Kluge, bank in court fighting over another property

A federal bankruptcy court judge will decide whether an aging manor home, owned by Patricia Kluge and William Moses and listed as an asset to be sold in their bankruptcy filing, should instead be conveyed to Farm Credit Bank.

The home was conveyed by Kluge to a trust set up for her son, John Kluge Jr., prior to foreclosure by Farm Credit on the Kluge Vineyard and Winery. The bank sold the winery and vineyard properties last year in a complicated auction scheme that Donald Trump bought for about $6 million.

It could not act on the Ellerslie house because it was owned by the trust.

Farm Credit is arguing that it effectively has a lien on the property because it filed a lis pendens, or notice of intent to file a lawsuit, prior to the Ellerslie being transferred to the trust.

The bank filed a lawsuit to claim the house, but did not receive a judgment prior to the trust conveying it back to Kluge two days before she and Moses declared bankruptcy. The bankruptcy trustee had listed the property as an asset for sale,

“By filing a lis pendens, Farm Credit effectively has a lien on the property,” Bill Shmidheiser, attorney for Farm Credit, told Judge William E. Anderson on Monday. “Other creditors may join that lawsuit, but their claims are secondary to [Farm Credit’s.]”

William F. Schneider, the bankruptcy trustee handling the Kluge case, disagreed.

“The lis pendens gives notice, but it does not create a lien,” he told Anderson. “Farm Credit did not receive a judgment in the lawsuit by the time that the property was reconveyed and there is no lien in effect.”

Shmidheiser and Schneider had agreed to resolve other disputed properties upon which the bank claimed a lien, but disagreed on whether the Ellerslie property should belong to the bank.

Ellerslie is on about six acres of land surrounded by what is now Trump Vineyard and Winery with access via paved driveway easement across the property.

The Ellerslie manor home was described by Kluge in a bankruptcy hearing last year as “dilapidated” and used to store a variety of household goods. It is described by Farm Credit as “an old house in need of some repair, currently unoccupied and uninsured.”

Anderson took the arguments under advisement and will rule on the property’s fate at a later date.

Kluge and Moses claimed in their June bankruptcy filing an estimated $2.65 million in assets and $47.5 million in liabilities.

The couple has an estimated net monthly income of $15,698 and monthly expenses of $22,750 and rent their residence from Sonabank for an estimated $5,500 per month. Sonabank foreclosed on the home earlier this year.

Documents filed with the court indicate the couple is currently employed by Eric Trump Wine Manufacturing LLC.

The couple filed bankruptcy last year after seeing banks foreclose on their winery, manor home, a luxury housing development, a closed gas station/bistro in downtown Charlottesville and their personal residence.

The filing placed the couple’s assets under Chapter 7 bankruptcy protection and under the control of Schneider. The filing indicated the couple’s debts were primarily business-related.