Wansdown Props. Corp. N.V. v. 29 Beekman Corp. (In re Wansdown Props. Corp. N.V.)

620 B.R. 487

IN RE: WANSDOWN PROPERTIES CORPORATION N.V., Debtor.

Wansdown Properties Corporation N.V., Plaintiff,

v.29 Beekman Corp., Defendant.

Case No. 19-13223 (SMB)

Adv. Pro. No. 20-01056 (SMB)

United States Bankruptcy Court, S.D. New York.

Signed October 5, 2020

BLANK ROME LLP, 1271 Avenue of the Americas, New York, New York 10020, Ira L. Herman, Esq., Evan J. Zucker, Esq., Of Counsel, Special Litigation Counsel for Plaintiff

THE SERBAGI LAW FIRM, 488 Madison Avenue, Suite 1120, New York, New York 10022, Christopher Serbagi, Esq., Of Counsel, Attorney for Defendant

MEMORANDUM DECISION AND ORDER DENYING CROSS-MOTIONS FOR SUMMARY JUDGMENT

STUART M. BERNSTEIN, United States Bankruptcy Judge:

This is a case of buyer's remorse. The defendant 29 Beekman Corp. ("Beekman" or "Purchaser") agreed to buy real property owned by the debtor Wansdown Properties Corporation N.V. ("Debtor" or "Seller"). Beekman backed out of the contract, and this adversary proceeding involves the right to the down payment. Both parties have moved for summary judgment. (See Debtor's Memorandum of Law in Support of Motion for Summary Judgment and in Opposition to Defendant's Motion to Dismiss Complaint ("Debtor's Motion "), ECF Doc. # 12)¹ ; (29 Beekman's Memorandum of Law in Opposition to Debtor's Motion for Summary Judgment and in Support of 29 Beekman's Cross-Motion for Summary Judgment ("Beekman Motion "), ECF Doc. # 28). For the reasons that follow, both motions are denied because whether the Debtor was ready, willing and able to close following Beekman's breach presents a disputed issue of material fact.

BACKGROUND

A. Purchase Agreement

The Debtor was formed under the laws of Curacao in 1979 as a holding company to own and manage a townhouse located at 29 Beekman Place, New York, New York 10022 (the "Townhouse") for Princess Achraf Pahlavi, the sister of the Shah of Iran. The Townhouse is the Debtor's main asset. On September 25, 2019, the Debtor entered into a Residential Contract of Sale ("Purchase Agreement") to sell the Townhouse to Beekman for $10,300,000. (Declaration of Ira L. Herman in Support of Plaintiff's Motion for Summary Judgment ("Herman Decl. "), Ex. A (EFC Doc. # 14.).) Beekman delivered a down payment of $1,030,000 ("Downpayment") to be held in escrow "until Closing or sooner termination of this contract." (Purchase Agreement ¶¶ 3-4.)

The sale could occur in one of three ways. The Purchase Agreement contemplated that the Debtor would file a chapter 11 case, and the "consummation of the transactions contemplated herein is subject to Seller's receipt of requisite authority under the Bankruptcy Code pursuant to, among other things, the entry of an order confirming the Plan, or if not possible, then approving a 363 Sale ." (Purchase Agreement ¶ 51(a) (emphasis added).)² The parties also agreed that the Purchase Agreement was still binding even in the absence of any bankruptcy proceeding. (See Purchase Agreement ¶ 51(a) ("[I]f Seller does not file such [chapter 11] proceeding or it is dismissed for any reason, then this Contract shall remain a binding obligation of Seller to sell and Purchaser to buy the Premises as set forth herein apart from the contemplated Bankruptcy Court proceeding.").)

A sale under § 363 (or outside of a bankruptcy case) rather than under a confirmed plan would have a significant financial impact on Beekman. New York State imposes a so-called "Mansion Tax" on conveyances of certain real estate such as the Townhouse. Based on the $10,300,000 sale price, the Mansion Tax would total $334,750. See N.Y. TAX LAW § 1402-b(a)(4). The Mansion Tax is similar to a stamp tax within the meaning of 11 U.S.C. § 1146(a) (formerly § 1146(c) ), see In re Jacoby–Bender, Inc. , 40 B.R. 10, 13 (Bankr. E.D.N.Y. 1984) (discussing N.Y. TAX LAW § 1402 ), aff'd , 758 F.2d 840 (2d Cir. 1985), and is not imposed in connection with a transfer under a confirmed plan. 11 U.S.C. § 1146(a).

Beekman agreed that it would be responsible for paying any Mansion Tax. (Purchase Agreement ¶ 40.) Thus, if the sale was consummated under a plan, Beekman would not have to pay it. If, on the other hand, the sale was consummated pursuant to section 363 before a plan was confirmed, the exemption under Bankruptcy Code § 1146(a) would not apply. See Florida Department of Revenue v. Piccadilly Cafeterias, Inc. , 554 U.S. 33, 52-53, 128 S.Ct. 2326, 171 L.Ed.2d 203 (2008). And obviously, the section 1146(a) exemption would not apply if the transfer occurred when no bankruptcy case was pending.

Important to the present dispute, the Debtor represented that "the net proceeds of a sale under this Contract would be sufficient to satisfy all claims against Seller and, as reasonably projected, Seller's contemplated estate in bankruptcy." (Purchase Agreement ¶ 51(b).) Beekman's obligation to purchase the Townhouse was subject to the fulfillment of several conditions precedent, including the "accuracy, as of the date of Closing, of the representation and warranties of Seller made in this contract." (Purchase Agreement ¶ 13 (a)(i).)³

The Closing Date was set to take place no later than forty-five days after the Confirmation Order became final and non-appealable, "provided, however, that in no event shall the Closing take place later than January 31, 2020, subject to extension of the Final Date." (Purchase Agreement ¶¶ 51(e), 52(d).) Beekman could, in this regard, extend the Final Date "on one or more occasions, until the earlier of 30 days after the entry of the Confirmation Order or January 31, 2021 by notice to Seller prior to the passing of the then effective Final Date." (Purchase Agreement ¶ 52(d).)

Finally, the Purchase Agreement contained an integration clause:

All prior understandings, agreements, representations and warranties, oral or written, between Seller and Purchaser are merged in this contract; it completely expresses their full agreement and has been entered into after full investigation, neither party relying upon any statement made by anyone else that is not set forth in this contract.

(Purchase Agreement ¶ 25.)

B. Bankruptcy

The Debtor commenced this chapter 11 case on October 8, 2019 and filed its modified plan ("Plan") and modified disclosure statement ("Disclosure Statement") on December 9, 2019. The Plan contemplated that the Debtor would sell the Townhouse to Beekman and the sale proceeds would be sufficient to pay all creditors except Gholam Reza Golsorkhi, the managing director and president of the Debtor, who had agreed to subordinate his asserted general unsecured claim in the approximate amount of $7.5 million to the payment of all other creditors. On December 12, 2019, the Court preliminarily approved the Disclosure Statement and scheduled the hearing on the final approval of the Disclosure Statement and confirmation of the Plan for January 14, 2020. (Order (I) Preliminarily Approving Disclosure Statement, and (II) Scheduling Hearing on Final Approval of Disclosure Statement and Confirmation of Debtor's Chapter 11 Plan , dated Dec. 12, 2019 (Main Case ECF Doc. # 32).) The schedule would allow the Debtor to obtain a final, non-appealable order confirming the Plan by the January 31, 2020 deadline. See FED. R. BANKR. P. 8002(a) (requiring a notice of appeal to be filed within fourteen days of the order appealed from).

The Debtor soon hit a snag. On December 31, 2019, the Debtor's sole shareholder, Pelmadulla Stiftung Vaduz ("Pelmadulla"), filed a general unsecured proof of claim in the sum of $3,243,941.19 based on a purported loan to the Debtor ("Pelmadulla Claim"). (Declaration of Christopher Serbagi in Opposition to Wansdown's Motion for Summary Judgment and in Support of 29 Beekman's Cross-Motion for Summary Judgment ("Serbagi Decl. "), dated Dec. 31, 2019, Ex. 8 (EFC Doc. # 23).) As a result, the Debtor could not confirm the 100% Plan that it had filed because, although it disputed the Pelmadulla Claim, the sale to Beekman would not generate sufficient proceeds to reserve for the Pelmadulla Claim. Consequently, the Debtor switched gears and determined to consummate the transaction with Beekman through a section 363 sale instead of under a confirmed plan.

The Debtor filed a sale motion on January 7, 2020, (see Motion Pursuant to 11 U.S.C. §§ 363 and 365 and Fed. R. Bankr. P. 2002 and 6004 for an Order Approving the Sale of the Debtor's Real Property , dated Jan. 7, 2020 ("Sale Motion") (Main Case ECF Doc. # 38)), and the Court scheduled the sale hearing for January 14, 2020. (See Order Shortening Notice on Debtor's Motion Pursuant to 11 U.S.C. §§ 363 and 365 and Fed. R. Bankr. P. 2002 and 6004 for an Order Approving the Sale of the Debtor's Real Property , dated Jan. 7, 2020 (Main Case ECF Doc. # 40).) The Court expedited the sale hearing to allow the Debtor to meet the contractual requirement of a final, non-appealable sale order by January 31, 2020.

The hearing on the Sale Motion went forward on January 14. The Court noted at the hearing that it would not be possible for the Debtor to solicit votes on a revised plan, which it had not yet filed, by the January 31, 2020 Closing deadline. (Herman Decl. , Ex. B, at 19:20-20:2.)⁴ At the hearing, Beekman's attorney referred to Beekman's objection (none had been filed), but informed the Court that the parties had reached a tentative settlement in which case Beekman would waive its objection. (Id. at 9:21-10:4; 18:7-10.) The sale hearing was adjourned to January 16, 2020 to allow the Debtor to deal with Beekman's and certain other objections to the sale.

On January 15, 2020, Beekman sent a letter ("January 15 Letter") to the Debtor that requires some parsing. (Herman Decl. , Ex. C.) The tentative settlement referred to the previous day and described in the letter had fallen through. Beekman first characterized the Debtor's temporal problem as rendering compliance with the January 31 deadline "not convenient or not desirable" for the Debtor, but "not impossible." (January 15 Letter at 2-3.) The ...