Colonial Williamsburg is threatening the trustee in the Carter’s Grove bankruptcy case with a motion to proceed with foreclosure on the historic home if certain agreements are not reached. CW has been financing the repair work needed on the mansion and expects costs could reach over $3 million.
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. He still owed two mortgage payments to note-holder Colonial Williamsburg, and the bankruptcy stopped a looming foreclosure sale. On June 24 last year, Minor filed a countersuit against CW, the previous owner of the mansion, alleging the foundation sold the mansion but knew that there was significant damage to the structure.
Trustee Stanley Samorajczyk, appointed in April to oversee the case, recently filed his first report, which outlines the status of the case along with the condition and needs of the mansion. In his report, the trustee says attorneys are working on a settlement agreement in the countersuit. CW filed a response last week citing a concern that the trustee had not responded to a recent proposal. Unless the trustee spells out how he plans to protect the property, CW has threatened to file a motion for relief from stay with the court, which, if approved, could allow for a foreclosure sale and allow CW to take control of the property.
The Trustee noted in his report that HVAC equipment was not working properly and there were leaks in the roof that needed immediate attention. He identified other less urgent repairs of the roof, masonry, gutters, downspouts, interior paneling, plaster and more that are needed before the home could be ready for sale that would discharge Minor’s debts.
The trustee also explained that funding is needed to cover various insurance costs, utility bills and other operating expenses. He noted that he had to have “lengthy negotiations with the three major utilities to prevent these services from being discontinued.” The costs are more than were originally estimated, he said.
Many of these needs had been identified when the trustee petitioned the court to accept emergency financing from CW to cover some of these costs. (Read a previous story here).
Though the mansion has many repair and maintenance needs, the trustee explained in his report that finger-pointing and public attention are getting in the way of things getting done: “the exaggerated accusations arising out of pre-bankruptcy and post-bankruptcy disputes seems to have spawned practical paralysis in accomplishing even the most uncontroversial basic tasks.”
A side effect of these problems has been “misconceptions among the public at large and potential purchasers about the present condition and long-term prospects of Carter’s Grove.” The trustee has been working on getting the message out that the mansion is fixable and that “its preservation for future generations is secured.”
CW is concerned that the trustee has not done enough to demonstrate an ability to preserve the property, based on recently filed court documents. In its response to the trustee’s report, CW noted that it has already given $189,635 towards emergency expenses and repairs.
The foundation has since offered agreement terms that would have CW fund all the costs of repairs, maintenance and insurance for the property and offer 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 estimated. However, it has not heard a response to this agreement from the trustee, and CW indicated that the trustee “is insisting on additional funding from CWF, to pay for general administrative costs that simply are not related to repair, maintenance, insurance or sale of the property.”
CW noted the trustee has no other source of funds to take care of the property, and that “absent an agreement… that protects the property and provides the cash needed to maintain the property… CWF will have no choice but to file a motion to seek relief from the automatic stay.”
If the court agrees, a relief from stay would allow CW to proceed with the foreclosure sale that was originally halted by the bankruptcy filing.
The countersuit needs to be settled if the trustee wants to get CW financing, according to the trustee’s report.
The judge in the case toured the property last week after the documents were filed to see the state of the mansion. Records are not yet available on those findings.
Trustee’s Report Details
The trustee noted in his report that the work needed to get Carter’s Grove ready to put on the market will not be completed until spring 2013 at the earliest.
He has been screening possible real estate brokers and expects to make a decision in August; the sale will likely take a year or more after the property goes on market, he said.
The trustee said his legal team is working on addressing the following items: