In re Chira

• Decision Date: 16 April 2007
• Docket Number: No. 06-61410-CIV.,06-61410-CIV.
• Citation: 367 B.R. 888
• Parties: In re Denis CHIRA, Debtor. Elizabeth Chira, Appellant, v. Jose Saal, and Sonya Salkin, as Chapter 7 Trustee of the Estate of Denis Chira, Appellees.
• Court: U.S. District Court — Southern District of Florida

367 B.R. 888

In re Denis CHIRA, Debtor Elizabeth Chira, Appellant, v. Jose Saal, and Sonya Salkin, as Chapter 7 Trustee of the Estate of Denis Chira, Appellees.

No. 06-61410-CIV.

United States District Court, S.D. Florida.

April 16, 2007.

Charles W. Throckmorton, IV, Kozyak Tropin & Throckmorton, Coral Gables, FL, for Appellant.

Ivan J. Reich, Kevin Markow, Becker & Poliakoff, Fort Lauderdale, FL, for Appellee Jose Saal.

Patrick S. Scott, Law Office of Patrick Scott, Fort Lauderdale, FL, for Appellee Sonya L. Salkin.

ORDER¹

ALTONAGA, District Judge.

THIS CAUSE comes before the Court upon Elizabeth Chira's ("Appellant['s] or Elizabeth['s]") appeal from an order of the United States Bankruptcy Court for the Southern District of Florida (the "Bankruptcy Court") granting Trustee, Sonya Salkin's Motion to Assume Executory Contract for the Sale of Real Property and to Settle Dispute with Jose Saal (the "365 Assumption and Settlement Motion").² The Court has carefully reviewed the briefs submitted by the parties, the applicable case law, pertinent portions of the record and heard oral argument on January 23, 2007.

I. BACKGROUND

This appeal arises from an order of the Bankruptcy Court granting a motion by the Trustee to (1) assume an executory contract in the Chapter 7 bankruptcy case of Denis Chira ("Debtor" or "Denis") and (2) to settle a dispute with Jose Saal ("Saal"). The executory contract involves the sale of the Sheldon Beach Hotel (the "Hotel"), a 42-room hotel located in Hollywood, Broward County, Florida. Denis Chira owns fifty percent of the Hotel, and his former wife, Elizabeth Chira, owns the other fifty percent. (See Appellant's Brief at 2-4).

The Chiras were married from 1970 until they divorced in 1999. (See id. at 3). On April 14, 2005, certain creditors filed an involuntary bankruptcy petition against Denis Chira, and the Bankruptcy Court entered an order for relief under Chapter 7 on June 20, 2005. (See R. 1; R. 29). The Bankruptcy Court appointed Sonya Salkin Trustee. (See R. 25).

Prior to Denis' involuntary bankruptcy, he and Appellant had engaged in extensive litigation in state court (the "divorce court") concerning disposition of the Hotel. (See R. 154, p. 2). Pursuant to the Chiras' divorce judgment, entered on June 17, 1999, Denis and Elizabeth would continue to own the Hotel as joint owners. (See id.). The divorce judgment incorporated a post-nuptial agreement, executed by Denis and Elizabeth on November 16, 1993, which prohibited either party's unauthorized transfer or sale of any interest in the Hotel without the other party's or the divorce court's express consent. (See id.).

After the divorce judgment, Denis and Elizabeth were unable to come to an agreement regarding the ownership, management and disposition of the Hotel, resulting in additional litigation. It was during these proceedings that Elizabeth requested the appointment of a receiver. The divorce court granted Elizabeth's request and appointed Dean Liotta receiver. The receiver was charged with managing the Hotel and the corporation that operated the Hotel, the Sheldon Hotel Lounge Corp. ("Lounge Corp."). (See Saal's App. # 2, pp. 10-11, 28, 31).

On August 28, 2003, the divorce court ordered the receiver to sell the Hotel for the benefit of Denis and Elizabeth Chira (the "Sale Procedures Order"). (See id. at 14, 34). Thereafter, on January 12, 2004, the divorce court entered an Order Granting Receiver's Motion for Authorization to Accept Purchase Offer and Sell Assets of Receivership Estate, conveying the Hotel to Jose Saal (the "Sale Acceptance Order"). (See id. at 14; R. 154, p. 4).³ As reflected in the Sale Acceptance Order, the court accepted an offer by Jose Saal, acting as nominee for an undisclosed purchaser, of $5,850,000 for the purchase, the Hotel. (See id.; R. 130, Exs. "B" & "C").

After entry of the Sale Acceptance Order, the receiver executed a Purchase and Sale Agreement (the "Purchase Agreement"), agreeing to convey the Hotel to the purchaser. (See Saal's App. # 2, pp. 14-15; R. 130, Exs. "C" & "D" to Purchaser's Mem.; R.154, p. 4). Pursuant to the Purchase Agreement, the Hotel was to be sold to the purchaser for $5,850,000, "as is, where is." (See R. 130, Exs. "C" & "D"). The purchaser was required to make a deposit of $100,000 upon execution of the Purchase Agreement, which was non-refundable except for good and marketable title. (See id.). The purchaser also agreed to pay for all costs related to title insurance. (See id.). The purchaser further acknowledged that the Hotel was being sold subject to any outstanding code enforcement lien, recorded or pending, in favor of the City of Hollywood or Broward County. The property was also sold subject to restaurant and retail leases. (See id.).

Before the sale could be completed, Elizabeth appealed the Sale Procedures Order to the Florida Fourth District Court of Appeal. Elizabeth did not appeal the Sale Acceptance Order. The divorce court stayed the sale pending the state appellate court's ruling. On November 24, 2004, the state appellate court affirmed the Sale Procedures Order. (See Saal's App. # 2, pp. 14-15; R. 154, p. 4).

By the time of the affirmance, "nothing could stop the Saal sale from closing except either Saal or the Receiver backing out of the contract." (See Saal's App. # 2, p. 35). However, and as described by Appellee, "Elizabeth engaged in another stall tactic: she made the `global' settlement agreement," with Denis and Nick Kahook⁴ ("Kahook") through Kahook's wholly-owned and controlled entity, Sheldon Beach Resorts, Inc., and sought discharge of the receiver. (See id.). At the same time, Elizabeth also filed a "Motion to Nullify, Vacate and Quash Order Granting Receiver's Motion for Authorization to Accept Purchase Offer and Sell Assets of Receivership Estate to Nullify Contract For Sale and Purchase and for Other Relief' directed to the .Purchase Agreement (the "Motion to Vacate Sale"). (See Saal's Answer Brief at 10; Saal's App. # 2, p. 18).

The divorce court discharged the receiver, finding it was no longer necessary to have a receiver appointed, given the parties' apparent willingness to work together in selling the Hotel. The divorce court, however, did not express any intention to void the Purchase Agreement between the purchaser and the receiver, and denied Elizabeth's Motion to Vacate the Sale. (See Saal's Answer Brief at 11 (citing R. 130, pp. 12, 17-25; Exhibit "K" to Purchaser's memo)). The court instructed Elizabeth and the purchaser to close the sale between themselves. (See id. at 13).

On April 14, 2005, before any sale of the Hotel could be consummated, certain creditors filed the involuntary bankruptcy petition (the underlying bankruptcy proceeding in this dispute) against Denis. (See R. 154, p. 6). Subsequently, on May 9, 2005, Saal moved for relief from the automatic stay to appeal to the state appellate court two orders that had been denied as moot by the divorce court, Saal's Motion to Reinstate the Receiver (in order to close on the sale of the Hotel), and the Lease Rejection Motion (to void a lease on the property). He also moved to compel the estate to assume or reject the Purchase Agreement. (See R. 4). On May 25, 2005, the Bankruptcy Court granted the stay relief requested by Saal but dismissed the appeal of the two orders on the basis that the appeal involved non-appealable interlocutory orders. (See R.15).

Thereafter, on June 29, 2005, the Bankruptcy Court entered an Order on Purchaser's Motion to Compel, which extended the time the Trustee had to assume or reject the Purchase Agreement. (R. 36). The Trustee and Saal later reached a "Settlement Agreement" concerning assumption of the Purchase Agreement (the same Purchase Agreement initially executed by the receiver and Saal during the state court proceedings). (See R.130, Ex. "P" to Purchaser's Memo).

Under the Settlement Agreement, the Trustee agreed to seek permission from the Bankruptcy Court to assume the Purchase Agreement in accordance with Section 365 of the Bankruptcy Code and sell the Hotel for $5,850,000, the pre-bankruptcy sale price established under the original Purchase Agreement. The Trustee also agreed to clear title⁵ to the Hotel and eliminate the Sheldon Hotel Lease, which burdened the property.⁶ (See id.). In exchange for these concessions, Saal agreed to pay the estate $100,000, to be used as a litigation fund for the estate, and an additional $1,900,000. (See id.).

Salkin filed the Motion to Assume Executory Contract for Sale of Real Property and to Settle Dispute With Jose Saal (365 Assumption and Settlement Motion) on February 28, 2006. The parties provided written submissions for the Bankruptcy Court's review and a hearing was held on April 3, 2006.

On June 2, 2006, the Bankruptcy Court, citing 11 U.S.C. § 365(a) and Bankruptcy Rule 9019, entered the Order being appealed from, Order Granting the 365 Assumption and Settlement Motion. (See R. 154). The Bankruptcy Court's ruling allows for the closing of the Hotel pursuant to the Purchase Agreement. (See id. at 7-8, 15). In approving the Trustee's assumption of the Purchase Agreement, the Bankruptcy Court found that the Purchase Agreement was a valid and enforceable executory contract. (See id. at 15). Further, the Court determined that the Trustee had provided adequate assurances that she would: (a) promptly cure any default, (b) compensate the non-debtor party to the contract for any actual or pecuniary loss resulting from such default, and (c) perform the contract in the future, as required by section 365 of the Bankruptcy Code. (See id. at 6).

The Bankruptcy Court determined that the divorce court's earlier dismissal of the receiver, on March 1, 2005, did not invalidate or terminate the Purchase Agreement entered into by the receiver and Saal. The Bankruptcy Court concluded that the divorce court "clearly and unambiguously intended that the Purchase Agreement survive...