Tuesday, November 18, 2008

Conch House's case to be continued -- Judge seeks more time to consider bankruptcy case

Conch House's case to be continued -- Judge seeks more time to consider bankruptcy case

Publication Date: 11/18/08

JACKSONVILLE -- The Conch House's case in bankruptcy court in Jacksonville Monday was continued to Dec. 1 with no decision being made.

Little time was spent on the case Monday, and Federal Judge Jerry Funk requested to move the case to a day when he had more time to consider the arguments.

Intervest National Bank of New York is requesting the Conch House case be converted from Chapter 11 bankruptcy to Chapter 7, which would allow the bank to lock the place up and sell off the assets.

John MacDonald, of Akerman Senterfitt in Jacksonville, representing Intervest, said Conch House owners owe hundreds of thousands in property taxes from 2007 and 2008. This shows the company is in poor health, he said.

"(They cannot) demonstrate failure to pay taxes is justifiable and can be cured," MacDonald said. "That's the hurdle."

But Conch House attorney Jason Burnett said they aren't shaken by the case, and they feel strongly they will show the judge that's not true.

"If that's their only issue with resolving the case, we feel very good with our position," said Burnett, of Gray Robinson in Jacksonville.

The case was heard in the U.S. Bankruptcy Court for the Middle District of Florida.

Conch House attorney Robert Altman, of Palatka, gave a short rebuttal to MacDonald on Monday, saying the business filed for bankruptcy after the 2007 property tax debt was incurred. Conch House owners still have time to pay the 2008 taxes and plan to do so, he said.

Burnett said debt from before a bankruptcy is treated differently. The debtor has an extended period of time to pay it.

"It has to be paid, and we will pay it, but you're given a break," Burnett said. "... You don't have to (pay it) in a lump sum."

Intervest says the Conch House must pay the 2007 taxes now because the owners filed for bankruptcy before the taxes were assessed, MacDonald said.

Both Altman and Burnett said they were "expecting a lot more" from Intervest than just an issue over taxes.

The Conch House will go before a judge in early January to present its plan to reorganize and come out of bankruptcy.

Altman said he doesn't "anticipate" the judge will shut down the Conch House with this case in December before its January hearing.

Conch House owners filed for bankruptcy after their deal with investors they sold the company to fell through. Conch House attorneys believe the bank wants the current owners gone because they're countersuing Intervest.

They say the bank gave Thomas Coghill, an investor who bought the Conch House, a $17 million loan while he was awaiting trial for fraud.

Intervest claims it had no knowledge of his criminal background, according to court documents.

The Ponce family claims that the investors negotiated the $17 million loan to buy the property and covered the rest of the $27 million price tag by allowing the Ponces to be a part of the investor group. The idea was that the Ponces would eventually be bought out of the deal.

Instead, the $17 million loan was closed without the family's knowledge, according to the countersuit.

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