Title: How the Pratt/Archer Family Lost Markham Hill to a Developer - Part 4

Part 4: Summary of the Markham Hill bankruptcy case

The following summary of the Markham Hill bankruptcy case was extracted directly from the Archer v. Kennedy petition filed in the Iowa District Court in Polk County on 11/05/2020 under case number 05771 LACL149083 (POLK). The plaintiffs are Julian and Jane Archer.

(Next week's Markham Hill Moment of History, Part 5 of this series, will only quote from legal documents I found online concerning the Archer v. Bond malpractice lawsuit, including the judge's decisions.)

"10. Plaintiffs owned Archer, LLC, an Arkansas limited liability company that owned a barn, inn, cottage and land in Fayetteville; Pratt Place Inn, Inc., an Arkansas corporation that operated Pratt Place Inn and the Waterman Archer Cottage; Sassafras Hill Enterprises, Inc., an Arkansas corporation that operated Pratt Place Barn; and Sassafras Hill Communications, Inc., an Arkansas corporation that owned a cell tower site leased by Verizon (collectively, the “Archer Related Entities”). The land owned by Archer, LLC upon which the barn, inn, and cottage were situated was a 72 acre Planned Zoning District (PZD) which included 68 acres for the inn, barn and cottage business, the Archer 4.1 acre homestead property (the “4 acres”), as well as a 2.4 acre 4 lot lot-split subdivision (the “Halsell Lots”). The Halsell Lots were under contract to be sold once certain improvements were made pursuant to zoning requirements. Plaintiffs also personally owned a separate 72-acre non-PZD R-4 parcel (the “R-4 Parcel”). The aforementioned land is collectively hereinafter referred to as the “Properties”. The cell phone tower subject to lease is located on separate acreage. Additionally, the Plaintiffs owned property in Iowa and Paris, France; horses; and personal items, including antique furnishings, that were or still are located in Pratt Place Inn, Pratt Place Barn, Pratt Place Cottage, and two storage sheds."

"11. In approximately March 2014, the Plaintiffs received a foreclosure notice from Simmons Bank for a two-month delinquency on a building loan secured by the Properties. Consequently, Plaintiffs sought legal advice from attorney Stanley Bond and his law firm (collectively, “Bond”), an Arkansas attorney reputed to be an experienced debt relief bankruptcy attorney, to determine their financial options and best solution to their financial problem."

"12. Bond advertised himself in his website as “one of the most trusted Chapter 11 Bankruptcy attorneys in the state” and asserted his belief that “bankruptcy law firms should take responsibility for teaching their clients about what they can expect throughout their Chapter 7, 11, 12 or 13 bankruptcy”. These statements were central factors in Plaintiffs’ decision to engage Bond as legal counsel."

"13. After consultation with Bond, Plaintiffs retained Bond to assist them in avoiding foreclosure by Simmons Bank based on the claimed default in the obligations owed to that bank, which Bond referred to as a “technical default”."

"14. Upon legal advice from Bond, Plaintiffs caused Archer LLC and Sassafras Hill Communications Inc. to each file a Chapter 11 bankruptcy proceeding on April 21, 2014."

"15. Bond failed to properly ascertain the terms of the note/debt that Simmons Bank held and was attempting to foreclose, and they failed to realize that the defaulting loan was in fact cross-collateralized and/or guaranteed by Pratt Place Inn, Inc. and Sassafras Hill Enterprises, Inc., as well as personally guaranteed by the Plaintiffs in their individual capacities. After Archer, LLC and Sassafras Hill Communications Inc. filed Chapter 11, Simmons Bank in turn began collection efforts against all remaining parties not in bankruptcy, including the Plaintiffs."

"16. Consequently, on advice of Bond, Pratt Place Inn, Inc. and Sassafras Hill Enterprises, Inc. filed for Chapter 11 on January 15, 2015, and the Plaintiffs personally filed for Chapter 11 on April 28, 2015. Bond initially represented Plaintiffs and the separate debtors for all five bankruptcies. The Court later ordered Pratt Place Inn, Inc. and Sassafras Hill Enterprises, Inc. to seek separate counsel, which they did although still under Bond’s guidance."

"17. Bond’s representation of Plaintiffs resulted in many acts of legal malpractice at varying stages of the bankruptcy process that spanned years in duration. Those acts of malpractice included, but were not limited to the following:

a. Bond failed to properly prepare Plaintiffs’ bankruptcy petition and schedules by failing to list certain assets, including horses; a garage and an apartment in Paris, France; furnishings inside the Inn, many of which were antique family heirlooms; bank accounts; and other assets.

b. Bond knew of the existence of the undisclosed assets and knew that the Plaintiffs incorrectly believed they were required only to list assets sufficient to cover their debt obligations. Despite that knowledge, Bond failed to properly advise Plaintiffs of the requirements to disclose all assets and the potential consequences for the failure to do so.

c. Bond failed to properly file claims of exempt assets, with the result that many of Plaintiffs’ personal assets eventually became part of their bankruptcy estate and subject to liquidation to satisfy creditor debts.

d. Bond neglected many important procedural requirements that must be strictly adhered to maintain a Chapter 11 bankruptcy proceeding. Bond’s lack of attention to detail and failure to ensure procedural compliance caused Plaintiffs, who had no prior bankruptcy experience or knowledge, to breach certain procedural requirements that should have been avoided with proper oversight and direction by Defendants.

e. Bond repeatedly failed to assert meritorious challenges to proposed actions of the bankruptcy Trustee which were detrimental to Plaintiffs."

"18. As a consequence of Bond’s neglect, a Motion to Convert to Chapter 7 or in the Alternative Appoint a Chapter 11 Trustee (the “Motion to Convert”) was ultimately filed in Plaintiffs’ case by the United States Trustee (“UST”) on March 7, 2016. Bond did not take any effective steps to oppose that motion and an Order was entered on May 12, 2016 involuntarily converting Plaintiffs’ personal bankruptcy from a Chapter 11 proceeding to a Chapter 7 liquidation case, thereby exposing virtually all of Plaintiffs’ assets to complete liquidation to pay off creditor debts."

"19. Prior to the above noted Chapter 7 sale/liquidation and in reaction to the Trustee’s initial stance that the barn, inn and cottage were harming the estate by performing at a deficit, Plaintiffs employed a CPA to scour the books, and records of these entities to properly underwrite their financial health. In January 2016, Plaintiffs provided the Trustee updated financial documentation performed by this CPA evidencing the barn, inn and cottage were not a detriment to the estate, and that they were in fact financially secure. The Trustee refused to consider these updated financials due to Bond’s continuous procedural miscues and associated negligence throughout the bankruptcies and elected to proceed with the sale of the barn, inn, cottage, 68-acres, 4-acres and associated assets at a steep discount. Bond neglected to challenge or question, via Motion or otherwise, the Trustee’s assertion that the assets in question were not profitable and should be sold. As a result, Plaintiffs, to their detriment, lost valuable and personal assets at sales well below market value."

"20. In December 2015, Plaintiffs had originally listed the R-4 Parcel for sale through their Chapter 11 Bankruptcy as debtors-in-possession and secured an offer of $1,087,050 from Mr. Seth Mims (“Mims”), a local real estate developer. Plaintiffs’ intent, as debtors-in-possession, was to use the proceeds from the R-4 Parcel sale and approximate $250,000 profit from the sale of the Halsell Lots to drastically pay down the Simmons debt and in turn have Legacy Bank refinance the remainder of the debt due and payoff Simmons in full. Legacy Bank is a local bank that was in close communication with Plaintiffs and agreeable to the deal. Discussions were also underway for Mims to purchase the 68-acres owned by Archer, LLC, which would have given him the land encompassing the Halsell Lots and on which the Barn, Inn and Cottage were located. Since the City of Fayetteville required two access points to property as large as Mims would be purchasing, the Plaintiffs agreed to grant him, without charge, the choice of one of two potential access easements across the 68-acres from the R-4 Parcel he was buying, with the understanding that the Plaintiffs wished to retain management of the Barn, Inn and Cottage and potentially repurchase the property on which they were located. Mims not only assured he was acceptable to these terms but offered to look for a financier to lend funds to Plaintiffs to facilitate this repurchase. Soon thereafter, however, Mims placed a $2,000,000 offer on the 68-acres, which was well below market value. The Trustee accepted the offer pursuant to its discretion and scheduled a hearing for Court approval for the sale of all Properties in early February 2016. Shortly afterwards, Mims stopped all communications with Plaintiffs."

"21. Meanwhile, in a last-ditch effort to prevent the sale of these valuable and personal 68-acres (including the Barn, Inn, Cottage, and valuable personal effects), Plaintiffs secured four written offers for the purchase of Sassafras Hill Communications, Inc. and its cell tower lease – two of the offers were over $1,000,000. This $1,000,000 along the $1,087,050 for the R-4 Parcel and $250,000 for the Halsell Lots would have more than paid Simmons in full and enabled Plaintiffs to potentially exit bankruptcy. These four offers were turned over to Bond with the expectation that the pending motion for approval of sale would be challenged by Bond so that Plaintiffs could pay their debt by other means, keep their 68-acres and associated personal and valuable assets, and exit bankruptcy. Bond did nothing. No motion or objection was ever filed although it should have been."

"22. Bond’s malpractice thus enabled the Trustee to sell the Properties unnecessarily and without obtaining any appraisals or seeking competitive bids and Mims was thereby able to buy them at a steep discount."

"23. The harm to Plaintiffs resulting from the sale of their assets was compounded by Bond’s failure to properly claim exemptions on Plaintiffs’ behalf, thereby exposing those assets to sale as well."

"24. Furthermore, due to Bond’s failure to properly disclose Plaintiffs’ personal assets in their Chapter 7 bankruptcy, the UST filed an Adversary Complaint to Deny Discharge on August 19, 2016. The discharge was denied. In effect, the Plaintiffs lost their desired property and valuable personal belongings when this should have been avoided, and they did not even receive a discharge or other protection from the bankruptcy, leaving them in a worse position from when they originally sought competent legal consultation from Bond."

"25. Had Bond ensured complete disclosure and full compliance with all Chapter 11 requirements at the outset and thereafter, the various Chapter 11 cases would not have been converted to Chapter 7 liquidations and Plaintiffs would not have been denied a discharge."

"26. Plaintiffs relied upon Bond’s promises, asserted skills and expertise to their detriment. "

"27. Bond owed a duty of care and competent representation to the Plaintiffs, and their acts and omissions as alleged herein breached that duty. As a result, the Plaintiffs lost all of their Arkansas property in bankruptcy with the exception of Sassafras Hill Communications and all the personal property to which the Archers still claim possession."

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As I mentioned above, Part 5 of this series will only quote from legal documents I found online concerning the Archer v. Bond malpractice lawsuit, including the judge's decisions.