Delay of Game
TO: TMA Membership
FROM: Stephen J. Lord, Attorney at Law, Counsel to Tamarack Municipal Association
RE: Credit Suisse Foreclosure
DATE: August 6, 2012
This Memorandum updates what we have learned previously about Credit Suisse obtaining a final Decree of Foreclosure and other parties moving for reconsideration because Judge Owen declined to enter final decrees of foreclosure for them.
Executive Summary
1. Teufel Landscaping filed an Appeal, throwing other aspects of the case into a delay mode.
2. Credit Suisse plans to proceed with a sheriff's sale on the Heritage and ski facilities portions of the property.
3. Teufel has requested a stay of Credit Suisse's right to execute against and obtain possession of the Heritage parcel and the Mountain Facilities.
4. Other parties had requested Reconsideration of the Opinion that the Receivership Mortgage had not been adjudicated. The August 2nd, 2012, Hearing, which had previously been set for hearing a) motions to reconsider this part of the Judge's June 18 Opinion and b) motions to amend the Complaint to include allegations against the receivership mortgage, was vacated. No new hearing date has been set.
5. The Judge indicated that he would wait for the parties to request permission from the Supreme Court to allow Judge Owen to continue to rule on other Motions such as the Motions to Amend the Complaints to include the receivership mortgage. He intimated that the Motions to Reconsider that the Receivership mortgage is junior to the construction lien claims may be heard without this permission but needs to be re-set.
Details:
1. Effect of Teufel Landscaping Appeal.
On July 18, 2012, Teufel Landscaping filed a Notice of Appeal. Under Idaho's appellate rules, the filing of an appeal automatically imposes a stay on trial court proceedings for 14 days.
On August 6, 2012, after the 14 day stay had expired, Teufel asked for stay relief. Teufel asked to be excused from having to post any bond pending appeal. Teufel's motion is not yet scheduled for a hearing.
Judge Owen called a status conference on July 25 to inform the parties that he would not hold the August 2, 2012, hearing on the motions to reconsider or in the alternative to amend complaints to include the Receivership Mortgage. In addition, Judge Owen believes that, pursuant to another portion of the Idaho appellate rules, because this is not a completed case, but only a case in which partial decrees and judgments have been entered, it is subject to a further rule of appellate procedure (Rule 13.4) that requires permission from the Idaho Supreme Court for the Trial Court to exercise any further jurisdiction over any of the non-completed portions of the case.
Other non-completed portions of the case would include the status of the BAG-Fairmont Hotel Parcels, the MHTN claim against Lake Wing, all of the Village Plaza, any Oz Architecture claims against Trillium Town Homes.
Multiple parties had requested reconsideration of Judge Owen's denial of Decrees of Foreclosure to be entered on behalf of Banner/Sabey, MHTN, BAG, and Oz Architecture. Those same parties had, in addition to requesting reconsideration, requested that the Judge alter each party's complaint to allow an amendment to include a claim against the receivership mortgage.
Because the Judge did not feel comfortable separating the motions to reconsider from the Motions to Amend, he simply vacated the August 2, 2012, Hearing.
The Judge indicated that he was unlikely to take those matters up again until the parties had given him a green light from the Supreme Court to proceed with further hearings on the motions to amend the complaints; he indicated that, if the parties wished to separately file Motions for Reconsideration, another provision of the Idaho Appellate Rules (13)(b)(7).
2. Credit Suisse Plans to Proceed with the Sheriff's Sale on the Heritage Property and Ski Facilities Portions of the Resort.
Teufel's Appeal automatically imposed a 14-day stay on Credit Suisse's attempt to execute on its Decree of Foreclosure. However, that 14-day period expired on August 2. Credit Suisse anticipates continuing the process of executing on its Foreclosure Order starting on August 2, unless other process delays are created by other parties.
3. Teufel Appeal.
It is likely that Credit Suisse will demand a bond in the amount of $343,189,749.63, plus 36%, to be either paid in cash or posted as a bond as a condition for Teufel to stay enforcement and execution of Credit Suisse's June 18 Decree. The 36% premium that needs to be added either to a cash deposit or a bond is $123,548,309.87, or a total of $466,738,059.50.
Because the Decree was entered prior to June 30, 2012, the statutory rate of interest for the State's fiscal year 2012 is 5.25%.
Multiplying a 5.25% statutory interest rate by the $343,189,749.63 judgment (it falls into the State's 2012 fiscal year which ends on June 30, 2012), the annual interest on Credit Suisse's Judgment is $18,017,461.86.
That results in judgment interest per diem of about $50,000 ($18,017,461.86 divided by 365 = $49,362.91).
If Teufel were appealing the money judgment against Tamarack Resort LLC, the appeal bond would be about $467,000,000, as noted above. However, Teufel has only appealed its ranking in priority as junior to Credit Suisse; it has not appealed the money judgment. The rules for bond to protect the winning party on appeal of a non-money judgment are purely discretionary with the trial judge.
The range of the Judge's discretionary options is limitless. He could, for example, require Teufel to post a bond at least in the amount of damage caused by Credit Suisse not being able to recover its collateral and sell the asset, which, at a minimum, would appear to be the amount of interest over a reasonable amount of time in which the appeal could be resolved. Assuming, and this is only an assumption, that the appeal could be heard, resolved, and decided by the Idaho Supreme Court in nine months, which is fast by normal standards, the bond for a nine-month decision making process would be a little bit over $13,000,000.00. The Idaho Supreme Court clerk's office tell callers that an average appeal time is 24 months - the interest on the judgment for an appeal that long is a little over $36,000,000.00.
Given these figures and given that Teufel is under bankruptcy protection in federal bankruptcy court in Portland, Oregon, it is unlikely that Teufel will be able to post a bond if the bond required by the Judge is of any substantial amount.
Teufel has reasoned in its August 6 motion for stay of the judgment that Credit Suisse is junior on much or all of the property anyway, an assertion that Credit Suisse is likely to challenge.
However, anyone who buys at a sheriff's sale would still make a purchase subject to Teufel's appeal.
Making this slightly less problematic is that, in the Judge's Decision, he denied Teufel the right to make a blanket claim over all of the Tamarack and homeowner properties; instead, Judge Owen limited Teufel's claim to several distinct parcels. Those parcels, by themselves, may be of limited value. In any event, while Teufle's appeal and request to stay the June 18 decree create procedural hurdles, they do not by themselves stop Credit Suisse from proceeding to a foreclosure sale. In short, the Judge could require the $467,000,000 bond, or no bond at all, or something in between, or limit Credit Suisse to foreclosing on only parcels in which he adjudicated that Teufel has no interest.
4. August 2 hearings
The August 2, 2012, Hearing on Motions to Reconsideration and Motions to Amend Complaints to include the Receivership Mortgage did not take place.
On August 3, 2012, OZ Architecture re-filed separate Motions to Reconsider and to Amend its Complaint. They have not yet obtained a hearing date on the motion to reconsider and have not yet filed with the Supreme Court for permission to have Judge Owen rule on the Motion to Amend. The other senior creditors are likely to follow suit, but there is not a timeline for doing so.
5. Stay Relief from the Idaho Supreme Court.
Judge Owen indicated that he wanted the Village Plaza parties, MHTN (Lake Wing, BAG, Fairmont and Hotel Parcels, and Oz Architects (Trillium Town Homes) to petition the Supreme Court to grant the Trial Court leave to continue administering matters relating to Village Plaza, Lake Wing, BAG Parcels, and Trillium Town Homes.
My estimate is that this will take somewhere between three and eight weeks.
Until the Judge regains jurisdiction to enter the Decree proposed by each one of the creditors in these other properties, no foreclosure sales can occur on the Village Plaza, the Lake Wing, the Trillium Town Homes, or the BAG parcels. Consequently, foreclosure sales on those assets appear to be, at the soonest, three to four months from now.
6. The Receivership Mortgage continues to be an unresolved and lingering issue.
Strategically, this will allow Credit Suisse additional leverage to be able to buy down the interests of those senior creditors, assuming that it can obtain funds to do so. So far, that has been problematic.
We will keep you apprised as further developments occur in the foreclosure case.