Case 14-30262

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UNITED STATES BANKRUPTCY COURT

FOR THE WESTERN DISTRICT OF NORTH CAROLINA
CHARLOTTE DIVISION
IN RE:
MARTHA J. LANCE
SS #: XXX-XX-4330
Debtor(s)

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) Case No.: 14-30262
) Chapter 11
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MOTION TO APPOINT CHAPTER 11 TRUSTEE OR CONVERT

TO CHAPTER 7 ON SHORTENED NOTICE
The undersigned, United States Bankruptcy Administrator for the Western District of
North Carolina, moves the Court to appoint a Chapter 11 Trustee or convert this case to
Chapter 7 and says:
1. This is a Chapter 11 proceeding in which a voluntary petition was filed on
February 19, 2014.
2. On November 19, 2014, the Debtor filed the Motion for Order Approving
Exclusive Right of Sale Listing Agreement and Motion for Authority to Sell Real
Property Located at 1311 Atlantic Street, Melbourne, Florida on Shortened
Notice (the Florida Motion) [docket # 73]. The Debtor sought to sell real
property and improvements wholly owned by the Debtor to the unrelated parties,
Timothy S. and Kimberlee D. Marshall for $1,100,000.00. The closing was to
take place on or before December 2, 2014. The Florida Motion sought to pay:
a. all ordinary and necessary closing costs, including commissions pursuant
to the Listing Agreement;
b. payments as are required for the release of any valid liens;
c. other payments which may be necessary to provide clear or insurable title
to the purchasers;
d. payment of any outstanding ad valorem taxes;
e. payment of $32,810.42 to The Henderson Law Firm on account of this
Court's November 17, 2014 Order Awarding Interim Compensation to
Attorney James H. Henderson; and,
f. the balance to the Debtor.

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3. This Court heard the Florida Motion on December 1, 2014. Appearing at that
hearing were: James H. Henderson on behalf of the Debtor and the
undersigned, United States Bankruptcy Administrator. The undersigned objected
to the distribution of the proceeds of the sale to the Debtor and requested that
the Court order the net proceeds to be paid to and held in escrow by the Debtors
attorney.
4. On December 1, 2014, the Court entered the Order Approving Exclusive Right of
Sale Listing Agreement and Granting Debtors Motion for Authority to Sell Real
Property Located at 1311 Atlantic Street, Melbourne, Florida (the Florida Order)
[docket # 76]. The Florida Order allowed the sale and the closing to take place
with the following disbursements to be made at closing:
a. all ordinary and necessary closing costs, including commissions pursuant
to the Listing Agreement;
b. payments as are required for the release of any valid liens;
c. other payments which may be necessary to provide clear or insurable title
to the purchasers;
d. payment of any outstanding ad valorem taxes;
e. payment of any other ordinary and usual obligations that are required to
consummate the sale of the Property pursuant to the terms of the
Contract; and
f. the balance to The Henderson Law Firm to be held in trust for the
Debtor pending further orders of this Court (emphasis added).
5. The Florida Order also allowed the Henderson Law Firm to pay from escrow:
a. The legal fees and expenses that are payable to The Henderson Law Firm
which accrued in this proceeding, as set forth in this Courts November 17,
2014 Order Awarding Interim Compensation to Attorney James H.
Henderson and the subsequent Application for Fees filed with the Court
on November 25, 2014. Other disbursements are subject to approval of
this Court;
b. Up to $10,000.00 to the Debtor to pay for expenses related to the sale,
such as the cost of movers, which counsel for the Debtor may release
upon submission of proper documentation; and
c. Any quarterly fees owed by the Debtor.

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6. The Florida Order specifically stated: Otherwise disbursements are subject to

the approval of this Court.
7. The Court, in the Florida Order, allowed the Debtor to consummate the sale of
the Property on the terms set forth in the Contract and this Order and authorized
the closing agent to make disbursements from the proceeds of sale in
accordance with the terms of the Contract and this Order.
8. The Florida Order also required, Upon closing, the Debtor shall file a report of
sale with the Court that includes a copy of the executed settlement statement.
9. On December 18, 2014, the Debtor filed the Debtors Report of Sale pursuant to
the Florida Order (the Report of Sale) [docket # 81]. The Report of Sale
included the following information:
a. Settlement date of December 5, 2014 and disbursement date of
December 8, 2014.
b. Payoff of first mortgage loan to Ocwen of $795,727.48. (Note that the
Florida Motion and the Florida Order identified the first lienholder as the
Christiana Trust, not Ocwen.)
c. Net proceeds payable to The Henderson Law Firm of $167,071.25.
d. Settlement charges to the Seller (Debtor) of $138,858.03. The settlement
charges included:
i. Moving bill requested by seller to pay to Brand Transfer & Storage
in the amount of $9,571.00.
ii. Reimbursement of expenses to Charles R. Lance in the amount of
$49,000.00.
10. Upon information and belief, the Debtor has not submitted any documentation to
her attorney for the payment of expenses.
11. The Debtor has violated the requirements of the Florida Order and may be found
in contempt.
12. On October 23, 2014, the Debtor filed the Motion for Authority to Sell Residential
Real Property Located at 9204 Heydon Hall Circle, Charlotte, North Carolina (the
NC Motion) [docket # 64]. The NC Motion requested that the Court allow the
sale of real property and improvements to American Financial Group (AFG) or
its assigns for $1,000,000.00. AFG is solely owned by the Debtors spouse. The
Debtor represented in the NC Motion that:

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a. There was no equity in the property located at 9204 Heydon Hall,

Charlotte, North Carolina (the NC Property).
b. The Debtor had negotiated agreements with the secured creditors, BSI
Financial Services (BSI) and SunTrust Bank (SunTrust), such that BSI
would accept $1,000,000.00 in satisfaction of its note and SunTrust would
accept $7,500.00 in consideration of the release of its deed of trust.
c. The negotiated agreements with BSI and SunTrust would reduce the debt
service required to retain the Property, allowing the Debtor to continue
using the Property as her residence and making it more likely that a
Chapter 11 plan can be confirmed by this Court.
d. The Debtor believed it will be for the benefit of the estate to sell the
Property.
e. The Debtor believes the Sale is being made at a fair price.
f. The Debtor does not have any meaningful income.
13. On November 14, 2014, this Court entered the Order Granting Authority to Sell
Residential Real Property Located at 9204 Heydon Hall, Charlotte, North
Carolina (the NC Order) [docket # 71]. The NC Order found and/or provided:
a. The agreements the Debtor negotiated with BSI and SunTrust will reduce
the debt service required to retain the Property, allowing the Debtor to
continue using the Property as her residence and making it more likely
that a Chapter 11 plan can be confirmed by this Court.
b. BSI has agreed to accept the sum of $1,000,000.00 in satisfaction of its
note if the payment is received on or before December 15, 2014.
c. SunTrust has now agreed to accept the sum of $7,500.00 in
consideration of the release of its Deed of Trust prior to confirmation.
d. The Debtor alleges in the Motion that it will be for the benefit of the estate
to sell the Property at a private sale . . ..
e. Based on the forgoing, the proposed sale is in the best interest of the
Debtor and the estate and should be approved.
14. Upon information and belief, on or about November 21, 2014 (approximately one
week after entry of the NC Order), AFG listed for sale the NC Property for the
asking price of $1,395,000.00.

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15. Upon information and belief, there is currently an offer to purchase the NC
Property for $1,085,000.00 and counter offers of $1,275,000.00 and
$1,250,000.00.
16. It appears that the Debtor may have misrepresented to the Court the benefit to
the estate of the sale of the property to AFG, the value of the NC Property, and
that the sale to AFG would allow the Debtor to continue to use the Property as
her residence. The listing of the NC Property a week following entry of the NC
Order for an amount substantially in excess of the price represented as a fair
price indicates the Debtors true, undisclosed intent with respect to the sale of
the NC Property to AFG. In essence, it appears the Debtor misrepresented
material facts to the Court to induce it to allow the sale to AFG in order to obtain
property for her or her spouses benefit that would otherwise be property of the
estate.
17. The Debtors Monthly Status Reports filed with the Court for the period February
28, 2014 through October 31, 2014 list receipts from AFG and Charles Lance
totaling $50,185.00 (not including a nominal amount of interest) [docket #s 25,
38, 54, 57, 60, 61, 67, 79]. The Debtors ending cash position on October 31,
2014 was $53.92 [docket # 79]. In addition, the February 2014 Report listed no
receipts, but listed disbursements to secured creditors paid by the Debtors
husband in the amount of $4,940.66 [docket # 24].
18. 11 U.S.C. 1104 requires the Court to appoint a trustee or examiner for cause,
including fraud, dishonesty, incompetence, or gross mismanagement . . . or
similar cause, . . . or if such appointment is in the interests of creditors, . . .
19. 11 U.S.C. 1112 requires the Court, unless other factors are established, and
upon request of a party in interest, to convert a case to Chapter 7 or to dismiss it,
whichever is in the best interests of creditors and the estate, for cause unless the
court determines the appointment of a trustee or examiner is in the best interests
of creditors and the estate pursuant to 11 U.S.C. 1104(a). Cause includes
but is not limited to:
a. substantial or continuing loss to or diminution of the estate and the
absence of a reasonable likelihood of rehabilitation; and,
b. failure to comply with an order of the court; . . .
20. The Debtors material misrepresentations to the Court and willful disregard of this
Courts order are sufficient grounds for the relief requested in this Motion. In
addition, the Debtors actions have caused a loss and diminution to property of
the estate and, based on the Debtors lack of any meaningful income, there is
no reasonable likelihood of rehabilitation.

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21. There is already a hearing scheduled for Monday, December 22, 2014 at 9:30
a.m. in this case [docket # 80]. There will be no prejudice to the parties for the
Court to also hear this Motion at that time.
Wherefore, the undersigned requests that the Court convert this case to Chapter 7
or appoint a Chapter 11 trustee and for such other and further relief as the Court deems
just and proper.
Dated: December 19, 2014.
/s/ Linda W. Simpson
Linda W. Simpson
United States Bankruptcy Administrator
402 W. Trade Street, Suite 200
Charlotte, NC 28202-1669
N.C. Bar #12596
Tel: 704-350-7590 Fax: 704-344-6666
Linda_Simpson@ncwba.uscourts.gov

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UNITED STATES BANKRUPTCY COURT

FOR THE WESTERN DISTRICT OF NORTH CAROLINA
CHARLOTTE DIVISION
IN RE:
MARTHA J. LANCE
SS #: XXX-XX-4330
Debtor(s)

)
) Case No.: 14-30262
) Chapter 11
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)
)
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CERTIFICATE OF SERVICE
The undersigned certifies that the pleading(s) or paper(s) to which this Certificate
is affixed was served upon the party(s) to this action listed below by depositing a copy
of the same, enclosed in a first-class postpaid, properly addressed wrapper, in a Post
Office or official depository under the exclusive care and custody of the United States
Postal Service and/or by means of the Electronic Filing System of the Bankruptcy Court
on December 19, 2014.
Martha J. Lance
9204 Heydon Hall Circle
Charlotte, NC 28210
James H. Henderson
-Served Electronically

/s/ Linda W. Simpson

Linda W. Simpson
United States Bankruptcy Administrator
402 W. Trade Street, Suite 200
Charlotte, NC 28202-1669
N.C. Bar #12596
Telephone: (704)-350-7587
Fax: (704)-344-6666
E-mail: Linda_Simpson@ncwba.uscourts.gov