Alterna Mortgage Income Fund, LLC v. GS Holdings-Brookside, Ltd. et al

Filing 64

ORDER GRANTING MOTION OF RECEIVER FOR APPROVAL OF (1) SALE OF ASSETS FREE AND CLEAR OF LIENS, CLAIMS AND ENCUMBRANCES AND INTERESTS; BY AUCTION; (2) FORM OF PURCHASE AGREEMENT; AND (3) OTHER RELATED RELIEF. Signed by Judge Timothy S. Black on 8/8/2013. (mr1)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
DAYTON DIVISION
ALTERNA MORTGAGE INCOME
FUND, LLC
Plaintiff,
vs.
GS HOLDINGS-BROOKSIDE, LTD., et al
Defendants.

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CASE NO. 12-cv-00252
(Judge Timothy S. Black)
(Magistrate Sharon L. Ovington)

ORDER GRANTING MOTION OF RECEIVER FOR APPROVAL OF (1) SALE OF
ASSETS FREE AND CLEAR OF LIENS, CLAIMS AND ENCUMBRANCES AND
INTERESTS; BY AUCTION; (2) FORM OF PURCHASE AGREEMENT; AND (3)
OTHER RELATED RELIEF
This Matter is before the Court pursuant to the Motion filed by April Rose, the courtappointed Receiver (“Receiver”) of the GS Holdings Brookside, Ltd. (“Debtor”), by her attorney,
for the entry of an order authorizing the Receiver to sell substantially all of the assets of the
Debtor free and clear of liens, claims and encumbrance and other interests, through a sealed
bidding procedure, and approving the form of purchase agreement (the “Sale Motion”). [Doc. #
60] The Court hereby finds the following:
1.

This Court has jurisdiction because complete diversity is present as required by 28

U.S.C. § 1332. Because the subject property is located in the Southern District of Ohio
substantive provisions of Ohio Rev. Code §§ 2735.01 et seq. apply.
2.

The Debtor owns a mobile home park, which includes real property,

improvements, fixtures, personal property, options to buy certain mobile home within the park,
and other assets, located in Clark County, Ohio, at the address of 1962 Mahar Road, South
Vienna, Ohio 45369. Alterna Mortgage Income Fund (“Alterna”) has a first and best security

interest in the real property, improvements, fixtures, and other assets in connection with the
business (collectively “Assets”) of the Debtor.
3.

The Debtor is in unequivocally in default on its obligations to first mortgage

holder and prime secured creditor Alterna, and Alterna filed a foreclosure action in the instant
case. The Court entered default judgment against Debtor GS Holdings Brookside on February
25, 2013, in the amount of $2,908,250, plus prejudgment interest and post judgment interest.
(Doc. 47). Alterna also motion for the appointment of April Rose as receiver.
4.

On November 1, 2012 [Doc. # 33], the Court entered an Order (“Appointment

Order”) which appointed April Rose the Receiver of Debtor and its assets. The Appointment
Order under paragraph 4 authorized the Receiver to immediately and exclusively possess and
control the Property, and under paragraph 13 authorized the Receiver to effectuate the sale of the
Assets free and clear of all liens, claims, and encumbrances.
5.

The Debtor has marketable title to the Assets and, accordingly, the transfer of the

Assets by the Receiver as contemplated by the Purchase and Sale Agreement (the “Agreement”)
(a) is a legal, valid, and effective transfer of the property of the Debtor’s receivership estate to
the Successful Buyer; and (b) will vest in the Successful Buyer all right, title, and interest of the
Debtor in and to all of the Assets, free and clear of all liens, claims, encumbrances, and other
interests of any other party/creditor in and to the Receivership Assets.
6.

Since being appointed by the Court, the Receiver has taken control of the Assets

and operated the mobile home park. The Receiver has brought the mobile home park through a
difficult period, and has instituted measures that have stabilized the park’s operations.
7.

The Receiver has enlisted the assistance of real estate broker John Blain in Clark

County, Ohio (the “Broker”).

Prior to contacting the Broker, the Receiver made numerous

inquiries and had numerous discussions with players active in the mobile home park market, to
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determine interest in locating a purchaser of the Assets.

Such efforts produced a viable

purchaser (the “Stalking Horse Buyer”) which represents that it is ready, willing, and able to
enter into a purchase agreement with Receiver to purchase the Assets for the amount of
$2,100,000.00.

This represents the highest and best offer the Receiver received prior to

commencing the marketing campaign. The Receiver and Buyer have agreed to enter into the
Sale and Purchase Agreement attached to the Motion as Exhibit A.
8.

Through consultation with the Receiver and at her direction, the Broker developed

and implemented a plan to market the Assets on a national level, which plan was designed to
produce as many prospective bidders for the Assets. The Buyer agreed to serve as the stalking
horse bidder, i.e., the opening bidder, subject to certain bidding protections described and
approved herein. The marketing activity was designed to achieve the Receiver’s goal of meeting
or exceeding the standard of commercial reasonableness in locating the highest and best bidder
for the Assets.
9.

The Broker engaged in an extensive, multi-media marketing campaign,

commencing on or before the date of the Sale Motion. The Broker listed the Assets for sale in
the Multiple Listing Services for the following seven counties:

Clark, Champaign, Logan,

Miami, Mercer, Auglaize, and Shelby. The Broker also listed the Assets for sale through internet
sources known to be widely viewed nationally by players in the mobile home park arena,
including

LoopNet.com,

the

largest

commercial

real

estate

service

online,

MobileHomeParkStore.com, a well-known and active internet site for buying selling mobile
home parks, and other sites specializing in commercial real estate sales, CoStar.com and
GlobeSt.com. The Broker further listed the Assets for sale in the local Springfield News and
Sun. The Broker also listed the assets in the Wall Street Journal, the Cincinnati Enquirer, and the
Cincinnati Business Courier.

Forthcoming are ads to be placed in business journals and
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newspapers in Columbus and Cleveland.

Moreover, the Receiver or Broker contacted

approximately ten major players in the mobile park business within the region, to advise them of
the sale of the Assets.
10.

To date, the marketing campaign has generated between 35 and 40 leads, and 26

informational summaries have been provided to prospective bidders. The Broker and Receiver
are still in the process of receiving inquiries and will continue to do so until the August 16, 2013
bidding deadline. The marketing plan for the sale of the Assets is thorough and exhaustive, and
the Receiver thereby (a) is adequately and effectively soliciting potential purchasers of the
Assets and marketing the Assets for sale; and (b) providing potential purchasers of the Assets
with adequate information concerning the Assets together with a full and fair opportunity to
conduct due diligence concerning the same.
11.

The Motion was served on all creditors and interested parties for whom counsel

has filed a notice of appearance via the Court’s electronic service mechanism, as well as by
regular U.S. Mail on the parties to the action not filing a notice of appearance.
12.

On July 26, 2013, the Court entered a Notation Order providing a deadline of

August 5, 2013, 4:00 p.m. for filing memoranda in response to the Sale Motion. The Receiver
has not received service of any memoranda in response to the Sale Motion, nor does the Case
Docket indicate that any memoranda were filed. The Court’s July 26, 2013 Notation Order also
required that proposed orders concerning the Sale Motion be sent to the Court and the parties by
August 6, 2013, 4:00 p.m. This Order is timely furnished.
13.

The sale approved herein between the Receiver and the Stalking Horse Buyer is a

non-collusive, arms’ length transaction that resulted from negotiation between and among the
Receiver, the Stalking Horse, and Alterna, the consideration bargained for and exchanged by the

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parties provided reasonably equivalent value to each party, and the Stalking Horse Buyer is a
good-faith purchaser. It is in the best interest of the Receivership estate that she be authorized to
enter into the Agreement.
14.

The Stalking Horse Buyer is the opening bidder in a sale process designed to

produce the highest and best offer for the Assets. The due diligence and bidding procedures are
set forth in full in the Addendum attached to the Exclusive Right To Sell Contract for the sale of
the Assets and provided with the Sale Motion, Upon executing a confidentiality agreement,
interested parties have received and will receive a summary sheet summarizing basic pertinent
information about the Assets.

Parties wishing to proceed further have had and will have the

opportunity to pre-qualify as bidders, which will and has enabled them to receive a due diligence
packet that will contain additional information about the Assets.

To pre-qualify, prospective

bidders will make a deposit of $10,000.00 (which is the same amount the Stalking Horse Buyer
has made) and provide the Receiver with information verifying their financial ability to close on
the purchase of the Assets. Qualified Bidders will also be given an opportunity to tour the real
property, including the mobile home park. The sale will be a cash sale.
15.

The Sale Motion complies with all applicable laws and rules with regard to the

sale of assets free and clear of liens, claims, and encumbrances, and that the sale of the Assets
free and clear of liens, claims, and encumbrances is in the best interest of the Debtor, its estate,
and the creditors.
For the reasons set forth in the Motion and for good cause shown, the Motion is hereby
GRANTED pursuant to its terms, and the following is hereby ORDERED:
1.

The Receiver is authorized, pursuant to the Appointment Order, to sell the

Assets to the Stalking Horse Bidder.

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2.

The Motion complies with all applicable laws and rules with regard to the sale of

assets free and clear of liens, claims, and encumbrances, and that the sale of the Assets free and
clear of liens, claims, and encumbrances is in the best interest of the Debtor, its estate, and the
creditors. The sale of the Assets is hereby APPROVED. On the closing date the Assets shall be
sold, conveyed, granted, assigned, transferred and delivered by the Receiver to the Successful
Purchaser under the Agreement free and clear of any and all encumbrances, claims, liens,
mortgages, security interests, pledges, taxes or tax claims arising since the entry of the
Receivership Order or that arose prior to the commencement of this case, whether direct or
indirect, fixed or contingent, matured or unmatured, disputed or undisputed, all claims arising
out of pending litigation and all potential or contingent claims or causes of action relating to
goods sold (collectively, “Interests”).
3.

All parties to the sale and their agents, employees, and assigns are hereby

authorized to take any act necessary to effectuate the terms of the approved sale and this Order.
The Receiver is authorized and directed to execute, deliver and perform under the Agreement
and all other documents contemplated thereby and to consummate the transactions contemplated
thereby; the execution, delivery, and performance by the Receiver of the Agreement and all other
documents contemplated thereby, and the consummation of the transactions contemplated
thereby, have been duly authorized.

Further, no consents or approvals, other than those

expressly provided for in the Agreement or this Order, are required to consummate the sale of
the Assets.
4.

The Agreement and any related agreements, documents, or other instruments may

be waived, modified, amended or supplemented by the parties thereto in accordance with the

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terms thereof in a manner that has no material adverse effect upon any lienholder not specifically
consenting thereto without further order of this Court.
5.

Except as may be expressly permitted by the immediately preceding paragraph or

the Agreement, or Paragraphs 8 and 10 of this Order, all persons and entities holding any
Interests or adverse claims of any kind and nature against the Assets, the Receiver, or the Debtor
are enjoined, stayed and barred from asserting such Interests or adverse claims against the
Stalking Horse Buyer, the Successful Buyer (if different from the Stalking Horse Buyer), the
Receiver, their successors and assigns, or against the Assets.
6.

Any applicable right of redemption, whether equitable or statutory, is hereby

terminated and barred effective on the date this Order is entered.
7.

The provisions of this Order authorizing the sale of the Receivership Assets free

and clear of the Interests are self-executing and neither the Receiver nor the Successful Buyer
shall be required to execute or file satisfactions, releases, termination statements, assignments,
consents, or other instruments in order to effectuate, consummate, and implement the foregoing
provisions hereof; provided, however, that this paragraph shall not excuse such parties from
performing any and all of their respective obligations under the Agreement.
8.

This Order (a) shall be and hereby is, effective as a determination that, upon the

closing date, except as otherwise provided herein or in the Agreement, the Interests shall attach
to the proceeds and the proceeds shall be distributed according to applicable laws governing the
priority of the Interests, but only with the same validity, force, and effect that they had against
the Assets immediately prior to the sale and that the conveyances and assignments authorized
herein have been affected; and (b) shall be, and hereby is, binding upon and governing the acts of
all entities, including, without limitation, all filing agents, filing officers, title agents, title

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companies, recorders of mortgages, recorders of deeds, administrative agencies and
governmental departments and all other persons and entities who may be required by operation
of law, the duties of their office or contract to accept, file, register or otherwise record or release
any documents or instruments respecting conveyance of the Assets.
9.

The sale will be conducted by the Receiver through a sealed bid process via

telephone. The deadline for Qualified Bidders to submit sealed bids will be August 20, 2013.
On August 21, 2013, the Receiver will telephonically convene all of the Qualified Bidders who
submit sealed bids, and inform them of the highest bid. At that time, those Qualified Bidders
who submitted sealed bids will have the opportunity to make final bids orally shortly after which
the Receiver will announce the highest and best bid.
10.

The Assets are subject to the first-priority mortgage liens and blanket security

interests in favor of Alterna, subject only to the real estate taxes and assessments due and owing
to the Clark County, Ohio Treasurer and/or Auditor. The sale proceeds shall be distributed first
to pay such real estate taxes (whose amount will be liquidated by agreement among the Receiver,
the County, and Alterna, or by Court order). The remaining proceeds shall then be distributed
first to Alterna, and thereafter to any other such creditors and parties holding Interests pursuant
to applicable law.
11.

The marketing campaign described herein is commercially reasonable.

12.

The bidding and sale procedures set forth in the Addendum attached to the

Exclusive Right To Sell Contract (i.e. the listing) and the Sale Motion are commercially
reasonable and are hereby approved. The sale will proceed as follows:
a.
The Broker will continue the marketing program discussed above until August 16,
2013, the deadline to become a Qualified Bidder.

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b.
Interested bidders who demonstrate sufficient financial wherewithal, in
the absolute discretion of the Receiver, which would include but not be limited to paying an
Initial Earnest Money Deposit in the amount of $10,000.00 (“Qualified Bidders”), shall be
given a due diligence packet and allowed to tour and inspect the properties (i.e. the Assets).
c.
Prior to the auction, Qualified Bidders will obtain due diligence materials
and review the Agreement, which is approved pursuant to this Order.
d.
Qualified Bidders will submit sealed bids to the Receiver at the Debtor’s
location—1962 Mahar Road, South Vienna, Ohio 45369—no later than August 20, 2013, at
4:00 p.m. EST. On that date, bidding will be closed. The announcement by the Receiver
of the highest and best bid and final opportunity to bid by those submitting sealed bids will
occur by telephone the next day August 21, 2013, at 10:00 a.m. A call-in number will be
provided to those submitting timely sealed bids wishing to participate in the call.
e.
The minimum opening bid will be $2,200,000.00, i.e. only sealed bids at least
in that amount will be considered. Open bidding by telephone by those submitting timely
sealed bids shall be allowed in increments not less than $100,000, with the first such bid
exceeding the highest and best bid announced by the Receiver by no less than $100,000.
f.
If there are no timely bids, the Receiver will close the contract with the
Stalking
Horse Buyer according to the terms set forth therein.
g.
The Winning (i.e. Successful) Bidder would be irrevocably bound until
closing, which will be scheduled to occur no later than August 26, 2013.
13.

Alterna is hereby authorized in its absolute discretion to credit bid in the

amount of its secured claim.
14.

The Court hereby approves the form of the Agreement, attached as Exhibit A

to the Motion and incorporated herewith, as the template for the final agreement between the
Receiver and the Successful Bidder. Upon a Buyer being determined to be the Winning
Bidder, which decision shall be made by the Receiver in her absolute discretion, the Buyer
shall be required to execute the Agreement substantially in the form as the Exhibit A
Agreement, subject to changes or modifications as may be negotiated between the parties
consistent with the Receiver’s business judgment.

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15.

Immediately after the sale, the Receiver will promptly move the Court to

confirm the sale, supported by a detailed affidavit regarding the efforts undertaken to market the
property in advance of the sale, as well as at least one appraisal performed by a disinterested
person permitted to appraise the value of property pursuant to applicable law. The Receiver
shall also submit a proposed entry confirming the sale to the Court. Said motion and proposed
entry, along with supporting materials, shall be served on all interested parties, who shall
submit any objections to this Court within 7 days of receipt.
16.

The Stalking Horse Buyer’s protections proposed in the Sale Motion are

hereby approved, as follows: (1) The Stalking Horse Buyer is hereby entitled to a Break-Up
Fee in the Amount of $15,000 in the event it is not the Successful Buyer (i.e. if it is outbid—
the Stalking Horse Buyer is not entitled to the Break-Up Fee if it is found to be in breach of
the Agreement or any of the provisions of this Order; further, the Stalking Horse Buyer will
forfeit its deposit in the event of any such breach); and (2) In the event that bidding occurs,
bid increments shall be in the amount of $100,000.00, i.e. that the first sealed bid must be at
least $2,200,000.00 and each successive bid at the telephonic sale be in increments of at least
$100,000.00.
17.
18.

The sale approved herein is commercially reasonable in all respects.
The service of the Motion was sufficient and appropriate, and satisfies all

due process requirements under applicable law.
IT IS SO ORDERED.
Date: August 8, 2013

s/ Timothy S. Black
Timothy S. Black
United States District Judge

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Submitted by:

//s/ Eric M. Sommer
Eric M. Sommer (0066363)
Strileckyj Law Office, LLC
8 North Limestone Street, Suite B
Springfield, Ohio 45502
Phone: [phone]
Fax: [phone]
e-mail: [e-mail]
Counsel for Receiver, April Rose

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