Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azb-2_10-bk-02972/USCOURTS-azb-2_10-bk-02972-0/pdf.json

Parties Involved:
PHOENIX PLAZA APARTMENTS, LLC
Debtor
U.S. TRUSTEE
U.S. Trustee
FEDERAL NATIONAL MORTGAGE ASSOCIATION
Creditor
Maricopa County
Creditor

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IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF ARIZONA

In re:

PHOENIX PLAZA APARTMENTS, LLC,

 Debtor. 

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Chapter 11

No. 2:10-bk-02972-JMM

MEMORANDUM DECISION

On April 28, 2010, this court took evidence on the issue of whether a state court

receiver, Greystar Management Services, appointed pre-filing by the Maricopa County Superior

Court, should be compelled to turn over the Debtor's property to the Debtor, or whether the receiver

should remain in possession until further bankruptcy court orders (DN 16).

The testimony of both the state court receiver, and the Debtor's principal, was taken.

On some factual issues, such as the condition of the property, the testimony differed dramatically.

The court concludes that secured creditor Federal National Mortgage Association ("FNMA") carried

its burden, by a preponderance of the evidence.

After review of the entire administrative file, the documents admitted into evidence,

and the testimony, the court concludes that it is in FNMA's best interests to retain the state court

receiver in possession. The court's reasons follow:

1. The secured creditor's debt is $4,437,714.13 (Schedules A and D).

Because the unsecured creditors (non-insiders) only have scheduled

debts of $31,330.84 (Schedule E), the secured creditor's claim

constitutes 99.993% of the Debtor's total debt. Therefore, by far, it has

the largest stake in the case, and also the greatest risk, as it has first

SIGNED.

Dated: April 29, 2010

________________________________________

JAMES M. MARLAR

Chief Bankruptcy Judge

________________________________________

Case 2:10-bk-02972-JMM Doc 42 Filed 04/29/10 Entered 04/30/10 08:16:30 Desc

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claim to the real property collateral (Ex. 3), due to its recorded Deed of

Trust.

2. The Note in favor of the secured creditor is fully matured, and all

became due and payable according to its terms on July 1, 2009 (Ex. 2).

The Debtor assumed this obligation (Ex. 5). A Trustee's sale was in

process when the bankruptcy case was filed on February 5, 2010

(Motion, DN 16, at 2, lines 7-9).

3. Pre-petition, after a fire damaged the premises, he Debtor deposited

checks, made jointly payable to itself and the secured creditor, into a

bank account controlled by the Debtor. No evidence was presented that

the secured creditor knew or consented to that action. The Debtor had

no legal right to deposit those funds without the secured creditor's

consent or endorsement. Moreover, the Debtor did not use the funds to

repair the fire-damaged premises. (Ex. 12.)

4. The Debtor has not yet filed a plan of reorganization and gave no

specifics as to the method by which it could confirm a feasible plan.

when asked directly how it intended to repay the secured debt, Mr.

Grinwald (the Debtor's principal) testified, "I don't know."

5. The receiver is regularly filing accountings with the Superior Court.

Those records are public. Should the Debtor desire that such

accountings also be filed with the Bankruptcy Court, any such motion

would be granted, even on an ex parte basis. Sharing such information

is useful and necessary to the reorganization. (See Ex. D, E, F, G,

and H.)

6. The court was not persuaded that the receiver is doing a poor job, nor

is incompetent.

7. It is in the creditor's best interest to retain the receiver, and thus excuse

compliance with the turnover request. 11 U.S.C. § 543(d)(1).

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Consequently, an order will be entered which excuses the receiver from the turnover

requirements of the Bankruptcy Code, until further order of the court (DN 16). The Debtor's request

for turnover will be DENIED (DN 24) and the court will order retention of the receiver, in

possession of the Debtor's property, and so remain until further order of this court.

A separate order will issue. FED. R. BANKR. P. 9021.

DATED AND SIGNED ABOVE.

COPIES to be sent by the Bankruptcy Notification

Center ("BNC") to the following:

The Honorable Eileen S. Willett

Maricopa County Superior Court

201 W Jefferson St CCB 4B

Phoenix, AZ 85003-2244

Lori Winkelman, Attorney for Federal National Mortgage Association 

Thomas G. Luikens, Attorney for Debtor

Office of the U.S. Trustee

Case 2:10-bk-02972-JMM Doc 42 Filed 04/29/10 Entered 04/30/10 08:16:30 Desc

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