Opinion
Case No. 08-10814-TC.
April 7, 2008
Lawrence D. Coppel, #00180, Gordon, Feinblatt, Rothman, Hoffberger Hollander, LLC, Baltimore, Maryland, Counsel for Centra Bank.
Stephen K. Carper, #03390, Clapp Carper, LLC, Frederick, Maryland, Counsel for the Debtor.
STIPULATION AND CONSENT ORDER AUTHORIZING DISPOSITION OF CERTAIN INVESTMENT ACCOUNT COLLATERAL AS ADEQUATE PROTECTION TO CENTRA BANK
Dale Ernest Ausherman (the "Debtor") and Centra Bank ("Centra"), by their respective undersigned counsel, hereby stipulate and agree as follows:
Stipulations
1. The Debtor filed a voluntary petition under Chapter 11 of the United Sates Bankruptcy Code (the "Bankruptcy Code") on January 18, 2008 (the "Petition Date").
2. Prior to the Petition Date, Centra made a commercial loan to SC AFIG 2, LLC (the "Borrower") in the original principal amount of $1,000,000, which loan was evidenced by a Commercial Promissory Note dated April 8, 2005 (the "Centra Loan"). As evidenced by a Note Modification Agreement and a Loan Modification Agreement, each dated October 31, 2005, the principal amount of the Centra Loan was thereafter increased to $2,000,000.
3. The purpose of the Centra Loan was to enable the Borrower to purchase improved residential real property in the Myrtle Beach, South Carolina area so that the Borrower could lease or sell such properties.
4. The Debtor and his spouse, Candace J. Ausherman (collectively, the "Aushermans"), each own a 50 percent interest in the Borrower, and each guaranteed repayment of the Centra Loan.
5. As security for the repayment of the Loan, the Aushermans executed a Commercial Security Agreement dated April 8, 2005, and a Consumer Security Agreement dated October 31, 2005 (collectively, the "Security Agreements"). Pursuant to the Security Agreements, the Aushermans granted Centra a first priority security interest in, inter alia, all property in a certain investment account at Merrill Lynch, Pierce, Fenner Smith Incorporated ("Merrill Lynch"), titled in the names of the Aushermans as joint tenants and designated as account no. xxx-xx636 (the "Account"), and all proceeds and products thereof, including, but not limited to, cash or stock dividends, conversions, or replacements (collectively, the "Account Collateral").
The Centra Loan is also secured by real estate owned by the Borrower.
Pursuant to the Security Agreement, Candace Ausherman also granted Centra a security interest in a Merrill Lynch investment account titled in her name only.
6. As of February 29, 2008, the net portfolio value of the Account Collateral was $219,092.05. The Account Collateral presently is invested substantially in publicly traded common stocks.
7. Upon the execution of a certain Control Agreement with respect to the Account dated April 8, 2005, by and between the Aushermans, Centra and Merrill Lynch, Centra perfected its security interest in the Account and Account Collateral.
8. As a result of volatility in the stock market, the Account Collateral has lost value in recent months and is at continuing risk of further diminution in value. Accordingly, the Aushermans have agreed that, as adequate protection of Centra's interest in the Account Collateral, the common stocks constituting the Account Collateral will be sold by Merrill Lynch at their fair market trading value, and the net proceeds of sale will remain in the Account and be reinvested in a money market account, subject at all times to the perfected security interest of Centra.
Order
WHEREFORE, on the basis of the foregoing stipulations, it is, by the United States Bankruptcy Court for the District of Maryland, hereby
ORDERED, that, as adequate protection of Centra's security interest in the Account Collateral pursuant to 11 U.S.C. §§ 361 and 363, the Debtor shall be, and hereby is, authorized to sell the common stocks constituting Account Collateral at their fair market trading value and to reinvest the net proceeds of such Account Collateral in a money market fund in the Account; and it is further
ORDERED, that Centra shall continue to have a lien on and security interest in the Account, the Account Collateral and the proceeds of the Account Collateral, and that such lien and security interest shall hereby be deemed to be perfected without any further notice or action by Centra or any other party; and it is further
ORDERED, that Centra's lien on the Account, the Account Collateral and the proceeds of the Account Collateral shall have the same validity, extent and priority as such lien had on the Petition Date; and it is further
ORDERED, that the proceeds of the Account Collateral shall remain in their entirety in a money market fund in the Account until further Order of the Court; and it is further
ORDERED, that this Stipulation and Consent Order shall survive the conversion of this case to a case under any Chapter of the Code, and the terms of this Stipulation and Consent Order shall be binding on any subsequently appointed trustee for or other representative of the estate of the Debtor or Candace Ausherman.