Attorneys Make Argument To Keep Carter's Grove Case In California

Saturday, March 26, 2011

Attorneys for Halsey Minor filed objections this week against Colonial Williamsburg’s motion to bring the Carter’s Grove bankruptcy case to Newport News, arguing the case should be heard in California. Minor also filed a supporting statement that reveals further details about the case.

At the end of January, Colonial Williamsburg announced its intent to auction Carter’s Grove after Carter’s Grove LLC, the company dot-com millionaire Minor formed to purchase the historic property from CW in 2007, defaulted on the final two payments. The auction was canceled after the entity filed for bankruptcy in California.

Colonial Williamsburg recently petitioned the court to shift bankruptcy proceedings from California to Newport News, citing five key reasons: proximity to creditors, witnesses to the case who reside in Virginia, the debtor’s only asset is in Virginia, the shift would be more economical, and the case has local concerns (read a previous story here).

Minor and his attorneys filed documents Wednesday arguing that the case should remain in California for the following reasons: CW holds less than 0.5 percent of the total debt, the largest secured creditors together hold more than 2/3 of the debt and are either located in California or have attorneys there, and Minor’s principal place of business is California.

There are two other outstanding liens on the property, which are held by the “other creditors” mentioned: one for up to $5 million to AVN Air for an aircraft, dated February 1, 2010; and another for $3.4 million to the auction group Sotheby’s, recorded just one day before Minor’s entity filed for bankruptcy.

Documents filed with the case state that an appraisal of Carter’s Grove valued it at $21 million, much more than all the debt attached to it. The value doesn’t include about 76 acres of developable land attached to the property.

According to a supporting statement filed by Minor, Sotheby’s froze Minor’s assets in November 2010 to collect $3.4 million in attorney’s fees from a previous lawsuit, which made Minor unable to pay CW, or any of his other related debts at the time.

In February 2011 Minor and Sotheby’s came to an agreement that Sotheby’s would sell some of Minor’s art and furniture to collect some of the cash and would get the rest from the note on Carter’s Grove.

The agreement freed up $1.3 million of his assets, according to Minor. This “short term liquidity” will “enable me to pay my ordinary course personal and business expenses and to restructure my other debts.”

“I have substantial other assets which, while currently illiquid, will be available to satisfy the claims of creditors,” Minor states. He expects the restructuring of his debt will move along with the consent of the creditors, but if not, “I intend to very quickly propose a plan that will pay all allowed claims in full.”

Compared to the two other creditors, the claims of CW and other local creditors (including James City County, which is owed about $22,000 in taxes, and various local utilities and insurers, owed just over $53,000) are much smaller and shouldn’t be a reason to move the case to Virginia, according to Minor and his attorneys.

Minor also pointed out that CW originally did business with him in California, where he lives, and all the paperwork and important parts of his business are conducted there, so they understood where his business “nerve center” was located.

Sotheby’s also filed documents with the court supporting keeping the case in California. “Sotheby’s has been attempting to collect various debts owed to it by Minor for some time,” according to the company’s attorneys, and it has been focusing its attention on California because that’s where Minor does business.

The California court will consider the motion to change venue on April 1.