Raj v. Barnard (In re Joe's Friendly Service & Son, Inc.)

538 B.R. 618, 2015 WL 5021762
CourtDistrict Court, E.D. New York
DecidedAugust 21, 2015
DocketNos. 14-70001(REG), 14-70002(REG), 15-cv-00376 (ADS)
StatusPublished
Cited by6 cases

This text of 538 B.R. 618 (Raj v. Barnard (In re Joe's Friendly Service & Son, Inc.)) is published on Counsel Stack Legal Research, covering District Court, E.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Raj v. Barnard (In re Joe's Friendly Service & Son, Inc.), 538 B.R. 618, 2015 WL 5021762 (E.D.N.Y. 2015).

Opinion

MEMORANDUM OF DECISION AND ORDER

SPATT, District Judge.

On January 23, 2015, the Appellant Yama Raj (“Raj” or “the Appellant”) commenced the present appeal from an order of the United States Bankruptcy Court for the Eastern District of New York (the “Bankruptcy Court”), contending that the Bankruptcy Court’s refusal to vacate its own prior order, which inter alia confirmed the Appellant’s purchase of certain real property in a bankruptcy sale, was an abuse of discretion. For the reasons set forth below, the Court finds that the Bankruptcy Court did not abuse its discretion and thus affirms the determination.

I. Background

On January 2, 2014, Joe’s Friendly Service & Son, Inc. d/b/a Thatched Cottage by the Bay (“Joe’s Friendly”) filed a Voluntary Petition for reorganization under Chapter 11 of the Bankruptcy Code (“Chapter 11”). Joe’s Friendly owned and operated a catering hall (the “Facility”) that was located on certain parcels of real property in Centerport, New York.

At about the same time, Thatched Cottage, LP (“Cottage LP”) also filed for reorganization under Chapter 11. Cottage LP owned the real property on which the Facility is located. The Facility and the real property upon which it sits will be collectively referred to as the “Premises.”

On January 10, 2014, the Bankruptcy Court granted a motion by Joe’s Friendly, pursuant to Federal Rule of Bankruptcy Procedure (“Fed. R. Bankr. P.”) 1015(b), to jointly administer the petition of Joe’s Friendly with the related Chapter 11 petition of Cottage LP. These jointly administered petitions are collectively referred to as the “Petitions.”

It is undisputed that the Appellee Beth-page Federal Credit Union (“BFCU”) is the holder of first priority liens and security interests in all of the assets of Joe’s Friendly’s and Cottage LP, including the Premises. Thus, BFCU has a pecuniary interest in the outcome of this appeal.

On July 4, 2014, the Appellee R. Kenneth Barnard (“Barnard”) was appointed by the Office of the United States Trustee to serve as the Chapter 11 Operating Trustee for both Petitions. Upon being appointed, Barnard immediately took control of operations at the Facility. Eventually, on or about July 24, 2014, he sought to sell the Premises and the debtors’ remaining assets in furtherance of satisfying the debtors’ outstanding obligations. At the time, the Facility was still a going concern.

On August 11, 2014, the Bankruptcy Court issued an order approving the proposed terms and conditions for a public sale of the Premises (the “Sale Order”).

The Sale Order also approved of the retention of David R. Maltz & Co., Inc. (“Maltz”) to act as the sale broker and auctioneer. In advance of the public sale, Maltz embarked on a campaign to market the Premises to prospective buyers. In this regard, Maltz created and distributed signs that advertised the Premises as a “21,000 Sq. Ft. Waterfront Catering Facility.” The Appellant contends that Maltz’s advertising brochure depicted the area for sale as including “a catering facility, buildings and property including the waterfront and bulkhead located on Mill Pond.” Appellant’s Br. at 2.

The Appellant contends that, in advance of the public auction of the Premises, he [621]*621attempted to review certain unspecified files relating to the property, which are allegedly maintained by the Town of Huntington Building Department. However, the Town advised him that it did not have “paper files ... that were available for review.” The Appellant does not elaborate further on this point.

On September 24, 2014, a public sale of the Premises was held.

According to Barnard, copies of the court-approved terms and conditions of the sale (the “Terms of Sale”) were provided to each bidder at the auction, who agreed to be bound by them. In fact, each registered bidder, including the Appellant, was required to read and execute the Terms of Sale in order to participate in the auction.

Relevant here, the Terms of Sale identified the Premises by section, block, and lot, as those parcels appear on the Suffolk County Land and Tax Map, and included the following provisions:

Maltz and the Trustee and the Trustee’s professionals have not made and do not make any representations or warranties as to the physical condition, expenses, operations, value of the land or buildings thereon, or any other matter or thing affecting or related to the Real Properties [the Premises] or this Sale, which might be pertinent to the purchase of the Real Properties ...
The Real Properties [the Premises] are being sold “AS IS” “WHERE IS”, “WITH ALL FAULTS”, without any representations, covenants, guarantees or warranties of any kind or nature, and fi-ee and clear of any liens, claims, or encumbrances of whatever kind or nature, with such liens, if any, to attach to the proceeds of sale in such order and priority as they existed immediately pri- or to the Closing, and the sale of the Real Properties are subject to, among things (a) any state of facts that an accurate survey may show; (b) any covenants, restrictions and easements of record; (c) any state of facts a physical inspection may show; (d).any building or zoning ordinances or other applicable municipal regulations and violations thereof; and (e) environmental conditions. By delivering their respective Deposits, all Bidders acknowledge that they have had the opportunity to review and inspect the Real Properties, the state of title thereof and laws, rules and regulations applicable thereto, and will rely solely thereon and on their own independent investigations and inspections of the Real Properties in making their bids. Neither Maltz, the Trustee nor any of their collective representatives makes any representations or warranties with respect to the permissible uses of the Real Properties including, but not limited to, the zoning of the Real Properties. All Bidders acknowledge that they have conducted their own due diligence in connection with the Real Properties and are not relying on any information provided by Maltz, the Trustee, or their professionals. The Real Properties will be sold subject to any and all violations or conditions re- • quiring corrective action.

(emphasis in original).

The Appellant does not dispute that he was provided with these Terms of Sale; that he agreed to be bound by them; and that he read and executed them prior to participating in the auction. Indeed, a COpy 0f the Terms of Sale signed by the Appellant is in the record,

Despite the clear language of the Terms of Sale, the Appellant contends here that his decision to participate in the auction was based largely on his understanding [622]*622that the Premises was “waterfront,” as had been advertised by Maltz.

Ultimately, the Appellant entered the highest bid for the Premises. As reflected in a Memorandum of Sale following the auction, the Appellant’s bid was for $4,650,000, plus a 4% buyer’s premium of $186,000, for a total sale price of $4,836,000. According to the Memorandum of Sale, which is a part of the court record, the Appellant paid a non-refundable deposit in the amount of $350,000.

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Bluebook (online)
538 B.R. 618, 2015 WL 5021762, Counsel Stack Legal Research, https://law.counselstack.com/opinion/raj-v-barnard-in-re-joes-friendly-service-son-inc-nyed-2015.