Community Banks force New Canaan Realtor to Liquidate: Six Prime Homes Ordered for Auction
Teri Buhl, www.teribuhl.com
“It looks like Ridgefield forgot Gordon Gecko’s first rule of investing. Don’t let emotions get in the way of making money.” -Steve Dibert
A top New Canaan real estate agent who tried to use a reorganization bankruptcy to save about a dozen of her investment properties in Fairfield County, CT is close to losing her battle with her bankers. After three years of fighting upstream in Bridgeport, Conn. federal bankruptcy court, Judge Shiff ruled last month against Ruth Jones and ordered a forced liquidation auction on six of the properties including her luxury primary residence in New Canaan. The case shows how even local community banks are not willing to modify loans with long time customers who once had an established history of payment credit and earned these banks millions in fees.
The homes scheduled for a September 11th auction at the Bridgeport court house included her 7,500 square ft primary residence which is underwater and a water-front vacation home near Westerly, RI that she bought in 2006 with a $2 million loan. The auction also includes along two other million dollar homes once used for corporate rentals on Old Stamford Road in New Canaan and two smaller multi-family rentals. Recent appraisals show they are prime properties in good condition – homes vulture distressed investors or even banks with bidding credits would love to get their hands on.
In Jones’ case, actions by the judge and trustee show how one-sided a Fairfield County bankruptcy court can be when banks can afford to hire embedded lawyers too familiar with a judge and trustees who owe them favors for referral fees.
But Jones isn’t taking this laying down. In the last month she filed a grievance report with the State regarding the bank appointed Trustee, Richard Coan. It’s unclear how Coan, whose experience is in Chapter 7 bankruptcy with Hartford-based law firm Coan, Lewedon, Gulliver & Miltenberger, was chosen as a reorganization trustee. Legal filings show Judge Shiff appointed Coan in February 2011 after the banks wouldn’t come to the table to accept any of the modification plans submitted by Jones.
Judge Shiff also stripped Jones of control to manage payments from her debtor in possession account which has around $300,000 in it from income producing rentals tied to the bankruptcy. The Judge’s order also listed “unauthorized use of cash collateral” related to monies in a DIP account that Jones managed prior to the trustee appointment. Jones refutes there was any inappropriate use of bankruptcy funds because she says the money taken out was earned from another company’s tax return that is not in bankruptcy. Her bookkeeper explains she made an investment with the funds in hopes of earning money to help payoff her creditors; unfortunately that money was pooled into a court monitored DIP account. Jones also states she had advice from her lawyer to use the money this way but Judge Shiff apparently took a hard-line because he saw it as a use of dollars that wasn’t first approved by the court. It was another legal setback for Jones that shows how hard it’s been to run real estate deals when you are hamstrung by the cold view of an overcrowded bankruptcy court mired in cases of homeowners hoping to use bankruptcy as they struggle to recover from the financial crises.