Weil Restructuring

Happy Mothers Day From the Weil Bankruptcy Blog

Contributed by Doron P. Kenter.

“A boy’s best friend is his mother.” – Norman Bates

“Let’s have a family gathering for the remaining family members who still speak to each other” – Someecards, Inc.

On this Mothers’ Day weekend, we celebrate all mothers, wherever they may be.  But the Weil Bankruptcy Blog would never miss the opportunity to point out what might happen when “things go south” and family feuds erupt, even over how to treat Mom.  Indeed, sometimes fights about mothers generate more than just awkward Thanksgiving dinners – they can also give rise to some interesting bankruptcy issues.  In this case, we bring you the story of Ma Harner, who, at 88 years young, was the focal point of a family dispute that ultimately came before the United States Bankruptcy Court for the Eastern District of California.  Let’s see what happened, shall we? 
We begin with the Brothers Harner — Mark and Christopher.  Mark and Christopher’s octogenarian mother lived in a mobile home on a 120-acre parcel of rural property in Mariposa, California.  Ma Harner held title to that property until March 2012, when Christopher somehow acquired title to the property, while reserving a life estate interest for his mother.  Several months later, Christopher obtained a release of his mother’s life estate and pledged the Mariposa land as collateral for his own $175,000 loan from Milestone Financial.  [Sidebar: Certain of Ma Harner’s other relatives, Stephen Harner and Susan Harner Lazdins, then filed an elder abuse civil action against Christopher. That case was ultimately settled with Christopher agreeing, among other things, that Ma Harner could continue to live on the land.]
Christopher made only three payments on the Milestone Loan, and missed many more, which caused the loan to go into default in early 2014.  On the date of a scheduled foreclosure sale of the property, Mark Harner purchased the Milestone Loan to stop the sale, which could have forced Ma Harner out of her home.  Mark then sought to foreclose on the property himself (presumably to take it out of Christopher’s hands), and on the eve of that foreclosure, Christopher commenced a case under chapter 13 of the Bankruptcy Code.  Mark then filed a motion for relief from the automatic stay to permit him to foreclose on the property.
In considering Mark’s motion, the bankruptcy court concluded that cause existed to terminate the automatic stay.  And although it is not our usual practice to quote at length from an opinion, in this case, the bankruptcy court sorted through the family mishegoss and said it best:

It is apparent from all of the pleadings that this Motion, and the underlying bankruptcy, arise essentially out of a long-standing family feud, a two-party dispute between the Debtor on the one hand, his brother and other family members on the other. The Debtor and his family have already been in litigation in the Mariposa Superior Court over the Mariposa Property and the care of their Mother. The person in the middle, who appears to have the most at risk here, and who cannot appear and be heard, is the 88 year old Mother. The only significant asset in this case is the Mariposa Property for which the Movant has invested a substantial amount of money in an effort to protect for his Mother. The only significant claim in this case is the Milestone Loan which the Debtor now owes to his brother. The unsecured debts are insignificant and the Debtor does not need the Mariposa Property to pay off those debts.

The Debtor’s response does not explain how or why he got his Mother to deed the Mariposa Property and surrender her life estate to him, and it does not address why he pledged the Mariposa Property as collateral for a substantial short term loan from Milestone Financial. Most striking is the omission of any evidence to show that the Debtor has a personal financial interest in the Mariposa Property. The court can infer from the absence of any evidence to the contrary that the Debtor did not pay his Mother anything for the Property. He subsequently borrowed all or substantially all of the value of the Property and spent the money for personal reasons unknown. He has not invested in any improvements to the Property. He has not invested in insurance for the Property or paid the property taxes. The Debtor claimed a homestead exemption in the Mariposa Property, but it does not appear that he lives there; he apparently lives and works in Las Vegas. The only residential improvement on the Property is the Mother’s mobile home.

The Movant purchased the Milestone Loan in a last minute effort to preserve the family ranch and protect the Mariposa Property for his Mother who lives there. This bankruptcy is solely about the Debtor’s desire to retain title to the Mariposa Property, but for what purpose? What will the Debtor lose if the Movant is allowed to foreclose the Milestone Loan, other than the possible ability to refinance the Loan and take more equity out of the Property? It appears that the person with the most at stake here is the Debtor’s Mother. If there are any issues to be resolved between the Debtor and his family regarding the Debtor’s right to own the Mariposa Property, or to care for their Mother, those can be resolved in the state court.

An unfortunate series of events indeed.  And although we take no formal position in the matter, it appears that Ma Harner was fortunate indeed to have Mark come to her aid.  Interestingly, even though bankruptcy courts are suitable forums for any number of disputes, in this case, where Ma Harner’s interests were of central relevance, the bankruptcy court realized that the family’s dispute would be better handled outside the context of Christopher’s bankruptcy case.  We can only hope that it was resolved with as little acrimony as would be possible under the circumstances.
Makes your family seem pretty good, doesn’t it?
*The author would like to wish a very special and happy first Mothers Day to his wife, Jennifer, who has been putting up with his corny “dad jokes” since before she became a mother.
 
Postscript: The United States Code officially refers to the day as “Mother’s Day.”  See 36 U.S.C. § 117(a).  Indeed, it has been suggested that the day was conceived to honor one’s own mother, rather than “all mothers.”  Perhaps in light of the statute, Microsoft Word itself suggests changing “Mothers Day” to “Mother’s Day.”  However, the author believes that the day should celebrate all mothers, including the many mothers and grandmothers that have been important influences on our lives. Moreover, even if the day is not meant to be a generalized celebration of all mothers, many people have more than one mother of their own to celebrate this weekend.  Accordingly, we chose to delete the apostrophe, which conforms to the grammatical convention in the section of the United State Code that proclaims Veterans Day to be a federal legal holiday.  See 5 USC § (a).

Footnotes:
  1. Not literally. This story happened out West, in California.
  2. “Ma” is used as a descriptive term. This was not actually her name. But it would have been great if had been.
  3. Craziness.
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