Eatery sale back in Superior Court
The unusual case stemmed from a foreclosure auction Nov. 28, 2016, of the former Brasserie L'Oustau restaurant at 1716 Depot St. in Manchester.
The auction followed a foreclosure action by mortgage-holder People's United Bank that summer against the former owners, Alana Provencale Inc., which was approved by the Bennington court in October 2016.
At the auction, William Drunsic, representing R.E.E. & C. Capital Management Services Inc., entered the high bid of $500,000 for the 4,500-square-foot, 125-seat restaurant property on approximately 1.5 acres.
A formal sale closing was scheduled in February 2017, but it never took place because the winning bidder withdrew, despite having agreed to the financial and other terms in writing.
R.E.E & C. Capital Management notified the bank two days before the Feb. 10 closing that it no longer wanted to go through with the purchase.
In response, People's United, represented by attorney Elizabeth Glynn, of Rutland, filed a motion in Bennington Superior Court Civil Division. Judge William Cohen subsequently ruled in favor of the bank's request that the sale agreement be upheld. His June 28, 2017, decision essentially confirmed and enforced the sale as agreed upon.
But on April 27, 2018, the Supreme Court reversed the lower court's decision and remanded the matter back to Superior Court "for proceedings consistent with this opinion."
In a Feb. 8, 2017, letter to the bank's legal representative, attorney Merrill Bent, of Manchester, representing R.E.E & C. Capital Management and Drunsic, had notified the bank that the closing would not take place as planned.
Bent included a note from Drunsic that stated in part, "It is with much regret that I need to inform you that I am not able to follow through with this transaction at this time."
Drunsic added: "As conventional financing is not available for this particular operation, I have to rely on available cash and private investment funds. My current investment group has decided that even at this price it is too risky to proceed with a new endeavor at this time. Their reasons were too many restaurants for sale, new entries into the market without evidence that the pie is growing sufficiently to absorb the additional seats and severe help issues."
He informed that bank that he had considered the options of not following through with the purchase and forfeiting the [$10,000] deposit or asking to extend the closing date "to allow me time to put another [investor] group together."
"While I have been talking to a couple of interested parties," Drunsic wrote, "I must emphasize that success is not guaranteed. While I have had success over the years with turning around closed out operations this one isn't ready at this time."
In ruling in favor of the bank's motion, Cohen determined that "it is equitable to order R.E.E & C. to pay the purchase price."
The judge wrote that R.E.E & C. had not objected during a hearing on the confirmation order detailing the proposed sale, and stated that he found creditable the auctioneer's assessment that a second auction "would result in a substantially lower bid, as indicated by his interviews with the next two high bidders. Were the court to allow R.E.E. & C. to back out of its agreement now, it would deprive the parties of the active bidding that took place."
However, the judge, acknowledging counter arguments put forth by R.E.E. & C., allowed the entity 90 days to pay the agreed upon purchase price or appeal the decision.
Bent filed an appeal for her clients with the Supreme Court, arguing that R.E.E. & C. is "not a party to the foreclosure action and the order does not compel action by it."
Under Vermont foreclosure statues, she stated, failure to close on the property should have resulted only in forfeiture of the $10,000 deposit by R.E.E. & C. and that the property could then be sold to another party.
In her arguments on the motion to compel, Glynn stated in part that, "to ensure that the lender gets relief, the court may and should compel the high bidder to pay the amount of its bid, as agreed to in writing at the public sale and as confirmed in the confirmation order."
The bank's attorney added that "the buyer concedes that it is in default of its obligation to purchase the property," and that "whether or not the buyer is a 'party,' the court can order the buyer to fulfill its obligation to purchase the property."
And Glynn contends that in failing to close on the property, R.E.E. & C. "knew that its refusal would deprive the [bank] and the court funds needed to account for expenses incurred in connection with the sale, including the $28,000 auctioneer's fee ... ."
In considering the R.E.E. & C. appeal of Cohen's decision, the Supreme Court took up the question of whether the lower court had jurisdiction to compel the purchase of the property, as well as whether the correct statutory remedies were applied.
The court agreed that a successful bid in a court-approved foreclosure sale and the subsequent court confirmation of the sale "renders a buyer a limited party such that the court is authorized to issue orders directing the buyer's action relative to the property's purchase."
But considering the remedy imposed by the trial court, an enforced purchase, the Supreme Court decision stated that such an option "is a remedy available only when there is no adequate alternative remedy, and the plaintiff [People's Bank] has the burden to prove that alternative remedies are inadequate."
The trial court "must determine whether there is an alternative plain, adequate, and complete remedy that could make the bank whole, and then weigh that alternative remedy against the bank's argument regarding the insufficiency of that remedy. In this case, the trial court did not consider the adequacy of other potential remedies."
Asked Thursday about R.E.E. & C. Capital Management's reaction to the Supreme Court decision, Bent said in an email, "R.E.E. & C. Capital is assessing the available options following the court's decision, with the intent of reaching a satisfactory resolution for both parties in order to put this property back into productive use."
Glynn could not be reached for comment.
The restaurant building was constructed in 1988 and remodeled in 2012. It formerly was called Laney's Restaurant.
Jim Therrien writes for New England Newspapers in Southern Vermont and VTDigger.org. Email: email@example.com. @BB_therrien on Twitter.
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