In Re Larry Goodwin Golf, Inc.
219 B.R. 391, 1997 Bankr. LEXIS 2246, 1997 WL 875706 (1997)
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Rule of Law:
A debtor who operates a substantial business on its property, providing services beyond merely holding the real estate for income, does not qualify as 'single asset real estate' under 11 U.S.C. § 101(51B) of the Bankruptcy Code.
Facts:
- On July 31, 1992, the Debtor purchased Uwharrie Golf Club from Uwharrie Golf, Inc. for $1,100,000.
- Uwharrie Golf, Inc. provided $950,000 in purchase money financing for the sale, secured by a promissory note and a Deed of Trust on the property.
- The property consists of an eighteen-hole golf course, pro shop, driving range, swimming pool facility, and adjacent undeveloped land.
- The Debtor's operations on the property include golf cart rentals, operating a pool, providing concessions, and attempting to sell the adjacent land.
- The Debtor's president, Larry Goodwin, continued to manage the business operations after filing for bankruptcy.
Procedural Posture:
- The Debtor, Uwharrie Golf Club, Inc., filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Middle District of North Carolina on April 29, 1997.
- A creditor, Uwharrie Golf, Inc., filed a Motion for Relief from Stay, seeking permission to foreclose on the golf club property.
- The bankruptcy court denied the creditor's Motion for Relief from Stay.
- The Debtor filed a Motion for Authority to Use Cash Collateral.
- During the hearing on the Debtor's motion, the creditor argued that the Debtor should be classified as a 'single asset real estate' case, which would require higher monthly payments under § 362(d)(3).
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Issue:
Does a debtor that operates a golf course with associated services like a pool, concessions, and golf cart rentals qualify as 'single asset real estate' under 11 U.S.C. § 101(51B) of the Bankruptcy Code?
Opinions:
Majority - Catharine R. Carruthers
No. A debtor that operates a golf course with numerous associated services is conducting a substantial business and does not qualify as 'single asset real estate.' The court reasoned that the definition of 'single asset real estate' in § 101(51B) is intended to cover passive investments where property is held primarily for income generation, such as apartment buildings or raw land, rather than active, operational businesses. The court relied on precedent, such as In re Kkemko, which held a marina was not single asset real estate due to services like boat repair and gas sales, and In re CBJ Development, which excluded a hotel with a restaurant and bar. The court found that the Debtor's activities, including golf cart rentals, a pool, concessions, and land sales, constitute operating a business on the property, thus placing it outside the statutory definition intended for simple, income-producing properties.
Analysis:
This decision clarifies the scope of the 'single asset real estate' designation under the Bankruptcy Code, distinguishing between passive real estate investments and active operating businesses. By classifying a golf course as an operational business, the court narrows the application of the expedited procedures in § 362(d)(3), which were designed to quickly resolve cases involving debtors with little more than a single, underperforming property. This precedent provides debtors operating service-oriented businesses like hotels, marinas, and recreational facilities with a stronger argument to avoid the stringent payment requirements imposed on single asset real estate cases, thereby increasing their flexibility and chances of a successful reorganization.
