U.S. Bankruptcy Judge K. Rodney May didn’t rule Tuesday on the Colony Beach & Tennis Resort case, opting instead to continue the hearing today.
He said he needed “to go through this one more time” Wednesday to review what had transpired.
He also expressed frustration with both sides and for the first time suggested that a foreclosure sale could resolve issues in a case in which the parties have yet to agree on a settlement.
“It may be best to go to bid and see who wants to bid for the heart of the Colony and let the pieces fall where they may,” May said.
The parties made several revelations Tuesday.
Colony Beach & Tennis Resort unit owner and developer Andy Adams and his entities agreed to a settlement amendment proposed Tuesday afternoon in a Tampa-based U.S. Bankruptcy courtroom that resolves his issues with the proposed settlement and his votes that he cast in favor of the settlement last month.
And, Colony Lender LLC principal David Siegal announced that Orlando-based Unicorp National Development Inc. managing member Charles Whittall, who was sitting in the courtroom, has agreed to pay Colony Lender $12 million in a foreclosure sale scheduled for Friday in Sarasota for Colony Lender’s 80% interest in recreational property.
But the revelations didn’t simplify matters.
They only confused them, leading May to postpone ruling and schedule more time to make decisions that will affect several parties in the case.
The hearing will resume at 1:30 p.m. Wednesday, Dec. 4, in May’s courtroom. May will attempt for the fourth time in two weeks to either accept or deny a settlement that gives $3 million to longtime Colony owner Dr. Murray “Murf” Klauber and doles out $2.3 million to a U.S. bankruptcy Chapter 7 trustee to pay creditors. The settlement also absolves the association from a $25 million judgment for damages Klauber won in an appeals court last year.
“None of us will ever see a case like this again,” May said. “Again I find myself in the position of not really knowing where we are heading.”
Colony Beach & Tennis Resort Association attorney Jeff Warren announced that the association and Adams, Breakpointe LLC and his family have agreed on an amendment to the proposed settlement. That agreement calls for giving $400,000 to be paid to creditors, $75,000 to Carolyn Field through the Field Trust and $25,000 to Adams through Breakpointe LLC.
Attorney Morgan Bentley, who represents Field, said she would not accept the offer, noting her investment in a recreational facilities lease is worth more than $300,000. The association’s legal counsel, though, pledged to work with Field to come to an agreement.
Warren said the association board of directors signed off on the amendment and said another vote of the unit owners wasn’t necessary to approve the amendment.
But Colony Lender attorney Michael Assaf argued another vote was needed.
Once again, though, Colony Lender, the largest affected creditor in the bankruptcy case, was left out of the settlement.
Colony debtor attorney Michael Markham told May that as part of the settlement, Colony Lender and the association would either come to a cash settlement or receive fair market value for three acres of recreational land that sit in the middle of the resort within one year of closing on the settlement in March.
“The association will deliver the deed in lieu of foreclosure in the event amounts are not paid,” Markham said.
Assaf, who received the settlement amendment for the first time as May walked back into the courtroom after a break, objected to the amendment, calling the revelation “improper” and the entire case “a quandary.”
“In 30 years of practice, I’ve spent more time scratching my head over this case than any other case,” Assaf said.
Assaf again asserted the association was attempting to force May to set a price for Colony Lender’s claim and again urged the judge to allow the foreclosure sale to proceed. The association is urging May to postpone the sale.
Siegal also urged May to allow the sale to occur.
“We ask your honor to rule,” said Siegal, emphasizing Unicorp will pay $12 million at the sale. “This settlement is an inhibitor to the resolution of the issues. Let us have our sale.”
Siegal also disputed the original settlement.
“It can’t be right to sell all the assets, not pay your debts and leave with $3 million,” said Siegal, referencing Klauber’s right to $3 million as part of the settlement.
Markham urged May to approve the settlement.
“We are trying to stop some of the parts from moving,” Markham said. “Instead of saying the problem is too hard to solve, we’ve done the best we can under the circumstances. We’re trying to clear as much as we can so things can start happening.”
Warren told the court “a foreclosure sale destroys what we are trying to accomplish, which is a whole Colony property.”
The case will resume Wednesday.
For more information on today's hearing and May’s rulings, check YourObserver.com for updates.
April 2007 — Dr. Murray “Murf” Klauber sued the Colony Beach & Tennis Association in Sarasota County, seeking $14.1 million in damages for repairs and upgrades.
November 2008 — The association filed for Chapter 11 bankruptcy, citing the $14.1 million judgment as its largest unsecured debt.
July 31, 2009 — U.S. Bankruptcy Judge K. Rodney May ruled in favor of the association, finding that it wasn’t responsible for assessing unit owners $14.1 million. Klauber appealed the ruling.
October 2009 — The hotel partnership led by Klauber filed for Chapter 11 bankruptcy.
February 2010 — Colony Lender LLC, managed by developer/entrepreneur Randy Langley and businessman/attorney David Siegal, purchased overdue loans on key Klauber Colony properties from Bank of America for an undisclosed amount.
Aug. 9, 2010 — May converted the Klauber-led Partnership’s Chapter 11 case to a Chapter 7 liquidation, giving unit owners possession of their units and dissolving the hotel partnership. The Colony shut down hotel/resort operations and all on-site businesses six days later.
July 27, 2011 — U.S. District Judge Steven Merryday reversed May’s August 2009 and essentially ruled in favor of Klauber.
Oct. 12, 2011 — Merryday remanded the case to May and directed him directed him to rule on whether to return possession of units to the Klauber partnership bankruptcy trustee and pay $7,751,470 in damages or pay $20,646,312 in damages to the partnership with no return of units.
Oct. 12, 2012 — Judge May awarded damages of more than $20 million to Klauber, his partnership with the association and the resort’s limited partners. The association vowed it wouldn’t let the judgment stand.
September 2013 — Colony Lender LLC won a judgment of more than $13 million in Sarasota County court.
Sept. 30, 2013 — The association’s board of directors approved a settlement with Klauber that includes a $3 million consulting agreement over five years and absolves the association of the judgment.
Oct. 10, 2013 — Colony Lender attorney Michael Assaf urged Judge May to liquidate and allow a sale of all resort assets. May wasn’t ready to convert the case from Chapter 11 to Chapter 7 liquidation but said meaningful settlement talks with Colony Lender must occur to end the case.
Nov. 20, 2013 — Owners of 205 units voted to approve the settlement, while three voted against it, according to the association. But the association counted votes for 58 units owned by Andy Adams, his family and his corporate affiliates as “yes” votes even though they were subject to a list of conditions.
Dec. 3, 2013 — In the third day of hearings, May declined to rule. He continued the hearing to 1:30 p.m. Wednesday, Dec. 4.
Contact Kurt Schultheis at email@example.com