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Longboat Key Wednesday, Aug. 12, 2009 8 years ago

Colony feud continues

by: Kurt Schultheis Senior Editor

The feud between The Colony Beach & Tennis Resort Chairman and owner Dr. Murray “Murf” Klauber, President and General Manager Katie Moulton and the Colony Association is continuing out of the courtroom.

Less than a week after Moulton expressed her desire to have a mediation session with the association to discuss the results of a federal bankruptcy judge’s ruling, the two sides are fighting over the closure of units and resort furniture and fixtures.

In a letter sent to Colony attorney Charles Bartlett dated Aug. 3, Colony Association attorney Peter J. Kelley said Moulton directed the removal of furniture and fixtures from a number of units, rendering those units unusable.

“The owners of those units have not consented to such action and, to my knowledge, Ms. Moulton has not even bothered to ask for their consent,” Kelley wrote in his letter.
Kelley also expressed concern that the air-conditioning in the closed units have been shut off, making the interiors of the units susceptible to mold and mildew.

“On behalf of the association and the affected unit owners, we demand that all furniture and fixtures removed from the units be immediately returned,” Kelley wrote.

Kelley demanded in his letter that all removed items be returned and appropriately re-installed within 30 days, explaining that the units would then be inspected to make sure they are restored and have functional air-conditioning.

“There is truth to the fact that a number of units have been taken out of service for the time being,” Bartlett said. “Some units have had some of the furniture and appliances taken out for use in other units. All furniture and fixtures are owned by the hotel, and they are free to do what they want with them.”
Bartlett, however, said there is no truth to the claim that air conditioning has been shut off in any of the Colony units.

Moulton called the situation “a non-issue,” explaining that it’s been the Colony’s practice for years to close a certain number of units in the slower summer season to make the hotel’s services more efficient.

Moulton said only one building on the property is not in service and approximately 24 units are currently not available for occupancy.

The latest squabble between the Colony and its association was revealed just more than a week after U.S. bankruptcy Judge A. Rodney May’s ruling denied the Colony damages from the Colony Beach & Tennis Resort Association to pay for, among other things, $14.1 million in past costs for operations, repairs and maintenance at the 234-unit historic Longboat Key resort.

While Moulton and Klauber said they were pleased the court dismissed all counterclaims by the association that sought more than $10 million in damages, the father-and-daughter team was counting on a favorable decision to obtain funds from the resort’s owners to cover postponed maintenance, repairs and renovations.
However, Jay Yablon, association vice president and chairman of the association’s legal committee, said the association’s counterclaims were only offsets in the event the court determined the association owed damages to Klauber.

“Because the court rejected their claim for damages in its entirety, there was nothing to offset against,” Yablon said.

Meanwhile, May again ruled in favor of the association Monday, Aug. 10 for a second and final time in bankruptcy court.

May said the association is not liable for recreation lease payments or $2 million in damages for property that includes tennis courts and a swimming pool.

In fact, May rejected the lease all together, finding there is no liability on the part of the association to make payments to the recreation leaseholders.

May called the lease “grossly excessive” in his ruling, determining that each unit owner was paying $104 per day for the use of the tennis courts and swimming pool based on 30 days of use per year that’s allowed by unit owners.

Moulton disagreed with May’s ruling, calling his calculations “off by a significant margin.”

Moulton said she and Klauber were looking into all of their available options for a possible appeal of May’s rulings.

Although the lease is now null and void with regard to the association, May made it clear, according to testimony, his rulings have only to do with the association as a group and nothing to do with the individual unit owners.

The Colony could continue to try and seek recreation lease payments from individual unit owners in court, although the unit owners could point to May’s ruling, which called the lease “unconsciable,” when making their argument.

Despite the rulings, Moulton said the action taken by the court does not affect resort operations and has no bearing on the Colony’s ability to stay current on three loans with Bank of America. The bank filed foreclosure proceedings in April against the Colony and seven of Klauber’s resort corporations, alleging they have defaulted on loans whose outstanding amounts total about $8 million.

“There’s no doubt we would have loved to have had the damages we were seeking,” Moulton said. “But Judge May’s rulings create some great opportunities that can be discussed at a later date.”

Yablon said Monday he was pleased with the judge’s ruling.

“Both claims have been denied in their entirety and been adjudicated to be zero,” Yablon said.

Because Colony Association attorney Jeffrey Warren persuaded the judge to issue a reorganization plan for the association at the end of July, the judge’s ruling Monday brings the bankruptcy case to a close, unless Klauber and Moulton make an appeal.

The association will most likely reorganize by assessing its unit owners for an estimated $1 million in legal fees, much less than a reorganization plan that could have been liable for as much as $17 million ($14.1 million in assessments, $2 million for the recreation lease and $1 million in legal fees).

Both sides agreed in theory last month to a five-year repayment plan for the association with a 6% interest rate.

But Yablon told The Longboat Observer that, although no final decisions have been reached, the association has preserved its right under the law as the prevailing party in the litigation to pursue the collection of its legal fees from the party that did not prevail.

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