Trinity Homes LLC

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Order Entered.

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David L. Bissett
United States Bankruptcy Judge

No. 1:19-bk-01035 Doc 206 Filed Q

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA

In re: )
)
TRINITY HOMES, LLC, ) Case No. 19-bk-1035
)
Debtor. ) Chapter 7
)
MEMORANDUM OPINION

On June 30, 2020, the court entered an order granting the motion of Thomas H. Fluharty
(the “Trustee”’) to compromise the claim filed against the estate by Pendleton Community Bank.
In conjunction with its approval of the Trustee’s motion, the court overruled the lone objection to
the motion, which 21‘ Mortgage Corporation filed on June 29, 2020.! The court delivered its
ruling upon the motion orally during a telephonic hearing on June 30, 2020. On July 14, 2020,
21* Mortgage filed a notice of appeal of the court’s order. To create a more robust record for the
District Court, the court issues this memorandum opinion restating its justification for overruling
21" Mortgage’s objection and granting the Trustee’s motion.
I. BACKGROUND
Prepetition, Trinity Homes, LLC (the “Debtor’’), operated a business selling mobile,
manufactured, and modular homes. The Debtor’s principal place of business was located at 644
Andell Road, Bridgeport, West Virginia (the “Property”). Notably, however, title to that property
was vested in a related, non-debtor entity, Endeavor Investments, LLC. 21* Mortgage financed
the Debtor’s operation and held a security interest in the Property, among other collateral.
On April 5, 2018, Pendleton Community Bank loaned $130,000 to the Debtor for the
purchase of a modular home described as “Mainstreet, Model No. 350MS-Mainstreet-O0000R C/S/

! To be clear, 21‘ Century first objected to the Trustee’s motion on June 26, 2020 but amended its
objection on June 29, 2020, after Pendleton Community Bank filed a response in support of the
anticipated compromise.

AUTHENTICATED
U.S. GOVERNMENT
INFORMATION

GPO

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Ranch (M), Serial Number 50345 (the “Modular Home”). To secure the Debtor’s repayment of
the $130,000, the Debtor executed and Pendleton Community Bank recorded a financing statement
giving Pendleton a security interest in the Modular Home. Notably, however, Pendleton’s interest
in the Modular Home is not also secured by a deed of trust. On December 9, 2019, the Debtor
filed its voluntary petition for relief under Chapter 7 of the Bankruptcy Code.

On March 11, 2020, the trustee filed a motion to sell the Property. Therein, he identified
three liens to be paid from the sale proceeds.? According to his motion, the trustee proposed to
sell the Property for $844,000, and the proposed sale would result in net proceeds of $149,300.
Notably, the sales contract provided for a closing date forty-five days from the court’s approval of
the sale. On April 8, 2020, the court entered its order approving the sale. According to the trustee,
Pendleton Community Bank first asserted a lien on the Modular Home during April but after the
court approved the sale of the Property. With the closing of the sale of the Property imminent, the
trustee endeavored to resolve Pendleton’s claim so as to not lose the sale. On June 12, 2020,
Pendleton formally made its claim against the Modular Home and the trustee almost
immediately—on June 19, 2020—proposed the extant settlement to the court.

Il. ANALYSIS

Pendleton Community Bank initiated the underlying contested matter by filing its June 12,
2020 motion to permit its late-filed proof of claim because it allegedly did not receive timely notice
of the Debtor’s bankruptcy case. Notably, Pendleton also did not receive notice of the Chapter 7
trustee’s motion to sell the Property, which is where the Modular Home currently sits. Pendleton
contends that it possesses a lien upon the Modular Home securing the repayment of approximately
$92,983.26, but it agrees to resolve its dispute against the estate by accepting $80,000 in full
satisfaction of its secured claim. According to the trustee, the settlement is fair and reasonable for
two principal reasons. First, it satisfies the purported secured claim of Pendleton Community Bank
for almost $13,000 less than the amount purportedly owed without having to litigate over the
amount owed and the issue of whether Pendleton possesses a properly secured claim. More

importantly, it removes any potential impediment to the trustee’s sale of the Property.

2 Notably, 21‘ Mortgage holds two of the liens upon the Property. By order dated May 26, 2020,
however, the court approved the trustee’s settlement with 21‘' Mortgage whereby 21*' Mortgage
agreed to release its second-priority lien upon the Property.

2

3
upon
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N.D. Ind. 2010) (quoting
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s proposal.
2.
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4
, 	11248 DK, 2010 WL 3260131, at *4 (Bankr. D. Md. Aug. 18, 2010
bounds of what is
.
h 	issue 	no
June 30, 2020.
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