June 5, 2008 — The Jeffrey Prosser hearings will come to St. Thomas for at least four days next week.
The proceedings on the bankruptcy of Prosser, former owner and CEO of Innovative Telephone, and of his wholly owned corporations, have been held in Pittsburgh, in the home courtroom of U.S. Bankruptcy Judge Judith Fitzgerald. She has dedicated Monday through Thursday of next week (June 9-12) to hearing three different aspects of the case in the federal court house. The sessions are expected to be open to the public.
What will not be open, however, are any settlement negotiations. In previous court sessions Fitzgerald has made it very clear that she wants to encourage a settlement next week. "Make sure that your representatives have full power to settle the case in St. Thomas that's an order" she told the assembled lawyers at an earlier hearing in Pittsburgh.
There are numerous parties involved in the upcoming hearings, numerous separate but related court cases and a wide variety of issues. And the lawyers have been sparring with each other for more than two years.
Three issues are scheduled to be heard next week, and numerous filings have been made in all three instances.
The first hearing on the agenda is unusual because Prosser and the court-appointed trustees, usually at odds, are in agreement. This deals with who owns, and who may foreclose on, the home of Jeffrey and Dawn Prosser in the Anna's Hope section of St. Croix.
The parties are, on one side, FirstBank Puerto Rico, which holds a mortgage on the partially-built mansion and wants to foreclose on it, and, on the other, most of the not-yet-paid contractors who have been working on the site, Prosser, and the two court-appointed trustees all of whom argue against foreclosure.
Advocating for FirstBank is the St. Thomas law firm of Dudley, Topper and Feuerzeig, LLP; they say that the bank has a $1.5 million mortgage on the property, which they define as including Plots 4, 4-A, and 10-AA "all of Estate Anna's Hope." The lawyers say that the bank no longer gets mortgage payments, nor is the property, appraised at $2.8 million, properly insured, so the bank is legally entitled to foreclose on it. They also argue that Dawn Prosser owns the land and that she is not part of the bankruptcy case.
Not so fast, say most of the contractors: The mortgage is on only those three plots of land, and the whole development consists of five plots (also Plots 5 and 10A) with most of the construction being on 10A. There is no way that anyone would buy the three mortgaged plots alone, they argue, any potential buyer would want the whole spread. Further they say that the property should, in fact, be included in the bankruptcy case.
The contractors making these points are Artisan Design Group, Jerry Mann Interprises (the spelling used in the brief), Charlie's Stone Consulting, Roiter's Mechanical Services, and Artisan Stone & Woodworks. They collectively have $638,408 in liens levied against the property. Their lawyers are Cheryl S. Kniffen of Duluth, Georgia, and Scot F. McChain of Christiansted.
The other contractor with a lien on the property (for $89,904) is Addison Construction and Maintenance, Inc. It is not participating in this court case.
The contractors added another possible complication to the matter by citing a December 12, 2007 title search prepared by Island Title Service Corporation of Christiansted which included a $1 million mortgage on the property by Merrill Lynch Credit Corporation dating back to Nov. 24, 1993; it was given to Dawn and Jeffrey Prosser.
Prosser's lawyers, Robert Craig of Omaha, Nebraska, and A. Jeffrey Weiss of St. Thomas, argued that since Prosser has a "possessory interest" in the property, it should be included in the estate, and not foreclosed upon.
The court-appointed trustees are Stan Springel, for Prosser's former corporations, and James Carroll, for Prosser's personal holdings. They have joined in opposing foreclosure on the grounds that a Prosser corporation made "substantial payments and transfers" to what they call "Shoy's Mansion" and thus the property should be included in the bankruptcy proceedings. They also say that the insurance payments have been made, and the lack of such payments can not be used as a justification for the proposed foreclosure.
The lawyers for Springel are Daniel Stewart of the Dallas firm Vinson & Elkins, and Benjamin Currence of St. Thomas.
The arguments submitted by all parties were stated in legal terms, with the phrase "relief from automatic stay" being effectively substituted for right to foreclose, and the basic economic motivations of the various parties being barely mentioned. Those motivations can be summarized as follows:
The bank would prefer to foreclose because it would get the full value of the mansion, not just the payment of its mortgage.
The contractors apparently see the likelihood of their being paid as better in a bankruptcy than in a foreclosure situation.
Prosser and his wife would lose everything in a foreclosure, but might secure some benefits from a bankruptcy ruling.
The trustees want to avoid foreclosure as part of their continuing efforts to maximize the funds available to pay the creditors.
The expected content of the other two hearings next week dealing with the extent to which the bankruptcy law protects Prosser real and personal properly from seizure, and the extent to which certain assets belong to the Prosser children, rather than to the bankruptcy estate will be reported in a subsequent article.
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