29 Beekman Corp. v. Wansdown Props. Corp. N.V.
| Docket Number | 1:20-cv-8984 (MKV),1:20-cv-10294 (MKV),1:21-cv-2280 (MKV) |
| Decision Date | 29 September 2021 |
| Parties | 29 BEEKMAN CORP., Appellant, v. WANSDOWN PROPERTIES CORPORATION N.V., Appellee. 29 BEEKMAN CORP., Plaintiff, v. BLANK ROME and GHOLAN REZA GOLSORKHI, Defendants. IN RE WANSDOWN PROPERTIES CORPORATION N.V. |
| Court | U.S. District Court — Southern District of New York |
In 2019, 29 Beekman Corp. signed an agreement to purchase a town house located at 29 Beekman Place in Manhattan from Wansdown Properties Corporation N.V. As part of the agreement, 29 Beekman made a down payment of $1.03 million. The agreement also provided that before the sale closed, Wansdown would file for Chapter 11 bankruptcy and would secure an order approving the sale from the Bankruptcy Court. However, as the closing date for the sale approached, and due to developments in the bankruptcy proceeding, 29 Beekman withdrew from the sale and requested return of its down payment. Wansdown refused. Before the Court are three related cases stemming from the breakdown in the contemplated sale.
The first case, proceeding under docket number 20-cv-8984 requests leave to file an interlocutory appeal from an order of the Bankruptcy Court for the Southern District of New York (Bernstein, J.) denying both Wansdown's and 29 Beekman's cross-motions for summary judgment on claims respecting Wansdown's retention of the down payment (the “Appeal Action”). The second case, proceeding under docket number 20-cv-10294, was filed in New York state court by 29 Beekman and was removed to this Court by Wansdown (the “Removed Action”). The complaint in the case asserts fraud and contract claims against Wansdown's president and its counsel in the bankruptcy proceeding, Blank Rome LLP. Finally, the third action, proceeding under docket number 21-cv-2280, seeks to withdraw the bankruptcy reference for the adversary proceeding between 29 Beekman and Wansdown (the “Reference Action”). The case was initiated in response to an order issued in the Removed Action directing 29 Beekman to show cause for why that case should not be referred to the Bankruptcy Court.
For the reasons stated herein, 29 Beekman's motion for leave to file an interlocutory appeal is DENIED. 29 Beekman's motion to withdraw the reference in the Bankruptcy Court also is DENIED. And in light of that, the Court refers the Removed Action to the Bankruptcy Court for resolution in the first instance.
The facts underlying this dispute are detailed in the Bankruptcy Court's well-reasoned opinion denying the parties' cross-motions for summary judgment. See In re Wansdown Props Corp. 620 B.R. 487 (Bankr. S.D.N.Y. 2020).[1] The Court recounts them here only to the extent necessary for resolution of the disputes before the Court.
Wansdown Properties Corporation N.V. was formed as a holding company to own and manage, for the sister of the Shah of Iran, a town house, located at 29 Beekman Place, New York, NY 10022. The town house was Wansdown's main asset. On September 25, 2019, Wansdown entered into an agreement to sell the town house to 29 Beekman Corp. for $10, 300, 000 [20-cv-8984, ECF 12-1 (“Purchase Agreement”)]. 29 Beekman delivered a down payment of $1, 030, 000 to be held in an escrow account until the closing.
The Purchase Agreement contemplated that Wansdown would file a chapter 11 case and stated that the sale would take place after “the entry of an order confirming [a Chapter 11] Plan, or if not possible, then approving a 363 Sale.”[2] Purchase Agreement ¶ 51(a). The closing was set for “no later than” 45 days “after the Confirmation Order . . . becomes 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). The Purchase Agreement provided that Beekman could “extend [the] Final Date, on one or more occasions, until the earlier of 30 days after entry of the Confirmation Order or January 31, 2021.” Purchase Agreement ¶ 52(d). As part of the representations in connection with the Purchase Agreement, Wansdown stated that “the net proceeds of a sale under th[e] Contract would be sufficient to satisfy all claims against Seller [Wansdown] and, as reasonably projected, Seller's contemplated estate in bankruptcy.” Purchase Agreement ¶ 51(b). 29 Beekman's purchase of the town house was subject, as a condition precedent, to the accuracy of the Debtor's representations in the Purchase Agreement. Purchase Agreement ¶ 13(a)(i).
Whether the sale proceeded under a confirmed bankruptcy plan or pursuant to Section 363 of the Bankruptcy Code had large financial consequences for 29 Beekman. Specifically, New York law provides that a “Mansion Tax” be paid on sales of real estate that both occur in cities with a population over 1 million people and where the purchase price exceeds $2 million. N.Y. Tax Law § 1402-b. In this case, such a tax on the sale of the town house would have exceeded $334, 000 and, by the terms of the Purchase Agreement, was to be borne by 29 Beekman. Purchase Agreement ¶ 40. Significantly, the Mansion Tax is not imposed in connection with transfers pursuant to a confirmed bankruptcy plan. 11 U.S.C. § 1146.
As contemplated, Wansdown commenced a chapter 11 case on October 8, 2019. Wansdown was represented in the bankruptcy case by, among others, Blank Rome LLP. The next month, Wansdown filed its proposed plan of reorganization, which contemplated that it would sell the town house to 29 Beekman and that the sale proceeds would be sufficient to pay all creditors except Gholam Reza Golsorskhi, the Managing Director and President of Wansdown, who had agreed to subordinate his asserted unsecured claim of approximately $7.5 million. In re Wansdown, 620 B.R. at 492. The Bankruptcy Court scheduled a hearing for early January 2020 to allow Wansdown to obtain a final, non-appealable order confirming the Plan by the January 31, 2020 deadline for the closing. See Id. at 492-93. But, before the hearing, Wansdown'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 it made to Wansdown. Id. at 493. While Wansdown disputed the claim, its existence made confirmation of the proposed plan impossible, and there was insufficient time to negotiate, file, and confirm a revised plan before January 31, 2020.
Instead, Wansdown filed a motion for a sale of the town house under Section 363. In re Wansdown, 620 B.R. at 492. 29 Beekman objected to proceeding in this manner, arguing that there still was time to confirm a plan. Id. When the Bankruptcy Court disagreed, 29 Beekman ultimately acquiesced to proceeding with a Section 363 sale, but only if Wansdown-not 29 Beekman-paid the Mansion Tax. Id. at 494. Over 29 Beekman's objections and despite statements from 29 Beekman that it was withdrawing from participation in any Section 363 sale, Wansdown pursued, and the Bankruptcy Court approved, the terms of the Purchase Agreement and the Section 363 sale on January 16, 2020. Id. The Bankruptcy Court also retained “exclusive jurisdiction to interpret, implement, and enforce the terms and provisions of, and to resolve any and all disputes that may arise under or in connection with, this Order and the Purchase Agreement.” Id. at 493. The sale order became final and non-appealable on January 30, 2020. Id.
After Wansdown told 29 Beekman that it was scheduling the closing for January 31, 2020, 29 Beekman stated that it was exercising its right, under paragraph 52(d) of the Purchase Agreement, to extend the deadline to February 10, 2020. In re Wansdown, 620 B.R. at 495. Then, on February 10, 2020, 29 Beekman again notified Wansdown that it was extending the deadline to March 10, 2020. Id. However, as noted above, the Purchase Agreement provided that Beekman could extend the January 31, 2020 deadline only “until the earlier of” either “30 days after entry” of the Bankruptcy Court order (which was issued January 16, 2020 and became final and non-appealable on January 30, 2020), or January 31, 2021. Purchase Agreement ¶ 52(d). On February 18, 2020, Wansdown notified 29 Beekman that it was terminating the Purchase Agreement based on 29 Beekman's failure to close by the deadline and that it intended to retain the down payment as liquidated damages. Id. at 495. Wansdown later sold the town house for $11, 500, 000 to another buyer under a revised plan. Id.
On February 26, 2020, Wansdown commenced an adversary proceeding in the Bankruptcy Court against 29 Beekman asserting claims for breach of contract based on the failure to close and seeking a declaratory judgment that Wansdown was entitled to retain the down payment. In re Wansdown, 620 B.R. at 495. 29 Beekman initially filed a motion to dismiss in that case, but, after Wansdown filed a pre-motion letter seeking to move for summary judgment, 29 Beekman filed its own adversary proceeding to recover the down payment. Id. In its complaint, 29 Beekman alleged that the Bankruptcy Court had “constitutional authority to enter a final judgment in this adversary proceeding as a ‘core' proceeding” as well as “continuing jurisdiction over the matter based on the jurisdictional reservations” in the sale order [21-cv-2280, ECF 8-20 (“Beekman Bankruptcy Ct Pleading”) ¶ 11]. Judge Berns...
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