Opinion
6:24-bk-03174-GER
10-24-2024
In re Timothy J. McBee, Debtor.
Chapter 7
ORDER GRANTING MOTION FOR RELIEF FROM STAY
Grace E. Robson, United States Bankruptcy Judge
THIS CASE came before the Court on October 3, 2024 at 10:30 a.m. (the "Hearing") upon the Motion for Relief from Stay (the "Motion") (Doc. No. 10) filed by James and Diane Gillard ("Movants"), the Response (Doc. No. 13) filed by Timothy J. McBee ("Debtor"), the Reply (Doc. No. 22) filed by Movants, and the Supplemental Authority (Doc. No. 37) filed by Debtor.
Response to Motion for Relief from Stay (the "Response").
Reply in Support of Creditors' Motion for Relief from Stay (the "Reply").
Debtor, Timothy J. McBee's Notice of Filing Supplemental Authority in Support of Its Response to Motion for Relief from Stay (the "Supplemental Authority").
Debtor commenced this case by filing a voluntary petition under Chapter 7 on June 25, 2024 (the "Petition Date"). According to Debtor's schedules, Debtor is the 100% owner of an entity called Charleston Roots Management dba CRM Construction Management ("CRM"). Prior to the Petition Date, CRM entered into a contract with Movants for the construction of a residential home (the "Contract"). Debtor holds a license as a Certified Building Contractor.
Doc. No. 1 at 13.
Doc. No. 10, Ex. A.
The name on the license is "Tim McBee" with a dba name of "CRM Construction Management." The license number is provided in the Motion and the Court was able to verify the license on the Florida Department of Business & Professional Regulation's website. See Fed.R.Evid. 201 (recognizing that a court may take judicial notice on its own or upon a party's request at any stage of a proceeding of a fact that is not subject to reasonable dispute because it can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned).
Debtor, solely in his capacity as president of CRM, executed the Contract with a face value of $790,418.00. According to Movants, they initially paid Debtor and CRM $45,000.00 for installation of a pool, executed a note with Truist Bank Corporation ("Truist") for the financing of $500,000.00 to be used toward the construction of the property as described in the Contract, and caused $290,481.00 to be deposited into an account with Truist towards the total Contract price for Debtor and CRM to draw upon during construction of the property. Movants state that they submitted a change order for the roof and the parties agreed to terminate the contract for the pool construction and reallocate the $45,000.00 down payment for the pool to the cost of the roof. Movants state that Debtor and CRM approved the change order but requested Movants pay an additional $43,330.58 in funds. Subsequently, Eagle Roofing and Construction LLC ("Eagle") filed a lien against the subject property when it was not paid for work, materials and labor supplied to Debtor and CRM. The Contract provided that the "Contractor" was responsible for all acts and omissions of its subcontractors and that there was no contractual relationship between Movants and subcontractors. The Contract provided that Movants may withhold payment for "failure of the Contractor to pay subcontractors or to pay for labor, materials or equipment when due." Movants state that CRM failed to cure Eagle's lien and subsequently purported to terminate the Contract. Movants paid $38,985.20 to satisfy Eagle's lien and obtained services of other builders to finish the construction of the subject property.
While the Contract does not define "Contractor," the Contract was between Movants and CRM as the Contract was signed by Debtor in his capacity as President of CRM.
On June 18, 2024, Movants filed suit against CRM and Debtor in the case captioned Gillard v. Charleston Roots Management, LLC, Case No. 05-2024-CA-034245-XXCA-BC (the "State Court Case"), in the Circuit Court for the Eighteen Judicial Circuit in and for Brevard County, Florida ("State Court"). Thereafter, Debtor filed the instant case and filed a Suggestion of Bankruptcy in the State Court Case.
The Court takes judicial notice of the case record and docket of the State Court Case. See Fed.R.Evid. 201.
Gillard v. Charleston Roots Mgmt., LLC, No. 05-2024-CA-034245-XXCA-BC (Fla. 18th Cir. Ct. June 28, 2024).
Movants seek relief from the automatic stay to continue to obtain judgment against Debtor and CRM and then pursue recovery of such judgment from the Florida Homeowners' Construction Recovery Fund established by Chapter 489 of the Florida Statutes (the "Fund"). Debtor argues the basis for the State Court Case is recovery of the money paid to remove the lien but the full cost of the roof was $85,536.88 and Movants paid $38,985.20, and the "difference between these amounts shows the efforts of the Debtor and CRM to pay the amounts due." Debtor also argues that Debtor and CRM terminated the Contract by letter dated June 21,2023 citing failure to release funds defined in the Contract and Debtor proceeded in good faith toward Movants. Debtor argues that lifting the stay would impose a hardship on Debtor because he would have to pay another attorney to represent him in the State Court Case and leaving the stay in place would not impose a hardship on Movants. Debtor argues that an order denying the Motion is as useful as a judgment for purposes of seeking recovery from the Fund. Debtor also makes an argument that he is not an indispensable party to any lawsuit that might be brought by Movants against CRM in their effort to recover from the Fund.
"Florida homeowners who contract for construction or home improvements, but are wronged by licensed contractors, can recover some of their losses from the recovery fund in certain circumstances." The purpose behind the Fund is:
DeMaria v. Constr. Indus. Licensing Bd., No. 1D20-2306, 2023 WL 2594105, at *1 (Fla. 1st DCA Mar. 22, 2023).
to compensate an aggrieved claimant who contracted for the construction or improvement of the homeowner's residence located within this state and who has obtained a final judgment in a court of competent jurisdiction, was awarded restitution by the Construction Industry Licensing Board, or received an award in arbitration against a licensee on grounds of financial mismanagement or misconduct, abandoning a construction project, or making a false statement with respect to a project.
"The Legislature makes perfectly clear that a key criterion for recovery from the fund is that the amount of the claimant's damages has already been reduced to a civil judgment, arbitration award, or restitution order." The filing of a bankruptcy petition by a licensee does not automatically relieve claimants from the obligation to obtain a final judgment against a licensee. Rather, where a licensee files a bankruptcy petition, the party alleging wrongful conduct must seek "to have assets involving the transaction that gave rise to the claim removed from the bankruptcy proceedings so that the matter might be heard in a court of competent jurisdiction."
DeMaria, 2023 WL 2594105, at *2 (citing Fla. Stat. § 489.141(1)(a), (d)).
See White v. Weatherford (In re Abrass), 268 B.R. 665, 686 (Bankr. M.D. Fla. 2001) (addressing the Florida Real Estate Recovery Fund). The Court notes that the operative language for eligibility to the Homeowners' Construction Recovery Fund and the Real Estate Recovery Fund is identical.
The Court finds that there are no assets to remove from this bankruptcy case. The asset at issue is money paid to CRM, which is not property of Debtor's bankruptcy estate, and for which this Court does not have the ability to set aside for the benefit of Movants. Furthermore, creditors are not receiving any distribution from Debtor's bankruptcy estate as reflected on the Trustee's report of no distribution filed on September 30, 2024.
At this time, Movants have not filed an adversary proceeding seeking to except the claim from discharge. Movants have, however, filed a Motion to Extend Deadline to File a Motion to Dismiss Case and to File a Complaint Pursuant to 11 U.S.C. §§ 523 and 727 (Doc. No. 33); the Court has not yet ruled upon the motion.
"The automatic stay can be lifted if an interested party demonstrates 'cause.' Cause is not defined in the Bankruptcy Code. Therefore, courts must determine 'cause' by examining the totality of the circumstances in each particular case."
In re Abrass, 268 B.R. at 687 (citations omitted) (first citing 11 U.S.C. § 362(d)(1); and then citing Egwineke v. Robertson (In re Robertson), 244 B.R. 880, 882 (Bankr. N.D.Ga. 2000)).
In this case, cause exists to lift the automatic stay. Movants will not recover any property or receive any distribution from this bankruptcy case. The Fund is designed to reimburse aggrieved parties, such as Movants, who contracted for the construction or improvement of their residence and the licensee abandoned the construction project. Arguably, Movants can only pursue recovery from the Fund if the stay is lifted. Therefore, the Court, having considered the Motion and the positions of interested parties, finds it appropriate to grant Movants relief from the automatic stay for the limited purpose of taking the necessary steps to seek payment from the Fund. Accordingly, it is
Fla. Stat. § 489.1401(2). The Court is not making any finding that Movants are entitled to reimbursement from the Fund.
See In re Abrass, 268 B.R. at 688.
ORDERED:
1. The Motion (Doc. No. 10) is GRANTED as set forth herein.
2. Movants may seek payment from the Florida Homeowners' Construction Recovery Fund; however, no recovery may be sought against Debtor, Debtor's property, or the bankruptcy estate.
3. To the extent necessary, Movants may proceed against Debtor in the State Court Case for the limited purpose of obtaining a judgment so that Movants may seek payment from the Florida Homeowners' Construction Recovery Fund; provided, however, that any judgment obtained against Debtor shall not be collectible from Debtor's property or the bankruptcy estate. Further, any judgment against Debtor shall not be recorded by Movants and Movants shall request that the State Court not record any judgment against Debtor.
4. The relief granted herein is without prejudice to any defenses that Debtor may have in proceedings before the applicable state court or governmental unit, including discharge of the debt.
5. Movants' request to waive the 14-day stay period pursuant to Federal Rule of Bankruptcy Procedure 4001(a)(3) is GRANTED.
Attorney Andrew S. Ballentine is directed to serve a copy of this Order on interested parties who do not receive service by CM/ECF and file a proof of service within three days of entry of this Order.