Understand the complexities and nuances of the Bankruptcy Code to better advise clients and prepare for court.
By Daniel Gill
A bankruptcy trustee in Virginia has been given the go ahead to liquidate assets and locate the heirs of creditors and shareholders in a recently reopened case that dates back to 1928 ( In re Yellow Poplar Lumber Co. , 2017 BL 223314, W.D. Va., Case No. 1:15CV00037, 6/28/17 ).
The trustee has proposed hiring a genealogy firm to help track down the right people in a case that involves two states, a half-dozen companies, unanticipated oil and gas interests, and accumulated royalties set aside for unknown claimants.
Closed for decades, the case’s revival began when a party claiming an interest in escrowed gas royalties filed a lawsuit in a Virginia federal court to establish its interest in the set-aside funds. When it became apparent in that lawsuit that the long defunct company, Yellow Poplar Lumber Co., had a potential claim to those funds, the judge directed the parties to reopen Yellow Poplar’s bankruptcy case, which was closed in 1931.
Although the bankruptcy code provides that closed cases can be reopened for cause and that no time restrictions are imposed by law, revival after eight decades appears unprecedented. According to Bloomberg Law: Bankruptcy Treatise, pt. I, ch. 42 (D. Michael Lynn et al. eds., 2016), the passage of time weighs heavily against reopening a case. The longer a party waits to reopen a closed case, the more compelling the reason to reopen must be.
Here, more than $2 million of escrowed funds, plus a continuing interest in royalties for gas producing tracts of land, will be administered by John M. Lamie, as Chapter 7 trustee for the long-since-defunct debtor, Yellow Poplar Lumber.
The trustee’s job will be to administer the interest of Yellow Poplar for the defunct company’s defunct creditors and the heirs of its shareholders following a settlement of the interest in escrowed funds approved by the district court on June 7.
Lamie told Bloomberg BNA on June 30 that there are probably about $150,000 worth of claims not paid off in the original bankruptcy case, and those claims may be worth about $1 million today.
So far, paralegals and other professionals have located a handful of heirs of Yellow Poplar’s creditors. Among these are heirs to the original trustee in the case, who apparently was also a principal of a creditor, Lamie said.
It’s likely that the task will prove more than challenging. None of the business creditors of the debtor still exists, and most creditors were small tradesman claims.
Lamie has proposed hiring a genealogy firm to help find creditor heirs as well as those of the original shareholders of Yellow Poplar. Any money left over after creditors and the trustee’s administrative expenses get paid will be distributed to the heirs of the shareholders, he said.
Lamie expects it to be difficult to locate these interest holders. So far public notices, published prior to the court’s consideration of the settlement agreement, failed to turn up any legitimate interest holders, he said.
The case begins during the “Roaring Twenties” and decades before the modern Bankruptcy Code was born .
On July 17, 1928, White Oak Lumber Company filed a petition in what was then the Western District of South Carolina to have Yellow Poplar Lumber declared bankrupt.
Under the 1898 Bankruptcy Act, applicable at the time, the company would be liquidated by a trustee for the benefit of its creditors, similar to how Chapter 7 functions currently.
Apparently a few assets were administered, creditors paid a small dividend, and the case was closed in 1931, Lamie said.
According to a deed dated Jan. 5, 1906, Yellow Poplar took an interest in certain tracts of land in Buchanan and Dickenson Counties in western Virginia. In 1929, the bankruptcy trustee in the Yellow Poplar case apparently executed another deed that may—or may not—have disposed of the properties.
Apparently certain tracts of land fell between the cracks of the deeds leaving ownership of those tracts uncertain, attorney Francis “Chip” Casola, who represented one of the parties to the modern dispute, told Bloomberg BNA in a July 5 phone call.
Ultimately title searches suggested that Yellow Poplar might still have an interest in the tracts.
Companies known as Range Resources-Pine Mountain, Inc. and Range Resources-Appalachian, LLC and others developed and operated gas wells on these land tracts.
A Virginia law enacted in the early 1990s, called a pooling statute, required Range Resources to escrow royalties for unknown, unidentified interest holders, Lamie said.
Under the pooling law, Range Resources put more than $4 million of royalties into an escrow account. If legitimate interest holders aren’t found, the escrowed funds will ultimately revert to the Commonwealth of Virginia.
Because Yellow Poplar apparently maintained an interest in certain tracts of lands being exploited for gas, the defunct company maintained an interest in the pooled royalties, Lamie said.
Some 82 years after the Yellow Poplar bankruptcy case was closed, a company called Plumb Creek Timberlands filed a lawsuit in 2013 in the Western District of Virginia.
It claimed an interest in the funds being pooled ostensibly for Yellow Poplar’s unknown heirs, according to Casola and papers filed in the district court. Plumb Creek claimed ownership in the tracts dating back to the 1920s.
This is where Lamie comes in. He first was appointed guardian ad litem to represent the interests of the unknown successors in interest to Yellow Poplar.
The court ordered the parties to reopen the original Yellow Poplar bankruptcy case “because the Trustee in that proceeding needed to be a party to this litigation,” the court said. But of course, by now that trustee is “long deceased,” the court said.
After the bankruptcy case was reopened in South Carolina, it was transferred to the Western District of Virginia, to the docket of James P. Jones, the judge presiding over the lawsuit over the escrowed royalties and who directed the parties to reopen the bankruptcy case.
Jones then ordered that Lamie be appointed as the Chapter 7 trustee for the case.
On Jan 25, 2017, a few days before trial, the parties to the lawsuit reached a settlement of the ownership claims.
The court approved the settlement by order dated June 7. Under the agreement, gas estates for two tracts of land would be split by Lamie, on behalf of the Yellow Poplar bankruptcy estate, Weyerhaueser Company (as successor in interest to Plumb Creek Timberlands) and Range Resources.
Lamie is represented by Browning Lamie & Gifford PC, Abingdon, Va. Weyerhaeuser Company was represented by Chip Casola, Roanoke, Va. Range Resources was represented by Wade Massie, Abingdon, Va.
To contact the reporter on this story: Daniel Gill in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Jay Horowitz at JHorowitz@bna.com
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
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