Attorneys Expect Dismissal Of Roxby Bankruptcy Cases
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Read the motion to dismiss Roxby Development’s Chapter 11 Bankruptcy filing
WHEELING -- A federal attorney filed motions Thursday in U.S. Bankruptcy Court to dismiss the Chapter 11 bankruptcy cases filed by Roxby Development and Roxby McLure LLC over failure to provide proof of insurance on its properties.
If those cases are dismissed, foreclosures of both the McLure Hotel and Scottish Rite building in East Wheeling would move forward.
Trial Attorney Shari Collias, representing the Office of the U.S. Trustee at the federal courthouse in Charleston, filed motions Thursday afternoon on behalf of acting U.S. Trustee John P. Fitzgerald III to dismiss Roxby’s bankruptcy cases.
Roxby had filed for Chapter 11 bankruptcy earlier this month on the eve of a scheduled foreclosure sale on the McLure Hotel in downtown Wheeling. The bankruptcy filing put the brakes on the auction and automatically placed a stay on any further legal action against the company from a long list of creditors to which - according to Roxby’s own bankruptcy filing - the company was in debt to the tune of between $10 million and $50 million.
Parties representing interests in the downtown McLure Hotel and the Scottish Rite building in East Wheeling - both of which had been acquired by Roxby in recent years - have been pursuing action to get the stay lifted in the bankruptcy cases.
The historic McLure Hotel and its adjacent parking garage are encumbered by a deed of trust in favor of FA Management Inc. - the previous owner of the property. Roxby had acquired the McLure Hotel in 2021 through a seller-finance agreement for $6.245 million, with 20% down at closing. More than $5.3 million is still owed on the property, according to the deed of trust. Tax liens and mechanics liens have since been filed on the property, as well.
Local attorney David Delk had been named substitute trustee on the deed of trust for the McLure Hotel and the parking garage. Shortly after Roxby’s bankruptcy filing, Delk filed a motion on behalf of FA Management for relief from the automatic stay - alleging, among other things, that the McLure Hotel and parking garage were not insured.
On Tuesday of this week, the U.S. Trustee interviewed Jeffrey Morris - president of Roxby Development, Roxby McLure LLC and Roxby Labs - by telephone in this case, according to Thursday’s filings.
"Jeffrey Morris, representative for the debtor, informed the U.S. trustee at the initial debtor interview that the debtor did not have commercial property insurance in place on either the hotel or the parking garage because the debtor could not afford to pay the premium," Fitzgerald wrote in his filing. "Mr. Morris was advised the debtor must obtain commercial property insurance for the hotel and parking garage and provide proof of it to the U.S. Trustee."
The filing stated that Morris was given until 3 p.m. on Wednesday to provide proof of active commercial property insurance. The action was filed after Morris failed to do so.
"The Scottish Rite also filed a motion to lift the stay," Delk said on Thursday. "I filed on Friday. Roxby doesn’t have any equity in this case, and we’re alleging Roxby has violated the terms of the deed on the hotel and the parking garage. If the case is dismissed and the stay is lifted, we can move forward with the foreclosure."
Delk said Roxby does not have unencumbered property that can be seen as valuable to the other creditors to which the company is in debt. A key factor in the situation is the lack of insurance protecting the properties involved and the previous property owners’ interests, Delk noted. He said he expected the bankruptcy cases to be dismissed and the foreclosure actions to proceed.
"When there’s not adequate protection, the court takes that very seriously," said attorney David Croft of Spillman Thomas & Battle, representing the Scottish Rite.
Croft said since their collateral is not adequately protected, he expected the court to give Roxby a certain amount of time - possibly a number of days - to secure insurance before granting the U.S. trustee’s motion to dismiss the bankruptcy cases.
On Thursday, Morris said Roxby is in the process of getting the insurance issue ironed out as quickly as possible.
"We have been working to have all of the required insurance in place," Morris said. "We are moving as swiftly as we can and intend for it to be secured prior to any hearing on the motion to dismiss."
The U.S. trustee’s filing requested that the court consider several circumstances related to the Roxby case, including factors that - according to the trustee - constitute cause for dismissal, including: "substantial or continuing loss to or diminution of the estate and the absence of a reasonable likelihood of rehabilitation, gross mismanagement of the estate, failure to maintain appropriate insurance that poses a risk to the estate or to the public, unauthorized use of cash collateral that is substantially harmful to one or more creditors, failure to pay taxes owned after the date of the order for relief or to file tax returns due after the date of the order of relief," and other circumstances.