TP, Inc.

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NORTH CAROLINA
SOUTHERN DIVISION
NO: 7:11-CV-253-BR
IN RE:
TP, INC.,
Debtor
)
)
)
)
RONALD BRYANT and 	) 	ORDER
DEBORAH BRYANT, 	)
Appellants. 	)
This matter is before the court on the pro se appeal of Ronald Bryant and Deborah Bryant
(collectively the “Bryants”) from the 4 October 2011 order of United States Bankruptcy Judge
Stephani W. Humrickhouse. In that order, Judge Humrickhouse converted the case to one under
Chapter 7 of the Bankruptcy Code. (DE # 5-3.) For the reasons set forth below, the bankruptcy
court’s decision is affirmed.
On 1 March 2010, debtor TP, Inc. (“TP”) filed a voluntary petition under Chapter 11 of
the Bankruptcy Code. (DE # 3-1.) The Bryants own all the shares of TP, with Ronald Bryant
serving as the corporation’s President and Deborah Bryant as its Secretary. (DE # 3-2 at 36; see
also DE # 5-3 ¶ 2.) Prior to the filing of the bankruptcy petition, TP was engaged primarily in
the development of residential real estate in Onslow and Pender Counties. (See generally DE #
4-1.) Bank of America, N.A. (“BOA”) purportedly holds a promissory note secured by deeds of
trust on a number of parcels of TP’s real property, with such debt apparently having been
guaranteed by the Bryants. (Id. ¶ 5; DE # 5-3 ¶ 3.)
On 22 February 2011, the Bankruptcy Administrator filed a motion to convert the case to
one under Chapter 7 or, alternatively, to dismiss the case. (DE # 3-3.) On 4 March 2011, BOA
filed a motion for an order appointing a Chapter 11 trustee or, in the alternative, converting the
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1It appears that special counsel was appointed to assist the trustee with TP’s claims against BOA, filed as an
adversary proceeding, No. 11-00112-8-SWH. (See DE # 5-1 ¶ 15(d); DE # 15-11.)
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case to a Chapter 7 proceeding. (DE # 3-6.) TP filed a response in opposition to those motions.
(DE # 4-1.) After a hearing on 22 March 2011, the bankruptcy court denied the motions to
convert or dismiss but allowed BOA’s request for appointment of a Chapter 11 trustee. (DE # 4-
6.) Thereafter, on 27 July 2011, the Chapter 11 trustee filed his report and motion to convert the
case to one under Chapter 7. (DE # 5-1.) The trustee represented that TP’s counsel, special
counsel,1 and the Bankruptcy Administrator did not oppose conversion to Chapter 7. (Id. ¶ 22.)
The Bryants, through counsel, filed a response in opposition to the trustee’s motion to convert,
contending that they would be deprived “of certain opportunities to participate in the case by
voting on the plan and/or proposing alternate plans.” (DE # 5-2.)
On 29 September 2011, the bankruptcy court held a hearing on the motion. In ordering
the conversion of the case to Chapter 7, Judge Humrickouse found in pertinent part as follows.
14. 	The following grounds exist[] which constitute cause for
the conversion of this case to Chapter 7:
a. 	The unauthorized lease of property of the estate by the
debtor-in-possession, and the collection by Mr. Ronald Bryant of the rents
of such property of the estate for his individual benefit;
b. 	The failure of the debtor-in-possession to keep its property
insured;
c. 	The failure of the debtor-in-possession to pay property
taxes on its property;
d. 	The failure of the debtor-in-possession to comply with a
court order, to the extent that it instructed its counsel to refuse to comply
with a turnover of funds required by the consent order entered by the
Court on February 17, 2011;
e. 	The failure of the debtor-in-possession to pay Quarterly
Fees when due, and lack of funds with which to make those payments; and
f. 	The failure of the debtor-in-possession to file monthly
reports as required by Local Bankruptcy Rule 4002-1(b).
15. 	In addition, the Trustee asserts that since the appointment
of the Trustee the Debtor’s president, Mr. Ronald Bryant, has
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continued to attempt to rent property of the estate and receive the
resulting rentals for his personal benefit to the exclusion of the
bankruptcy estate.
16. 	The Trustee has determined, and the Court finds, that an
orderly liquidation of the Debtor’s property under Chapter 7 would
be a more efficient and preferable alternative to the continuation of
this case under Chapter 11. Proceeding under Chapter 11 to
liquidate the Debtor’s property would involve the substantial time
and expense of the filing of monthly reports, payment of quarterly
fees, and the proposal, solicitation and attempted confirmation of a
plan under Chapter 11. On the other hand, a conversion of this
case to Chapter 7 would allow the Trustee to liquidate the Debtor’s
property under the protection of the automatic stay but without
incurring this additional time and expense.
. . . .
18. 	For the reasons set forth above, the conversion of this case
to Chapter 7 would be in the best interests of creditors and the
estate.
(DE # 5-3.) It is this order from which the Bryants appeal.
Conversion of a case from Chapter 11 to Chapter 7 is governed by 11 U.S.C. § 1112(b).
That statute provides in relevant part that “on request of a party in interest, and after notice and a
hearing, the court shall convert a case under this chapter [i.e., Chapter 11] to a case under
chapter 7 or dismiss a case under this chapter, whichever is in the best interests of creditors and
the estate, for cause . . . .” 11 U.S.C. § 1112(b)(1). “Cause” includes
(A) substantial or continuing loss to or diminution of the estate and
the absence of a reasonable likelihood of rehabilitation;
(B) gross mismanagement of the estate;
(C) failure to maintain appropriate insurance that poses a risk to
the estate or to the public;
(D) unauthorized use of cash collateral substantially harmful to 1
or more creditors;
(E) failure to comply with an order of the court;
(F) unexcused failure to satisfy timely any filing or reporting
requirement established by this title or by any rule applicable to a
case under this chapter;
. . .
(I) failure timely to pay taxes owed after the date of the order for
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relief or to file tax returns due after the date of the order for relief;
. . . [and]
(K) failure to pay any fees or charges required under chapter 123
of title 28 . . . .
Id. § 1112(b)(4).
The court reviews the bankruptcy court’s findings of fact for clear error and its legal
conclusions de novo. See In re Meredith, 527 F.3d 372, 375 (4th Cir. 2008). A bankruptcy
court’s decision to convert a case under § 1112(b) is reviewed for abuse of discretion. See In re
Superior Siding & Window, Inc., 14 F.3d 240, 242 (4th Cir. 1994) (“[T]he decision not to grant a
motion to convert under 11 U.S.C. § 1112(b) is discretionary . . . .”).
The Bryants do not challenge any of the bankruptcy court’s findings of grounds for cause
for conversion. (See DE ## 1, 3, 15, 17, 18.) At best, they contend that continuation of the case
under Chapter 11 as a re-organization would be in the best interest of the estate because the
development of a property in Pender County could continue and would ultimately bring in a
projected $92,000 per month in income. (DE # 1 at 4-5.) Even taking this argument into
consideration, one must also consider what is in the best interests of the creditors. See 11 U.S.C.
§ 1112(b)(1). As the bankruptcy court found, TP “has no substantial tangible assets other than
its real estate” and has no employees or ongoing operations other than the rental of its real estate,
which third parties are managing. (DE # 5-3 ¶ 12.) Also, the bankruptcy court found that the
value of several of TP’s properties exceeds certain encumbrances against the properties and that
the trustee has taken steps to sell the properties for the benefit of the estate and creditors. (Id. ¶
13.) Re-organization is simply not a viable option, in terms of the creditors’ interest. The court
will not disturb the bankruptcy court’s determination that conversion is in the best interests of
the creditors and the estate.
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Finally, the court notes that the Bryants have made references to purported misconduct
on the part of BOA and in their most recent filing appear to contend that others involved in this
case have engaged in misconduct. (See DE ## 3, 15, 17, 18.) They also appear to request that
the court certify a class. (DE # 18 at 8.) None of these issues are appropriate for consideration
in the context of this appeal. Rather, the issues must be raised, if at all, in the first instance in the
appropriate trial forum.
The 4 October 2011 Order of the Bankruptcy Court of the Eastern District of North
Carolina is AFFIRMED.
This 23 May 2012.
__________________________________
W. Earl Britt
Senior U.S. District Judge
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