In re Roman Crest Fruit, Inc.

• Decision Date: 27 December 1983
• Docket Number: Bankruptcy No. 83 B 11596 (HB),Adv. No. 83-6055A.
• Citation: 35 BR 939
• Parties: In re ROMAN CREST FRUIT, INC., Debtor. HUNTS POINT TOMATO CO., INC., Plaintiff, v. ROMAN CREST FRUIT, INC., The City of New York, Department of Ports and Terminals, Tropical Brands Packing Corporation, Arthur Slavin, as Escrowee, Anthony Levatino, and Janet Levatino, Defendants.
• Court: U.S. Bankruptcy Court — Southern District of New York

35 B.R. 939 (1983)

In re ROMAN CREST FRUIT, INC., Debtor.

HUNTS POINT TOMATO CO., INC., Plaintiff, v. ROMAN CREST FRUIT, INC., The City of New York, Department of Ports and Terminals, Tropical Brands Packing Corporation, Arthur Slavin, as Escrowee, Anthony Levatino, and Janet Levatino, Defendants.

Bankruptcy No. 83 B 11596 (HB), Adv. No. 83-6055A.

United States Bankruptcy Court, S.D. New York.

December 27, 1983.

COPYRIGHT MATERIAL OMITTED

Angel & Frankel, New York City, for debtor; Eric S. Brown, New York City, of counsel.

Chester B. Salomon, P.C., New York City, for Tropical Brands Packing Corporation, intervenor.

Gerst & Pullin, Franklin Square, N.Y., for Hunts Point Tomato Co., Inc.; Alan L. Pullin, Franklin Square, N.Y., of counsel.

Siegel, Sommers & Schwartz, New York City, for the Creditors' Committee; James Beldner, New York City, of counsel.

The Corporation Counsel of the City of New York by Robin Weiner, New York City, Assistant Corporation Counsel, for City of New York.

HOWARD C. BUSCHMAN, III, Bankruptcy Judge.

In this action, Hunts Point Tomato Co., Inc. ("Hunts Point"), the plaintiff herein, seeks specific performance of an alleged agreement by Roman Crest Fruit, Inc. ("Roman Crest"), an importer of fruits and vegetables, to assign its interests in four leases covering its stores numbered 269, 270, 273, and 274 at the New York Terminal Market at Hunts Point, Bronx, New York, together with the offices appurtenant thereto and the leasehold equipment, improvements, and refrigeration systems therein¹ (the "Leaseholds").

At the request of Hunts Point, the Supreme Court of the State of New York, Bronx County, issued, ex parte, a temporary restraining order barring Roman Crest from transferring the Leaseholds pending resolution of Hunts Point's motion for a preliminary injunction. Shortly thereafter, Roman Crest filed a voluntary petition under Chapter 11 of the United States Bankruptcy Code ("Code"), and removed the state court action to this Court pursuant to 28 U.S.C. § 1478. The temporary restraining order continued in effect pending this Court's decision on Hunts Point's motion for a preliminary injunction as provided in Rule 9027(k) of the Rules of Bankruptcy Procedure and 28 U.S.C. § 1479.

Simultaneously with the removal of this action to this Court, Roman Crest moved for an order vacating the restraining order and dismissing the action. Roman Crest also sought this Court's permission, pursuant to § 363 of the Bankruptcy Code, 11 U.S.C. § 363 (1978) (hereinafter the "Code"), to sell the Leaseholds to Tropical Brands Packing Corporation ("Tropical Brands") for an allegedly higher consideration. Annexed to its application is an agreement entered into by the debtor with Tropical Brands subsequent to the disputed Hunts Point agreement and prior to its filing the Chapter 11 petition for reorganization. Implicit in its § 363 request is that Roman Crest, if its agreement with Hunts Point is deemed to be a contract, rejects or seeks to avoid it.

At a hearing held on November 15, 1983, the parties agreed that resolution of this dispute, i.e., whether there is a contract and, if so, whether it can be rejected or avoided, was necessary prior to entertaining the debtor's motion to sell the Leaseholds. Upon their further consent and because of the debtor's desire to sell the Leaseholds quickly, the Court ordered, pursuant to Rule 65(a) of the Federal Rules of Civil Procedure, that a trial of the plaintiff's claim for specific performance be advanced and be consolidated with the hearing on the motion for a preliminary injunction and with the debtor's motion to dismiss that portion of the complaint and vacate the restraining order. Trial of its claim for damages was held in abeyance to be heard at a later time. At the urging of the debtor and upon the consent of Hunts Point, Tropical Brands was permitted to be heard and to join in the debtor's defense of this action at trial.

I.

This controversy has its roots in what began as a simple sale of property in the late summer of 1983 whereby Roman Crest would assign the Leaseholds to Hunts Point for the sum of $100,000. Having negotiated by themselves, the principals and representatives of Hunts Point and Roman Crest, respectively Messrs. Louis Guerra and Anthony ("Pat") Levatino, approached Arthur Slavin, Esq., general counsel to the New York Chapter of the United Fresh Fruit and Vegetable Organization and to the New York Produce Trade Association at Hunts Point, and asked him to formalize their agreement. Apparently on behalf of both sides, Slavin thereupon prepared a written contract, bill of sale and assignment and ordered a title search for liens and encumbrances. He also began the process of obtaining the consent of the City of New York Department of Ports and Terminals, as landlord and as required by the form of contract Slavin had prepared, to the contemplated assignment. Either at this stage or later, the City orally indicated it would approve the assignment to Hunts Point.

But having heard of Roman Crest's financial difficulties, Slavin, for his own reasons, decided only to represent Hunts Point and to inform Levatino that Roman Crest should request its own attorney to review and approve the documents he had prepared. When the parties met on September 9, 1983, Slavin, therefore, advised the parties that, to expedite the transaction, both could sign the agreement, bill of sale and assignment and "then send it sic down to Phil Weinstein for his approval and if his approval doesn't come through there is no deal."

Guerra then executed the contract and assignment and assumption agreement on behalf of Hunts Point and gave Mr. Slavin a $10,000 check, drawn on Hunts Point's account, payable to Arthur Slavin, escrowee, representing its down payment, as called for by § 3.1 of the agreement. Levatino, with pen in hand, then, for the first time, revealed that he could no longer sign as an officer or director of Roman Crest since he had resigned those positions and had transferred his stock to his wife.² The signatory and acknowledgement pages of the various documents were then changed and Slavin instructed Levatino that he would have to work out the execution details with Weinstein. Levatino took the documents home and, over the weekend, his wife signed them. He then sent them to his attorney's office.

It is at this point that the seamy underside of this simple deal begins to emerge. To Levatino, the transaction contemplated far more than merely the receipt by Roman Crest of $100,000 which would inure to the benefit of its creditors: it was his euphemistic "understanding" that he would be paid, personally, "more or less `X' amount of dollars in cash" under the table. But by September 12, 1983, when he sent the documents to Roman Crest's attorney, he and Guerra "really hadn't agreed on anything concrete..." with respect to this second deal.

Once Mrs. Levatino had signed the documents, however, Mr. Levatino's ability to insist on an additional cash payment was sharply limited. Accordingly, Mr. Levatino informed Roman Crest's attorney of his desire for a supplemental payment and the attorney refused to have anything to do with the transaction. He called Slavin to tell him that his approval was not forthcoming and sent the signed documents to him with a handwritten cover note stating that his failure to approve was the result of a disagreement between him and Levatino and with a cover letter reciting his failure to approve and purporting to prohibit use of the documents.

The principal reason cited by Roman Crest's attorney for withholding his approval is, however, far from credible. He claimed that he could not approve of the transaction principally because the contract representations and warranties as to the absence of any liens and encumbrances on the Leaseholds were simply not true at that time. He added that he so informed Slavin who unequivocally denies that assertion.

Because in his demeanor, sincerity and command of the facts Slavin is a far more credible witness, his version of this telephone call is worthy of belief. Roman Crest's attorney's purported concern regarding the absence of any liens and encumbrances is fabricated. Under the contract, clear title was only a condition to closing, there being no contractual representation that the property was unencumbered on the date the contract was signed. Although one might believe in good faith that certain liens might prove difficult to satisfy, here Slavin had determined that there would be no difficulty in obtaining satisfactions from all but one or two lienholders and he expected that Roman Crest would be able to satisfy them as well.

Most significantly, these conditions are fairly customary. Indeed, they are contained, word for word, in Roman Crest's subsequent agreement with Tropical Brands. Yet no impediment was found to Roman Crest's entering into that contract.

Furthermore, not until six weeks later, when the parties were gearing up for litigation, do these reasons appear in any document. That the attorney wrote to Levatino on October 18, 1983, listing the warranty and representation of no liens or encumbrances as the reasons for his disapproval shows only that those contractual clauses were seized on as a belated afterthought. On the basis of all the evidence, we find that the failure to approve the contract lies in a disagreement between Levatino and the attorney, as the attorney's contemporaneous note states, seemingly over Levatino's attempt to obtain an under the table payment. As the attorney also testified, he informed Levatino that this was the wrong thing to do and that Levatino should seek counsel for bankruptcy advice.

Slavin, upon receipt of the documents, on his own accord and without an express escrow agreement by the parties regarding the documents, decided to hold the documents in escrow and failed to record them. For its part, the debtor apparently finally heeded...