In re Marina Enterprises, Inc., Bankruptcy No. 81-00119-BKC-JAG.
| Decision Date | 14 August 1981 |
| Docket Number | Bankruptcy No. 81-00119-BKC-JAG. |
| Citation | 14 BR 327 |
| Parties | In re MARINA ENTERPRISES, INC., Debtor. |
| Court | U.S. Bankruptcy Court — Southern District of Florida |
Gregory C. Hartman, Miami, Fla., and Avery Cohen, Guren, Merritt, Sogg & Cohen, Cleveland, Ohio, Stanley Weiss, Carpenter, Bennett & Morrissey, Newark, N.J., for Casino.
Philip Bloom, Miami, Fla., and Michael V. Blumenthal, Finley, Kumble, Wagner, Heine & Underberg, New York City, for Marina.
ORDER ON MOTION TO DISMISS/OR TRANSFER VENUE AND ON APPLICATION FOR REJECTION OF LEASE
This chapter 11 proceeding was filed on January 28, 1981 by Marina Enterprises, Inc. (Marina). The immediate precipitating cause was the obtaining on January 27, 1981 of a partial summary judgment of foreclosure by Hotel Associates of Atlantic City of a purchase money mortgage it held on the only substantial asset of the debtor, a parcel of unimproved property containing slightly less than 8.5 acres in Atlantic City, New Jersey and zoned for hotel-casino development (hereinafter referred to as "the subject property"). The automatic stay invoked upon the filing of the chapter 11 petition (11 U.S.C. § 362) stopped any foreclosure sale or other post-judgment relief in that foreclosure action. Hotel Associates of Atlantic City has not only not requested that the stay be modified to permit it to proceed but rather has stipulated that it will not seek such relief from stay and supports the debtor in the positions taken by Marina as debtor-in-possession on the issues dealt with in this opinion.
The subject property was acquired by the debtor from Hotel Associates of Atlantic City (HAAC) in May, 1979 pursuant to a contract in that regard made in April, 1979. (Casino's Exhibit D). A purchase money mortgage from Marina to HAAC was a substantial part of the consideration for that conveyance. That sale was subject to a lease that was in existence between HAAC as lessor and Casino by the Sea Corporation (Casino) as lessee which was executed June 20, 1978 and amended on September 30, 1978 (Joint Composite Exhibit No. 1). Article 1 of that lease provides that the lessor will erect on the subject property an eighteen story building to be used "solely and exclusively as a Hotel and Casino." It further provides in Article 2 that the "term of this lease shall commence at such time as the Building shall have been substantially completed." It is not disputed that not only was the building never completed, but it is agreed by all parties that it was never even commenced.
The first matter of significance brought before the court by Marina as debtor-in-possession in this case was its application on April 24, 1981 for order rejecting and disaffirming the lease on the subject property between Marina (the owner, as a result of its acquisition from HAAC) as lessor and Casino as lessee. (C.P. No. 17a). This application was originally set for hearing on June 2, 1981 but as a result of stipulated continuances, it was last scheduled and subsequently heard on July 8 and 9, 1981. On June 16, 1981, Casino filed its answer to Marina's application for order rejecting and disaffirming lease (C.P. No. 32) and on June 24, 1981, filed its motion to dismiss chapter 11 proceedings or in the alternative to transfer venue (C.P. No. 37). The affidavit of Howard Levin, president of Casino, in support of that motion had previously been filed on June 16, 1981 (C.P. No. 31). By reason of notice requirements under the rules, the hearing on the motion to dismiss or transfer venue was scheduled for July 30, 1981.
Casino moved that the hearing on Marina's application for rejection of lease be continued from the July 8, 1981 scheduled hearing date to July 30, 1981 to coincide with the hearing on the motion to dismiss. Following a hearing on the motion for continuance, the court entered its order on July 1, 1981 denying that motion (C.P. No. 51) and further provided in that order that the parties be prepared to argue the motion to dismiss or transfer venue at the July 8th hearing even though the court stated and the parties understood that the motion to dismiss or transfer venue could not be determined until all interested parties had an opportunity to participate in the hearing that remained scheduled on that motion for July 30, 1981.
Extensive memoranda were filed by the parties prior to the July 8th hearing and that hearing was held on July 8th (transcript is C.P. No. 67) and 9th (transcript is C.P. No. 68) at which time extensive evidence was taken and arguments heard with respect to the rejection of lease and dismissal or transfer issues.
Following that hearing, the parties submitted additional comprehensive briefs which have been of great aid to the court in this matter. The hearing on dismissal or transfer scheduled for July 30, 1981 was held that date and additional evidence and argument were presented by the parties (transcript is C.P. No. 99). No additional parties filed any pleadings or made any appearance at the July 30th hearing. The debtor had previously filed or caused to be filed affidavits of all other creditors in opposition to Casino's motion for transfer of venue (C.P. Nos. 57-63).
The evidence on the issues of jurisdiction (dismissal), venue and rejection of the lease is to a large extent interchangeable and overlapping. The court considered all of the evidence presented on July 8th, 9th and 30th (C.P. Nos. 67, 68 and 99 and the exhibits admitted into evidence at those hearings) on all of the issues.
First we address the issues raised by Casino's motion to dismiss or in the alternative to transfer venue. If the matter is dismissed, then all other issues become moot. If venue is transferred to the Bankruptcy Court for the district of New Jersey in which Atlantic City is located, then the application for rejection of lease should be considered by that Bankruptcy Court.
The thrust of Casino's position as to dismissal is that Marina is a mere shell which is owned and controlled ultimately by Cavanagh Communities Corporation (CCC) through a controlled subsidiary of CCC (Royale International Corporation of New Jersey); that the debtor has no business or going concern values or other assets to preserve for the interest of claimants; that CCC is utilizing the processes of this court and the provisions of the Bankruptcy Code for an improper purpose; and that there is no reasonable likelihood that the debtor can effectuate a plan of reorganization. Able and resourceful counsel for Casino have urged every fact and legal point that might avail it on its dismissal request. However, none of the voluminous evidence admitted by way of documentary exhibits and testimony establishes that there was anything illegal or improper in the conduct of the debtor or its affiliates regarding the formation of the debtor-corporation, the acquiring of title to the subject property or the bringing of these proceedings. Only Marina is a debtor in this case and regardless of the disposition of any claims which any creditor may have against Marina, those creditors are not precluded from pursuing any claims they may have against parties other than the debtor herein (such as HAAC, CCC or other individuals and corporations which may be liable to Casino for damages resulting from any alleged and established misconduct such as breach of contract or otherwise.)
Marina was formed prior to its acquisition of the subject property which occurred in the spring of 1979. The closing of the purchase of the subject property from HAAC by Marina was in May, 1979 pursuant to the agreement for the purchase and sale of that real estate dated April 5, 1979 (Casino's Exhibit D). Between the time the contract of purchase was entered into and the closing, CCC entered into an agreement with Casino to acquire Casino's lessee's interest in Joint Composite Exhibit No. 1. The agreement between CCC and Casino was made on April 30, 1979 and is in evidence as Debtor's Exhibit No. 3. Concomitant with that agreement and of even date, there was a letter of understanding between Casino and Marina (Casino's Exhibit C). CCC was funding Marina's purchase of the subject property from HAAC through a series of stock transactions by which CCC through another subsidiary gained ultimate control of Marina. As aforesaid, Marina closed on its acquisition of the subject property with HAAC but CCC never acquired Casino's leasehold interest in that property pursuant to Debtor's Exhibit No. 3, ultimately, because it was unable to complete the financing of that acquisition.1 Therefore, whether CCC intended to merge the fee owned by Marina and the lease being acquired by it is moot by reason of the failure to consummate the acquisition of the lease. There is nothing in law or experience to suggest that a merger of fee and leasehold was inevitable since frequently, affiliated corporations choose to have title in one entity and leasehold interest in another.
Marina filed this bankruptcy case only after HAAC had obtained a partial summary judgment in its foreclosure action in January, 1981 and it submitted its asset (the fee interest in the subject property) to the jurisdiction of this court. The property had not been transferred to Marina by any of its affiliated corporations for the purpose of this bankruptcy. Casino introduced a deed of bargain and sale (quitclaim deed) from Royale International Corp. of New Jersey to Marina regarding the subject property executed and recorded just a few days prior to the summary judgment in the foreclosure action and the filing of the petition in this proceeding (Casino's Exhibit G). There is no evidence that Royale International Corp. of New Jersey ever held title to the subject parcel and Casino does not contend that it did. It asks the court to infer a nefarious purpose to that deed by its mere execution and recording. Technically it appears to be nothing more than a wild quitclaim deed. However, the court can...
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