A judge approved a settlement agreement in the Carter’s Grove bankruptcy case Wednesday between Colonial Williamsburg and the trustee in the case, though Sotheby’s, a creditor in the case, raised an objection last week.
Dot-com millionaire Halsey Minor’s Carter’s Grove LLC, the entity Minor created to purchase the historic home, filed for bankruptcy protection last year which stopped a looming foreclosure sale. Colonial Williamsburg and the trustee in the case reached an agreement last month that would allow for the repair and sale of the property, and would also end the countersuit Minor put forth alleging CW sold the mansion but knew that there was significant damage to the structure.
The agreement has CW funding all the costs of repairs, maintenance and insurance for the property and offering the expertise of its staff. It has also offered to fund $500,000 for professional fees, and it has offered to change the priority of some of its claims on the property. The cost of this new agreement would likely exceed $3.3 million, CW has estimated. Read a recent story on the settlement here.
Gail Waddell, CW’s lead legal counsel in the case, reported the judge’s ruling supporting the settlement. “This is an important day for us,” she said. Waddell said the trustee told the court the claims in the adversary case were not well-founded, and that the judge adopted this finding. The adversary case will be dismissed, she said.
Sotheby’s, which has a lien against the property to collect $3.4 million in attorneys’ fees relating to a previously concluded case involving Minor, had filed an objection last week to the agreement terms. Close on the heels of Sotheby’s objection, trustee Stanley Samorajczyk made a motion to examine Sotheby’s and Carter’s Grove owner Halsey Minor’s records relating to the lien to find out whether it is valid.
According to documents filed by Sotheby’s, the company obtained a $6 million judgment against Minor in 2010 for artwork Minor bought and did not pay for. A New York court awarded the auction house attorneys’ fees; Minor and Sotheby’s entered into an agreement in 2011 to reduce the fees to $2.5 million, and in return Minor agreed to the secured claim against the property (which has a lower priority than CW’s claims).
Sotheby’s was “concerned that the professional fees in this case rapidly will sail out of control, rather than be incurred thoughtfully and necessarily.”
The company was also concerned that “in the name of settling the adversary proceeding… the trustee is seeking to materially alter his franchise to go far beyond preserving, protecting and marketing the property” and that “the settlement in various ways protects most of all the interests of CWF among creditors when CWF is far and away least at risk, while putting the estate’s other creditors in further jeopardy.”
The judge’s decision in the case put Sotheby’s complaints to rest.
The Sotheby’s documents also said the trustee “indicates he intends to investigate alleged fraudulent conveyance claims against Sotheby’s and AVN,” which also holds a lien on the property for $5 million.
This seems to be supported by the trustee’s motion last week requesting permission to examine the books and records and representatives of Sotheby’s, Minor and their affiliates regarding Sotheby’s secured claim.
The trustee said Minor and Sotheby’s made their settlement agreement in the art case “mere weeks before the [bankruptcy] petition date.” He also said that the Credit Line Deed of Trust between the two was filed and the same day that Minor filed bankruptcy papers for Carter’s Grove.
“Determination of the validity or invalidity of Sotheby’s claim, and its lien, is one of the critical building blocks of a plan of reorganization,” the trustee said. He wants to get more information to determine if “adversary proceedings or contested matters” are appropriate.
The parties have agreed to give Sotheby’s until September 17 to file an objection to the trustee’s motion.
Future of the Mansion
The settlement paves the way for the sale of the historic property, which the trustee said in his July report would likely be put on the market around spring 2013.
At the time, the trustee said he was screening possible real estate brokers. Bob Taylor, CW’s senior vice president for finance and administration, told WYDaily that Stephen McLean of real estate firm Mclean Faulconer has since been selected by the trustee as the agent for the property.
McLean was the broker for the property when it was listed in 2007; at that time the property sold within seven or eight months, Taylor noted.
He also said that the mansion is “in good condition,” and that CW has already helped make many of the repairs.
Read a recent story here by Dennis Hockman, editor-in-chief of Preservation, the magazine of the National Trust for Historic Preservation, on the state of the mansion as of July.
Colonial Williamsburg has been serving as the de facto general contractor since the trustee took over the bankruptcy proceedings, and this will continue under the new agreement, according to Waddell.
Taylor said that the HVAC system has been fixed and the high-priority roof repairs have also been completed, along with exterior masonry repairs and time-sensitive interior work.
A few other repairs that include cosmetic interior work need to be completed, he said.
