Colony Association piling up settlement cash

Colony Beach & Tennis Resort Association President Jay Yablon says the association has learned from past mistakes. It signed deals with developers who unit owners hoped could swoop in and resurrect the resort — deals that never came to fruition.

“If we are going to move forward any time soon with redeveloping the Colony in a manner satisfactory to existing owners, it is clear that those owners themselves are going to have to fund a settlement of all outstanding legal matters,” Yablon said.

To move forward, Yablon and his board needs unit owners to pay up.

A budget sent to owners June 25 that the board is poised to approve July 7, informed owners they will be assessed $29,000 per unit in the coming fiscal year. The assessment includes $5,000 for normal operating assessments and $24,000 for settlements.

The assessments will be used to create an approximately $6.8 million settlement fund the association will use to pay for a disputed recreational services lease judgment and bid it intends to make in September for a $25 million judgment that U.S. Bankruptcy Trustee William Maloney is seeking to sell at auction (see sidebar) next month.

“The legal situation at the Colony has proved to be just too messy for an outside investor to be willing to do this for us, and the time has arrived when we all must step up as an association and get this done ourselves,” Yablon said. “The money will be used to acquire assets from trustees (Douglas) Menchise and Maloney.”

Yablon said recent legal developments and, most importantly, an appeal pending stay that was denied last week have led the association to move more confidently toward settlements that could lead to a swifter resurrection of the resort.

Colony Lender LLC and Unicorp National Development’s appeal of U.S. Bankruptcy Judge K. Rodney May’s sanctions was denied a motion for stay pending appeal in an order Wednesday by U.S. Middle District of Florida Judge James Whittemore.

The news means Colony Lender and Unicorp now must comply with May’s order to drop lawsuits against unit owners in state court while May finalizes sanctions and agrees to monetary sanctions against them in September.

Colony Lender and Unicorp, though, still have the right to appeal the sanctions order once May finalizes them sometime next month.

Yablon called the order “a big announcement for those waiting for roadblocks to be removed to pave the way for Colony settlements.”

“The legal situation at the Colony has proved to be just too messy for an outside investor to be willing to do this for us, and the time has arrived when we all must step up as an association and get this done ourselves."

— Colony Beach & Tennis Resort Association President Jay Yablon

Colony Lender principal David Siegal, though, called the order “nothing more than an indication that Judge Whittemore wants the sanctions to become final before we make the appeal again.”

The sanctions appeal order comes on the heels of the association’s news that it has reached a settlement with U.S. Bankruptcy Chapter 7 Trustee Douglas Menchise, who controls everything regarding the rec lease and a rec lease judgment for $2.5 million. May must schedule a hearing to decide whether to approve that settlement, which Colony Lender will oppose because it believes the recreational land it owns came with the rec lease and the $2.5 million judgment it can use to assess unit owners.

Colony Lender and Unicorp sought relief from Whittemore in regard to sanctions issued by May on May 12, which ordered all three parties to dismiss within 14 days lawsuits against all Colony unit owners, in which Colony Lender and Unicorp seek more than $5 million in damages for unpaid rent plus interest on a disputed recreational facilities lease.

May said those letters violated an automatic bankruptcy stay and Whittemore upheld May’s ruling.

Whittemore called Colony Lender’s arguments for the appeal “borderline disingenuous” and also stated a number of times in his order that Colony Lender did not provide any legal support for their positions.

May, in his sanctions ruling, required Colony Lender principals David Siegal and Randy Langley, along with Unicorp President Chuck Whittall, to write a letter to every unit owner on official company letterhead that includes their names on it, asserting the claims being sought against them are being dismissed.

“We will write and send letters and dismiss the state lawsuits against unit owners,” Siegal said.

And five Colony unit owners that sold their units to Unicorp last year for $20,000 apiece after all owners received demand letters in August, telling them they could face millions of dollars in liabilities if they do not sell their units to Unicorp, will have a 30-day opportunity window to get their units back.

Liens placed on Colony units for rent by Colony Lender and Unicorp are required to be removed as part of the pending order.

 “This just means we have to wait awhile longer for Judge May to finish his sanctions decision,” Siegal said. “Then we will refile our appeal.”

May has requested the association submit memos for a cost and damages study to assess what kind of monetary sanctions (both punitive and actual damages unit owners accrued by paying for legal fees associated with the lawsuit) the parties should be required to pay for its actions.

Punitive damages would be money ordered to pay to make an example of certain Colony Lender actions and actual damages would be assessed for costs and delays unit owners had to endure for the state court lawsuits while they wait for a resort to be developed.

“It has taken awhile, but Colony Lender and Unicorp’s actions are finally catching up with them and the federal judiciary is taking notice,” said Yablon, in a prepared statement released to the Longboat Observer. “I am convinced that at the end of the day the courts will uphold these sanctions. If they and Unicorp do not desist from their attempt to force the Colony owners to give up their interests for next to nothing, and if they continue to block any and all progress at the Colony until that happens, then we will hold them accountable for the millions of dollars of damage which they have caused and are causing to the Colony owners, and we will continue to pursue sanctions remedies and recoveries against them to the maximum degree that the law permits.”

May ruled that Colony Lender has no other claims in other pending bankruptcy estates.

Sanctions hearings are scheduled to continue through September.