake or a mistake arising from oversight or omission whenever one is found in
a judgment, order, or other part of the record. The court may do so on motion or on its own, with or without notice.
But after an appeal has been docketed in the appellate court and while it is pending, such a mistake may be corrected
only with the appellate court’s leave.” As no appeal was taken from the Clarification Order, this opinion and order is
intended to supplement the Court’s ruling on that issue.
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parties, or the extreme level of contentiousness that exists in this case. The heavy lifting of a
confirmation battle of competing plans having been resolved at trial, the Court believed some of
these post-confirmation issues could be resolved without the Court’s involvement. The Court
was wrong in that regard. But, the Court notes that similar hurdles have had to be addressed by
other courts.
For example, in In re Charles Street African Methodist Episcopal Church of Boston,
Judge Bailey observed as follows:
[the Lender] objects to the almost complete lack of covenants in the promissory
notes and mortgages it would be given under the Plan. The parties are in agreement
about the state of the law on this question. The Bankruptcy Code requires no
particular set of covenants in restructured loans. The issue is whether the terms are
fair and equitable, considering all the circumstances. The Court must consider “(1)
whether the proposed terms and covenants unduly harm the secured creditor with
respect to its collateral position; and (2) whether the inclusion of terms and
conditions from the pre-bankruptcy loan documents would unduly impair the
debtor’s ability to reorganize.” In re Am. Trailer & Storage, Inc., 419 B.R. 412, 441
(Bankr. W.D. Mo. 2009). CSAME emphasizes the second prong, arguing that it
would now be reasonable to expect that at the first technical breach of even the
most minor covenant, [the Lender] would not act as a normal lender, but would
accelerate and thus cause the Plan to fail; and CSAME further points out that before
the deterioration in relations between the parties, [the Lender] showed little concern
for the covenants. [The Lender] emphasizes the first prong, arguing that the
standard covenants are so wholly lacking that its collateral position is severely
compromised, especially because most relevant covenants would not here be
satisfied.
The Court agrees with CSAME that, in view of [the Lender’s] conduct in this case
and since its declaration of default, it should be expected that [the Lender] would
use standard covenants for maximum leverage, beyond their intended purpose. The
Court would insist that collateral be insured (with due regard for the fact that three
of the six properties have virtually no value beyond that of their land) and that
nonpayment be an event of default after a suitable grace period. Beyond that, the
Court will consider other covenants provided they are fashioned in a manner
acceptable to CSAME or to otherwise allay CSAME’s valid concern.
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In re Charles St. Afr. Methodist Episcopal Church of Bos., 499 B.R. 66, 109–10 (Bankr. D.
Mass. 2013).13
Here, given the combativeness that has occurred over nearly five years of litigation in this
Court and elsewhere, the Court has some of the same concerns as expressed by the court in the
Charles Street AME case, i.e., that at the first hint of default, the lender would use that leverage
to foreclose or otherwise move against the Debtor or the collateral security. Nevertheless, there
need to be loan covenants that are adequate to protect the lender, particularly as to taxes and
insurance, that would not put the borrower into immediate default. So long as the Debtor is
performing under the New Loan Agreement that Judge Flatley had before him at confirmation,
and the Debtor’s insurance coverages are consistent with the coverages maintained pre-petition,
the terms of the New Loan Agreement — coupled with the terms of the confirmed plan and the
existing security documents (other than the Original Loan Agreement and the cash management
provisions) — are sufficient to protect the Lending Parties in this case and provide the Debtor
with a viable path to reorganization.
B. Turnover of Property
In its counterclaim and third-party complaint, Tara has represented that there is over
$140,000.00 in a Wells Fargo account that constitutes funds remitted by the Debtor’s tenants.
Tara has requested that Wells Fargo apply the amount on deposit to its loan payments under the
confirmed plan, but Wells Fargo has refused to accede to that request. The Debtor contends that
Wells Fargo is Comm 2013’s agent and that Comm 2013 has instructed Wells Fargo not to apply
those funds to the loan payments. Because the funds have not been applied to the payments due,
13 Had this Court had the opportunity to address these issues on the front end, similar to what the court did in
Charles Street AME, a Third Amended Plan clarifying these issues may have been the preferable process.
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the Debtor has been unable to make the real estate tax payments pending reimbursement from its
tenants for property taxes.
Section 2.4 of the confirmed plan provides, in part, as follows:
Prepetition, every payment made by Tara to Comm 2013 included $13,500.00 for
property taxes, and each of the tenants of the Crossings Mall made payments
attributable to taxes directly into the Clearing Account of Comm 2013. The proof
of claim of Comm 2013 indicates that it is holding sums earmarked by 	the
tenants of the Crossings Mall for taxes. Pursuant to Bankruptcy Code Section 542,
Comm 2013 must turn over the funds attributable to taxes that it is holding, as
the lien of Comm 2013 does not attach to amounts earmarked by tenants of the
Crossings 	Mall 	for property 	taxes, 	pursuant 	to 	UCC 	Section 	9-203. 	The
Confirmation Order shall require Comm 2013 to turnover such sums to Tara to
facilitate payment of the Claim of the Sheriff of Kanawha County.
This provision was included in the plan confirmed by Judge Flatley without change or
elaboration. This provision is different than what is requested in the counterclaim and third-
party complaint, which asks Wells Fargo to apply the funds on deposit against the loan payments
due under the plan so the Debtor can presumably free up funds to pay the taxes itself. The Court
will enforce this provision as confirmed by the Court and direct the funds to be turned over by
Comm 2013 pursuant to Section 2.4 of the confirmed plan.
C. The Lien Release
The Lending Parties have asserted the Lien Release is a cloud on title which needs to be
removed. In that regard, the Lending Parties have submitted the Declaration of Bruce A. Toney,
an attorney and title agent for First American Title Insurance Company. Having reviewed the
Lien Release and reinstatement documents, Mr. Toney asserts that “[f]rom a title perspective, the
Lien Release and Reinstatement create confusion with respect to the status of Secured Creditor’s
interest under the Deed of Trust. I do not believe that a title insurance company would insure
Secured Creditor’s interest under the Deed of Trust without providing for exceptions to coverage
relating to the Lien Release and Reinstatement.” Toney Dec., at ¶ 5. A.P. ECF 32.
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The Debtor has not disputed the Toney Declaration, and the relief the Lending Parties
request is appropriately made. However, the Court has a concern. There is no evidence before
the Court as to the status of the title to the real property at issue, and if there are any intervening
liens, particularly any that may have appeared in the year nothing was of record in the Kanawha
County land records. The Court assumes there are no intervening liens or other adversely
affected parties, or the Toney Declaration would have pointed that out. If there are intervening
liens or property interests, or adversely affected parties, the parties to those liens or interests have
a right to be heard. The Court will continue this matter to allow for the Toney Declaration to be
supplemented, and if there is no dispute as to this issue, the Court would request the parties to
submit a proposed order for recording in the land records that will allow the title company to
give a coverage endorsement appropriate under the lender’s policy of title insurance. If a
sufficient agreed order cannot be obtained, or if there is an intervening lien or interest, or an
affected adverse party, the Court shall set this matter for further hearing.14 	The Court would
request an update on this matter by counsel scheduling a telephone conference with the Court
within thirty (30) days.
D. Post-Confirmation Defaults
The Lending Parties have asked the Court to enter a declaration of post-confirmation
default. However, most, if not all, of the post-confirmation defaults they allege derive from the
Original Loan Agreement or cash management agreement that are affected by this Memorandum
Opinion, or provisions that could be remedied by the payment of real estate taxes upon receipt of
14 The Office of the United States Trustee has not been notably active in this bankruptcy case since confirmation.
Perhaps it is time for them to reinsert themselves to monitor the relationship of all counsel and parties, with an eye
toward diffusing the extraordinary tensions that permeate this case.
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the reserve funds.15 The Court will deny the Lending Parties’ motion for summary judgment
without prejudice on those issues, pending implementation of this Memorandum Opinion and
Order.16
CONCLUSION
For all of the above stated reasons, the Debtor’s Motion for Summary Judgment is
granted in part and denied in part. The Lending Parties’ Motion for Summary Judgment is
continued in part and denied in part. A separate Order will follow.
15 Two alleged defaults cannot be resolved by the payment of real estate taxes: (1) the alleged failure of the Debtor
to obtain Comm 2013’s approval to enter into a lease agreement (“KFC Lease”) with Charter Central, LLC for the
construction and rental of a Kentucky Fried Chicken Restaurant under Sections 4.1.9(a) and 4.1.10(b) of the
Original Loan Agreement; and (2) the alleged violation of Section 4.1.9(a) of the Original Loan Agreement by
entering into the KFC Lease for a period of 25 years in excess of Section 4.1.9(a)’s 15-year term cap. See A.P. ECF
22-3. The New Loan Agreement does not include similar provisions on seeking approval from Comm 2013 or a
lease term cap, but the Court will at this time treat these alleged defaults similarly to the other alleged post-
confirmation defaults and deny summary judgment without prejudice.
16 On July 16, 2021, Comm 2013 filed a Motion to Permit Supplemental Submissions on Summary Judgment as a
few of the exhibits it filed in support of its summary judgment motion were filed after the deadline of midnight on
June 11, 2021. Tara filed an objection to such motion asserting that Comm 2013 failed to show excusable neglect
for its failure to timely file such documents. The Court exercises its discretion in this case to allow the late filed
exhibits, but admonishes counsel for Comm 2013 that better internal planning and supervision needs to be done to
ensure that deadlines are met when set by the Court. They are deadlines — not suggestions or guidelines. Future
stumbles will not be well received.
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