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In re Terry Properties, LLC

United States District Court, W.D. Virginia, Abingdon Division

August 30, 2017

IN RE TERRY PROPERTIES, LLC,
v.
FARM CREDIT OF THE VIRGINIAS, ACA, Appellee. Debtor. TERRY PROPERTIES, LLC, Appellant, Adv. Proc., No. 16-07038, No. 1:17CV00004

          By: James P. Jones United States District Judge Robert T. Copeland, Copeland Law Firm, P.C., Abingdon, Virginia, for Appellant;

         William E. Shmidheiser, III, Lenhart Pettit, Harrisonburg, Virginia, for Appellee.

          OPINION

          James P. Jones, United States District Judge.

         In this bankruptcy adversary proceeding, the debtor and appellant, Terry Properties, LLC (the “Debtor”), appeals the judgment of the bankruptcy court granting summary judgment as to the appellee, Farm Credit of the Virginias, ACA (“Farm Credit”), denying summary judgment as to the Debtor, and denying the motion of the Debtor to amend its Complaint. For the reasons described below, I will affirm the judgment of the bankruptcy court.

         I. Procedural History.

         In November 2016, the Debtor filed a voluntary petition for relief under Chapter 12 of the Bankruptcy Code in the United States Bankruptcy Court for the Western District of Virginia (the “Bankruptcy Court”). Shortly thereafter, the Debtor commenced the present adversary proceeding against Farm Credit, seeking to avoid a transfer by the Debtor in October 2015 pursuant to 11 U.S.C. § 548(a)(1)(B). Farm Credit subsequently moved for summary judgment. In response, the Debtor cross-moved for summary judgment. It then moved to amend its original Complaint. All three motions were fully briefed and orally argued in a hearing before the Bankruptcy Court.

         Following the hearing, the Bankruptcy Court (Paul M. Black, J.) issued a Memorandum Opinion in which it granted summary judgment as to Farm Credit, denied summary judgment as to the Debtor, and denied the Debtor' request to amend its Complaint. The Debtor appealed to this court, which has jurisdiction under 28 U.S.C. § 158(a)(1) . The appeal has been fully briefed and orally argued. For the reasons that follow, I will affirm the decision of the Bankruptcy Court.

         II. Standard of Review.

         Because this case is a “core proceeding, ” the Bankruptcy Court had the power to, and did, enter a final judgment. See 28 U.S.C. § 157(b)(1) & (b)(2)(H); see also Stern v. Marshall, 564 U.S. 462, 474 (2011). I therefore review this appeal under “traditional appellate standards, ” id. at 475; that is, I defer to the Bankruptcy Court's findings of fact unless clearly erroneous, and I review the Bankruptcy Court's conclusions of law de novo. Fed.R.Bankr.P. 8013; see also Stern, 564 U.S. at 515 (Scalia, J., concurring).

         III. Factual Summary.

         As the Bankruptcy Court noted in its Memorandum Opinion, the facts underlying this case are clear from “the record and the documents filed by the parties, none of which have been called into legitimate question.” Mem. Op., R. at 67, ECF No. 2. I agree with and adopt the Bankruptcy Court's findings of fact as described in its Memorandum Opinion. A recitation of these facts is below.

The present dispute stems from a Loan Restructure Agreement dated October 19, 2015 (the “Agreement”) . . . . The Agreement is between Farm Credit as Lender; the Debtor; Terry Dairy, LLC (“Dairy LLC”); David Wilmer Terry (“David Terry”) and Jacob Jerome Terry (“Jacob Terry”), trustees of the Ernest Epperson Terry Trust, a testamentary trust (the “Trust”); and David Terry, Jason B. Terry, Jacob Terry, and Levi Ernest Terry individually. The individual Terrys and the Trust are jointly and severally defined as the “Borrower” in the Agreement.
As of the date of the Agreement, the Borrower . . . was indebted to Farm Credit in connection with five different obligations: (1) a 2015 Non Revolver Loan in the original principal amount of $200, 000.00, (2) a 2015 Fixed Rate Loan in the original principal amount of $1, 034, 189.35, (3) a 2012 Fixed Rate Loan in the original principal amount of $110, 000.00, (4) a 2010 Non Revolver Loan in the original principal amount of $1, 400, 000.00, and (5) a 2009 Fixed Rate Loan in the original principal amount of $518, 000.00, all as modified or extended.

R. at 67-68.

         These five obligations were secured by, among other things, three credit line deeds of trust (the “Deeds of Trust”) on real property located in Wythe and Smyth Counties, Virginia (the “Property”). Each of the Deeds of Trust named the Trust as the Grantor and secured any and all indebtedness of the “Grantor” - that is, the Trust - to Farm Credit. R. at 68. The Deeds of Trust secured maximum principal amounts of (1) $518, 000, (2) $1, 400, 000, and (3) $110, 000, respectively. Id.; Agreement, R. at 29, ECF No. 3.

         According to the Agreement, the Borrower had sought to restructure its loans with Farm Credit in March 2015. Farm Credit denied the application as submitted, and the parties subsequently negotiated a “mutually agreeable restructure plan, ” which is captured in the Agreement. R. at 30. In the Agreement, the Borrower indicated to Farm Credit that the Trust would be “dissolve[d] and liquidate[d] . . . with its assets and liabilities (including the liabilities of the Trust to Lender with respect to the Loans and Loan Documents) being divided between, transferred to and assumed by the Dairy LLC and [the Debtor].” Id.

         The Agreement also set forth the terms and conditions under which Farm Credit agreed to the dissolution of the Trust and the transfer of its assets to the Debtor and Dairy LLC. One condition states:

         The Property shall be transferred to [the Debtor] by deed of assumption acceptable to [Farm Credit] in form and substance, pursuant to which [the Debtor] acknowledges and agrees by countersignature to assume all obligations of the Trust under and with respect to the Deeds of Trust, the Notes and the other loan Documents.

Id. The Agreement also provided that:

Upon transfer of the real estate from the Trust to [the Debtor] (which shall occur by deed of assumption approved by [Farm Credit] as described . . . above), [the Debtor] shall take title subject to the lien of the Deeds of Trust, which it acknowledges. [The Debtor] agrees to perform all obligations under the Deeds of Trust, and will execute and deliver any and all documents and instruments requested by [Farm Credit] to evidence, replace, or restate and consolidate the Deeds of Trust.

R. at 34. In addition, the Agreement further stated:

To facilitate such transfer and as a condition to the restructure of the Loans under this Agreement, Dairy LLC and [the Debtor], jointly and severally, hereby expressly assume and promise to pay and perform all obligations of the Trust under the Notes, Deeds of Trust, and other Loan Documents to which the Trust is a party.

         R. at 31.

         Pursuant to the Agreement, on October 19, 2015, a Deed of Assumption was executed by which the Trust conveyed the Property, subject to the Deeds of Trust, to the Debtor. See Deed of Assumption, R. at 54, ECF No. 3. On the same day, the Debtor executed a Credit Line Deed of Trust Modification and Substitution of Trustee for each of the three Farm Credit Deeds of Trust (“Deed of Trust Modifications”). Importantly, the Bankruptcy Court determined that the execution of the Deed of Trust Modifications occurred “[c]ontemporaneously with the execution of the Deed of Assumption.” Mem. Op., R. at 69, ECF No. 2. It also found that the Deed of Trust Modifications:

[C]hanged the definition of “Grantor” to Terry Properties, LLC (the Debtor), confirmed that the indebtedness secured included, without limitation, all indebtedness and obligations of the Terrys individually, the new Grantor, Terry Dairy, LLC and/or the Trust to Farm Credit, as well as any modifications, extensions or renewals thereto. The modification ...

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