Judge rules against Colony Lender in damages claim

U.S. Bankruptcy Judge K. Rodney May ruled Nov. 12 that a recreational lease damage judgment was not conveyed to Colony Lender LLC in a foreclosure sale of the Colony Beach & Tennis Resort. The ruling means that Colony Lender cannot collect damages for unpaid rent and taxes for a three-year period beginning in 2009. (See sidebar.)

Colony Lender LLC will appeal the ruling after the judge issues a written order, principal David Siegal said.

Colony Lender has a separate lawsuit pending in state court against unit owners, seeking $4,594,276.40 for accrued unpaid rent plus interest on a disputed recreational facilities lease for the period through Oct. 29, 2008 through Aug. 15, 2014, plus $525,244.82 in unpaid real estate taxes plus interest, and attorney fees.

Otherwise, Wednesday was an anti-climactic day in May’s Tampa courtroom. The judge was expected to rule on other issues, including whether Colony Lender violated a stay order that it insists was not in place, when it asserted ownership of the recreational lease and recreational lease judgment.

Chapter 7 Bankruptcy Trustee Douglas Menchise has a pending motion seeking sanctions against Colony Lender LLC for its actions, including its assertions that it controls the recreation lease and that unit owners could face millions of dollars in liabilities. May did not rule on sanctions or several other items.
May directed the parties to brief several sub-issues in anticipation of ruling by the end of the year.

Lingo of the land
Recreational lease — The recreational lease stems from a 1973 agreement between unit owners and longtime Colony owner Dr. Murray “Murf” Klauber in which unit owners paid Klauber and leaseholders $650,000 annually for use of the property’s tennis courts and other recreational facilities on 2.3 acres in the shuttered resort. Unit owners stopped paying on the 99-year lease in October 2008.
Judge K. Rodney May has not ruled on who controls the lease.

Recreational lease damage judgment — The $2.2 million judgment against the Colony Beach & Tennis Association in bankruptcy court that’s held by Chapter 7 Bankruptcy Trustee Douglas Menchise, who controls former entities of Dr. Murray “Murf” Klauber. The damages represent three years’ rent on the lease, because the association was allowed to cap damages at three years in its 2009 bankruptcy case.
Judge K. Rodney May ruled that Colony Lender LLC did not receive the recreational lease damage judgment in its foreclosure sale.