Opinion
Case No. 5:99-cv-161-OC-21GRJ
January 14, 2003
W. Lawrence Smith, Esquire, Hill, Ward Henderson, P.A. Tampa, FL, Attorney for John P. Colman.
Victor W. Holcom, ESQ., Tampa, FL., Attorney for Old Dutch Foods, Inc.
ORDER ON MOTION FOR CONFIRMATION OF SALE OF PROPERTY OF THE RECEIVERSHIP ESTATE (Tampa Warehouse/5409 S. West Shore Blvd.)
Filed herein are the Receiver's Motion for Confirmation of Sale of Property of the Receivership Estate (Tampa Warehouse/5409 S. West Shore Blvd.) (Dkt. 318) and Plaintiff's Response (Dkt. 327) in opposition thereto. A hearing was held on said motion on August 23, 2002.
The Receiver entered into an Agreement of Sale and Purchase to sell a warehouse in Tampa, Florida (Subject Property) to Net Advisors Realty, Inc. (Net Advisors), for $490,000. Net Advisors subsequently assigned the sales agreement to John Colman. In accordance with 18 U.S.C. § 2001 and the Court's January 14, 2002 Order (Dkt. 269) establishing private sales procedures, the Receiver published notice of its agreement to sell the Subject Property on January 31, 2002. On February 7, 2002, the Receiver received a competing offer from South Westshore Corporation for $539,000. South Westshore Corporation subsequently withdrew its offer on February 14, 2002.
Subsequently, the Receiver became aware of a possible title defect with the Subject Property and considered possible courses of action in light of this defect. The Receiver advised Colman of this defect and Colman elected not to terminate the sales agreement but to wait for the Receiver and Plaintiff to determine whether and how title could be cleared. Consequently, on or around March 11, 2002, the Receiver and Coleman amended the sales agreement to extend the closing date and due diligence period to allow for the resolution of the title defect. On April 12, 2002, the Receiver and Colman again amended the sales agreement to extend the due diligence period. The Receiver and Colman subsequently amended the agreement several more times to further extend the due diligence period.
In May of 2002, Old Dutch Foods, Inc. (Old Dutch) expressed interest in the Subject Property. Counsel for Old Dutch asserts that as early as March of 2000 his client had expressed interest in the Subject Property but that the Receiver "steered it" away from the Subject Property. Although the Receiver informed Old Dutch that he could not entertain an offer from it because he had previously entered an agreement to sell the property, Old Dutch submitted an offer to purchase the Subject Property on or about May 23, 2002, for $540,000, which was at least 10% greater than the Net Advisors/Colman offer.
The Receiver subsequently learned that a title insurance company would agree to issue title insurance for the Subject Property and filed its Motion for Confirmation of its sales agreement with Colman for $490,000. On the day of the hearing, Colman submitted an amended offer for $551,368.42. According to the Receiver, Plaintiff, and Colman, if Colman's amended offer was confirmed, the net amount that Plaintiff would receive after costs and the Receiver's commission would be the same amount Plaintiff would receive if Old Dutch's offer was confirmed. During the hearing, Old Dutch increased its offer by $5,000, and counsel for Receiver suggested that ten minutes be allotted to allow the prospective purchasers to further bid on the Subject Property. No such time was allotted.
The Receiver asserts that the Court should confirm the sale to Colman because (1) he contracted to sell the property to Colman; (2) no competing offer was received within ten days after the Notice of Private Sale was published or within a reasonable time thereafter; (3) despite the title problem, Colman did not elect to cancel the sales contract, allowing the Receiver to devote his time to marketing other properties; (4) Colman did not cause the title problem and, thus, he should not be punished for the extra delay it caused; and (5) because the Court has discretion to confirm Colman's offer, it is only fair that the Receiver request that the sales agreement be confirmed.
Plaintiff opposes the Receiver's Motion for Confirmation to Colman for $490,000 and initially sought confirmation of the sale of the Subject Property to Old Dutch for $540,000, provided that the amount of the Receiver's commission was modified to comport with the Court's September 20, 1999 Order (Dkt. 54). Plaintiff seeks to maximize the return to the Receivership Estate from the sale of the Subject Property and asserts that Old Dutch's offer yields $73,000 more to the Receivership Estate after costs and the Receiver's commission are deducted than Colman's original offer. At the hearing, however, counsel for Plaintiff stated that it does not oppose confirmation of the sale to Colman at the amended offer price of $551,368.42, which according to the parties, will provide Plaintiff with the same amount after costs and the Receiver's commission as Old Dutch's offer would.
The Court will not play the role of auctioneer and, thus, will only consider the motion before it, the Receiver's Motion for Confirmation of Colman's original offer for $490,000. In addition, it would be inequitable for the Court to consider Colman's last minute amendment without also considering Old Dutch's offer and its proposal at the hearing to increase its offer by $5,000. If additional bidding is to be allowed, all interested parties should be allowed to bid.
Title 28 Section 2001(b) provides, in pertinent part:
After a hearing, . . . the court may order the sale of such realty or interest or any part thereof at private sale for cash or other consideration and upon such terms and conditions as the court approves, if it finds that the best interests of the estate will be conserved thereby. . . . The private sale shall not be confirmed if a bona fide offer is made, under conditions prescribed by the court, which guarantees at least a 10 per centum increase over the price offered in the private sale.
In the Court's January 14, 2002 Order (Dkt. 269) establishing the private sales procedures, the Court stated:
5. After publication of the terms of a private sale, if a bona fide offer to purchase is made to the Receiver which is at least ten percent (10%) greater than the sales price offered by the private sale, the Receiver will notify this Court and a hearing shall be set to consider which offer is in the best interests of the parties and the Receivership's Estate.
6. After publication of the terms of a private sale, if no additional bona fide offer is received by Receiver within ten (10) days after the publication of the Notice of the private sale, the Receiver shall file with the Court a Motion to Approve Sale with an affidavit of the Receiver.
In the Court's April 23, 2002 Order (Dkt. 293), the Court considered the Receiver's Motion for Confirmation of Sale of Property of the Receivership Estate (Twenty (20) Apartment Projects) (Dkt. 272) to LCA Land Acquisitions, Inc. (LCA). The Receiver originally entered into an agreement to sell the twenty apartments to Fortune Capital Partners, Inc. (Fortune Capital). On February 11, 2001, the tenth day after publication of the Receiver's sales agreement with Fortune Capital, H.L.H. Properties, Inc. (H.L.H.), made an offer that was 110% of Fortune Capital's offer. On February 21, 2001, H.L.H. withdrew its offer. The next day, James Riesenberg made an offer that was 110% of Fortune Capital's offer. Several days later, on February 26, 2001, LCA made an offer that was more than 110% of Fortune Capital's offer. The Receiver sought confirmation of its sales agreement with LCA and Fortune Capital objected, asserting that the Court's Order (Dkt. 269) establishing the private sales procedure prohibited consideration of offers received after the ten-day period following publication.
The Court's Order (Dkt. 293) was subsequently vacated by the Court's June 13, 2002 Order (Dkt. 303) pursuant to the Receiver's request after the purchaser exercised its right to terminate the sales agreement during the due diligence period.
In response, the Court stated:
Fortune Capital's assertion that the Court's Order (Dkt. 269) prohibits consideration of offers received after the ten-day period is an incorrect interpretation of the Order. The provisions of the Order should be construed — to the extent construction is necessary — in light of the intent of the statute. The statutory intent of Section 2001 is to maximize the return to the Receivership Estate to the benefit primarily of the parties to the suit. Nothing in Paragraph 6. prevents the Receiver or the Court from considering an offer made after the ten-day period following publication of notice of the sales agreement even if a bona fide 110% offer is received during the ten-day period.
* * *
Paragraph 5. of the Order provides a procedure for presentation to the court if a bona fide offer is received during the ten-day period. But Paragraph 5. neither: (1) prohibits the receiver from considering subsequent offers even where the bona fide offer is withdrawn nor (2) entitles the original private sale buyer (Fortune Capital in the instant case) as of right to require court confirmation of such sale or, for that matter, require the receiver to submit such private sale to the court.
Court's April 23, 2002 Order, Dkt. 293, p. 3. Thus, it is clear that, under the private sales procedure established in the Court's January 14, 2002 Order (Dkt. 269). the Court and the Receiver may consider offers submitted more than ten days after publication.
Inherent within the Court's January 14, 2002, Order (Dkt. 269) establishing a private sales procedure is the idea that, while offers subsequent to the initial offer need not necessarily be within the ten-day period following publication, they must be made within a reasonable time after publication. To hold otherwise would introduce unnecessary uncertainty into the private sales process by requiring the Receiver and Court to consider additional offers up to the time that the Court enters an order confirming a sale. This would wreak havoc on the integrity of the private sales process in the long run and predictably invite negative consequences.
LCA's offer regarding the twenty apartments was made approximately fifteen days after the end of the ten-day period following publication. Old Dutch's offer regarding the Subject Property, however, was made over three months after the end of the ten-day period following publication. While the Court does not purport to establish a bright-line test, under the facts surrounding the sale of the Subject Property, Old Dutch's offer was not made within a reasonable time after publication. Thus, the Receiver's Motion for Confirmation is due to be granted.
Upon consideration thereof, it is hereby ORDERED:
1. The Receiver's Motion for Confirmation of Sale of Property of The Receivership Estate (Tampa Warehouse/5409 S. West Shore Blvd.) (Dkt. 318) is GRANTED.
2. The Receiver is authorized to proceed with the sale of the property described as Tampa Warehouse/5409 S. West Shore Blvd., and more fully described on Exhibit A attached hereto to John P. Colman on the terms and conditions set forth in the proposed Agreement of Purchase and Sale, as amended.
3. The offer to purchase submitted by Old Dutch Foods, Inc., is not approved and is deemed REJECTED.
4. The private sale to John P. Colman is hereby CONFIRMED.
5. The property shall be sold free and clear of any federal tax liens held by the United States of America.
6. The Court finds that under the special "alternative amount" withholding rule in I.R.S. Reg. § 1.1445-2(d)(3), the owner of the Subject Property, DBA Marketing, Inc., will not realize any proceeds from the sale of the Subject Property and, therefore, neither the Receiver nor John P. Colman are required to withhold any of the sale proceeds for the purpose of paying federal taxes on the sales.
7. The Receiver is authorized to satisfy any liens or encumbrances that are to be paid as a condition of the sale, to pay all closing costs associated with the sale (including the Receiver's attorney's fees and costs), and to pay the Receiver's commission pursuant to the provisions of the Order on Motion of Receiver for Approval of Receiver's Compensation Arrangements and for Authority to Pay the Receiver's Compensation and Expenses of the Receivership on a Monthly Basis (Dkt. 54). The Receiver shall disburse the balance of the sale proceeds to Plaintiff.