Stony Brook Development, LLC

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF MARYLAND
In re: 	*
STONY BROOK DEVELOPMENT, LLC, 	* 	Case No. 06-13781-WIL
Chapter 11
Debtor. 	*
* 	* 	* 	* 	* 	* 	* 	* 	* 	* 	* 	* 	*
MEMORANDUM OF DECISION IN SUPPORT OF ORDER
DENYING MOTION [16] OF SKY BANK TO TRANSFER VENUE
The Court has before it the Motion [16] of Sky Bank to Transfer Venue to the United
States Bankruptcy Court for the Northern District of West Virginia (the “Motion”), filed on July
21, 2006, the Debtor’s Response [21], filed on July 31, 2006, the Objection [24] of K Bank, filed
on August 7, 2006, and the Opposition [26] of Farm Credit of the Virginias, ACA (“Farm
Credit”), filed on August 28, 2006. A hearing on this matter was held on August 29, 2006. The
Court has reviewed the pleadings, the record in this case and has heard argument of counsel, and
now issues this Memorandum of Decision in support of its Order denying Sky Bank’s Motion.
Signed: September 08, 2006
SO ORDERED
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Background
On June 29, 2006, the Debtor filed its voluntary chapter 11 petition. On July 19, 2006,
the Debtor filed its Schedules and Statement of Financial Affairs. Other than a vehicle listed on
Schedule B, the Debtor’s major assets appear to consist of two parcels of real estate. The first is
an undeveloped piece of land in Lake Crest Estates Development, Cheat Lake, West Virginia
(the “Cheat Lake Property”), valued at $4,000,000.00. The second is an office on Garrett
Highway, McHenry, Maryland (the “Garrett County Property”), valued at $700,000.00. The
Cheat Lake Property is encumbered by two liens in favor of Sky Bank and K Bank. The Debtor
believes that Sky Bank’s lien is fully secured and that K Bank’s lien may be partially secured by
this property, and that the unsecured portion of K Bank’s claim may be the largest unsecured
claim in this case. The Debtor also believes that K Bank’s lien may be secured by other
collateral located in Maryland that is owned by parties affiliated with the Debtors. The Garrett
County Property is encumbered by a lien in favor of Farm Credit, which lien may be fully or
partially secured.
Sky Bank is a Pennsylvania financial institution. Its loan documents regarding the Cheat
Lake Property are governed by Pennsylvania law. K Bank is located in Maryland. Farm
Credit’s principal place of business is in Virginia but it has an office in Maryland as well. On
Schedule H, the Debtor listed two co-debtors, Brenda and Louis Strosnider, both of Oakland,
Maryland. Mr. Strosnider is also the president of the Debtor. Creditors listed on Schedule F are
located in West Virginia, Ohio and Pennsylvania. In the Statement of Financial Affairs, the
Debtor disclosed a lawsuit (K Bank, plaintiff) pending in Circuit Court of Maryland for
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Washington County, and also disclosed that its books and records are located in Oakland,
Maryland.
Sky Bank seeks to transfer venue to the Bankruptcy Court for the Northern District of
West Virginia on the grounds that it would be more economic and efficient for the administration
of the estate and more convenient to the parties. The Cheat Lake Property is located there, the
majority of the Debtor’s creditors are located there, all but one of the creditors is closer in
proximity to the Bankruptcy Court in West Virginia than they are to this Court, and because the
Debtor is closer to West Virginia. Sky Bank also argues that certain witnesses and experts that
will undoubtedly be employed in this case in connection with the sale and/or valuation of the
Cheat Lake Property will need to be licensed in West Virginia, or at least have experience with
those issues in West Virginia. Sky Bank finally argues that it is in the best interest of justice to
transfer venue because issues of West Virginia and Pennsylvania law will predominate.
The Debtor, K Bank and Farm Credit oppose the Motion. They argue that the Debtor, its
officers and headquarters are in this district, that the Debtor has been engaged in a majority of its
real estate transactions in Maryland, that K Bank is located here, and that the collateral securing
at least some portion of their liens is located in Maryland. They also argue that it makes no
difference which of the two courts applies the law governing Sky Bank’s contracts with the
Debtor. K Bank further argues that there are alleged fraudulent conveyances that occurred in
Maryland. Finally, the Debtor argues that a related Chapter 11 case, Ridgeline Hospitality
Services, LLC, Case No. 06-14869-WIL, is pending before this Court, and Mr. Strosnider is
involved in this case as well. The Court notes that a hearing in the Ridgeline Hospitality case on
the debtor’s motion to dismiss is scheduled for September 12, 2006.
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Discussion
Sky Bank concedes that this Court has jurisdiction and that venue is proper here. Venue
of the bankruptcy case is proper in the District of Maryland pursuant to 28 U.S.C. §1408. Sky
Bank seeks to transfer venue to West Virginia, pursuant to 28 U.S.C. §1412. Section 1412
provides the Court may transfer the bankruptcy case to another district in the interest of justice
or for the convenience of the parties. 28 U.S.C. §1412. Transferring venue is within the sound
discretion of the bankruptcy court and should be exercised with caution. In re Ridgely Comm.,
Inc., 107 B.R. 72, 78 (Bankr. D. Md. 1989). This exercise requires the Court to consider the
following factors: (1) proximity of creditors to the Court; (2) proximity of the Debtor to the
Court; (3) proximity of witnesses necessary to the administration of the estate; (4) location of
estate assets; (5) economic administration of the estate; and (6) whether ancillary administration
will be necessary. Id. (citing Commonwealth of Puerto Rico v. Commonwealth Oil Refining Co.,
Inc. (In re Commonwealth Oil Refining Co., Inc.), 596 F. 2d 1239, 1247 (5th Cir. 1979)).
The Court finds that at this early stage in the bankruptcy case it is no more inconvenient
for parties in interest or as yet unidentified witnesses to travel to the Southern Division of the
District of Maryland than it would be to the Northern District of West Virginia. The Court needs
more than mere allegations by Sky Bank that witnesses will be needed and why their
inconvenience in traveling to this district outweighs the Debtor’s choice to file its petition here.
See e.g., Intranexus, Inc. v. Siemens Medical Solutions Health Services Corp., 227 F. Supp. 2d
581, 584 (D. E.D. Va. 2002) (citing Scheidt v. Klein, 956 F. 2d 963, 966 (10th Cir. 1992) (in
context of motions to transfer venue of non-bankruptcy case under 28 U.S.C. §1404(a)). See
also Cole-Tuve, Inc. v. American Machine Tools Corp., 342 F. Supp. 2d 362, (D. Md. 2004)
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(also in context of a motion under 28 U.S.C. §1404(a) and citing Helsel v. Tishman Realty &
Constr. Co., 198 F. Supp 2d 710, 712 (D. Md. 2002) (finding that a party seeking to transfer
venue must submit affidavits from witnesses demonstrating inconvenience).
In addition, it is reasonable to assume that the more active participants in this case have
already appeared before this Court at the hearing on August 29, 2006. It is too soon to tell how
much or little other parties, such as the general unsecured creditors, will participate. The Debtor
may well be closer in miles to West Virginia, as Sky Bank suggests, but the Debtor does not
wish to go there. The Court finds that a significant consideration. The Court is also persuaded
that Maryland is the better venue, notwithstanding the location of the Cheat Lake Property,
because the Debtor’s books and records, officers and co-debtors are located in Maryland. This
Court is equally able to interpret Sky Bank’s loan documents and apply Pennsylvania law as the
West Virginia court is and this consideration is given little weight. There is also a potentially
substantial state court suit pending in Washington County Maryland, a case the parties have
intimated will be the subject of a motion for relief from stay. The related Ridgeline Hospitality
case (again, the Court is aware that the debtor’s motion to dismiss that case is pending) and Mr.
Strosnider’s involvement therein is a minor factor that supports denial of the Motion. The Court
is not convinced that the need for ancillary administration if the Cheat Lake Property or other
assets are liquidated weighs strongly enough to overcome the desires of the Debtor, its co-
obligors and two of the major creditors to retain venue in this Court.
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For the foregoing reasons, the Court finds that it would be more efficient for the
administration of the estate and more convenient to the Debtor, its insiders and the creditors
likely to participate in this case to remain in this district and will therefore deny the Motion.
A separate Order will issue.
cc: 	Debtor
Counsel for the Debtor - Ronald Drescher, Esq.
Counsel for Sky Bank - Richard Costella, Esq.
Counsel for K Bank - Troy Swanson, Esq.
Counsel for Farm Credit of the Virginias, ACA - Roger Schlossberg, Esq.
U.S. Trustee
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