In re Sugarhouse Realty, Inc., Civil A. No. 95-2156. Bankruptcy No. 92 23024.

Citation192 BR 355
Decision Date17 January 1996
Docket NumberCivil A. No. 95-2156. Bankruptcy No. 92 23024.
PartiesIn re SUGARHOUSE REALTY, INC.
CourtUnited States District Courts. 3th Circuit. United States District Court (Eastern District of Pennsylvania)

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Allen B. Dubroff, Astor, Weiss & Newman, Philadelphia, PA, for Sugarhouse Realty, Inc., Sugarhouse II Corp., Riverfront Concepts, Inc.

Nicholas J. Le Pore, II, Carl A. Solano, Schnader, Harrison, Segal & Lewis, Philadelphia, PA, for LHTW Corp.

Anna Hom, Spector, Gadon & Rosen, P.C., Philadelphia, PA, for First Lehigh Bank.

Susan Dein Bricklin, U.S. Attorney's Office, Philadelphia, PA, David E. Street, Department of Justice, Environmental Enforcement Section, Washington, DC, for U.S. Environmental Protection Agency.

Frederic J. Baker, Asst. U.S. Trustee, Philadelphia, PA, pro se.

MEMORANDUM

CAHN, Chief Judge.

Let's Hope This Works Corporation ("LHTW"), purchaser of Sugarhouse Realty, Inc.'s ("Sugarhouse Realty") property under a confirmed bankruptcy plan of reorganization, appeals the bankruptcy court's order granting First Lehigh Bank's ("First Lehigh") Motion to Compel LHTW Corporation to Close Under Agreements of Sale Necessary for Consummation of Confirmed Plans of Reorganization Pursuant to 11 U.S.C. § 1142 ("Motion to Compel").1 This court has jurisdiction pursuant to 28 U.S.C. § 158(a) (1988). For the reasons set forth below, this court affirms the order of the bankruptcy court.

I. FACTS AND PROCEDURAL HISTORY

The facts of this case were fully set forth in the bankruptcy court opinion, In re Sugarhouse Realty, Inc., Nos. 92-23024 SR, 92-24533 SR, 93-22920 SR, 1995 WL 114151 (Bankr.E.D.Pa., March 15, 1995). A summary of the facts relevant to this proceeding follows.

This case involves three tracts of real property contiguously situated along the west side of the Delaware River in Philadelphia, commonly known collectively as the former Jack Frost Sugar Refinery Site (the "Site"). The Site consists of approximately 30 acres of land including the remains of the hundred-year-old multi-building sugar refinery. The Site has a lengthy history of environmental litigation.2 The three tracts of land are owned by three separate corporate debtors (collectively, the "Debtors"). The largest tract is owned by Sugarhouse Realty; the smaller tracts are owned by Sugarhouse II Corporation ("Sugarhouse II") and Riverfront Concepts, Inc. ("Riverfront Concepts"). William Thayer ("Thayer") is the principal stockholder of all three corporations. Royal Bank of Pennsylvania ("Royal Bank") claims a first mortgage lien on the Sugarhouse Realty tract. First Lehigh3 claims first mortgage liens on the tracts owned by Sugarhouse II and Riverfront Concepts.

The Site was purchased by the Debtors with the intent to clean up and develop the property. Their plans were to build condominiums, a marina, retail shops, a heliport, and an entertainment center on the Site. Unfortunately, the real estate recession intervened and the plans for the resurgence of the Delaware River area failed. Sugarhouse Realty fell behind in mortgage payments. Claiming a balance due of approximately $3,300,000, Royal Bank sought to foreclose on the Sugarhouse Realty tract in late 1993. Subsequently, all three Debtors filed for bankruptcy4 under Chapter 11 of the Bankruptcy Code, 11 U.S.C. §§ 101-1330 & app. (1994).5

Sugarhouse Realty and Royal Bank entered into a stipulation that called for a public auction of all three tracts of land. The auction was to require a minimum bid of $7,000,000. The stipulation also provided for a period after an unsuccessful auction during which the Debtors could attempt to secure a private sale buyer. If both attempts at sale were unsuccessful, Royal Bank would be at liberty to complete the foreclosure sale on February 7, 1994. No bids were received at a December 16, 1993 auction, and no buyers were subsequently located.

In 1993, the public learned that legislation approving riverboat gaming was being considered in Philadelphia. If this legislation passed, licenses would likely be issued in the Delaware Avenue area. Because of the Site's location, passage of the legislation would make the Site economically desirable notwithstanding the debt and environmental contamination. Trump and LHTW6 became interested in the property. Both were trying to initiate gaming operations in the Philadelphia area. A competitive bidding war ensued. Thayer aligned himself with Trump, thus placing LHTW at a disadvantage.7 Nonetheless, LHTW retained environmental experts and attempted to enlist a party-in-interest to serve as plan proponent.

Prior to the February 7, 1994 foreclosure sale, Thayer presented evidence to the bankruptcy court of a pending sale to Trump or a Trump-related corporation. The court issued a sixty-day injunction, postponing the foreclosure sale until April 4, 1994, with the condition that the Debtors propose and have confirmed a plan of reorganization prior to the sale date.8 Royal Bank opposed the injunction, arguing that LHTW, a prospective bidder at the February 7 sheriff's sale, would bid an amount sufficient to cover at least the Royal Bank claim.

With time running out, competition between Trump and LHTW increased. Thayer proposed a number of reorganization plans, all focused on a sale to Trump. LHTW frantically sought a party-in-interest to serve as proponent of its plan, and adopted the slogan, "Anything Trump can do we can do better." While Thayer's plan favored the Debtors, the LHTW-authored plan favored creditors.9 The City of Philadelphia ("the City"), a creditor of all three debtors, became the proponent of the LHTW-authored Plan (the "City Plan").

During the City's disclosure statement hearing, Trump deposited the full amount of the existing tax claim with the City. Accordingly, the City withdrew its plan of reorganization. The EPA, a creditor of Sugarhouse Realty, then stepped forward to assume the City's position as plan proponent for the portion of the City's Plan that concerned the one Sugarhouse Realty tract (the "EPA Plan").

Shortly thereafter, First Lehigh assumed the role of plan proponent for the rest of the City Plan, which concerned the tracts owned by its debtors, Sugarhouse II and Riverfront Concepts (the "First Lehigh Plan"). The sheriff's sale scheduled for April 4, 1994 was postponed after Trump delivered a $1,000,000 payment to Royal Bank.

The bankruptcy court approved the companion EPA and First Lehigh disclosure statements. The only remaining events were a vote by the classes, confirmation of one of the competing plans — either the Debtors' Plan or the combined EPA and First Lehigh Plans — by the court, and signing of the Agreement of Sale. The plan confirmation hearing was scheduled for April 28, 1994. Prior to confirmation, on April 15, Trump withdrew from his negotiations with the Debtors, and the Debtors were forced to withdraw their plan of reorganization. The Debtors' request for a continuance was denied by the bankruptcy court.

On April 28, 1994, a confirmation hearing took place on the EPA and First Lehigh plans of reorganization. Thayer was opposed to the EPA and First Lehigh plans and had earlier made it clear that he would not be cooperative. The court confirmed the plans after concluding that objections raised by Thayer lacked merit.

In order to proceed without Thayer's cooperation, several unusual provisions were included in the documentation. First, the Agreement of Sale was not executed prior to confirmation of the plan by the court. Second, the plan proponents (EPA and First Lehigh) were named as attorneys-in-fact for the Debtors with the power to execute all documents on behalf of the Debtors. Third, the order confirming the Plan contained very specific language directing the parties to consummate the transaction.

Shortly after plan confirmation, LHTW sought access to the property. Thayer was uncooperative. LHTW asked First Lehigh's counsel to draft a motion requesting that the court order Thayer to both allow access to the property and execute the agreements of sale. A duplicate motion relating to the Sugarhouse Realty plan was sent to the EPA to file as well. Access to the property was granted and LHTW instructed the attorneys not to file the motions.

Execution of the Agreement of Sale, as directed by the Confirmation Order, was suspended by the Debtors' appeals. However, on July 5, 1994, all appeals were withdrawn. First Lehigh immediately made written demand upon LHTW to proceed to closing. On July 11, 1994, LHTW transmitted a letter to the United States Attorney for the Eastern District of Pennsylvania (counsel for the EPA) purporting to withdraw pursuant to section 3.3 of the Agreement of Sale, citing as a reason the EPA's failure to sign the Agreement of Sale on behalf of Sugarhouse Realty. On July 13, 1994, LHTW sent a follow-up letter enumerating failures of conditions precedent under section 13.2 of the Agreement of Sale that LHTW believed excused its performance and permitted termination of the agreement. Negotiations between the parties were unsuccessful, and on August 12, 1994, First Lehigh filed the Motion to Compel which is the subject of this appeal. LHTW responded with a motion to dismiss. On March 15, 1995, after lengthy evidentiary hearings before the bankruptcy court, Judge Raslavich issued an opinion and order granting First Lehigh's Motion to Compel.

On appeal of that order to this court, LHTW argues first, that the bankruptcy court erred in holding that the Agreement of Sale does not permit withdrawal after confirmation of the plan by the bankruptcy court ("post-confirmation withdrawal") and, second, that the bankruptcy court erred in holding that LHTW had no right to refuse to close for failures of conditions precedent under section 13.2 of the Agreement of Sale.10

The parties have extensively briefed the issues and, on October 6, 1995, presented thorough oral argument.11

II. STANDARD OF REVIEW

In reviewing the...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT