In re Hunt's Pier Associates
| Decision Date | 10 July 1992 |
| Docket Number | Bankruptcy No. 91-15644S. |
| Citation | 143 BR 36 |
| Parties | In re HUNT'S PIER ASSOCIATES, Debtor. |
| Court | U.S. Bankruptcy Court — Eastern District of Pennsylvania |
COPYRIGHT MATERIAL OMITTED
Hershel Kozlov, Cherry Hill, N.J., trustee.
David S. Fishbone, Ciardi, Fishbone & DiDonato, Philadelphia, Pa., for debtor.
Justin G. McCarthy, Adelman Lavine Gold & Levin, Philadelphia, Pa., for movant.
Thomas J. Elliott, Elliott, Bray & Riley, Blue Bell, Pa., for RTC.
Samuel E. Klein, Kohn, Klein, Nast & Graf, P.C., Philadelphia, Pa., for Leon Silverman and Elias Stein.
Mark S. Halpern, Furman & Halpern, Bala Cynwyd, Pa., for David Kami.
Michael H. Kaliner, Jackson, Cook, Caracappa & Bloom, Fairless Hills, Pa., for Theodore Snyder.
Frederic Baker, Asst. U.S. Trustee, Philadelphia, Pa., U.S. Trustee.
Before this court is a motion of Vekoma International B.V. ("Vekoma") requesting a determination that the automatic stay does not apply to its right to foreclose upon certain amusement rides claimed to be owned by the Debtor-partnership, Hunt's Pier Associates ("the Debtor"). The rides were pledged as security to Vekoma by New Hunt's Pier Corporation ("the Corporation"), an entity which the Debtor allowed to manage and operate an amusement pier containing the rides. In the alternative, Vekoma seeks relief from the automatic stay, contending that it has a valid lien against the rides superior to a security interest in the rides which is prior in time held by Atlantic Financial Federal ("AFF"), represented by its successor's receiver, the Resolution Trust Corp. ("the RTC").
The motion presents several issues for determination by the court: (1) Whether the rides at issue are owned by the Debtor, the Corporation, or some other entity; (2) The effect of this determination upon Vekoma's security interest in the rides; (3) Whether any security interest of Vekoma is superior to that of AFF; and (4) The impact of all of the foregoing upon Vekoma's right to obtain relief from the Debtor's automatic stay to foreclose upon its putative security interest.
This court concludes as follows:
(1) The rides are not the property of the Corporation, but only two are owned by the Debtor;
(2) Vekoma nevertheless appears to have a valid security interest in all of the rides;
(3) Vekoma's security interest in the rides is not superior to that of AFF;
(4) Vekoma's security interests in two of the rides are potentially avoidable by the Debtor's Trustee; and
(5) In light of (3) and (4) supra, Vekoma's request for relief from the automatic stay must be denied as to those two rides.
(6) The automatic stay does not apply to the third ride, but it is questionable, under state law, what rights it can assert in that ride.
This matter arises in connection with the voluntary Chapter 11 bankruptcy case commenced by the Debtor on October 23, 1991. The administration of this case has been as topsy-turvy as the facts giving rise to the motion at issue, largely because both are the final product of destructive in-fighting among Leon Silverman and Elias Stein, two of the Debtor's partners, on one hand; and David Kami, a third partner, on the other. A dispute also rages as to whether the original fourth partner, Theodore Snyder, has been bought out or remains a partner in some capacity.
At the outset of the case, Silverman and Stein, who apparently had chosen the Debtor's counsel, attempted to chart the case's direction, while Kami furiously attempted to vindicate his counter-interests. The RTC, neutral in the intra-partner disputes, changed the course of this case dramatically by filing, on January 10, 1992, a motion to appoint a trustee, principally based upon the need for an arbitrator to quell the dissention among the partners. Kami followed, on February 4, 1992, with his own similar motion to appoint a trustee.
Vekoma filed the instant motion on February 18, 1992, the day before the February 19, 1992, hearing on both motions to appoint a trustee. At the close of that hearing, we ordered the appointment of an examiner, directing that the examiner provide a report to the court prior to a continued hearing on March 11, 1992, on the motions to appoint a trustee. Accountant Robert Brennan, appointed as examiner, performed his duties in timely, exemplary fashion and recommended the appointment of a trustee. Subsequent to our Order of March 11, 1992, directing the appointment of a trustee, Hershel Kozlov ("the Trustee") was appointed on April 6, 1992.
During the unsettled period between February and April, Vekoma agreed to continue the disposition of its motion to April 8, 1992, and again to May 13, 1992. In the meantime, after a process too tortuous to attempt to describe, a consensus was reached that the crown jewel of the Debtor's holdings, an amusement pier in Wildwood, New Jersey, would be leased to Snyder for the fast-approaching 1992 summer season, with an option for Snyder to purchase it after that season. By May 13, 1992, Snyder was well into the process of preparing the pier for the public, and the disposition of the rides, which is the subject of the instant motion, became ripe for resolution.
On May 13, 1992, despite the fact that potential witnesses for both sides were unavailable, all parties were anxious for a resolution of this matter. They decided to present it on a paper record. By agreement of the interested parties, we entered an Order of May 14, 1992, directing the parties to prepare and file with this court, by May 20, 1992, a Stipulation of Facts ("the Stipulation"), which would constitute the record in this matter. Any interested parties were accorded an opportunity to file Briefs in support of their respective positions by June 3, 1992 (favoring the Motion), and June 17, 1992 (opposing it).
The Stipulation included, as Exhibits, depositions of Silverman, Kami and Snyder. Unfortunately, all provisions of the Stipulation were not unanimously agreed upon by the interested parties. Nevertheless, no party demanded a hearing, and the Stipulation remains the record. After Vekoma submitted its statement of the facts and Brief, the Trustee, the RTC, and Snyder submitted Briefs containing counterstatements of facts and argument in opposition to the Motion.
From a review of the Stipulation and the counterstatements of facts in the parties' Briefs, we find that the following are the relevant facts.
The Debtor was formed in June, 1985, as a partnership of Silverman, Stein, Kami, and Snyder. On August 16, 1985, the Debtor entered into an asset purchase agreement ("the Purchase Agreement") with Hunt's Theaters, Inc. The Purchase Agreement provided that the Debtor would purchase certain parcels of real estate, including "Hunt's Pier," an amusement pier platform and deck, including all rides, vehicles, theater equipment, inventory, equipment and supplies, located at 2701-21 Boardwalk, Wildwood, New Jersey ("the Pier"); and various other real estate holdings and interests in Wildwood and other nearby communities in Southern New Jersey.
On February 28, 1986, the Debtor entered into a Loan and Security Agreement with AFF ("the AFF Agreement") to finance the Purchase Agreement. The AFF Agreement provided that AFF would lend the Debtor $10 million. In exchange, AFF was granted, inter alia, a first mortgage pledging all of the real estate, fixtures, machinery and equipment acquired under the Purchase Agreement as collateral for the loan. In addition, AFF was given "a first priority lien and security interest in all Accounts, Equipment, General Intangibles and Inventory . . . now owned or hereafter acquired by the Borrower." On March 3, 1986, AFF filed a UCC-1 Financing Statement in Cape May County, New Jersey, covering the properties listed in the AFF Agreement.
Following consummation of the purchase, the Debtor began to manage and operate the acquired properties. Silverman was selected as the managing and tax partner. Snyder, the only one of the partners who had experience operating amusement facilities, was assigned the role of managing the day-to-day operation of the Pier.
In 1987, the Debtor purchased several additional amusement rides for the Pier. They included the "Bertazzon Double Decker Carousel" ("the Carousel"), for a purchase price of $235,000, and the "Raider Ride," for an unstated purchase price. The Pier was also provided the use of a Kiddie roller coaster, known as the "Go-Gater" ride. These three rides will be referred to collectively hereafter as "the Rides."
Both Kami and Snyder claim ownership of the Go-Gater. Snyder asserts that he purchased and acquired title to the Go-Gater in the name of Sportland Investments, which operates a separate small amusement pier in Wildwood. Kami contends that he and Snyder each paid one-half of the purchase price of the Go-Gater and that its title was to be placed in Kami's name.
Discord soon developed among the partners, however, and litigation ensued which has continued ever since. One attempt at resolving these disputes was a July, 1988, settlement which provided that Kami, Silverman, and Stein would redeem Snyder's partnership interest in the Debtor for $2.3 million. There is a dispute as to whether this $2.3 million was paid and whether Snyder consequently remains a partner.
Thereafter, in July, 1988, the three remaining partners entered into an agreement which proposed to divide the assets and liabilities among them, with distribution to occur on April 1, 1991 ("the July Agreement"). The July Agreement was amended and restated in an October, 1988, letter agreement ("the October Letter"). The October Letter provided, inter alia, that Kami was given the exclusive right to manage and operate the Pier and the Ocean Block, a group of properties owned by the Debtor which are contiguous to the Pier. It also provided that Kami would operate the Pier through a corporation to be formed and...
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